March 14, 2006

World on Fire: Market-Dominant Minorities, Smithian-Optimal Societies, and Radius of Trust

Having just read Amy Chua’s World On Fire and having discused it off-line with some of the other Seedlings, my thoughts are that is a useful entry into the ongoing discussion we've been having on culture and globalization,. However, I have some reservations. To some extent, she takes one idea and tries to universalize it, with the usual result that it fits a certain set of circumstances well, and others less well.

What I noticed was that her theory works best with the "Market-Dominant Minority" ("MDM") example she knows from personal experience --- the Chinese in Southeast Asia -- and similar situations, such as the traditional Jewish role in Europe, the Indians in East Africa, and the Lebanese in west Africa and Latin America.

What these groups have in common (and do not share with her other examples) are the following:

1. They have all had long histories as part of civilizations that reached Smithian optimality, but not the Exit. Often they have experienced many cycles of reaching optimality and falling back into the Malthusian predation trap. This has given them cultures that are comfortable with the workings of money and capital, that stress education, frugality, and hard work, but also that stress separation from the (potentially envious and dangerous) majority populations around them;

2. They have achieved their MDM role by and large in cultures that have never experienced Smithian optimality (or, of course, the Exit);

3. Although they are not typically high-trust cultures themselves, they have evolved means of extending their group radius-of-trust circles beyond immediate family networks: village associations or name associations for Chinese, sub-caste groups for Indians [pace Gurcharan Das]; and similar geographical and/or religious subgroups for Lebanese and Jews.

4. The cultures they move among are lower-radius-of-trust than themselves.

None of these societies could by themselves achieve the Exit. But they have all adapted rather well to operations within a post-Exit global system, basically by occupying a higher-trust niche within lower-trust societies. Interestingly, when these minorities move into a genuinely high-trust environment, like the US, the UK, or post-Napoleonic, pre-Hitler Germany, they assimilate readily and switch from being MDMs to becoming competitive, but not dominant, members of the wider society. They also begin intermarrying, even when they had intermarried little or not at all in previous host societies.

Her other examples follow quite different patterns. Some are “settler” societies in which a relatively small group of settlers impose their rule upon a much larger class of prior inhabitants, like the old settler elites in Latin America north of the Rio Plata, or the settler societies in South Africa and Zimbabwe. Although these populations are minorities, and are economically dominant, they differe substantially from the classic MDM populations of the previous category, most particularly by holding state power directly, as a class, rather than merely influencing it or buying favors from it. Here the problem is more one of forcing the dominant group to share political power, and secondly to share econoic opportunity.

The third pattern, perhaps best exemplified by Rwanda or the former Yugoslavia, is where two prior-exsting ethnic groups aree locked into contention. Even though one group might be economically dominant, the two groups are more nearly co-equal, and the compelte expulsion of the minority group is not an option.

One point I had trouble with in Chua is her use of the term “raw laissez-faire capitalism” to refer to the IMF-imposed systems in Latin Amerca, eastern Europe and elsewhere. Although the IMF reforms abolished some of the big state monopolies and privatized various marketplaces, they left almost untouched the web of street-level regulations and permits that hindered entrepreneurial emergence, they typically left the huge swathes of land in state hands untouched, and did nothing about extending secure land title to low-income people. Thus entrepreneurial formation was just as hard as ever, poor people had no access to the capital potential of the land with which they mixed their labor, yet even the inefficient subsidies and boondoggles by which they mitigated their poverty previously had been abolished. A pessimal outcome, but one not remorely describeable as “laissez-faire”.

I do think most of her solutions are sensible: encouraging village-level elections before national ones, encouraging assimilation of MDMs (although she balked at the Thai approach), encouraging solutions that spread wealth broadly, although she seems to favor social distribution programs, which typically are mismanaged and corrupted in developing nations, rather than a trust fund solution, such as is run in Alaska and Singapore, and would be easier to guarantee transparency with. Another element of a solution, which Chua did not discuss, would be a “cantonalist” constitution on the Swiss model, in which most public decisions were pushed to relatively local, decentralized government entities, which would more easily be made transparent.

