globalization and violence

8/13/2019 Globalization and Violence

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Third World Quarterly, Vol. 25, No. 6, pp. 10071030, 2004

Globalisation, extremism and violencein poor countries

RICHARD SANDBROOK & DAVID ROMANO

ABSTRACT Globalisationunderstood as external and internal market liberali-sationgenerates conditions in poor countries that are conducive to the emerg-ence of extremist movements, instability and conflict. Liberalisation and theaccompanying requirement of macroeconomic stabilisation subject people torapid and sometimes devastating changes in fortune. Yet globalisation has hadvastly different effects in different countries. Many have succumbed to sporadicgrowth or stagnation, inequality and turmoil, whereas others have achieved abroadly based prosperity, peace and democracy. A comparison of two liberalis-ing African casesEgypt and Mauritiusis employed to explain this divergencein paths. Mauritius has so far deftly navigated the maelstrom of globalisation byachieving growth with considerable equity and genuine democracy, while Egypthas followed a path of belated and partial liberalisation, irregular growth, the

rise of new inequalities and insecurities, repression and violent Islamist move-ments. The major reason for this divergence lies in certain contingent institu-tional and class processes.

That neoliberalisms triumph would usher in a more peaceful and prosperousworldan end of historywas a popular post-cold war view. According tothis position, the collapse of state socialism in the 1980s allowed all countriesto adopt a market orientation and open economies. Free global markets, it wasbelieved, facilitated the free movement of ideas as well as products, therebyopening closed states to the outside world. Free trade and investment, further-more, could foster the prosperity necessary to defeat poverty and defuse

conflicts. Democratisation and the development of civil societies would, in time,accompany economic liberalism. All these changes would facilitate a morepeaceful world.

But a darker view, that liberalisation foments extremist movements andconflict, competed with this sanguine viewpoint. Marx had memorably ex-pounded in The Communist Manifesto on the volcanic impact of marketforceshow they introduce everlasting uncertainty and agitation, how all thatis solid melts into airduring the first era of globalisation. Similarly, KarlPolanyi in The Great Transformation (published in 1944) famously labelled asutopian the liberal project of creating a self-regulating market economy. Such

Richard Sandbrook is at the Munk Centre for International Studies, 1 Devonshire Place, Toronto, Canada

M5S 3K7. Email: [email protected]. David Romano is in the Department of Political Science,

McGill University, Montreal, Canada. Email: [email protected].

ISSN 0143-6597 print/ISSN 1360-2241 online/04/061007-24 2004 Third World Quarterly

DOI: 10.1080/0143659042000256869 1007

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a project invariably instigated a counter-movement of societal protection, for aliberal economy would lead to the devastation of society. However, where themovement towards liberalism and the societal counter-movement entered intodeadlock, or where market-induced insecurity became extensive, conditions

ripened for the rise of extremist, violent tendenciesfascism and Stalinism inthe Europe of the 1920s and 1930s. More prosaically, yet with no less chillingeffect, the US Central Intelligence Agency forecast, in its 2000 report GlobalTrends, 2015, that the second era of globalisation would be no less tumultuousthan the first:

[Globalisations] evolution will be rocky, marked by chronic financial volatility anda widening economic divide. Regions, countries, and groups feeling left behind willface deepening economic stagnation, political instability, and cultural alienation.They will foster political, ethnic, ideological, and religious extremism, along withthe violence that often accompanies it.

This darker view frequently surfaces in a neoliberal concern that economicglobalisation may provoke a damaging populist backlash against the marketeconomy.1

Are the forecasts of Marx, Polanyi and the CIA correct? Our current era iscertainly not a peaceful one. Civil wars, insurgencies, ethnic/religious strife,riots, rampant urban crime and terrorism, often abetted by the weakening orcollapse of state power, have marred the post-cold war era. Few safe havensexist when even the USA is subjected to a major terrorist attack. Is globalisationimplicated in this record of instability and conflict?

Definitely not, according to a recent cross-national quantitative studyat leastif one restricts ones focus to terrorist violence.2 The authors of this ambitiousstudy affirm the liberal consensus in arguing that economic globalisation(increased flows of foreign trade, foreign direct investment, and portfolioinvestment) dampens terrorist activities in recipient countries by promotingeconomic development (see p. 254). This study suffers, however, from two flawsin its reasoning. First, the authors assume that it is a countrys growingintegration into global markets that produces its economic development. In fact,many factors other than an increase in trade and investment account foreconomic growth, and it may well be that growth promotes a countrys foreigntrade and investment, rather than vice versa.3 Second, the authors do not considerthe importance of reverse causation. That is, the low incidence of terroristattacks in a country may itself bolster the confidence of investors and exporters,leading to higher rates of investment and trade in that peaceful country. Theliberal theory remains unproven.

In contrast, we contend that, as a general tendency, globalisationwhich wetake as synonymous with external and internal market liberalisationgeneratesconditions that are conducive to the emergence of extremist movements, insta-bility and conflict. Virtually the entire human population has been drawn into agrowing dependence on markets that, because they are now scantily regulated,subject people to rapid and sometimes devastating changes in fortune. The

distributional shifts, new forms of insecurity, and external shocks demandstrong, coherent states to take decisive defensive action and mediate domestic

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GLOBALISATION, EXTREMISM AND VIOLENCE IN POOR COUNTRIES

conflicts; yet these new tensions, combined with externally influenced austerityprogrammes and anti-state ideologies, challenge the legitimacy and coherence ofalready weak states. The rise in tensions and grievances, coupled with anincreasingly ineffective and unpopular regime, provide an opening for violent

protest movements. Although competition-induced creative destruction mayaugment global efficiency, this goal is often achieved at the immediate cost ofgreater uncertainty and upheaval.

But the actual political impact of market liberalisation in each country isheavily influenced by contingent domestic factors. Whereas the outcome inmany cases approximates that of the darker scenario, in others globalisation hashad just the benign impact that the sanguine neoliberal perspective forecasts: abroadly based prosperity together with democracy and peace. The pattern ofpre-existing cleavages and dissidence, together with the capacity of institutionsto manage distributional and value conflicts, shapes these divergent outcomes.

This obvious point, however, simply pushes the analysis back one step. Howand why is the institutional endowment of certain counties superior to that ofothers in handling the pressures of globalisation?

To probe this issue, we employ a comparison of two liberalising country-casesEgypt and Mauritiusboth usually identified as part of Africa. Thoughsharing several key social and economic circumstances in the 1960s and 1970s,they have diverged in political outcomes since undertaking structural adjustment.Mauritius has deftly navigated the maelstrom of globalisation by achievinggrowth with considerable equity and genuine democracy, whereas Egypt hasfollowed a path characterised by belated and partial liberalisation, irregular

growth, the rise of new inequalities and insecurities, repression, and violentIslamist movements. If Mauritius is globalisations prodigy, Egypt is one ofglobalisations bastards. One important reason for this difference lies in theformers institutional endowment and class/ethnic relations, both of which arisefrom a peculiar colonial experience. Not only did liberalisations success here,in contrast to Egypt, require merely minor institutional adjustments, but unusualclass/communal dynamics generated, again in contrast to Egypt, an equity-en-hancing separation of political from economic power. Growth with a degree ofequity also contributed to the survival of democratic institutions of conflictmanagement. Certain contingent institutional conditions and political dynamicsthus domesticated globalisations disruptive impact in Mauritius, though not inEgypt.

Before examining how these contingent factors shape a countrys experienceof globalisation, we need to explore how ascendant global market forces exerta destabilising influence in the global south.

