Jihad vs. McWorld (40 page)

Even within nation-states, we are eschewing the tools we have. The dogmas of laissez-faire capitalism that have suffused the politics of America and Europe in the last few decades have been reinforced by the resentments of an alienated electorate that has lost confidence in its own democratic institutions; together, they have persuaded us that our democratic governments neither belong to us nor function usefully either to limit markets or to help them work. The expiration of Marxist and command economy dogmas has breathed new life into free market and laissez-faire dogmas and forced us back into Friedman’s choice of radical collectivism or radical individualism. We condemn politicians as if they were not chosen both by us and from among us, and turn on governments as if we still lived under the absolute monarchs of the eighteenth century—as if constitution building were aimed exclusively at curtailing tyranny and not also at
facilitating common democratic action. Citizens abjure the common “we” and allow it to be identified exclusively with corrupt politicians or totalitarian despots. Democratic authority and the abuse of democratic authority become synonymous.

When peoples emerging from communism become frustrated by wild capitalism, they turn not to discredited parliamentary institutions but back to the tougher party apparatchiks who have survived the passing of the very Communist regimes whose legacy has delegitimized parliamentarianism.
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These developments have meant that democracy has had an increasingly hard time inside nation-states afflicted with radical market ideology. Western analysts have pushed so hard for the liberation of markets that they have “thrown out the state-controlled baby with the bath water.”
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If laissez-faire ideology has made it this difficult to conjure up a noncollectivist democracy, how can a transnational democratic polity ever be imagined? Even if we could overcome our political diffidence, which mechanisms might afford us the chance as citizens to undo the inadvertent evils of global markets? The eclipse of the national “we” in the shadows of both Jihad and McWorld is trouble enough. Now we face their consequences in the absence of any global civic “we,” prepared to act beyond national boundaries. When the only transnational “we” available has to be drawn from anarchic congeries of greedy “me’s,” the market ultimately fails on its own terms. We get the goods but not the lives we want; prosperity for some, but despair for many and dignity for none. McWorld’s twenty-six thousand or more international nongovernmental associations are no match for its
Fortune’s
top five hundred multinational corporations. Cartels show little hospitality to citizens. McWorld is not and cannot be self-regulating. Nor is it likely to produce the kinds of democratic civic bodies it needs to stay in business. This is McWorld’s paradox. It cannot survive the world it inevitably tends to create if not countered by civic and democratic forces it inevitably tends to undermine.

Now these defects may not be defects at all by the standard of macroeconomics.
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They are only defects by the standards of politics. They become the defects of markets, however, when macroeconomics and markets are allowed to usurp the role of politics. The disastrous consequences that follow from patterning political reforms
on macroeconomic theories are patently visible in countries throughout Latin America and Africa where “as the private sphere flourishes … the public sphere crumbles.” To Guillermo O’Donnell, a leading Latin American political scientist, the matter is simple: “privatization is not democratization.”
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Period.

I cannot begin to do justice to the havoc wrought by the attempt to impose an economic solution to the problems of democracy on the world’s developing regions, but I do want to offer brief portraits of two post-Communist lands where—in confounding privatization with democratization—wild capitalism has become the primary arbiter of civic values for the last five years and where as a consequence an older democracy (in the newly unified Germany) and a new would-be democracy (in old Russia) are each facing hard challenges to their democratic aspirations.

T
HERE IS AMPLE
empirical evidence to justify the shrill criticism by observers like Solzhenitsyn of Russia’s experiment with overnight democratization via capitalism-in-a-hurry. There are few participants in the process who are not today deeply worried about the impact of “shock therapy” capitalism both on Russia’s constitution—“a document of very limited legitimacy, and thus authority”
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—as well as on the future of Russian democracy, “which has never been more uncertain.”
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John H. Fairbanks, Jr., believes that “many of the preconditions of fascism are now or will soon be present in Russia: hyperinflation, mass unemployment, seething status resentments, disillusion with democracy, a society that is ‘De-Christianized’ but still craves ‘spirituality,’ bitter border conflicts, constant fighting waged not by state armies but by
freikorps-like
volunteer groups and residual socialist and nationalist feelings.”
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Not every observer is so dramatic, but even sober economists such as Padma Desai have concluded that the shock strategy “hasn’t worked—and won’t.”
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He estimated a decline in Russian GNP of 19 percent and a further fall of 11 percent in 1993, along with inflation of 2,500 percent in 1992 and a continuing
inflation thereafter of 25 percent a month. Elsewhere in Eastern Europe, even the economies that have been advertised as “successful” have nonetheless sustained a radical decline in industrial output (over 50 percent in Hungary, the Czech Republic, and Slovakia [similar to Russia], and more than 75 percent in Bulgaria), and a costly surge in retail prices, continuing inflation, and unemployment between 10 and 20 percent in nations that had none.

In Russia itself where advisors including the conservative Hoover Institution, investment bankers like Goldman, Sachs and Company, and radical free-market economists such as Jeffrey Sachs have been pushing shock tactics, in the first two quarters of 1994 industrial production fell a further 25 percent per quarter (faster than during the Great Depression in America), with agricultural production stalled at a thirty-year low.
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Some estimates classify a full one-quarter of the Russian population as impoverished with an additional 40 percent living below the subsistence line.
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While the rich buy cellular phones, Maine lobster, and illegal drugs, the average industrial wage remains somewhere between $40 and $70 a month, just a little more than what it takes to rent a car at a good hotel for an hour.
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Stretch limousines at $150,000 and $30,000 Cartier watches sell out in what are usually all-cash transactions in boutiques that once targeted foreigners but now cater primarily to Russians—about a million of whom (from a population of 150 million) can afford luxury goods. By the end of 1993, nearly forty thousand foreign-make cars had been registered in Moscow.
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At the Exhibition of Economic Achievement fairgrounds that once paid tribute to the wished-for wonders of Soviet industry and science there stands today a massive shopping arcade: a tribute to McWorld, where “Muscovites cart off newly bought Sony and Panasonic Televisions so fast it looks like a looting spree” and where a Russian visitor exclaims: “I am in shock, I am in shock, I think we have become the 51st state of America.”
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Naglost
(a term meaning “anything goes” with particularly brazen and insolent undertones) has replaced
glasnost
as the working cry of the new capitalism, where pyramid schemes pass as investment opportunities, gut-burning moonshine is sold in Chivas Regal bottles, and protection money and security guards have become the ante of playing in any business at all.

