by Amy Chua
To summarize, there is always an inherent instability in free market democracy. None of the Western democracies today faces this instability in its most explosive form: when the wealthy minority is also a hated, ethnic “outsider” group. Even so, every one of the Western democracies has alleviated the potential conflict between the rich few and the poor many through a host of devices, past and present, such as extensive social safety nets and redistribution, gradual expansion of the suffrage, upward mobility, and even racism. It is important to recognize, as we export free market democracy to the non-Western world, that many of these stabilizing devices do not exist in the developing world, that some of them are unsavory, and that others are, practically speaking, unreproducible.
The next section will cast a further shadow. As already mentioned, market-dominant minorities have existed in the West in the past. On the relatively rare occasions when a Western nation had to confront the problem of rapid democratization in the face of widespread poverty and a deeply resented, perceived market-dominant minority, the consequences were as terrible as any the world has seen. I will focus on just two examples here, one from the United States, the other from Western Europe.
The American South
In the United States after the Civil War, newly emancipated blacks represented a majority of the population in a number of Southern states including Alabama, Florida, Georgia, Louisiana, Mississippi, and South Carolina. In all these states—not unlike postapartheid South Africa—whites were a starkly market-dominant minority, terrified to the point of hysteria at the prospect of black majority rule. Thus, the first year after the Emancipation Declaration, “a great fear of black insurrection and revenge seized many minds,” writes C. Vann Woodward in The Strange Career of Jim Crow. “[T]he black race,” warned Southern politicians, if mobilized, “will be in a large majority, and then we will have black governors, black legislatures, black juries, black everything. . . . We will be completely exterminated, and the land will be left in the possession of the blacks, and then it will go back into a wilderness and become another Africa or St. Domingo.”11
Southern whites responded to the threat of black majority rule by effectively disenfranchising blacks. They did so, moreover, in the name of capitalism and white supremacy. (Else, in the words of Alabama’s James S. Clark, “our lovely State, with its few Caucasian inhabitants, would be converted into a kind of American Congo.”)12 To be sure, these Southerners faced the problem of the newly enacted Fifteenth Amendment, supposedly prohibiting discrimination against blacks in the suffrage. Led, however, by Mississippi, where impoverished blacks constituted 70 percent of the population in 1870, all the Southern states found elaborate ways to prevent blacks from exercising their right to vote. There were even, as late as the mid-twentieth century, delegations from the American South to South Africa to learn “tips” on how to disenfranchise and subjugate an ethnic majority.
The basic technique for establishing white minority rule in the American South was to set up barriers to voting such as property or literacy qualifications, and then to create exemptions that only white males could satisfy. Between 1895 and 1910, variations of this scheme were incorporated into the state constitutions of South Carolina, Louisiana, North Carolina, Alabama, Virginia, Georgia, and Oklahoma. Although these restrictions were highly effective in reducing the black vote, many Southern states adopted poll taxes as further obstacles. Violence, intimidation, and racially motivated redistricting took care of most remaining blacks. As late as the 1960s it was physically dangerous for blacks as well as whites to demonstrate on behalf of black voter registration or to try to organize blacks to register and vote; some were killed for doing so.13
The Fifteenth Amendment of the U.S. Constitution notwithstanding, disenfranchisement of black majorities during the Jim Crow period was highly successful. In Louisiana, for example, the number of registered African-American voters fell from 130,334 in 1896 to only 1,342 in 1904. In 1896, African-Americans represented a majority in twenty-six districts; by 1900 in none. At the same time, “separate but equal” laws were proliferating. During the First World War, Maurice Evans, an Englishman who lived in South Africa, visited the American South. He found the situation there “strikingly similar” to the one he had left behind at home: “The separation of the races in all social matters is as distinct in South Africa as in the Southern States. There are separate railway cars . . . and no black man enters hotel, theatre, public library or art gallery.” In addition, there were “the same separate schools, the same disenfranchisement, and the same political and economic subordination of the black man.” Wealthy Southern whites were aware of the parallel as well. “There are more Negroes in Mississippi,” wrote Alfred Stone, a plantation owner from the Yazoo Delta of Mississippi, “than in Cape Colony, or Natal, even with the great territory of Zululand annexed to the latter; more than in the Transvaal, and not far from as many as in both of the Boer colonies combined.”14
After the Second World War, with the rise of the civil rights movement in the United States, the paths of the American South and South Africa dramatically diverged. Nevertheless, the bottom line remains. After the Civil War, whites in a number of Southern states suddenly found themselves in the position of a starkly market-dominant minority, fearful of “black domination,” revenge, confiscation, and radical redistribution at the hands of a newly empowered black majority. Facing what it saw as the unresolvable conflict between a black-dominated democracy and the maintenance of their own wealth and status, Southern whites opted aggressively for the latter, doing everything in their power to undercut the former.