General tendencies: liberalisation and turmoil

With the ascendancy of neoliberalism in the early 1980s, structural adjustmentbecame the principal economic policy imperative in indebted countries. Hitherto,most of these countries had pursued state-led development, featuring import

substitution, subsidies, regulation of markets, and varying degrees of stateownership of productive assets. In the 1980s or earlier, these statist economies

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faltered, especially in Latin America and sub-Saharan Africa. These economiccrises derived from multiple sources: exogenous shocks (world recession, inter-est-rate hikes, energy price increases) and domestic constraints (neopatrimonialpolitics, corruption, mismanagement, armed conflicts, instability). Something

needed to be done. The neoliberal prescription involved a rapid shift fromstate-led to market-led development. To compete in global markets and attractcapital, the new model enjoined governments to maintain low inflation, reduceproduction costs, cut corporate taxes and labour costs, limit subsidies, privatiseland and public corporations, and liberalise markets. These changes, whatevertheir economic merits, have had profound social and political implications.

Both the wider reach of markets and technological developments accentuatethe disruptive potential of economic liberalism today. A century ago much of theworlds population lived in self-provisioning peasant societies in colonies andsemi-colonies, or on family farms in industrialising countries. Large regions of

the world were integrated into the world economy only through trade; land andlabour had not yet been transformed into commodities. However, the decline ofthe family farm in industrial countries, the deepening commercialisation ofagriculture in poor countries, and high rates of ruralurban migration haverendered a growing proportion of the worlds population more vulnerable tomarket conditions. Also, the collapse of communism and the USSR (198991)have further extended the sway of the market system. As the market penetratesevery nook and cranny, no one escapes its fluctuations. Meanwhile, technologi-cal advances in transport, telecommunications, satellite transmission, the internetand computer-based information-processing have not only linked the destinies of

people world-wide, but also accelerated the pace of change. Even a mightymega-corporation such as Enron can evaporate into thin air. An apparenteconomic success-story like Argentina can self-destruct in a few months. Andsuch dramatic oscillations have immediate global effects.

Five ways in which market opening may augment economic insecurity,inequality and alienation, and thereby foster extremist movements, include thefollowing.4

Trade liberalisation

In agriculture neoliberal policy typically prescribes a reduction or elimination ofprice controls and subsidies to producers, in addition to export orientation andlow tariffs, as the best way to improve economic conditions. Such a programmecan wreak havoc with the livelihoods of smallholders, as the case of India shows.India liberalised the import of soy bean and soy oil imports in August 1999. Theresult was that subsidised imports from Western countries rose by 60% in thefirst year. Prices crashed by more than two-thirds, and millions of oilseed-pro-ducing farmers had lost their market, unable even to recover what they had spenton cultivation. The entire edible oil production and processing industry was alsodestroyed. Millions of small mills have closed down.5 The phasing out offertiliser subsidiesoften required under IMF conditionalityraises production

costs, and helps drive many small farmers into insolvency.As policies such as these drive many smallholders to the wall, export-

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orientated large companies buy them out. Former farmers head for the burgeoningurban slums. Export receipts may increase and subsidised wheat and rice importsfrom the EU and the USA may lower food prices, but at the expense of decliningfood self-sufficiency, growing insecurity and inequality, and much bitterness.

Trade liberalisation in industry also produces many losers, along with winners.Even if the freer trade maintains or increases overall output and labour produc-tivity, it will lead to the failure of some firms, to widespread retrenchment ofworkers, and to unemployment in some sectors. Chronic insecurity grows,especially in industrialised countries like the USA, where unions are weak, asindustries rapidly wax and wane, better-paid permanent jobs vanish, and un-skilled and even skilled workers watch their real wages fall.6 That this insecurityfosters anger, intolerance, and extremism should not be surprising.

Financial liberalisation

This policy shift breeds periodic currency crises that undercut living standardsand employment. Liberalisation of domestic banking, followed by internationalfinancial deregulation, has opened up cross-border capital movements throughoutthe world since the 1980s. IMFconditionality presses developing countries in thedirection of removing capital controls. Today, at least $1.5 trillion passes throughcurrency markets each day in a world of instantaneous trading where marketsnever close. The result is a high volatility of financial flows leading toturbulence: a rise in the frequency and severity of financial crises. Mexico in1994, Thailand, Indonesia, South Korea and Russia in 199798, Brazil in 1999,

and Turkey and Argentina in 200003 are just the most recent instances ofdevastating financial crises resulting in a collapse in the local currency, ineconomic activity and in employment. One expert estimates that these crisesraised the incidence of poverty by 7% in these eight countriespushing an extra57 million people below the poverty line.7 Financial liberalisation, therefore, isa major contributor to the chronic insecurity of the market system.8

IMF-style stabilisation programmes, designed to remedy financial disequilibria,can raise societal tensions and thereby foster conflict.9 The standard packageincludes exchange-rate devaluation, positive real interest rates, a sharp decline inmoney supply, and a cut in governmental expenditures. But slashing publicspending will usually result in a reduction or elimination of popular subsidies,

job losses, wage cuts, and a reduction of public investment and services. The netresult may be to sabotage implicit social contracts, the tacit bargains wherebysectors of the population assent to rule in exchange for the public provision ofcustomary services and material benefits. Not only will these sudden lossesalienate strategically located public employees, but they will also weaken thegovernments support in other key constituencies as services deteriorate andprices rise. Also, high interest rates and credit reductions will harm smallproducers and perhaps reduce the food supply to the cities. Rising tensions,accompanied by falling state capacity, are a recipe for political disaster invulnerable economies. To compound the political crisis, the IMFusually imposes

capital-account liberalisation as a condition of its stabilisation loans. Thiscondition exposes the vulnerable economy to heightened volatility in the future.

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Stabilisation, liberalisation and inequality

Domestic and external liberalisation has also deepened certain inequalities withinsocieties. Since the early 1980s, inequality has risen in most countries, and in

many cases sharply.10

A detailed study of 73 countries for which high-qualitydata were available revealed that inequality rose in 48 cases (accounting for 59%of the samples population), remained constant in 16 countries (although in-equality rose in two of them, Indonesia and Bangladesh, in the late 1990s), andfell in only nine countries, accounting for 5% of the total population.11 Otherstudies confirm this general trend.12 Although data are limited, they also point tothe growth of regional inequality. China, India and Thailand manifest growingregional gaps and high rates of ruralurban migration. Growing regional dispar-ities may exacerbate ethnic cleavages, as ethnic groups are generally regionallybased.

This worsening income distribution is directly related to neoliberal policies.Economic stabilisation programmes induce deep recessions while cutting expen-ditures that benefit the poor (food subsidies, public employment, accessibleeducation and health care). Financial liberalisation, besides inducing periodicrecessions, shifts income to lenders and rentiers at the expense of wages andborrowers. Privatisation often concentrates the ownership of public assets in thehands of wealthy political insiders, further exacerbating inequality. Tax systemstend to become less progressive and more reliant on value-added taxes, lessredistributive and more reliant on user payments, all of which promotes in-equality. And the quest for more flexible labour markets generally translatesinto reduced employment protection, lower minimum wages, curtailed unionrights and falling public employment. In all these ways liberalisation andglobalisation hammer the living standards and prospects of middle-class sectorsand workers in many countries, while benefiting the owners of capitalphysical,financial and intellectual.13

Growing inequality breeds political turmoil in two ways. First, rising in-equality reduces the contribution that economic growth (where achieved) makesto reducing poverty. Defined as those who survive on less than $1 per day (1985purchasing power parity), the very poor remained constant at about 1.2 billionpeople between 1987 and 1998, according to the World Bank. By the latter date,nearly half the worlds population still lived below the higher poverty line of $2

per day. Expectations that free markets would transform the living standards ofthe poor have, therefore, been dashed in many countries, with potentiallydisruptive effects. Second, relative deprivation is a more powerful motivator ofinter-group violence than absolute deprivation. A large-scale quantitative studyconcludes: The risk of political disintegration increases with a surge of incomedisparities by class, region and community.14

This political disintegration can take two forms. On the one hand, in highlystratified class societies, growing inequality will deepen class conflict and oftenaugment the appeal of left-wing movements. This pattern has characterised muchof Latin America.15 Particularly explosive are the likely social consequences of

the liberalisation of agricultural markets and the creation of private property inland where smallholders had hitherto held communal rights to land use. The

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increased vulnerability and insecurity of rural populations have fomentedconflicts along class or ethnic lines.16 On the other hand, in countries where deepcommunal cleavages have emerged since independence (as in parts of Africa andAsia), growing disparities have exacerbated regional, ethnic and/or religious

divisions. As one expert succinctly observes: When secular economic trendslead to low growth, debt crises, rising unemployment, and rising rates ofimmigration, and when the resulting hardships and benefits are disproportion-ately allocated among various cultural groups, existing political cleavages basedon cultural differences are exacerbated and new ones are created.17 Secessionistmovements, civil wars, pogroms, warlordism, or low-intensity insurrection keptin precarious check, are the unfortunate outcome. Most of the more than 30violent conflicts that raged within the countries of what were formerly known asthe Second and Third Worlds in the early 1990s had a communal basis.

