World on Fire - Brownstein, Michael [142]
If this state of affairs could be changed—if large numbers of the “indigenous” population had an ownership stake in their society’s capital markets—the benefits might be considerable, economically and politically. As Columbia Law School professor John Coffee has put it,
“Encouraging equity markets to develop and encouraging dispersed ownership may . . . imply not only efficiency gains but also a more open society, one less dominated by banks” and “crony capitalism” and “more attractive to entrepreneurship.”
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Fourth, a more controversial strategy for addressing the problem of market-dominant minorities consists of government interventions into the market, consciously designed to “correct” ethnic wealth imbalances. Such ethnic-based interventions on behalf of an economically disadvantaged group are known as affirmative action programs in the West. Particularly in the United States, these programs have been the subject of increasingly bitter criticism in recent years.
Whatever the merits of these criticisms in the West, it is important not to confuse apples with oranges. In the West, affirmative action policies are intended to benefit disadvantaged ethnic minorities—African-Americans in the United States, aborigines in Australia, or Maori in New Zealand, for example. By contrast, affirmative action policies in countries with a market-dominant minority are intended to benefit disadvantaged majorities—for example, blacks in South Africa, Quechua and Aymara Indians in Bolivia, or the 80 percent indigenous pribumi majority in Indonesia. This is a rather major difference.
For one thing, even putting aside questions of justice, a situation in which the great majority of citizens in a country live in extreme poverty, while a tiny ethnic minority controls most of the nation’s wealth, is extremely unstable, particularly when combined with sudden democratization. For another thing, affirmative action programs in these countries, if voted in by a majority of the population as is the case in South Africa, represent a democratic outcome—and therefore an outcome that it would be awkward for, say, the IMF or the United States to overturn in the name of markets. In any event, Western policymakers, especially American policymakers, have to be careful not to project their own negative feelings about affirmative action or identity politics onto societies where the conditions and demographics are totally different.
Indeed, many Americans are unaware that other countries, including a number of Western countries, have pursued ethnically based affirmative action programs—some with notable success. Canada, for example, has had considerable success addressing the problem of a market-dominant minority at the provincial level. In Quebec, aggressive affirmative action policies in the 1960s helped raise the economic status of the severely economically disadvantaged 80 percent French Canadian majority vis-à-vis the market-dominant English-speaking minority, who historically controlled Quebec’s banks, insurance companies, trade, and manufacturing—indeed, the virtual entirety of the modern economy.
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But conditions in Quebec forty years ago were considerably more propitious than those prevailing in the non-Western world today. (Quebec was part of a prosperous, industrialized country and the recipient of generous federal funding from the Canadian government.)
16 A much more relevant example for today’s developing countries is Malaysia’s affirmative action program for its indigenous Malay majority. Following the 1969 race riots in Kuala Lumpur, which were similar in many respects to those that recently erupted in Indonesia, the Malaysian government adopted the “New Economic Policy” (NEP), aggressively seeking to achieve “national unity . . . expressed as the improvement of economic balances between the races.” At that time indigenous Malays, or bumiputra, represented roughly 62 percent of the population