Us vs them, p.4
Us vs. Them, page 4
Across the border in Egypt, hundreds of thousands of angry, inspired people demanded that their government deliver change or stand down. On February 11, President Hosni Mubarak was ousted after three decades in power.2 Across North Africa and the Middle East, new crowds gathered, and strongmen shuddered. In October, Libya’s Muammar Qaddafi was hounded from power, found hiding in a drainage pipe, and bayonetted in the street.3 Over the next several years, civil war in Syria killed or displaced half the country’s population.4
In none of these countries did most citizens, particularly young people, believe that government would help them build a secure and prosperous life. Satellite television and the introduction of social media showed them they were not alone and that they didn’t have to accept that nothing ever changes. These were not people who shared in the rising living standards elsewhere in the developing world, and they knew it. Just as in Europe and the United States, many of these people came to believe that their countries were governed by elites for the benefit of elites, whether in government, business, or the military, and that no one in power cared about them or their families. They believed that nothing would ever change unless they changed it.
This story reminds us just how quickly public anger can change history, but it is not simply the poor and excluded that governments have to worry about. In many developing countries, governments are becoming victims of their own success. Those who have joined the new middle class don’t just want better government; they expect it. They demand it. This is the natural result of a larger international success story that is now visible even to those who haven’t fully shared in it.
And thanks to globalism’s coming tech innovations, the problem will be far, far worse in developing countries than in the wealthy West.
VICTIMS OF SUCCESS
At first glance, the numbers seem to say that globalism has been all good news for the developing world. World Bank statistics show that the percentage of the world’s people who live in “extreme poverty” fell from 64 percent in 1960 to less than 10 percent in 2015. In 1960, 58 percent of people around the world were illiterate. In 2014, that number was just 15 percent.5 Access to education and health care has climbed alongside life expectancy, and the biggest developing countries have benefited most. In India, there were 338 million people living on less than one dollar per day in 1990. By 2013, that number had fallen to 218 million. In Brazil, the number fell from 31 million to 10 million, and in Indonesia from 104 million to 25 million. In Russia, the drop was from 3 million to about 40,000 people. In China, the number plummeted from 756 million to just 25 million, a fall of more than 95 percent.6 That’s a true story, and one that globalization’s champions love to tell.
But there’s more to the story.
During the first decade of the twenty-first century, a surge in credit markets turbocharged economic growth and created an unprecedented period of abundance in many developing countries. China’s rapid rise lifted emerging-market boats as its demand for commodities poured cash into countries on every continent. For oil producers, crude prices well above $100 per barrel brought in tidal waves of cash, allowing state officials to continue to siphon money into corrupt, cash-eating state-owned companies. Boom times secured the power of ruling parties and leaders, but also allowed them to dodge some tough questions. When should we ask a lot more people to pay taxes? When should we cut subsidies on things like food and fuel in a country that still has large numbers of people living hand to mouth? Why shut down unproductive factories and put workers on the streets when we can wait until next year? In short, why mess with success?
Then came the global financial crisis. By exposing the shortcomings of underregulated markets and the threats they posed to the economic and political stability of much of the world in 2009 and 2010, market turmoil appeared to discredit American-style private-sector-driven capitalism in favor of a seemingly more stable state-dominated model with Chinese characteristics. Another source of trouble for the governments of many developing countries: The giant was no longer quite so hungry. China’s economy has slowed in recent years, an expected by-product of reforms that acknowledge that no country, not even intelligently governed China, can keep a double-digit annual economic pace forever. This slowdown—and China’s shift from heavy government spending on resource-devouring infrastructure construction to a growth model driven more by middle-class consumption—means lower Chinese demand for oil, gas, metals, and minerals from other emerging countries. Lower commodity prices, particularly for crude oil, undermine growth in resource-rich developing countries like Saudi Arabia, Russia, Brazil, South Africa, Venezuela, Nigeria, and others.
Around the world, tougher economic times make governments less popular. In response, political leaders then spend too much money, including on subsidies. They pressure central banks to print more money to stimulate an economy in the short term, stoking inflation and raising public anxiety as cash buys less than it did the week before. They block foreign investment to protect local interests, workers, and sectors, exacerbating long-term problems by making their economies less competitive.
Even without the coming tech change, frustrations are high in many developing countries. Globalization created rapid industrialization, and the resulting filthy air and water can drive protest as well. In December 2016, residents of the smog-blanketed southwestern Chinese city of Chengdu began placing pollution masks on statues in the city center. Police in riot gear responded to a gathering in the city’s Tianfu Square with a crackdown that lasted several days. Protesters then took to social media with photographs of themselves holding signs that read “Let me breathe.”7 For years, the Chinese leadership has searched for solutions to the problems of toxic air and water, but plans to shutter economically wasteful and polluting industries push miners and steelworkers out of their jobs, sending new groups of disgruntled citizens into the streets. Every road leads to potential trouble.