Liberalisation, especially when accompanied by democratisation,18 sharpens

divisions and raises social tensions. The prospects for longer-term social peacedepend principally on two trends. First, if neoliberal reform actually increasesgeneral prosperity, then class or communal tensions may dissipate. But, in thecontext of a decade or two, such reforms have rarely fulfilled their promise inLatin America and Africa. Second, if political institutions emerge that preventabuses of power, manage conflict by reconciling or repressing dissidents, anddesign and implement appropriate economic and social policies, the outcomemay be peaceful. But effective yet limited political institutions are notoriouslydifficult to develop in societies riven by mutual distrust and hostility. So theoutlook is bleak in many countries.

Cultural globalisation

Neoliberal globalisation is not just a matter of economics; it also threatens entireways of life. The global penetration of the mass media and the values, imagesand tastes they purvey, have a powerful impact upon non-Western cultures.Television, films, popular music and advertising, industries dominated by USmega-corporations, pervade the world. These industries transmit a possessiveindividualism that fragments tightly knit communities; propagate consumertastes that influence the dress, language, food and attitudes of young people;

popularise notions of sexual, gender and authority relations that often clash withlocal notions of virtuous behaviour; and reflect a secular, narcissistic outlookusually in conflict with sacred worldviews defended by local elites. Mediaconglomerates are driven by a quest for profits, not hegemony; yet theseemingly innocuous market quest for fun, creativity, and profits puts wholecultures in harms way and undermines autonomy in individuals and nationsalike.19

The dialectical reaction to McWorldthe homogenising, consumer-orien-tated and secular popular cultureis often Jihada reversion to a worlddefined by religion, hierarchy and tradition. As Benjamin Barber graphicallydepicts the latter:

Jihad in its most elemental negative form is a kind of animal fear propelled by

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anxiety in the face of uncertainty and relieved by self-sacrificing zealotryanescape out of historyMoral preservationists, whether in America, Israel, Iran, orIndia, have no choice but to make war on the present to secure a future more likethe past: depluralized, monocultured, unskepticized, reenchanted.20

This fundamentalist holy war assumes diverse formsChristian, Jewish, Hindu,as well as Islamicalthough only in the Islamic world do such protest move-ments threaten the stability of entire societies.

State disintegration

Whether these tensions will afflict a particular country and foster conflict andinstability depends heavily on the capacity of its state to mediate and disarmthem. Yet neoliberalism can weaken the capacity of states to maintain order. If

states had begun to disintegrate before the initiation of stabilisation and liberal-isation, the latter processes undercut them further.21 Two tendencies underminestate effectiveness. First, the legitimacy and mediatory capacity of a statedepends heavily on its provision of basic serviceseducation, health, cleanwater, roadstogether with its mounting of safety nets and its servicing ofextensive patronclient networks. However, external shocks (reduction of aid,declines in the terms of trade, outflows of foreign capital), IMF-sponsoredstabilisation programmes and privatisation of state corporations will curtail agovernments resources just as societal tensions rise. Central governments willthen be less able to manage conflict by compensating the regions, classes and

unemployed who bear the brunt of the adjustments; indeed, they may be unableeven to maintain order, as emboldened rebels defy central authority. The lattermay capture lucrative local resourcesgold, diamonds, oil or timberin orderto build their own patronage networks.22 Second, the authority of the governmentwill suffer if it is seen as the puppet of external forces, such as the IMF or theUS government. When national elites buy into the Washington or post-Washing-ton Consensus, this transnational consensus risks alienating those domesticgroups that clamour for protection from unleashed market forces. The conse-quent political turbulence, in turn, motivates threatened political leaders to movetowards more centralised and authoritarian governance, regardless of democraticconstitutions. National disintegration is then manifest in growing regional,communal, or class challenges to state authority. This dynamic operates even insuch a well established democracy as India since the early 1990s, according toa leading political analyst.23

Market liberalisation, therefore, not only heightens the insecurity and uncer-tainty of certain groups in characteristic ways, but also may deepen existingsocial cleavages (and create new ones) by widening the gap between winnersand losers while circumscribing a states capacity to deliver valued services andpatronage. The demographic trends tend to magnify the potential for politicalunrest. In many developing countries, half of the rapidly expanding populationis under 25 years of age. Young men without prospectsthe contemporary

embodiment of Marxs dangerous classesare disproportionately representedamong those adversely affected by market conditions.

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Transnational strains, national responses

Yet rebellion and violence are not the necessary outcome of these stresses on thesocial fabric. An adept regime strategy either to buffer the losers living

standards, enhance equity and build a new political base or, alternatively orconcomitantly, to repress the dissidents, may quell the turbulence. Alternatively,the rise in insecurity and sense of inequity, if coupled with an increasinglyineffective and unpopular regime, provides openings for extremist movementsand political violence. The domestic political consequences of transnationalstrains depend heavily on the depth of pre-existing cleavages, the organisationand goals of dissident groups, and the flexibility and coherence of institutions.

Protest movements try to translate inchoate grievances into a sense of injusticeand threat, and thereby to mobilise people for political action. Counter-elitesmanipulate cultural tool-kitsdominant symbols, myths, historical memories,and attitudesto interpret events, attribute blame and sanction action, includingpolitical violence.24 Leaders compete to frame issues in a way that will gainsupport among their target audience. The ideological content of these radicalmovements ranges from the far left to the far right. In Chiapas in southernMexico, for instance, peasants have responded to a compatible blend of liber-ation theology and Marxism, together with the imagery of Emilio Zapata, inrallying behind the EZLN (Zapatistas) since the mid-1980s. Globalizing econ-omic, political and cultural forces merged with the impact of historically derivedconditions and the activism of mobilizers, tying local realitiesto wider worldcurrents, observes one analyst of the Chiapas rebellion.25

Similarly, Islamism, whose upsurge in popular support coincides with the

current era of globalisation, has become the main ideology of protest inpredominantly Islamic countries. Islamism offers a religio-historical justifi-cation for revolt in a context where other protest ideologiespopulism,nationalism, socialism and pan-Arabismhave failed to achieve their anti-imperialist, nationalist, egalitarian goals. Islamists provide basic services in poorareas, champion the Islamic heritage in opposition to alien cultural influences,crystallise feelings of discontent and deprivation (especially among the young),condemn corrupt and authoritarian regimes, and articulate the anger aroused bythe IsraeliPalestinian conflict. Grievances arising from economic trends andpersistent poverty thus blend with cultural and geopolitical tensions to fortify

Islamist support.26

By identifying the machinations of specific groups (defined by class, ethnicity,nation or religion) as directly responsible for detrimental trends, radical move-ments focus popular frustration and anger. Therein lies the rationale for politicalviolence, for how else can the powerful manipulators be defeated and the properorder restored?

