Title: World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability
Author: Amy Chua
Scope: 3 stars
Readability: 4 stars
My personal rating: 5 stars
See more on my book rating system.

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Topic of Book

The title says it all. Chua points out that most poor nations have wealthy ethnic minorities who are resented by the indigenous majority. Chua argues that free markets and democracy only make the situation worse.

My Comments:

Echoing earlier books by Thomas Sowell, Chua shows ethnic minorities that are often unknown in the West dominate the economies of poorer nations. Sadly, this engenders anger, hatred and resentment, which often leads to violence.

Chua makes a compelling case that violent resentments of “market-dominant minorities” are endemic to many, if not most, nations. She does not make a compelling case, however, that free markets and democracies are making the problem worse; only that they are not getting rid of hatred.

Key Take-aways

• In wealthy Western countries, we associate ethnic minorities with poverty.
• Outside of the West, many ethnic minorities are far wealthier than the local majority. Chua calls them “market-dominant minorities.”
• These market-dominant minorities own large swathes of the private economy.
• Some important examples are:
  • Chinese throughout Southeast Asia
  • Jews in Russia
  • Indians and Europeans in southern Africa
  • Europeans, Lebanese and Japanese in Latin America
• These market-dominant minorities have brought huge benefits to the local population, but despite this, the locals bitterly resent them. This resentment dominates much of politics. These minorities are often the target of deadly violence.

Important Quotes from Book

“This book is about a phenomenon—pervasive outside the West yet rarely acknowledged, indeed often viewed as taboo—that turns free market democracy into an engine of ethnic conflagration. The phenomenon I refer to is that of market-dominant minorities: ethnic minorities who, for widely varying reasons, tend under market conditions to dominate economically, often to a startling extent, the “indigenous” majorities around them”

“Market-dominant minorities can be found in every corner of the world. The Chinese are a market-dominant minority not just in the Philippines but throughout Southeast Asia. In 1998, Chinese Indonesians, only 3 percent of the population, controlled roughly 70 percent of Indonesia’s private economy, including all of the country’s largest conglomerates. More recently, in Burma, entrepreneurial Chinese have literally taken over the economies of Mandalay and Rangoon. Whites are a market-dominant minority in South Africa—and, in a more complicated sense, in Brazil, Ecuador, Guatemala, and much of Latin America. Lebanese are a market-dominant minority in West Africa. Ibo are a market-dominant minority in Nigeria. Croats were a market-dominant minority in the former Yugoslavia. And Jews are almost certainly a market-dominant minority in post-Communist Russia.”

“By contrast, the sobering thesis of this book is that the global spread of markets and democracy is a principal, aggravating cause of group hatred and ethnic violence throughout the non-Western world”

“Because markets and democracy benefit different ethnic groups in such societies, the pursuit of free market democracy produces highly unstable and combustible conditions. Markets concentrate enormous wealth in the hands of an “outsider” minority, fomenting ethnic envy and hatred among often chronically poor majorities”

“When free market democracy is pursued in the presence of a market-dominant minority, the almost invariable result is backlash. This backlash typically takes one of three forms. The first is a backlash against markets, targeting the market-dominant minority’s wealth. The second is a backlash against democracy by forces favorable to the market-dominant minority. The third is violence, sometimes genocidal, directed against the market-dominant minority itself”

“Ultimately, however, I argue that the best hope for democratic capitalism in the non-Western world lies with market-dominant minorities themselves”

“Chinese market dominance and intense resentment among the indigenous majority—is characteristic of virtually every country in Southeast Asia.

Ethnic Chinese have played a disproportionate role in the commercial life of Southeast Asia since long before the colonial era”

“Bolivia is one of only four countries—the others are Peru, Guatemala, and Ecuador—in which Amerindians still constitute a majority or near majority of the population. In all these countries, the same basic ethnic reality holds… in all these countries, Amerindians represent a distinct, recognizable, mass underclass, often the object of condescension, controlling only a tiny portion of the nation’s wealth. Meanwhile, whites—however artificial the term and however permeable the category may sometimes be—are a starkly market-dominant minority”

“With the exception of Argentina, Chile, and Uruguay (where from early on indigenous peoples were largely extinguished), Latin American society is fundamentally pigmentocratic: characterized by a social spectrum with taller, lighter-skinned, European-blooded elites at one end; shorter, darker, Indian-blooded masses at the other end; and a great deal of “passing” in between.”