The Chinese government, which has managed the political risk that flows from public protests as efficiently as any authoritarian government in the world since the Tiananmen Square crackdown in June 1989, once published a statistic on the number of the country’s “mass incidents,” or protests that involve at least a few dozen people. (The minimum threshold has varied over time from about fifty to one hundred people.) A few have involved thousands. According to official Chinese figures, the number of these protests grew from about 8,700 in 1993 to more than 127,000 in 2010.8 The state no longer publishes this number, but there’s no reason to believe there aren’t still large numbers of public protests each year, particularly because these stats are politically ultra sensitive. The sources of public anger include local corruption, environmental worries, ethnic tensions, lost jobs, product safety problems, and even spontaneous explosions of rage that can arise from a simple traffic accident. As in Russia, protests in China pose virtually no near-term threat to the Communist Party’s monopoly hold on political power. China’s leaders remain firmly in charge, but they know there will be plenty of complicated and dangerous challenges ahead.
In another example of pollution fears launching a near revolution, take Turkey. On May 27, 2013, a group of environmental activists gathered in Istanbul’s Gezi Park to protest government plans to uproot a grove of trees in the city’s central district to clear space for a shopping mall. Their aim was to occupy the park to block the work. The next day, police moved in with tear gas and pepper spray to break up their camp. Coverage on social media included violent images from the confrontation, and the numbers of both protesters and police began to grow. As anger intensified, protesters spilled into the streets of Izmir, Ankara, and other Turkish cities. Thousands were injured and hundreds arrested across dozens of Turkish provinces. Some were charged with crimes for writing posts about the protests on Twitter.9 On June 4, a protester was killed.10
On June 13, then Prime Minister Recep Tayyip Erdogan issued a final warning for protesters to leave the park.11 The violence escalated, and more protesters died. Turkey’s Interior Ministry reported on June 23 that about 2.5 million people had taken part in demonstrations in seventy-nine of the country’s eighty-one provinces.12 The fury continued for weeks. By the time the storm had subsided, eight people were dead and about eight thousand were injured.13 What had begun as an environmental protest became a stand against police brutality fueled by frustration with an increasingly authoritarian government. In 2016, a failed coup attempt against now President Erdogan further polarized this already divided country, and Erdogan’s bid to grant himself ever expanding Vladimir Putin–scale powers has deepened the public indignation that a big segment of Turkey’s people now feel toward their government.
In other countries, frustration boils over as the contracting economy forces the government to provide less for their now expectant people. At almost exactly the same time as Turkey’s protests began in June 2013, the city government in Sao Paulo, Brazil, announced a nine-cent hike in bus fares. The public response was instantaneous. In a country where minimum-wage workers spend a quarter of their income on public transport, protesters took to the streets. As in Turkey, a brutal police response turned a local protest national—and the press coverage went global. Hundreds of thousands of angry people in cities across the country began to protest corruption, lousy public services, and police violence. A sharp economic slowdown and the Lava Jato corruption scandal—the largest in Brazil’s history—have made street protest a much more common event in a country mired in a long and deep economic recession. In March 2015, another round of demonstrations brought an estimated 2.4 million people into the streets of Brazil’s biggest cities. In January 2016, protests erupted anew when Sao Paulo officials tried again to raise bus fares. In March 2016, some 3.6 million joined new street protests. The demonstrations have continued, and some have turned violent.14 This is a new development in a country where, until five years ago, street demonstrations were limited mainly to periodic strikes organized by trade unions.
In other regions and in countries with different systems, new protests have emerged in response to various forms of bitter frustration with government. In 2014, in the Ethiopian city of Ambo, university students began demonstrations against a plan to expand Addis Ababa, the country’s capital, into the surrounding countryside, forcing farmers off their land. In the confrontation with police that followed, seventeen were killed, and protests spread across the country.15 Though the city expansion plans were scrapped, hundreds have since been killed and thousands arrested.16 More of the world became aware of Ethiopia’s unrest when, during the 2016 Rio Olympic Games, marathon silver medalist Feyisa Lilesa crossed his arms above his head as he crossed the finish line in a gesture of solidarity with protesters. Three weeks later, fear that dissent would grow out of control led the ruling Ethiopian People’s Revolutionary Democratic Front to declare a state of emergency, which remained in place until August 2017.
Much of the hostility in Ethiopia is related to ethnically based political grievances. Members of the Oromo and Amhara communities, which together make up more than 60 percent of the population, have set aside differences during the protests to focus anger at a government that both feel is dominated by minority Tigrayans. But as in Turkey and Brazil, these protests are not the sign of hopelessness we saw in Tunisia and Egypt at the dawn of the Arab Spring. In the decade before 2016, Ethiopia’s economy grew at a red-hot 8 percent to 11 percent per year.17 The country’s infrastructure—roads, bridges, electricity, etc.—is strong by Africa’s standards. But as in the United States and Europe, globalization has produced losers as well as winners. Youth unemployment in Ethiopia’s cities remains just under 30 percent, and many new jobs consist of manual labor that can’t satisfy the ambitions of university graduates for a better life.18 As in Brazil and Turkey, expectations have been raised that citizens can ask more from government. And as in Brazil and Turkey, government isn’t keeping up.