Institutional conditions: Egypt and Mauritius compared

To probe the institutional conditions and regime strategies that shape domestic

political impacts, we compare the cases of Egypt and Mauritius. Both countriesunderwent economic crisis and structural adjustment in a postcolonial context of

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low per capita incomes and dependent economies, high unemployment and highpopulation growth. However, their trajectories have sharply diverged sinceadjustment. Egypt has experienced sporadic periods of healthy growth, coupledwith rising inequality and economic insecurity (especially in Upper Egypt),

semi-authoritarianism and a simmering Islamist revolt. In contrast, Mauritius hasattained a rising and broadly based prosperity, an increasingly strong democracy,a modest welfare state and social peace.

Before trying to explain this striking divergence, we need to show that the twocountries shared some similar challenges at the time of market liberalisation.

Dependent, underdeveloped economies

Mauritius, at independence in 1968, gave no sign that it would later stand outfrom other similarly underdeveloped countries in the region. The countryappeared to be a typical sugar colony, with a harsh history of servile labour,extreme racial inequality and a monocultural economy. France, which controlledthe island until 1814, forged a colonial society in which a small Frenchplantocracy exploited African slaves on its extensive landholdings. These estateswere eventually converted into sugar plantations. The British inherited thisinegalitarian system in 1814, although they abolished slavery in 1835. The newcolonial power replaced slavery with a system of indentured labourers fromSouth Asia, a system that persisted into the early 20th century. By the 1860sMauritius had become the leading cane producer in the British Empire. Atindependence, sugar production occupied 94% of all cultivated land, and

accounted for 93% of the countrys exports. Nineteen large estates dominated thesugar industry.

Similarly, when Egypt officially gained independence in 1922, cotton ac-counted for 90% of the countrys exports. Land ownership patterns displayedextreme inequalities, with a powerful elite controlling most of the best land. TheEgyptian royal family and a collection of about 2500 other elite families andcompanies, owned 27% of all cultivated land in Egypt. These large land holdersvirtually controlled the government; on average, half the ministers, senators anddeputies came from this class.27 Under British dominance, Egypts plantation-style dependent economic status continued until Nassers revolutionary coup in

1952 initiated some land-reform measures.

State-led development, economic crisis and structural adjustment

Mauritiuss development model following independence was typical in itsreliance on extensive state intervention into economic life. The governmentcontrolled the exchange rate and capital exports, set nominal interest rates,established parastatals to promote its social and economic goals, imposed anexport tax on sugar (with large producers paying a higher rate than the smallproducers), subsidised basic foods, mounted public works projects to absorb the

unemployed, invested in public health and education facilities, and providedsubstantial protection for firms producing for the home market.28 Where the

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government diverged from the African norm was in its promotion of manufac-tured exportsby means of a set of incentives and astute management of theexchange rateat the same time that it encouraged import-substitution industri-alisation. It established an Export Processing Zone (EPZ) in 1970. Sugar revenues

were used to diversify and industrialise the economy, as well as support amodest welfare state.

Mauritius, like most other African and Latin American countries, suffered aneconomic crisis in the late 1970s. Although the government addressed the crisisbefore it became as severe as elsewhere, the economy nonetheless exhibitedthese common symptoms: a decline in the terms of trade, a worsening of thebalance of payments, a tripling of the external debt throughout the 1970s, areduction in output, high unemployment and persistent inflation. The roots of thecrisis are also familiar. The government was unable or unwilling to reduceentitlements to balance the decline in revenues resulting from two hikes in the

price of oil, a world recession, a drop in sugar prices, and a series of cyclonesand droughts that devastated sugar harvests. Unremitting pressure exerted by theunion movement and a radical opposition party dissuaded the government fromadopting an early austerity programme.

Between 1979 and 1985 Mauritius carried through a series of stabilisation andadjustment programmes with loans from the IMF and the World Bank. Theseprogrammes combined orthodox measures (devaluation, demand reduction, cutsin subsidies, decline in government spending) with some unorthodox (non-mar-ket) policies, such as continued import controls and job security provisions, pricecontrols and export taxes.29 These measures met with considerable (and unusual)

success: by 1983 Mauritius was well on the way to recovery.The Egyptian experience resembles that of Mauritius in its initial statistapproach, its ensuing economic crisis, and its subsequent combination ofeconomic liberalisation with state controls. After the coup of 1952, Gamel AbdelNassers new government presented Egyptians with the promise of substantiveindependence and economic development. These goals were to be accomplishedby a heavy reliance on state intervention in the economy, import-substitutionindustrialisation (ISI) and land reform. Nasser greatly expanded the parastatalsector and civil service, guaranteed employment to virtually all Egyptianuniversity graduates, and increased the publics access to education and healthservices. These policies, together with land reforms and wealth redistributionpolicies, displaced some elements of the former ruling class and narrowedincome disparities.30

The 1967 ArabIsraeli war, however, marked the end of Nassers ArabSocialist experimentation. Egypt, Jordan and Syria were badly defeated and losta good deal of territory to Israel in a war that lasted only six days. This defeatwas combined with the economic strains of militarism and increasingly evidentgovernment inefficiency. As well, Nassers earlier successes at reducing classinequalities had petered out by 1967, as a new class of government and militaryelites became entrenched in their positions and allied themselves with the largelandowners not displaced by the reforms of previous years.

Anwar Sadat introduced a new direction after Nassers death in 1970. In 1974he inaugurated infitaha limited market opening. He needed to find a way to

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deal with Egypts large debt, which was high even before the collapse of oilrevenues in the early 1980s. The mammoth Egyptian bureaucracy, inefficientstate-owned enterprises, military expenditures, price and currency controls, andextensive state subsidies on basic goods such as bread and sugar, were the most

evident sources of economic drain. Sadats reform accomplishments, however,were largely limited to privatisation of some agricultural lands, the removal ofmany import and foreign investment controls, and attempts to encourage foreigninvestment. Although negotiations with the IMF in 1975 led to a stabilisationpackage in 1976 that included the removal of subsidies on bread and other basicfoods, the food riots in 1977 prompted the government to retreat from theagreement. Meanwhile, the new class of bureaucratic and military elites blockedreductions of the bureaucracy, major state enterprises and military expenditures.Hence, infitah represented a modification, not an abandonment, of a state-dominated economy.

Egypt encountered its next economic crisis in the latter half of the 1980s. Thecountry emerged as a major debtor nation, with its foreign debt in 1986 reaching$46.3 billion. In addition, its balance of payments deficit equalled 15% of GDP;inflation rose to 20%; and the country experienced negative economic growthfrom 1987 to 1989.31 Yet the government of Hosni Mubarak dithered, unwillingto do more than tinker with the existing strategy of state-led ISI and extensivewelfare provision.

Only in 1991, following the Gulf War, did the government address itseconomic crisis with more wide-ranging reforms. In exchange for a World Bankloan and substantial debt relief from the Paris Club, Egypt complied with an IMF

stabilisation agreement (199195) followed by liberalisation. The reforms under-taken in the 1990s reduced public sector investment and subsidies on everythingfrom food and electricity to capital imports, eliminated many price and currencycontrols, introduced a general sales tax, sold off many government enterprises,and lifted several import and export restrictions.32 Nonetheless, the Egyptianbureaucracy remained extensive and military cutbacks were entirely absent fromthe reforms.

This combination of reforms with foreign debt forgiveness and assistanceyielded some respectable growth during the 1990s. Real GDP growth per capitaaveraged 2.5%. This growth did lead to some diminution of poverty; however,this achievement was accompanied by increasing income disparities in certainregions (especially Upper Egypt) and declining purchasing power for manyEgyptian households.33

Demographic situation

At independence, rapid population growth and high unemployment raised fearsin Mauritius that overcrowding and political unrest would pose obstacles toeconomic development. At an annual rate of 3% in the 1960s and 1970s, thecountrys population grew at about the norm for the region. Unemploymentranged as high as 20% between independence and 1982 While the expanded

educational system generated increasing numbers of graduates in the 1970s andearly 1980s, many of the jobs that were available were unskilled, poorly paid and

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seasonal. Unemployed, well-educated young men rallied to the radical Mouve-ment Militant Mauricien (MMM). In desperation, the government created anagency in the 1970s to facilitate emigration.