“white wealth takes two very different forms: old Spanish (or in Brazil’s case, Portuguese) wealth, typically rooted in the plantation, or latifundia, system; and more recent immigrant wealth, often reflecting enormous entrepreneurialism”

“Today, Bolivia, Mexico, and Peru are the major exceptions in Latin America. Because of extensive agrarian reforms, these countries (along with Cuba) have largely dismantled their latifundia systems, at least to a much greater extent than elsewhere in Latin America. Virtually everywhere else in Latin America, the latifundia system is not only intact but poised to boom with each new round of pro-market, pro-globalization reforms”

“The other form of white market dominance in Latin America stems not from plantation wealth but from the entrepreneurial energies of relatively recent immigrant groups, who are dramatically overrepresented among the region’s business elite. Thus, a study from the 1960s found that of Mexico’s thirty-odd outstanding business leaders, almost half reported a foreign paternal grandfather. Similarly, a 1965 survey of Bogotá executives revealed that although Colombia has had relatively little immigration, 41 percent of the country’s leading entrepreneurs were foreign born”

“Some of Latin America’s most stunningly successful immigrant entrepreneurs have been Lebanese or Jewish. In terms of numbers, both groups are tiny, representing almost negligible minorities in their countries of residence. In terms of economic dynamism, however, both groups have been extraordinary.”

“Fast forwarding five hundred years, Jews occupied a commanding economic position in many Eastern European countries during the early twentieth century. Jews in interwar Romania, although just 4 percent of the population, controlled most of the private capital in the export, transportation, insurance, textile, chemical, housing, and publishing industries. Although their access to universities was restricted, they were also strongly represented in law, medicine, journalism, and banking. In Poland, as of 1921 over 60 percent of all commerce was conducted by Jews, who comprised just 11 percent of the population. Around the same time, Lithuania’s Jewish minority accounted for more than three-quarters of the country’s commercial activity”

“Whereas Indians are known as the “Jews of East Africa,” the Lebanese are the preeminent market-dominant minority in West Africa”

“nationalization in the Third World has always been far less an expression of Communism than of popular frustration and vengeance directed at a market-dominant minority.

With a few exceptions (China, Cuba, Vietnam), nationalization programs in Third World countries—unlike those in the former Soviet bloc—never sought to eliminate private property or eradicate all economic classes. On the contrary, in the vast majority of countries in Asia, Africa, and Latin America, nationalization programs have targeted explicitly and almost exclusively the assets and industries of hated market-dominant minorities”

“Crony capitalism typically involves a corrupt arrangement between an indigenous autocrat and a market-dominant minority. But there are more extreme versions of the antidemocratic backlash. In some cases, a market-dominant minority itself seizes power”

“Along these lines it is striking to note that none of the Asian Tigers has ever had a market-dominant minority. In all the Asian Tigers, the ethnic majority—the Japanese in Japan, the Koreans in South Korea, and the Chinese in Hong Kong, Taiwan, and Singapore—is both economically and politically dominant.”

“The same is true in all the industrialized Western nations. In the West we grapple daily with the problem of economically underprivileged ethnic minorities—blacks and Hispanics in the United States, African immigrants in France, aborigines in Australia, Maori in New Zealand, and so on. In stark contrast, the non-Western world today tends to be characterized by just the opposite dynamic: the presence, in country after country, of a tiny but economically powerful market-dominant ethnic minority”

“In the Middle East as elsewhere, globalization has wildly disproportionately benefited an “outsider” market-dominant minority—in this case, the Israeli Jews—fueling ethnic resentment and hatred among a massive, demagogue-incited population that considers itself the “indigenous” “true owners of the land.” In the Middle East, however, this conflict occurs not at the national, but at the regional level”

“America today has become the world’s market-dominant minority… Just 4 percent of the world’s population, America dominates every aspect—financial, cultural, technological—of the global free markets we have come to symbolize. From the Islamic world to China, from our NATO allies to the southern hemisphere, America is seen (not incorrectly) as the engine and principal beneficiary of global marketization. For this we have earned the envy, fear, and resentment of much of the rest of the world. “Anti-Americanism around the world is, among other things, an expression at the global level of popular, demagogue-fueled mass resentment against a market-dominant minority”

“One long-term strategy—in my mind more likely to be effective and certainly more dignified than erecting barbed-wire fences—is for market-dominant minorities to make significant, visible contributions to the local economies in which they are thriving”

If you would like to learn more about how ethnic identities often undermine progress, read my book From Poverty to Progress.