This is exactly why we need to be worrying about market fundamentalist policies being promoted by the CPA--low tariffs (5%), an inflation obsessed central bank, a dismantled social safety net, massive and rapid privatization, etc.

Compare how Russia and China have gone about their economic transformations, and you'll understand why our current "shock and awe" economic policy in Iraq is a very bad idea.

Like these countries, Iraq was a socialist state with a highly centralized authoritarian leadership. In the long run, many of the Washington Consensus ideas can work in Iraq--but you can't just privatize willy-nilly without a social safety net to absorb them.

That's also why disbanding the army was so stupid--in addition to putting thousands of trained and armed killers on the streets, it also precipitously dismantled an element of the Iraqi nanny state, in effect throwing a bunch of Dads onto the street.

Free markets are great, but sequencing is important.

Perhaps all elites (not just the ethnic/religious/racial elites) should take Chua's warnings seriously. Saudi Arabia's royal family and Egypt's kleptocrats come to mind.

Note that one possible conclusion of Chua's article is that free markets should come BEFORE democracy et. al. Don't necessarily assume that having privatization give way is the only option.

As for Iraq, for Chua's thesis to be helpful there would have to be an economic minority in Iraq that controls many of the levers of the economy. I don't know how much the Sunnis have, esp. in non-Sunni parts of the country (it has to be felt in other ethnic areas to set the dynamic in motion). If the answer is "some, but not much" then privatisation has no ostacles from the problem Chua describes.

Indeed, privatisation can sometimes be an important ally in failed state situations. If Iraq was a socialist state, then like all socialist states it enriched its political overlords. Privatization with safeguards to secure participation from ALL sectors of the country may actually be an important first step to spread that concentrated economic power a bit, followed by an "Alaska Fund" type initiative to really drive the benefits down to lower levels of the economy.

The experience of Eastern Europe shows that unthinking privatisation has its perils, but so too does unwillingness to disturb the political order (i.e. the nomenklatura who owned the country before). Both of these roads lead to economically enriched minorities with ties to the old regime, and a cultural template of advancement through political connections. This is poisonous.

Socialist kleptocracies are a leading cause of failed states. Thoughtful privatization, couple with a strong program of property rights DeSoto style (i.e. building off of local customs and seeking to establish a broad property owning class) are important tools to consider as we ponder how to reconstruct them - or intervene before full breakdown occurs.

FYI Thomas Sowell wrote about this phenomenon at least 15 years ago in his essay "Middleman Minorities." I don't think the essay is online but he folded it into one of his books.

Joe,

It doesn't sound like we disagree.

In fact, China's example shows how capitalism before democracy can be a good thing, and Russia shows how rushed privatization can lead to criminal oligarchy. Could China speed things up? Perhaps, but it's an achievement that they've gotten where they have without a civil war or an economic collapse.

I would say that given that Sunnis controlled the Saddam regime, they also controlled Iraq's oil wealth. And there really doesn't seem to much non-oil wealth in the country, so make of that what you will.

I heard a rumor, btw, that we caught al-Douri.

Sowell has brought up the middleman minority problem in some of his online articles:

**International affirmative action** June 4, 2003

**'Diversity' in India** March 7, 2002

I'm not quite sure what this says in reference to your idiotarian post, except possibly to contradict it.

I mean, are you now saying that the idiotarians actually may have a point?

The article agrees with the anti-globalization crowd's main point: that markets often concentrate wealth in the hands of a minority. (In this, case, the First World is the minority.)

Power, wealth, and fame have always been concentrated in the hands of the few with the skills and temperment needed to acquire them, and they always will be. There is no social or economic system that does not concentrate desirable things into the hands of the few, simply because it is human nature to take for granted anything with widespread availability, even things as important to survival as the air we breathe.

The democratic and capitalist systems concentrate these things in the hands of an elite, just like any other system. But - and this is the really critical distinction - the elites can lose their wealth, power, and fame should they be prove themselves unworthy of it, in the eyes of the people. Businesses can be bankrupted if they alienate enough customers, politicians can be voted out of office if they prove incompetant, and celebrities can be stripped of their fame should they commit grievous offenses in the eyes of their fans.

Our system does not work to prevent the concentration of power, but it ensures that it is the people in general, not a small cadre of elites, that choose where the wealth, power, and fame are concentrated. It is when that decision is taken out of the hands of the people, and granted only to those already in power, that freedom is lost.