A large and rapidly growing population has likewise posed substantial

problems for Egypt, especially given the scarcity of arable land in that country.Until 1970 population growth in Egypt hovered at around 2.5% a year; it hassince declined to an annual rate of under 2%. The employment policies ofNassers government led to unemployment rates of only around 3% during the1960s. By 1984 measured unemployment had climbed to 6%.34 With roughly500 000 new jobseekers entering the Egyptian market each year, unofficialunemployment estimates in 2001 lay between 17% and 19%, roughly double thegovernments official estimates.35 The Economist Intelligence Unit (9 October2001, p. 3) likewise estimates recent unemployment figures at about 15%25%percent, with the figures for school graduates even higher at around 36% for

men and over 50% for women. These latter figures were inflated by thegovernments decision, in 1984, to cease guaranteeing jobs for post-secondarygraduates.

Although both countries shared these three features of the underdevelopedworld when they undertook market liberalisation, they were dissimilar in twoimportant ways. The first is scale: Mauritius is an island with a population ofonly 1.2 million, whereas Egypt is a continental country with some 70 millioninhabitants. Surely, many people would surmise, this difference makes thedevelopmental challenge in Egypt vastly more complex than that in Mauritius.Second, Mauritius harbours one of the most ethnically and religiously heteroge-

neous societies in the developing world; Egypt, one of the most homogeneous.It is doubtful that either of these differences, however, favours Mauritiusdevelopmental prospects over those of Egypt.

First, is it true that small states have small problems? No, according to adetailed statistical comparison of small and large countries.36 This study discov-ered no significant difference between the two categories in income level andeconomic growth, when region was held constant. Small states, however, doexhibit a greater vulnerability to harmful shocks than large countries, owing totheir typical reliance on exporting a limited range of commodities to just ahandful of trade partners and their typical susceptibility to cyclones. Mauritiussuffers from both forms of vulnerability.

Second, Mauritius is similar to many African countries in its extreme culturaldiversity. Hindus comprise just over half the population. Most Hindus are theprogeny of 294 000 indentured labourers who were recruited from the Indiansubcontinent to work on the sugar plantations, and then remained on the island.But Hindus do not constitute a unified voting bloc; they are divided by caste andregional/linguistic origins. Hindus predominate in the public service, someprofessions, and are heavily engaged in agriculture as labourers and smallplanters. Muslims, also the descendants of indentured labourers, form about asixth of the population. They are disproportionately involved in commerce in thetowns and cities. Descendants of slaves, the Creoles account for just over a

quarter of Mauritians. Darker-skinned Creoles, the majority of this category,have mostly remained at the bottom rung of the socioeconomic ladder.37 They

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earn their livelihood mainly as urban workers and fishermen. A small minorityof light-skinned Creoles form an educated and more prosperous elite. Adoptingthe French language and culture, these Creoles have succeeded in the professionsand private firms. The Chinese, though few in number (2%3% of the popu-

lation), are economically influential as entrepreneurs and shopkeepers. Finally,Franco-Mauritians constituted only about 2% of the population in the 1970s.They have diversified from sugar-cane production into manufacturing in the EPZ,tourism and financial services.

Mauritians tend to divide politically by ethnicity and religion, rather than byclass. From 1948 onward Mauritians were repeatedly asked to make politicalchoices that required them to decide whether class or community interest tookpriority. With rare exceptions, communal claims took precedence.38 Indeed,several instances of communal violence marred the transition to the islandsindependence, just as tribalism marred decolonisation in many mainland

African countries. British troops intervened to quell HinduCreole clashes andCreole rioting in 196465 and CreoleMuslim riots just six weeks beforeindependence in 1968. The emergent country seemed headed for communaldisaster.

Egypt, on the other hand, has no sizeable ethnic or religious minorities. Thepopulation is at least 94% Sunni Muslim, with Coptic Christians accounting formost of the remainder. Moreover, the vast majority of Muslims are of Hamiticorigin. Egypt has, however, experienced periodic MuslimCoptic communalstrife since the late 1970s, culminating in demonstrations, sit-ins and protests in2001 as Copts asserted their rights.

In short, Egypt and Mauritius shared several initial circumstances and differedon dimensions that should, on balance, have favoured Egypts development.

Divergent trajectories

Yet Mauritius, unlike Egypt, has achieved a high measure of social peace in thecontext of rapid economic development, broadly based prosperity and (for adeveloping country) a well articulated welfare state. The island has diversifiedfrom its initial dependence on sugar by successfully promoting export-orientatedmanufacturing (especially textiles and knitwear garments), tourism, offshorebanking and business services and, most recently, information and communica-tions technology. Mauritius is also one of Africas rare consolidated democra-cies, having held eight national elections and witnessed three changes ofgovernment.

Not that the miracle is unblemished. For one thing, many Creoles evidentlybelieve that they have been left out of the general prosperity. Creole anger wasstarkly revealed when violence punctured the countrys two-decade-old socialpeace in February 1999. The death in police custody of a popular Creole singerprecipitated severe rioting and looting by Creoles, followed by limited ethniccleansing by Hindus in several predominantly Hindu villages.39 Five peopledied, hundreds were injured and several dozen Creole families had their homes

burned. The government quickly moved to heal the wounds by undertaking aprogramme to assist the marginalised. In addition, many economic uncertainties

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cloud the future of a small open economy that must constantly adapt to changingglobal market conditions.40 Nevertheless, the Mauritian success, thoughqualified, must still be regarded as a breakthrough in a region suffering frominternal wars and economic calamities.

This breakthrough, however, was not preordained or easily achieved. In theearly days of independence, the outlook was so unpromising that a multi-ethnic,revolutionary socialist party emerged the Mouvement Militant Mauricien(MMM)to voice lower-class protest. The MMM, inspired by Marxist and Third-Worldist ideas, denounced communalism and appealed for support from theurban and rural proletariat and petty bourgeoisie. It captured control of organisedlabour in the docks, road transport and sugar plantations, established youth andwomens wings, and organised sports and cultural activities for its members. Ina context of high unemployment among young, educated Mauritians, and vastracial inequalities, the party posed a substantial challenge to the existing order.41

The official response was a brief period of repression, the only one to mar thecountrys postcolonial history. Spurred by extensive labour unrest and a deterio-ration of its popular base, the social-democratic government declared a state ofemergency between 1972 and 1975, imprisoned MMM and union leaders, anddeferred national elections. The MMM emerged as the largest party in theAssembly in the delayed elections of 1976. But the party had to wait until 1982to enter government. By then, political realities and economic development hadmoderated the MMMs radical platform. Paul Berenger, the MMMs founder, asminister of finance, implemented the neoliberal reform programme negotiated bythe previous government with the IMF. Berenger, observes a World Bank study

without apparent irony, was impressed by the force of the logic inherent in theIMF recipe and adopted it despite its unpopularity.42 The party thereafteraccommodated itself to the imperatives of coalitional politics, in a societyexperiencing rapid growth, diminishing inequality in income distribution, anexpansion of a modest welfare state (featuring free health services, free edu-cation at all levels, public housing and public pension schemes), and a markedreduction in unemployment.