By contrast to the developing world today, Americans generally have not had to deal with the problem of sudden democratization in the face of pervasive poverty and a deeply resented, market-dominant minority. But several post–Civil War Southern states did face this precise problem, and Americans hardly rose with dignity to the challenge. As in apartheid South Africa or Rhodesia, market-dominant whites in the American South responded to the prospect of black majority rule by mass disenfranchisement.
Thus, along with the developing-world illustrations I gave in chapter 6, the American South during the Jim Crow era is a classic example of a backlash against democracy, in which a market-dominant minority, fearful of confiscation and redistribution, seizes political power. Unfortunately, the historical record of the West is darker still.
Weimar Germany and the Nazi Holocaust
Weimar Germany is a rare example of a Western nation that pursued—with catastrophic ethnonationalist consequences—free market democracy under conditions strikingly analogous to those characteristic of many developing countries today. Caution is required here. The Holocaust is in some ways so singularly evil that no straightforward comparison can be made between Nazi Germany and any other country, at any other time. To avoid misunderstanding, I offer three preliminary clarifications.
First, the Jews in Weimar Germany were not an economically dominant minority in the sense that, say, the Chinese are economically dominant in most Southeast Asian countries. Claims that “Jews ran the German economy” were patently false. Second, I am distinctly not suggesting that the roots of anti-Semitism in Weimar Germany, or anywhere else for that matter, were economic in nature. Anti-Semitism in Germany, as elsewhere in the world, existed long before Jews were particularly successful economically. (Economic grievances certainly had nothing to do with the numerous pogroms directed at poor shtetls in Russia and Eastern Europe.) Third, Weimar Germany obviously differed in profound respects from most of today’s developing countries. For example, Germany was a former imperial power, with colonies and protectorates all over Africa and a formidable naval fleet and army. Weimar Germans, including women, were far more educated than the average inhabitant of the developing world today. Commentators have described Weimar Germany as “a cradle of modernity.” Moreover, Weimar Germany had a powerful industrial base, an impressive network of railways and infrastructure, and a highly sophisticated banking
system.15
Nevertheless, conditions in post–World War I Germany were more analogous to those in the developing world today than one might think. Most crucially, Weimar Germany was characterized by widespread economic deprivation and suffering, in large part because of inflation that reached catastrophic proportions in 1923. (By most accounts the principal cause of the inflation was not reparations to the Allies, but rather the excessive national debt that Imperial Germany had incurred in financing the war.) With the plunging mark, writes historian Gordon Craig, “the simplest of objects were . . . invested with monstrous value—the humble kohlrabi shamefacedly wearing a price-tag of 50 millions, the penny postage stamp costing as much as a Dahlem villa in 1890. . . .” While a few—principally industrialists and speculators—profited from the inflation, millions of working and middle-class Germans were left suddenly impoverished. Those on fixed incomes or pensions were hit hardest. At one point, in late 1923, only 29 percent of the total German labor force was fully employed. Contributing to the mass frustration was a chronic national housing shortage, estimated at 1.5 million dwellings in 1919–20. As in the developing world, malnutrition and disease in the Weimar Republic were pervasive, particularly among children and the old. Deaths from hunger were common.16
Against this background, Jews in the Weimar Republic were widely perceived as an “outsider” ethnic minority wielding outrageously disproportionate economic power vis-à-vis the “indigenous” majority. The reality of the Jews’ economic situation in the Weimar Republic was as follows. Relative to their tiny numbers—Jews formed just under 1 percent of the total population of Germany—they were disproportionately represented in certain professions and occupations. Between 1918 and 1933, nearly three-quarters of German Jews earned their livelihood from trade, commerce, banking, and the professions, particularly law and medicine. By contrast, only about one-quarter of the non-Jewish population of Germany was similarly employed.