Chua couldn't be more wrong. Elites, of course, often ethnically distinct elites, have had massively disproportionate influence since the dawn of time. What's different now is that the ever-more-shameless left has made resentment of these elites -- violent, blindly murderous resentment -- ideologically justifiable, all the way to its reductio ad absurdum on September 11.

It's the ideology, stupid, and Chua -- that lefty Yale Law prof -- is on the wrong side of this battle. Because our modern US cocktail of free markets (not to be confused with corrupt markets elsewhere), free government, and mass culture -- that is, the ideology of incrementalism and equal opportunity -- is the only alternative to the neo-Jacobinism of the global left.

Our post-9/11 war is a war against the worldly (as opposed to, e.g., in the 'kingdom of heaven') legitimacy of resentment; winning here, destroying the left entirely, is the only way it will succeed.

I tend to agree with the general orientation of "Someone's" post above. As Helmut Schoeck pointed out in his classic 1967 study of social envy, socialism is founded on a fear of envy, i.e., of the envious as precisely the potential carriers of group hatred such as Chua warns against. The socialist solution, as one might expect from this diagnosis, is to create a society in which forced redistribution of wealth and power would leave no one with any significant advantage over anyone else.

Nevertheless, as Schoeck also argued--writing as he did in West Germany during the cold war, and with Eastern Europe's and Britain's post-WWII socialism as models--envy is not so much obliterated as democratized: now everyone worries about everyone getting something that they don't.

Another study along the same lines has a title that is very insightful on this score: "relative deprivation." That is, you are not deprived of something unless and until someone else comes to possess and you don't. This is Chua's fundamental narrative, and it marks her as just another "envyist" whistle-blower. If the definition of envy is the statement: "Anything anyone else possesses that I do not has been taken from me and is therefore justly owed me," then "envyism" (my own term for a social system founded on the fear of envy) is the belief that there is nothing so politically important as creating a world that is comfortable for the envious.

I've posted these remarks on similar blog entries elsewhere, and never fail to get a rise out of someone--which is one reason why I've posted them again, here.

Tetterdemalian, we agree about the system in place in America, and its key virtues. This is not true everywhere.

In addition, Chua herself notes that the dynamic she describes leave ALL players poorer in the end. So we all agree there, too. That doesn't change the dynamic, however, which can be viewed even in the USA - recall the Korean shopkeepers during the LA riots. Such people are actually the neighbourhood's best hope, but they're also an irresisteble target for the Farrakhan's and Sharptons of the world.

Sometimes, reality sucks. But it's still reality, and papering it over with ideology is always foolish and dangerous.

The dynamic Chua describes makes a great deal of sense. IF you have economic power going one way and political power heading in the exact opposite direction at the same time, with both processes unfettered, AND different and identifiable ethnicities leading each development, you have a problem. A big problem. Human nature being what it is, it's an explosive situation ripe for exploitation, thievery, and even genocide. History seems very consistent about this.

Chua is not arguing against democracy as a goal, but she is raising questions about its necessary prerequisites, and whether those change under certain circumstances. That strikes me as an argument any conservative should consider carefully - not because it destroys the goal, but because thinking about it beforehand can change our understanding and raise the odds of eventual success.

And "someone" - Chua's point is that sometimes the modern U.S. combination IS a Molotov Cocktail. Now, there are times when a Molotov cocktail is an indispensible tool. There are also times when it's inappropriate, and the biggest failing of the anarcho-left is its utter inability to tell the difference.

Let's not follow them there, hmmm?

Let's not help the left, either. You and I agree fully that the people who exploit these frictions for hateful purposes are often members of the left, which seems to have elevated tribalized politics to core dogma over the last 20 years. Chua describes circumstances that make their success almost certain.

Please tell me why these circumstances are something we should be blind to or encourage. I thought we wanted the left to fail, no?

Destroying the legitimacy of resentment is indeed our goal, and as a right-wing type I'm also quite intent on not taking measures that will kill the golden goose of economic productivity. If we acknowledge what both recent and modern history is telling us about this dynamic of resentment, we may be able to figure out how best to destroy its legitimacy without killing the drivers of economic growth.

There's no necessary reason that the solutions have to be left wing. But like all problems, the dynamic itself must be acknowledged before we can hope to solve anything.

In many places of the world--say, Equitorial Guinea--ideology has nothing to do with any of this.

In that case, you have a country historically ruled by a corrupt group of what RAND graduate school and former World Bank representative Robert Klitgaard (I didn't make that name up, honest) called "tropical gangsters." Just a bunch of crooks using government to line their pockets and keep others from fully participating in a market economy.

