Global Trade

PAUL SOLMAN:

The theory behind the WTO is clear: Global trade should lead to global prosperity, which combined these days with democracy, represents hope for stability in a dangerously unstable world.

But what if both free trade and democracy have dangerous side effects of their own? Unlike the very visible protesters at the WTO this week, the author of a provocative recent book called World on Fire is pro-globalization.

The book argues, however, that many non-western economies are dominated by deeply resented ethnic minorities, and that globalization and democracy could actually make the resentment worse. The book's author: Yale Law School Professor Amy Chua.

AMY CHUA, Author, World on Fire: Just imagine if Bill Gates and the ten other wealthiest Americans were all — just pick an ethnic group — were all Chinese or all Arab. And then imagine that the 70 percent rest of the American population lived in entrenched poverty and had experienced no upward mobility for the last several generations.

PAUL SOLMAN:

Or not much.

AMY CHUA:

Or not much. Then you really come close to the situation that I think actually holds true in much of the nonwestern world.

PAUL SOLMAN:

Chua argues that groups like the Chinese in Southeast Asia, the Indians in East Africa, the British in Zimbabwe, the Jews in Russia all are elite minorities perceived as benefiting from free market globalization at the expense of the so-called native majority.

AMY CHUA:

Markets make this hated kind of outsider minority richer and richer, while democracy empowers the poor, frustrated majority who is easily manipulated often by opportunistic demagogues. And the result is typically a very explosive situation.

PAUL SOLMAN:

Chua's thesis is born of her background. Her family — which grew a turn of the century fish paste business into a plastics conglomerate — is part of the tiny Chinese elite that controls more than half of the Philippine economy.

The Chuas themselves experienced ethnic resentment with a vengeance.

AMY CHUA:

In 1994, I received a call from my mother that my aunt, my father's twin sister, had been murdered in her home in the Philippines by her chauffeur. And he was a member of the Philippines' roughly 80 million, incredibly poor indigenous ethnic Filipinos, most of whom make less than two dollars a day, 40 percent of whom live in temporary shelters all their lives.

I ended up going to find the police reports. And under "motive," although the killer had taken jewels and some money from my aunt before he killed her or after, there was only one word under motive, and that word was not "robbery," but it was "revenge."

PAUL SOLMAN:

In the decade since, ethnic tensions in Southeast Asia have, says Chua, grown worse, most notably in Indonesia.

AMY CHUA:

The free market policies in the '80s and '90s led to a situation in which the country's tiny, three percent Chinese minority controlled an astounding 70 percent of the private economy. Now the introduction of democracy in 1998, which was hailed with euphoria in the United States, unfortunately brought about a violent backlash against both free markets and against the Chinese.

MAN ON STREET:

We're all afraid. They want to damage anything.

AMY CHUA:

So 5,000 shops and homes of ethnic Chinese were burned and looted; 2,000 people died.

The wealthiest Indonesian Chinese left the country, taking with them between 40 and 100 billion dollars of ethnic Chinese-controlled capital. And that, as you can imagine, plunged the country into an economic crisis from which it has still not recovered.

PAUL SOLMAN:

What is it about globalization that advantages market-dominant ethnic minorities?

AMY CHUA:

It's important to see that free trade is often just touted as a kind of mantra and people assume that, "oh, free trade is going to lift everybody out of poverty." And it's just not the case because in most developing countries, in many developing countries certain ethnic groups have head starts in terms of capital, education, international financial connections.

So in the short run, what a lot of poor majorities experience from privatization or the influx of foreign investment or free trade is sometimes the removal of subsidies.

That means that their prices go up. In addition, unemployment, at least temporary, which means that their livelihoods are really stricken — and not only that, most importantly, they see these trade liberalization policies benefiting disproportionately certain people who are in a better position to benefit from foreign partners. You know, I mean, when foreign investors from the United States or England or Germany come in, they are not going to go to the poor slums and enter into a joint venture with the slum dwellers.

PAUL SOLMAN:

Even before globalization, Chua notes, many of these countries were ethnic tinderboxes needing little to ignite them. Serbs resented the economically successful Croat minority; East Africans resented the market-dominant Indians, imported by the British in the late 1800s to build railroads.

Attorney Reshma Saujani's family was among the wealthiest in Uganda.

RESHMA SAUJANI:

Several houses, several cars, chauffeurs, servants. I do remember though my father did experience some sort of like ethnic violence. He remembers coming home one day and his cousin Babu had been decapitated by a local black who as he was walking behind the railroad on his way home from school.

