The Foreign Service Journal, June 2005

Pondering the Path to Pluralistic Prosperity World on Fire: How Exporting Free-Market Democracy Breeds Ethnic Hatred and Global Instability Amy Chua, Anchor Books, 2004, $14.00, paperback, 368 pages. R EVIEWED BY S TEPHEN P. N EWHOUSE World on Fire: How Exporting Free-Market Democracy Breeds Eth- nic Hatred and Global Instability is a fair book that puts forth a credible thesis about a vitally important sub- ject: the interaction of free markets and democracy. Amy Chua, a Yale Law School professor, basically argues that huge disparities in wealth and opportunity that break along ethnic lines generate conflict — and that democracy and market liberalization actually exacerbate these tensions. The results of such conflicts vary, but none of the outcomes give cause for optimism. In some cases, the dis- enfranchised react against the market through ethnically-targeted expropria- tion. In others, the “market-dominant minority” undercuts democracy and suppresses the ability of themajority to strike them. In the worst cases, the privileged ethnic group becomes the target of more violent actions. Setting her argument off from de t erminism with a number of caveats, Chua contends that while this is not a universal phenomenon, it is more common than one might think. She identifies market-dominant mi- norities ranging from the Chinese merchants of Southeast Asia and the Ibo of Cameroon to the Jewish bil- lionaires of post-Soviet Russia and the Lebanese throughout Africa. She sees ethnic violence from Rwanda to Yugoslavia through the same lens, and a rgues that the same basic pattern of inequality, resentment and reaction also makes global anti-Americanism comprehensible. Such observations are at odds with the advice developed nations (Chua blames the U.S., especially) push on developing ones. But in Chua’s view, democratic and market-oriented re- f orm should be taken slowly, mirror- ing the way economic and political institutions evolved in the West, rather than rapidly and concurrently. Chua’s basic thesis may be intu- itive, but the evidence she summons is less than compelling. She frequent- ly cites her own experiences to illus- trate her points, reinforcing the sense that her data-gathering was haphaz- a rd, rather than systematic. At the same time, she construes many events quite differently than is conventional (I have seen no other account of the Rwandan genocide portraying it as the result of too much democracy, too soon). The combination is unsatisfy- ing. One should recognize, however, that this is a direct result of the grand scope of the argument and serious data limitations: who has counted eth- nic groups worldwide over time sys- tematically? How does one measure “tension”? Who has kept a count of liberalization, and how would one compare minor policy changes to more substantive ones? Another limitation of the book, surprising from a law professor, is an un-lawyerlike lack of definitional pre- cision. She repeatedly confounds “democracy” with any situation in which the majority can impose its will. In addition, “free market” is not how I would describe crony capitalism — the operative word there is “crony” — of friend and family counting for more than price. Deeper theoretical questions also sit not far in the background. Chua implies in several places that capital- ism and competition inevitably yield severe income inequality. But there is no basis for that presumption. In fact, economic theory predicts that under competition, relative productivities and resource scarcities would be the primary determinants of income. This shortcoming is related to intrigu- ing questions the book leaves uninves- tigated and unanswered: How do these groups establish and perpetuate themselves as market-dominant minorities? Why doesn’t competition erode their positions? But despite such shortcomings, Chua has produced a readable, if somewhat repetitive, book that posits a fairly plausible challenge to the accepted wisdom of the Washington consensus. Free markets and democ- racy don’t necessarily combine to make the world rich, peaceful and just. The path to pluralistic prosperity may depend much more on sequencing and on other important real-world dif- ferences that are sometimes lost in the call for quick reform. Stephen P. Newhouse has been a Foreign Service officer with the De- partment of State since 1997. He is currently on the staff of the Under Secretary for Economic, Business and Agricultural Affairs. The views ex- pressed here are his own and not nec- essarily those of the State Department or the U.S. government. J U N E 2 0 0 5 / F O R E I G N S E R V I C E J O U R N A L 95 B O O K S u Chua posits a plausible, if not totally convincing, challenge to the accepted wisdom in Washington.