Thus in 1933, Jews made up around 10 percent of Germany’s doctors and more than 16 percent of its lawyers and notaries public. Commerce and finance, however, were the major pursuits of most German Jews. In 1930, Jews owned 40 percent of Germany’s wholesale textile firms and nearly 60 percent of the country’s wholesale and retail clothing businesses. In 1932, Jews owned roughly 80 percent of all department store business. Weimar Jews were also prominent in banking. Nearly half of the country’s private banks were owned by Jewish banking families like the Bleichroders, Mendelssohns, and Schlesingers. On the other hand, Jews controlled almost none of Germany’s more numerous and increasingly important credit banks; nor were the modern large banks that financed the German industrialization principally controlled by Jews. Although a significant number of German Jews were extremely well off, the great majority of them belonged to the middle classes, and many Weimar Jews were poor.17
The economic picture of the Weimar Jews was thus a mixed one. Jews plainly did not control the Weimar economy. To the contrary, the wealthiest Germans in the Weimar Republic by and large were non-Jews: members of the nobility or landowning aristocracy as well as powerful industrialists such as Robert Bosch, Carl Friedrich von Siemens, and Hugo Stinnes.18 On the other hand, almost no Jews were peasants, farmers, or members of the urban proletariat, and the average income of Jews was 3.2 times that of the general Weimar population.19
It is crucial to reiterate that the “Jewish problem” in Germany was far more than an economic problem. As many have pointed out, anti-Semitic economic hostility “is necessarily predicated upon the antisemites’ marking of the Jews as being different, identifying them not by the many other (more relevant) features of these people’s identities, but as Jews, and then using this label as the defining feature of these people . . .”20 The imagery and rhetoric used against German Jews was contradictory and confused. Thus, writes Gordon Craig, “the arrogant Jew” included “the flea-market and marts-of-trade and stock-market Jew, the Press and literature Jew, the parliamentary Jew, the theatre and music Jew, the culture and humanity Jew . . .” Although “materialist,” Jews did not work but only “exploited.” Jews were both greedy “capitalists” and the “secret force behind Communism.”21
Nevertheless, regardless of the falsity of the charges of Jewish economic dominance, there was undeniably an economic dimension to the mobilization of German anti-Semitism. The stereotype of the Jew as rich and rapacious had long existed in Germany (as in many other European countries). Four hundred years before Hitler capitalized on this theme, Martin Luther wrote: “[T]hey hold us Christians captive in our country. They let us work in the sweat of our noses, to earn money and property for them, while they . . . mock us and spit on us, because we work and permit them to be lazy squires who own us and our realm.” Similar rhetoric accompanied the vicious wave of anti-Semitism following the financial crash of 1873. Fifty years later, Jews in Weimar were widely accused, by Germans high and low, of being “uniformly prosperous,” “ruling Germany financially, economically,” and causing the nation’s economic privations.22 In other words, the Jews were said to be a grossly economically dominant outsider minority even though their actual level of economic success did not warrant this perception. As in many developing countries today, these charges of economic dominance provided a convenient spur to, and rationalization of, ethnic mobilization.