Chua has introduced some points about ethnicity and culture into the debate about development and globalizations, some of which make people uncommfortable. There is a powerful desire on many peoples' part for a universalist theory, one that provides a toolkit of solutions that can be dropped into any society on earth and made to deliver big results quickly. Marxism serves this desire, and so does the sort of macro-economic determinism that Chua mistakes for "laissez-faire capitalism". Universalists of all stripes are uncomfortable with explanations that say "Well, your solution is right in general terms but we can't generate a solution in specific cases without taking into account the local knowedge about historical and cultural factors." The Anglosphere analysis is an example of such non-universalist thinking: it says "We know these mechanisms work in this set of cultures. We know (for example, from the LLSV work) that they have some effects when implanted into some other cultures. For some other cultures, we know that institutions and mechanisms do not work when implemented piecemeal and in quite different contexts. For everyplace else, the answer has to be 'Not known not to work.' "

Despite some reservations about her analysis, I’m happy to see Chua's book, as it will spark further discussions of this sort.

Posted by James C. Bennett at March 14, 2006 11:51 AM

I reviewed Chua's important book back in 2003:

Posted by: Steve Sailer at March 14, 2006 03:34 PM

OK but let's go a step further, how then can they regions like Latin America to create their own conditions for the Exit?
The problem with the World bank/IMF in Latin America was that the former kept forgetting the civilizational elements when implementing their universalist prescriptions. Latin Americans have always been prudentially skeptical of Anglospheric captalism; yet neither the gurus nor the Latin Americans themselves seemed to have found the
practical solution to mate market economies and the virtuous circle. Chile is the odd country out.

Posted by: xavier at March 14, 2006 04:58 PM


I think Hernando de Soto is on the right track with his proposals to regularize informal land titles and simplify permitting for business. Probably the most important thing is to make sure the entrepreneurial job-creation engine is allowed to operate when the big state boondoggles are shut down.

Of coure Latin America is part of the way through the Exit -- Sao Paulo and Buenos Aires are perfecctly modern. The trick is to pull the rest of the continent through.

Posted by: Jim Bennett at March 14, 2006 09:20 PM

When I interviewed Hernando De Soto, he told me Latin America's problem was essentially racial. The white ruling class liked things the way they were and they rigged the system to keep it that way.

Posted by: Steve Sailer at March 14, 2006 11:29 PM

That is posible and would, I think, explain Chile as an exception. I may be mistaken, but I think that Chile is a majority european country.

Posted by: Adams at March 15, 2006 06:24 AM

The Chileans and Argentinians killed all their indios, so they "solved the problem" that way. Not a course that can be recommended nowadays, and a good thing, too.

Having read Chua's book, Hugo Chavez made a lot more sense to me.

Posted by: Lex at March 15, 2006 07:49 AM

Not in Cjlie. In fact the Aracudian war lasted 3 centuries and the Chilean state was finally able to negotiate a peace treaty with the Indians. I have no idea if any Chileans have written a novel about it but I bet that the war would certaily rival the conflicts between the apaches and the Americans.
Also, it's precisely because of that war that Chile was the odd man out in Latin America. Given the sophitication of the Aracudnians and the length of the conflict Spain had to send soldiers. They tend to be unsentimental and less prone to flights of fancy. So I suspect that that's an important context for the Chileans' temperment

Thanks. I've been trying to get my hands on Hernando's books in Spanish since they've been published but no luck,. Here,s an inteeresting question: do the Arab Christians in Latin America play a minor role as market domint minorities or are they more so in Asia and parts of Africa?
What are the implications with Morales' presidency with respect to the whites? I suspect revenge and the usual cycle of mutual contempt?

Posted by: xavier at March 15, 2006 10:16 AM

My impression is that the Arab MDMs in Latin America are relatively mixed between Christians and Muslims.

Posted by: Jim Bennett at March 15, 2006 01:03 PM

*That is posible and would, I think, explain Chile as an exception. I may be mistaken, but I think that Chile is a majority european country.**

Posted by: peter at April 17, 2007 05:13 PM
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