In developing democracies and authoritarian states alike, corruption is a familiar complaint, whether at the petty local-shakedown level or at the highest reaches of government. In 2017, demonstrations against state corruption organized by opposition activist Alexei Navalny reportedly included 60,000 people in eighty-two Russian cities and towns from the Baltic Sea to the Pacific Ocean. Protesters carried yellow rubber ducks to mock Prime Minister Dmitry Medvedev’s extravagant lifestyle, symbolized by a house built as a waterfowl sanctuary on one of several lavish properties he regularly used. Hundreds were arrested in Moscow alone.19
A poll conducted not long after by Moscow’s Levada Center found that though 72 percent of people said they trusted Vladimir Putin, 67 percent said he was “fully” or “in large part” responsible “for the scale of high-level government corruption and financial abuse that are frequently cited by his opponents.” More than half (51 percent) said they were tired of waiting for him to improve their lives. Just 32 percent said Putin had improved their living standards. That same percentage said their president had successfully fought corruption.20 As he stands for reelection in 2018, Putin remains popular, and protests will not weaken his grip on power, but even this deeply entrenched and genuinely popular leader must worry about the future.
Pollution, corruption, economic problems—there would be enough reason to fear for developing countries even if the coming tech disruption weren’t expected. As it is, many fragile countries are headed for serious trouble.
CUE THE ROBOTS
All these challenges are important for developing countries, but it’s the tech revolution that will create unprecedented pressure on emerging states and their more fragile institutions. In November 2016, the United Nations warned that two-thirds of all jobs in the developing world were at risk.21 While automation and innovations in machine learning threaten 47 percent of all jobs in the United States, the number is 65 percent in Nigeria, with a population of 140 million people, 69 percent in India, home to more than 1.3 billion, and 77 percent in China, a country of 1.4 billion.22 That’s a lot of personal upheaval involving very large numbers of people. Again, the point is not that all those jobs will disappear. It’s that, even if one type of job is simply replaced with a newer type that complements the work of machines, the transition will be brutally difficult on a historically unprecedented scale.
To begin to understand the scale of change that robotics and artificial intelligence, in particular, will bring to the political lives of developing countries, look back at their past successes.
Successful emerging-market countries tend to follow a similar pattern of development. They begin as poor countries with large numbers of people living in the countryside. The young begin moving toward cities, where they hope to earn higher wages for themselves and their families. They arrive ready to work, but are in no position to command high wages. This sudden surge of inexpensive labor attracts the attention of manufacturers who own factories in countries where workers are much more highly paid. New factories appear, and word of new jobs makes its way to rural areas, generating an even bigger wave of poor young people headed for the big city. This is now an old and familiar story, one that has played out hundreds of millions of times in China, India, and across Southeast Asia, Latin America, and sub-Saharan Africa.
Problems begin to develop as cities sag under the weight of all these new people. Governments that don’t have much money can’t afford to build the new roads, bridges, public transport, public schools, and public hospitals needed to accommodate all these new people. Those that can pay the bill discover that investment in better infrastructure attracts even more new people into the cities, demanding still more infrastructure. Those that are well governed can flourish. Those that are poorly governed become incubators of crime, corruption, anger, and protest.
The next stage of development begins as these once poor workers begin to demand higher wages and better working and living conditions. Consumer classes appear in countries that have never had them. Higher pay for these workers means the country is no longer as attractive for foreign companies, but some countries—those with capable, reform-minded governments—can adapt. New technologies—purchased, invented, or stolen—allow them to get more productivity from each worker, who then produces more sophisticated, higher-value-added goods and services that continue to push wages higher. A sea change that began with low-cost manufacturing ends with the birth of a true middle class.
But the virtuous circle that depends on good demographics, labor mobility, economic growth, and political reform is beginning to break down. The global introduction of robotics and AI, even on a limited scale, will sharply reduce the low-wage advantage that helps poor countries and poor people become middle-income countries and middle-class consumers. A shoe manufacturer in Kentucky is better off replacing a middle-wage worker with a no-wage robot than with a low-wage worker in Mexico, China, or Cambodia. And with the advent of 3-D printing, companies can keep manufacturing much closer to the customers who will buy their products. No need to move factories to distant shores.
Where do all those energetic, ambitious young people go? The youth bulge we see in many developing countries can move from economic advantage to political threat as their path out of poverty is blocked. If they never join the active workforce, they will never have access to the education and training needed to earn twenty-first-century jobs, and they know their children will fare no better. Those able to keep their jobs may discover they must work for less pay and fewer (if any) benefits. If automation reduces wages in developing countries, it may become impossible for workers to gain the education needed to succeed in a world where advanced AI generates a much bigger share of the economic growth. Lower growth means less government revenue—and, therefore, less money to spend for education and services, for infrastructure, and for all the other things that middle classes expect from government. The virtuous circle becomes a vicious circle.