Egypt, in contrast, has experienced halting and belated economic liberalisa-tion, accompanied by the rise of extremist, violence-prone Islamist movementslinked in part to the uneven and traumatic pattern of socioeconomic change, andby a repressive, semi-authoritarian government. Although Islamism in thiscountry predates globalisation, its most violent manifestations have surfacedsince 1980. The modern worlds first Islamist political opposition emerged inCairo in 1928. The Muslim Brotherhood advocated a return to Islamicgovernment, law and cultural practice, as well as economic equality and charityto help the poor. After being banned in 1948 for its anti-British and anti-govern-ment agitation, the movement assassinated Egyptian Prime Minister Nuqrashithat same year. By 1949 the Brotherhood boasted an estimated two millionsupporters.43 During the 1960s government repression combined with the appealof Nasserism effectively pushed the Islamist opposition to a peripheral position.The Muslim Brotherhood opposition renounced violent means in the 1970s, and

instead pushed for change via electoral politics. The movement has nonethelesscontinued to see its access to the electoral arena blocked or severely restricted,

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according to a forthcoming USAID study, nearly doubled between 199596 and19992000, while it rose from 29% to 34% in the regions urban areas. And itis in Upper Egypt, and among ruralurban migrants from this region, that radicalIslamist movements have their greatest popularity.50

Although the economic reforms began to show some positive results by the1990s, with incidences of poverty declining in metropolitan and Lower Egypt,these gains were not evenly distributed. We have already alluded to regionalinequality and the plight of tenant farmers. But middle and lower-middle classyouths have also suffered. With more than half the population under the age of25, many graduates of secondary schools and universities face long-termunemployment since the government terminated its policy of employmentguarantees. About 36% of male graduates and over 50% of women graduates areunemployed. While 20%30% of the people live below the poverty line, thereis great affluence at the other end of the social scale.51 These conditions breed

extremism: in the 1970s and 1980s the Islamist groups recruited most of theiractivists from the middle classes, especially the unemployed, but more recentlythey have drawn much support from the marginalised poor.52

To build support in these circumstances, Islamists have cast their message ina religious idiom that all Muslims will find accessible. Islam offers a belief-sys-tem from which movement leaders and ideologues draw selectively to formulateand legitimise a programme of action. Islamists in Egypt, as elsewhere, call fora return to the principles of an idealised golden age of Islam (during the time ofthe Prophet and the first four Caliphs in the seventh and eighth centuries), whencorrect religious observance led to a strong and healthy society. In the case of

the most radical Islamist movements, such as al-Qaeda, various Islamic Jihads,and the Egyptian al-Gamaa al-Islamiyya, Islamic texts are interpreted in amanner that casts pious Muslims as protagonists in a black-and-white, life-or-death, all-or-nothing struggle between good and evil, belief and unbelief, virtueand sin. The complex mechanisms and effects of neoliberal globalisation areexplained simply and forcefully by these movements. Lowered standards ofliving for the masses, unemployment, weak states, lost wars against Israel, theinfluence of multinational corporations, and materialist cultural assaults onMuslim values are simply the consequences of having strayed from fundamen-tal Islamic belief and practice. The rulers of countries such as Egypt are thenportrayed as puppets of foreign infidels bent on exploiting and leading Muslimsastray.53

Cairo has ruled out negotiation with these radical Islamist movements,offering no carrot to accompany the stick of repression. Twenty thousand peoplewere detained without trial in Egypt in 2002, according to The Economist, thebulk of whom were Islamists. Mubaraks government has periodically under-taken mass arrests and sweeps of Islamist areas, particularly in Upper Egypt andthe poorer neighbourhoods of Cairo. At the same time, the regime has attemptedto head off Islamist criticisms by casting itself as more pious and Islamic, takingcontrol of independent mosques and licensing imams whose sermons reach themasses. The net affect of this policy has been an increasing Islamisation of

Egyptian society, as the government essentially concedes the Islamists demandfor a more Muslim way of doing things.54 By conceding the field, the govern-

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appear out of thin air; they reflect, in turn, the configuration of power andprivilege in society. Successful developmental states, not to mention democraticdevelopmental states, are rare. In Africa, neopatrimonial states, akin to that inEgypt, represent the norm.56 If this is so, we must explain the origins of

Mauritius developmentally orientated state.That Mauritius had undergone a capitalist transformation long before indepen-

dence, whereas Egypt is still in the midst of this transformation, is criticallyimportant. Because of its peculiar colonial history, Mauritius undertook struc-tural adjustment in the early 1980s within a society that had already developedthe full panoply of market institutions: people were accustomed to treating landand labour as commodities, a local capitalist class had emerged which investedheavily in the islands economy, and a modern, or capitalist, state with aWeberian-type bureaucratic apparatus held sway. An interventionist state, there-fore, had to contend with an independent capitalist class, although it did not have

to deal with a landed aristocracy or a substantial peasantry. In Egypt, on theother hand, liberalisers, to succeed, had to struggle against an entrenchedneopatrimonial elite, a highly politicised bureaucracy and military, and businesscartels whose success depended on personal linkages to the politically powerful.Rather than a Weberian-type bureaucratic apparatus as in Mauritius, Egyptremains saddled with one of the developing worlds most infamously bloated,inefficient and corrupt administrations. Market adjustment in this country,therefore, implies something akin to revolutionary change.

In Mauritius the absence of an aboriginal population is key to understandingits unusual development as a thoroughly capitalist economy and society. No

pre-capitalist mode of production survived into the 19th and 20th centuries.Instead, an independent bourgeoisie emerged under French rule, with its roots incommerce and estate agriculture. This class transformed itself into a plantocracywhen the British promoted Mauritius as a sugar colony following its conquest;its members depended largely on local resources to expand their holdings andproductivity.57 (There were few foreign-owned plantations in this remote col-ony.) Local capital accumulation continued in the postcolonial era, when stateincentives channelled the plantocracys surplus into the Export Processing Zoneand tourism.58 Labour was treated as a commodity from the outset, first in theform of slaves, and later as indentured labourers. After the end of the indenturedlabour system in the early 20th century, strong unions emerged to cater to theinterests of a rural and urban proletariat (especially dock workers and transportworkers in the towns). Throughout the 19th century, too, an educated and mainlyCreole commercial and bureaucratic class developed (les gens de couleur, alongwith a largely Hindu yeomanry who purchased land, beginning in the 1860s,from Franco-Mauritian plantation owners who were forced to retrench in hardtimes. These small planters, by investing in their childrens education, hadengendered by the 1940s a substantial Hindu professional and bureaucratic classthat competed with, and partly displaced, the Creole elite in the colonial andpostcolonial bureaucracy.59

Finally, the French and British imperialists imposed a bureaucratic and

centralised state in Mauritius that, because it did not compete with any tra-ditional political system, did not appear, as elsewhere, to be an alien imposition.

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Career bureaucrats, the bulk of whom were Mauritians, developed an esprit decorps and managerial tradition long before independence. This state has avoidedthe disintegration of administrative capacity that has all too often accompanieddecolonisation on the mainland. Twenty-two years after independence a detailed

study of the Mauritian civil service concluded that it remains neutral and has notbeen politicized. It has achieved ethnic and gender representation, and its publicservants exhibit a high level of technical competence coupled with an apprecia-tion of the institutional setting of governance.60 Because the main politicalparties (excepting the MMM before 1982) shared a Fabian socialist ethos, civilservants worked within this consensus to develop long-term social and economicpolicy.

If the preceding capitalist transformation accounts in part for the unusualsmoothness of neoliberal reform in Mauritius, it does not explain why redistribu-tive policies and peaceful democratic politics accompany (and promote) econ-

omic success on the island. The answer seems to lie in the peculiar class andethnic dynamics that, in separating economic from political power, allowed arelatively autonomous state to carry through a social-democratic programme inthe unlikely context of a racially stratified society. None of these dynamicsobtains in the case of Egypt.