Weimar Germany shared another feature in common with most of today’s developing countries: Germany after the First World War embarked on a period of intense marketization and democratization. Whereas normal market transactions had ground virtually to a halt during the war, Germany after 1918 saw a massive influx of foreign investment, new international trade opportunities, a burst in industrialization, and the accumulation of huge fortunes by big business and financiers. Like today’s “emerging economies,” the Weimar government undertook freewheeling economic liberalization, for example by eliminating import-export quotas; offering tax breaks to businesses and holders of capital; and, after 1923, repealing significant labor-law protections including, perhaps most strikingly, the eight-hour workday.
At the same time, Weimar Germany pursued intense democratization. In 1918 and 1919, over a period of barely ten months, Emperor Wilhelm II abdicated, the German people elected a National Assembly, and the National Assembly promulgated a new constitution providing for universal suffrage, direct popular election of the Reich president, and the never-before-tried practice of popular referenda. The new constitution also guaranteed a lengthy list of fundamental human rights (Grundrechte).23
In other words, to a surprising extent Weimar Germany shared both the basic background conditions prevalent in many developing countries today and the standard policy package being pursued by these countries. In conditions of widespread economic distress and a (perceived) economically dominant minority, Weimar Germany pursued intensive market liberalization and rapid democratization. Indeed, in important respects, conditions in Weimar Germany were more propitious for the success of these policies than they are in the developing world today. For example, Weimar Germany had a much higher general level of education; an impressive array of “social safety nets”; and a much stronger legal system, whose judges were notoriously independent (and anti-Semitic).
The fate, however, of Weimar free market democracy is well known. In 1932 and 1933, the National Socialist German Workers’ Party, as the Nazi Party was formally named, gained control of the German government through electoral means. Although historians over the last fifty years have repeatedly described the Nazi movement as self-contradictory and ideologically inconsistent—“a confused mixture of nationalistic, anti-Semitic, and pseudo-socialist demands”24—the Nazi movement led by Adolf Hitler was in fact unwaveringly and quintessentially ethnonationalist, and in this diseased sense, perfectly coherent. Point Four of the twenty-five-point party program (coauthored by Hitler and promulgated in 1920) declared: “Only members of the nation may be citizens of the State. Only those of German blood, whatever their creed, may be members of the nation. Accor
dingly no Jew may be a member of the nation.”25
Like the ethnonationalist movements of the developing world, National Socialism was never truly socialist. The Nazis never undertook to abolish the institution of private property nor to eradicate all economic classes. On the contrary, Hitler repeatedly made overtures to big business, and the Nazi movement was supported by many wealthy Germans, including industrial magnates and aristocrats. Indeed, Nazism was more anti-Communist than it was anticapitalist—in either case with the same anti-Semitic thrust. Precisely because its principal commitment was to ethnonationalism, there was little need for an economic policy. (Once heard at a Nazi gathering: “We don’t want higher bread prices! We don’t want lower bread prices! We don’t want unchanged bread prices! We want National Socialist bread prices!”) Far more than any of its rivals, the Nazi Party was successful in bridging social cleavages and transcending class divisions—from industrial tycoons to farmers, but above all the middle class—in its call for a once-again-powerful Germany for “true Germans” and the destruction of Germany’s “enemies” at home and abroad.26
Once Hitler was in power, “the destruction of the Jewish race in Europe” became a guiding principle of official state policy. Hitler began with a series of laws depriving Jews, through stringent “racial” qualifications, of their positions in the state bureaucracy, the judiciary, universities, and the professions. In 1938, for example, Hermann Goering required Jewish physicians and lawyers to liquidate their practices, then issued the more general Decree on Eliminating the Jews from German Economic Life. Soon afterward he dictated the wholesale expropriation of Jewish property and businesses. Goering insisted that expropriated Jewish property belonged to the state. In reality, private German enterprises were the main beneficiaries. At the same time, Jews were stripped of their citizenship and political rights. Hitler’s “final solution” was the extermination between 1941 and 1945 of an estimated 6 million people, most of them Jews.27