PAUL SOLMAN:

Decapitated?

RESHMA SAUJANI:

Yes. His head cut off.

PAUL SOLMAN:

Uganda's Idi Amin expelled some 75,000 Indians in 1972, as powerfully depicted in Mira Nair's movie, "Mississippi Masala."

ACTOR, Mississippi Masala:

What's in the bag?

ACTOR, Mississippi Masala:

Nothing. Just food.

PAUL SOLMAN:

Physician Amit Gohil's parents tell of the same experience.

DR. AMIT GOHIL:

People were being shot, Indian girls were being raped as they tried to depart. And on the road from Kampala to Entebbe, there was like numerous checkpoints, many soldiers taking all the possessions, all the meager possessions that they … that people had at the time.

RESHIMA SAUJANI:

And my mother and her sisters got this bright idea to kind of hide jewelry in toothpaste tubes, in their Colgate toothpaste. And so they made out with a little bit of jewelry. I still wear my grandmother's ring actually on my hand, the gold one. I still wear it to kind of remind me every day of how much they've sacrificed and suffered in this tragedy.

PAUL SOLMAN:

To Amy Chua, however, the point is that though Idi Amin was hardly democratic —

AMY CHUA:

I was just reading coincidentally in the Economist (magazine) the other day an obituary for Idi Amin and one of his former ministers said that this act of expelling the Indians was pretty much the most popular thing that Idi Amin ever did, I mean, it was incredibly supported and cheered on by the majority. And things really sadly have not changed that much. And just recently, a politician campaigned in Kenya on an expulsion platform. He said, "Look, vote for me and I'll expel the Indians."

PAUL SOLMAN:

Chua's point: Globalization and democracy are exacerbating ethnic tensions. Former World Bank economist William Easterly, however, doubts it. We brought him together with Chua in Washington Square Park near New York University, where he now teaches, to explain why.

WILLIAM EASTERLY, Former World Bank Economist:

Ethnic conflict is certainly a tragic reality in a lot of places, but I'm not sure that free markets and democracy make it more likely. Free markets are not a panacea; they don't work overnight, but in the long run that's the way poor countries become rich is through the combination of free markets and democracy.

AMY CHUA:

If it were possible that free market policies and free trade policies could lift the entire country out of poverty, then you wouldn't have the problems I'm talking about. That has never happened.

WILLIAM EASTERLY:

I think it has happened. It's happened in Korea, Taiwan, Singapore, Hong Kong.

AMY CHUA:

And those are all countries without a market dominant ethnic minority.

WILLIAM EASTERLY:

Well, Professor Chua, let's not throw out the baby with the bath water. I think democracy and free markets and free trade and privatization is the best hope for these countries to become richer.

PAUL SOLMAN:

Meanwhile, in places like the Philippines, free market inequality heightens resentment, Chua insists.

So our last stop was a Philippine neighborhood in Queens, nestled below the elevated subway that storms its way to Manhattan. Amidst the travel agents and cocktail lounges, the remittance shops for sending money back home, we thought we might find ethnic resentment in the flesh. Rolando Katigbak, a retired Filipino accountant, was the very first person we approached.

PAUL SOLMAN:

What is the attitude towards well-off Chinese people in the Philippines?

ROLANDO KATIGBAK:

Well, there a sense of jealousy since these people came from another country.

PAUL SOLMAN:

Amy Chua was standing to the side.

PAUL SOLMAN:

She's Chinese.

ROLANDO KATIGBAK:

I got to hand it to you Chinese people, you have business acumen, better than our own people.

PAUL SOLMAN:

But it still makes you resent them?

ROLANDO KATIGBAK:

Of course. If you get rich in your own country I don't care. But our resources are being used by other people who came over… ( train rumbling )

PAUL SOLMAN:

The train drowned Katigbak out. After it passed, Chua posed one final question.

AMY CHUA:

But do you think the Chinese through their businesses, you know, add anything to the Philippine economy by helping create jobs or –

ROLANDO KATIGBAK:

Not as much as we would expect them to.

AMY CHUA:

You don't feel they give back to their country enough?

ROLANDO KATIGBAK:

Not enough.

PAUL SOLMAN:

In a sense that exchange is at the hard of the globalization debate. If people around the world think the WTO benefits only those on top, they'll resent it. And Amy Chua adds, where those on top are an ethnic minority like hers, the resentment can become incendiary.