Mauritiuss democratic developmental state emerged from the logic of classand ethnic antagonisms, as well as from the Fabian socialist proclivities of thefathers of independence. At independence, economic power resided in the handsof a small Franco-Mauritian and Creole elite who owned and ran the sugarplantations. The colonial state depended upon sugar revenues, yet British

governors never felt close to the French-speaking elite, who held them at armslength. Meanwhile, the educated offspring of the predominantly Hindu smallplanters felt excluded from the upper echelons of the sugar industry, andtherefore sought upward mobility through the colonial state and independencemovements. A frustrated Hindu intelligentsia in the postwar period establishedthe Mauritius Labour Party and entered bureaucratic employment as fluentEnglish speakers. Politics and the state provided the majority Hindus with a wayof countering the economic power of the plantocracy. Democratic politics wouldempower the Hindus in particular, for leaders could tap the support of voterswhose hostility to the plantocracy ran deepa hostility deriving from a harshhistory of indentured labour and slavery, from the fact that most small plantershad family members who worked seasonally on the large plantations, and froman exclusionary and stratified racial system. In addition, the state, through its topposts and control of contracts, offered an alternative route to economic success.Although the plantocracy and Creole elite opposed both independence andmajority rule for fear of Hindu domination, the British nonetheless passed powerto a largely Hindu leadership and state bureaucracy in 1968. Those members ofthe local capitalist class who chose to remain accepted an implicit bargain: theyyielded their political dominance and accepted substantial redistribution fromgrowth in exchange for the legitimacy and order that a modest social democracywould generateprovided that social reform was limited to a welfare state

supported by progressive taxes, and excluded asset redistribution. This consensushas prevailed since independence; even the radical MMMjoined the consensus in

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1982.61 Hence, Fabian socialist ideas, imbibed during lengthy stays in Britain,united the leaders of the major parties and unions, and provided the ideologicalbasis for a welfare capitalism that drew support from the descendants of slavesand indentured labourers.

There was obviously much more behind the Mauritian miracle than theseclass, ethnic and institutional legacies. The Labour Party, which held power until1982, devised a workable economic strategy that diversified the sugar economy,promoted growth through export-orientated manufacturing, tourism and offshorebanking. But this miracle, if such it is, is not a free-market miracle. Mauritiushas skilfully benefited from protectionist policies at home and abroad. Drawingon the experience of Taiwan and Singapore, an interventionist state protected itsimport-substitution sector while providing a panoply of incentives to the EPZ.Moreover, the country negotiated preferential access to the EU and the USA forits exports. Luck has also played an important role. Mauritius hosts three

diasporic communities with transnational commercial linksthe Indian, theChinese and the Franco-Mauritian. Chance also played a role when Hong Konginvestors, who had exhausted their own apparel quotas in the USA, discoveredMauritius with its new and unfilled quotas after it established its EPZ. AndMauritius has benefited heavily from foreign aid as a result of its strategiclocation and ownership of Diego Garcia. Finally, ingenious electoral arrange-mentsinvolving shifting governing coalitions and a best-loser rule thatensures ethnic representationtogether with a system for consulting all groupson policy initiatives have managed most ethnic tensions and prevented electoraldemocracy from becoming an all-or-nothing ethnic struggle.62

The contrast between Mauritius developmental state and Egypts neopatrimo-nial state is striking. Market reform where neopatrimonial states prevail is almostinvariably tumultuous. The clientelistic basis of states saps their administrativecapacity and biases economic reform in favour of political cronies. As oneobserver bluntly notes of Egypt:

an openly competitive capitalist economy requires real capitalists, rather thansoldiers and managers lurking in the interstices of the network that links the publicand private sectors. After all, if Arab Socialism foundered because there were noreal socialists, what would be the fate of Arab Capitalism without real capitalists?63

Furthermore, without a separation of political from economic power in such a

system, the prospects of equitable development are dim. Neopatrimonial statesare poorly equipped to mediate global market pressures equitably and peacefully.

Conclusion

Market liberalisation has often proved destabilising in poor countries. Thebreakdown of implicit social contracts between rulers and ruled, the deepeningof regional and social inequalities, the increase in economic insecurity, thechallenge to local values and the waning of state legitimacy breed conditionsconducive to extremist movements and political violence. To counteract these

tendencies, well organised and relatively autonomous states are required: toformulate and implement astute economic strategies that encourage investment,

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to negotiate the equitable sharing of gains and burdens, and to mount welfareprogrammes. Yet such states are rare in the global south.

Mauritius has constructed such a state. Its relative peace and prosperity haveflowed, not from a wholehearted embrace of the neoliberal creed, but from an

activist state that selectively implemented market opening and negotiated prefer-ential trade arrangements. Mauritius is blessed with strong institutions, whichhave facilitated efforts to promote investment while managing distributionalconflicts and mounting a welfare state and safety nets. These strong institutionsflow from contingent historical conditions: the early imposition of capitalistrelations of production, and peculiar class and ethnic dynamics that haveseparated political from economic power. A relatively autonomous state in ademocratic system has used that autonomy to pursue redistribution with growthin an initially inegalitarian, race-stratified society.

More typical of Africa, Egypt lacks comparable historical conditions, and thus

has undertaken a halting liberalisation in an institutional context that is inimicalto a market economy. Liberalisation in such cases is a tumultuous process: thestrains and stresses of economic and social change aggravate existing fault linesin society. To take advantage of global markets requires precisely the flexibleand effective state structures that are missing because they lack the requisitesocial foundations. The mammoth size and corrupt, authoritarian proclivities ofthe state in countries such as Egypt drain away its effectiveness and flexibility,as well as the resources needed to soften liberalisations blows.

These conclusions are unsettling, for they suggest that a harmonious route toglobal economic integration in poor countries depends on unusual social and

political conditions. The Mauritian case, for example, offers limited guidance tothose who have not yet traversed the Great Transformation, nor witnessed aseparation of political from economic power in the context of an effectivecapitalist state. We must, therefore, conclude that the darker scenario ofglobalisation will more often prevail than the sanguine neoliberal scenario.

Notes1 G Soros, The capitalist threat, Atlantic Monthly, 279 (2), 1997, pp 4558; and D Rodrik, Has

Globalization Gone Too Far?, Washington, DC: Institute for International Economics, 1997.2 Quan Li & D Schaub, Economic globalization and transnational terrorism: a pooled time-series analysis,

Journal of Conflict Resolution, 48 (2), 2004, pp 230258.3 For these arguments, see D Rodrik, The New Global Economy and Developing Countries: Making

Openness Work, Washington, DC: Overseas Development Council, 1999, ch 6.4 Not every liberalising developing country encounters all these tensions. The degree of a countrys exposure

depends on many factors, including the severity of its preceding economic crisis and the extent and paceof its market opening.

5 A Mittal, Land loss, poverty and hunger in D Barker & J Mander (eds), IFG Special Report: DoesGlobalization Help the Poor? San Francisco: International Forum on Globalization, January 10, 2002.

6 See E Luttwak, Turbo-Capitalism: Winners and Losers in the Global Economy , New York: HarperCollins,1999, for a thorough review.

7 W Cline, Financial crises and poverty in emerging market economies, paper delivered at a conferenceon Social and Economic Impacts of Liberalisation and Globalisation, University of Toronto, 1920 April2002, pp 36.

8 R Kaplinsky, Globalisation and economic insecurity, Institute for Development Studies Bulletin, 32 (2),2001, pp 1324.

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9 V FitzGerald, Global linkages, vulnerable economies and the outbreak of conflict, in EW Nafziger &R Vayrenen (eds), The Prevention of Humanitarian Emergencies, Basingstoke: Palgrave, 2001,p 79.

10 GA Cornia. & J Court, Inequality, Growth and Poverty in the Era of Liberalisation and Globalisation,Policy Brief No 4, World Institute for Development Economics Research, Helsinki, 2001, p 1.

11

Ibid.12 RH Wade, Is globalization reducing poverty and inequality?, World Development, 32 (4), 2004, pp567589; and A Berry & J Serieux, All about the giants: probing the influences on world growth andincome inequality at the end of the 20th century, CES-ifo Economic Studies, 50 (1), 2004, pp 133170.

13 Cornia & Court, Inequality, Growth and Poverty, pp 1418.14 EW Nafziger & J Auvinen, Economic development, inequality, war, and state violence, World Devel-

opment, 30 (2), 2002, p 156.15 On the case of Venezuela, see M Lopez-Maya, L Lander & M Uger, Economics, violence and protest

in Venezuela: a preview of the global future?, in K Worcester, SA Bermanzohn & M Unger (eds),Violence and Politics: Globalizations Paradox, New York: Routledge, 2002.