Meanwhile, more than 15 million are unemployed (as compared with less than a million in the old Soviet Union) and critics—not all
of them conservatives or nationalists or sulking Communists—argue that shock therapy has become shock without therapy. Conservative editor Aleksandr Prokhanov laments, “The economy is dying, social links are breaking apart. At some point soon society will become ungovernable.”
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Viktor Chernomyrdin, Yeltsin’s new prime minister installed after radical reform failed, announced: “The period of market romanticism is over,” but he must still figure out how to deal with $2.5 billion in rescheduled foreign debt, most of it favoring foreign investors who received investment credits.
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The $11 billion in bilateral assistance promised by Western nations in 1993 and 1994 is also aimed at helping Western exporters while the $4.5 billion in real aid promised by international organizations has been forthcoming only in dribs and drabs—as has been the case throughout Eastern Europe, where Western promises have yet to pay off.
¹²

New York Times
reporter James Sterngold, reporting on the 1993 economic summit in Japan, wrote that the Russian aid package negotiated there “clearly amounted to less than met the eye … just a reallocation of funds committed” earlier.
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While Russia awaits serious investors in its own economy, McWorld is moving in. The world’s largest McDonald’s is now in business near Red Square—although it caters to the well off, with a Big Mac lunch (which can be ordered in English or Russian) costing a week’s wages. Ben and Jerry’s has come to the provinces, although unlike Pizza Hut, it is prudently holding off on Moscow. Avon is hawking cosmetics to housewives whose vanity is being assiduously stroked by the new media, which feature Western gangster films, soap operas, and game shows; and every electronic and software firm in the world is staking out a position in what is hoped will be a primary consumer growth market in the new century.

The old creaking collectivist and statist monoliths are slowly disappearing, but in their place, alongside struggling new Russian businesses, are American-style takeover firms riding shotgun for Russian companies that buy raw materials for rubles and resell them at exorbitant dollar prices abroad. Western observers celebrate unfriendly takeovers as if they were crucial blows in the struggle for democratization. Joseph Blasi, a Rutgers University economist, happily retells the story of the Vladimir Tractor factory near Moscow where “a Russian businessman with a Harvard M.B.A. unseated the plant’s chief
executive with the help of a New York investment group that owned one-sixth of the stock.”
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What is greed in New York counts as economic modernization in Moscow where perhaps greed really
is
good. Many indigenous Russian investment firms trade in the vouchers given early on in the privatization process to every Russian as a marker for their piece of the old Soviet collectivist rock, taking advantage of the fact that most Russians, desperate for cash to pay rent and subsistence, cannot afford to hold on to their vouchers and are willing to sell them cheaply to speculators. Like their American counterparts, these companies manufacture nothing except unearned profits. Other firms like the notorious MMM that went into a dizzying tail-spin in 1994 are little more than pyramid schemes through which gullible grandmothers are hustled out of their life savings, the proceeds of which are used to lure others into buying a stake in an outfit that neither owns nor produces anything other than the misplaced hope of its duped investors.
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For those rich enough to want to gamble directly, there are a dozen new casinos in Moscow, while for the less well-heeled, Harrah’s ruble slot machines are available in almost every neighborhood workingman’s grocery store.
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Wild capitalism has made business and crime kissing cousins and no one is quite sure where one ends and the other begins. Street crime and mafia-style executions are only the tip of an infrastructural iceberg that lurks below the water of business and government. Often the same people who once ran state-owned enterprises are now their “private” owners, while other former Communist managers help liquidate the businesses they were supposed to privatize, leaking goods abroad on the black market and smuggling oil and nickel and scandium out of the country for profits from which neither Russia nor Russian voucher holders profit.
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Amateur speculators lurk in the Moscow subway with signs saying I BUY VOUCHERS while enthusiastic professionals, unhindered by a centralized securities exchange, an FTC, or SEC, or regulations of any kind, exclaim: “We are making money out of air!”
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Money is not made out of air, however, but snatched from the pockets of Russians whose incomes do not permit them the luxury of speculation. What Robert Reich condemned as the “secession of the rich” from America’s public sector is a growing issue in Russia as well: two societies are emerging, one rich, private, and insulated, the
other, poor, public, and exposed to the trials of the Russian nation (that is, the Russian market) at large. As the first society succeeds, with the collusion of investors from abroad—individual and institutional—the second (including the 40 percent who are technically “impoverished”) is abandoned to a bankrupt public sector incapable of offering social security, employment, or a decent wage. Even advocates of privatization now acknowledge that wage subsidies might have protected workers from what they rather charmingly call the “labor-shedding” practices of privatizers wishing to make state firms look more attractive to investors who might not have the political gumption to fire half the staff of newly acquired companies.
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In practice, however, a large percentage of the new class that makes up the second sector of the poor, the indigent, and the unemployed are flotsam and jetsam on the tides of privatization: workers who have been sloughed off by a system that is more profitable to its new private owners without them. The real story of democratization in Russia and elsewhere in Eastern Europe will likely unfold as a product of the tensions between these two oppositional sectors.