There's nothing about that situation that either left or right should like. As much as both sides of the political spectrum disagree (in America, I submit the gap is quite small), one area of common ground is in respect for the rule of law.

In countries like Nigeria, Iraq, and Russia, there is always the danger that an elite few can abuse the law and seize the levers of wealth for their own private benefit. That's what Saddam did, remember?

Or, as Robert Heinlein wrote in 1970:

Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded -- here and there, now and then -- are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people slip back into abject poverty.

This is known as "bad luck."

Joe, you never responded to my mail about my two blog posts:
*Bush hate, Jew hate, Success hate*

and *Money grubbing hate leads to Jew hate *

but, clearly, I agree on the problem of "envyism". The Left that is so upset at tax cuts (for the rich!) epitomize this problem. So yes, low taxes, please -- let honest workers get richer, faster!

And as pointed out, corrupt gov't kleptocracy is the underlying development problem. Yet another way of stating the problem of corruption is using gov't to collect other people's money, and then controlling & using this gov't wealth for personal gain.

But this is exactly what all gov't redistribution has been about, as well -- which is why it's always been corrupt.

I propose a solution! Tax loans. Where the gov't replaces a gov't grant/ program, with a loan -- and the recipient's taxes count as repayment of the loan. Plus, as long as there is an outstanding balance, the recipients pay a small (5-10?) surtax to reduce the loan debt.

In other words, the gov't gives loans of the taxpayer's own money, to replace the current grants of other people's money.

*Tax Loans *
What do you think?

Tax loans. Interesting idea, Tom.

RE: the emails... you may have noticed that my posting volume has actually picked up while on vacation, that's how sparse it was over the last few weeks. So I've been a bit snowed.

But thanks for leaving the links here. This is a subject I plan on coming back to over the next little while.

Maybe I'm missing something...but how is this tax loan program any different in effect from, say, federal education grant programs, numerous government-supported mortgage programs, etc.?

The 20/80 rule is universal across species and populations.

20% will gather 80% of the resources.

The way to solve this problem is to destroy nature.

The way to take advantage of it is to let the 20% go as fast as they can so that their crumbs become loaves and ultimately whole bakeries.

You see when envy is pointed out as a deadly sin it is literally true. It destroys the envious and the economy they live in.

Praktike, maybe you didn't read the link (hint, hint)?? First, loans are not grants -- they need to be repaid. Second, your taxes go to repay the loan; so this means you didn't get "other peoples money", you got your own, in advance.
Third, you pay MORE in surcharge/ repayments (like a surtax).

The educational example is instructive -- allow a $25 000/year loan for four years. The grad gets a $40 k/year job, 20% in income taxes = 8k. Plus a 5% additional repayment = 2k; his repayment is that 2k + 8k = 10k. The next year he owes $90k.

The sooner he pays it off, the sooner his taxloan charge is gone. ***This is the incentive for the recipient to take less loan, it's not free money -though it is, and is supposed to be, cheap***

The IRS, not some private bank, will be in charge of crediting the payments, and collecting.

Tom, I did read the link, and I'm sorry I was imprecise in my earlier wording. And don't get me wrong, I think your idea is interesting.

Take Stafford Loans.

Or Fannie Mae mortgages.

The main difference I see between these and tax loans is who the bank is and the degree to which they are subsidized. Still "your own money in advance." And with a loan, you still pay more in surchage via interest.

And M. Simon,

There's a vast difference between 80/20 and 99.05/0.05.

Cheers.

Joe, sorry for the sharpness of my original comment -- was a bit tipsy, and wanted to make sure my points made it through the haze. But while Chua has a point about the dangers of democracy -- the rule of law, and respect for that, is much more important and really a precondition -- bringing "the market" into it is the worst sort of red herring. Man's pre-"globalization" state isn't utopian equality but inequality (and actual, government-sponsored injustice -- it isn't "globalization" or the "market" that lets people run a corrupt kleptocracy) more wretched than many can imagine. And the "global" or Western import that ignites this into violent outbreaks isn't economic change, it's modern leftist ideology that tells folks it's OK to kill "oppressors", and demonstrates how to do it.

What's the solution? Simple: open people's minds to the truth of advancement by non-zero-sum transaction -- free markets and the rule of law. (Plus mass culture to convert their more unruly feelings back into economic activity -- but that will take care of itself given a communications infrastructure.) But this is what folks like Chua tend to deride as naive neoliberalism...

Well I think that you guys really have absolutely no idea what you are going on about! Read through what you've written, but this time do it carefully! You guys must really have issues if you all cannot see the blatant error that stares you in the face.