16 See, for example, the insightful analysis of rural rebellion in Mexico and Egypt in D Tschirgi,Marginalized violent internal conflict in the Age of Globalization: Mexico and Egypt, Arab StudiesQuarterly, 21 (3), 1999, pp 1334.

17 B Crawford, The causes of cultural conflict: an institutional approach, in B Crawford & RD Lipschutz

(eds), The Myth of Ethnic Conflict: Politics, Economics, and Cultural Violence, Berkeley, CA:International and Area Studies, University of California, 1998, p 35.

18 J Snyder, From Voting to Violence: Democratization and Nationalist Conflict, New York: WW Norton,2000.

19 B Barber, Jihad vs McWorld: How Globalization and Tribalism are Reshaping the World, New York:Ballantine Books, 1996, p 81.

20 Ibid, p 215.21 For examples in the Islamic world, see P Lubeck, Islamist responses to globalization: cultural conflict

in Egypt, Algeria and Malaysia, in Crawford & Lipschutz, The Myth of Ethnic Conflict, pp 293319.For sub-Saharan Africa, see SP Riley & TW Parfitt, Economic adjustment and democratisation in Africa,in J Walton (ed), Free Markets and Food Riots: The Politics of Global Adjustment, Oxford: Blackwell,1994.

22 W Reno, Warlord Politics and African States, Boulder, CO: Lynne Rienner, 1998.23

R Kothari, Under globalisation, will nation state hold?, Economic and Political Weekly, 1 July 1995,p 1596.24 M Zald, Culture, ideology and strategic framing, in D McAdam, JD McCarthy & M Zald (eds),

Comparative Perspectives on Social Movements, Cambridge: Cambridge University Press, 1996.25 Tschirgi, Marginalised violent internal conflict.26 For an elaboration of this argument, see RAF Woltering, The roots of Islamist popularity, Third World

Quarterly, 23, 2002, pp 11451158; and AK Cronin, Behind the curveglobalization and internationalterrorism, International Security, 27 (3), 2002, pp 3545.

27 A Hourani, A History of the Arab Peoples, Cambridge: Belknap Press, 1991, p 380.28 R Gulhati & R Nallari, Successful Stabilisation and Recovery in Mauritius, EDIDevelopment Policy Case

Series No 5, Washington, DC: World Bank, 1990, pp 1117.29 D Brautigam, The Mauritius miracle: democracy, institutions and economic policy, in R Joseph (ed),

State, Conflict, and Democracy in Africa, Boulder, CO: Lynne Rienner, 1999, p 159.30 JA Bill & R Springborg, Politics in the Middle East, New York: HarperCollins, 1994, p 217.

31 D Wiess & U Wurzel, The Economics and Politics of Transition to an Open Market Economy, Paris:OECD, 1998, p 32.

32Ibid, pp 35, 54.

33 L Haddad & A Ahmed, Chronic and transitory poverty: evidence from Egypt, 19971999, WorldDevelopment, 31 (1), 2002, pp 7185; and T Mitchell, No factories, no problems: the logic of neo-lib-eralism in Egypt, Review of African Political Economy, 82, 1999, pp 455468.

34 P Rivlin, Economic Policy and Performance in the Arab World, Boulder, CO: Lynne Rienner, 2001, p 28.Rivlin notes that pre-1970 employment data for Egypt are not very reliable, however, and even todaysstatistics vary according to the source.

35 US Energy Information Administration, Country Analysis Briefs: Egypt, 2001, at http://www.eia.doe.gov/emeu/cabs/egypt.html.

36 W Easterly & A Kraay, Small states, small problems? Income, growth and volatility in small states,World Development, 28 (11), 2000, pp 20132027.

37 WF Miles, The Mauritius enigma, Journal of Democracy, 10 (2), 1999, p 92.38 LW Bowman, Mauritius: Democracy and Development in the Indian Ocean, Boulder, CO: Westview,

1991, p 33.

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39 B Carroll & T Carroll, Trouble in paradise: ethnic conflict in Mauritius, Commonwealth and ComparativePolitics, 38 (2), 2000, p 25.

40 For example, uncertainties arising from the phasing out of preference for the countrys three majorexportssugar, textiles and clothingunder the Lome Convention and the Multifibre Agreement.

41 J Houbert, Mauritius: politics and pluralism at the periphery, Annuaire des Pays de lOcean Indien, 9,

198283, pp 242243.42 Gulhati & Nallari, Successful Stabilisation, p 40.43 DJ Sullivan. & S Abed-Kotob, Islam in Contemporary Egypt: Civil Society vs the State, London: Lynne

Rienner, 1999, p 41.44 K Duran, Cairo: a torrent of frightening disclosures, The World and I, 15 (11), 2000, p 301.45 Bill & Springborg, Politics in the Middle East, p 222.46 P Lubeck, Antinomies of Islamic movements under globalisation, WP 99-1, Center for Global, Inter-

national and Regional Studies, University of California, Santa Cruz, 1999, p 13.47 Bill & Springborg, Politics in the Middle East, p 222.48 RM Burrell & RK Abbas, Egypt: The Dilemmas of a Nation, 19701977, Beverly Hills, CA: Sage, 1977,

p 32.49 R Bush, An agricultural strategy without farmers, Review of African Political Economy, 80, 2000,

pp 235249.50 Tschirgi, Marginalized violent internal conflict, p 8.

51 Economist Intelligence Unit, Country Profile: Egypt, 9 October 2001, p 3, at http://db.eiu.com/reports.asp?title countryProfileEgypt&doc id918057&valn.

52 Tschirgi, Marginalized violent internal conflict; and Lubeck, Antinomies of Islamic movements.53 D Zeidan, The Islamic fundamentalist view of life as a perennial battle, Middle East Review of

International Affairs, 5 (4), 2001, p 12.54 G Abdo, No God But God, London: Oxford University Press, 2000.55 Compare the scores on rule of law, government effectiveness, graft, and the overall polity score in United

Nations Development Program, Human Development Report 2002, New York: Oxford University Press,2002, Table A1.1. For a discussion of the high institutional quality in Mauritius, see A Subramanian &D Roy, Who can explain the Mauritian miracle: Meade, Romer, Sachs, or Rodrik?, in D. Rodrik (ed),In Search of Prosperity, Princeton, NJ: Princeton University Press, 2003, pp 229232.

56 R Sandbrook, Closing the Circle: Democratization and Development in Africa, London: Zed Books, 2000,pp 1719 and ch 5.

57 RB Allen, Slaves, Freedmen, and Indentured Labourers in Colonial Mauritius, Cambridge: CambridgeUniversity Press, 1999.

58 Note that about half the total equity of firms in the EPZ is owned by Mauritianswhich is a high levelof local ownership even in comparison with South Korea and Malaysia. See Subramanian & Roy, Whocan explain the Mauritian miracle, p 210.

59 This interpretation draws on Houbert, Mauritius; A Darga, Autonomous economic and social develop-ment in democracy: an appreciation of the Mauritian miracle, Africa Development, 21 (2/3), 1996,pp 7988; and Allen, Slaves, Freedmen, and Indentured Labourers.

60 B Carroll & SK Joypaul, The Mauritius senior public service since Independence: some lessons,International Review of Administrative Sciences, 59 (3), 1993, p 434.

61 This interpretation draws on T Meisenhelder, The developmental state in Mauritius, Journal of ModernAfrican Studies, 35 (2), 1997, pp 278297; Houbert, Mauritius; and R Seegobin & L Collen, Mauritius:class forces and political power, Review of African Political Economy, 8, 1977, pp 109118.

62 See B Carroll & T Carroll, Accommodating ethnic diversity in a modernizing democratic state: theory

and practice in the case of Mauritius, Ethnic and Racial Studies, 23 (1), 2000, pp 120142.63 R Springborg, Mubaraks Egypt: Fragmentation of the Political Order, Boulder, CO: Westview, 1989,p 11.

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