Us vs them, p.5
Us vs. Them, page 5
In 2018, it’s still too soon to know whether the tech revolution will kill more jobs than it creates. But as in the rich countries, we can be very sure that the new jobs will be very different from the old ones, that education and training for these new forms of work will be fundamentally different, and that large numbers of workers won’t make the leap from the old world to the new. It’s an open question where those who lose from this next wave of change will declare their political allegiance—or whether they will declare war on the entire system. The growing violence we’ve seen in Venezuela in recent years provides a vivid reminder of what happens when frustrated people have no nonviolent outlet to demand change.
There are many reasons why the tech revolution will hit the emerging world much harder than it will hit Europe and the United States. In developed countries, children are more likely to grow up with digital technologies as toys and then to encounter them in school. Governments in these countries have money to invest in educational systems that prepare workers, both blue and white collar, for change. Their universities have much greater access to state-of-the-art technologies. Their companies produce the innovations that drive tech change in the first place. This creates a dynamic in which high-wage countries are more likely than low-wage ones to dominate the skill-intensive industries that will generate twenty-first-century growth, leaving behind large numbers of those billion-plus people who only recently emerged from age-old deprivation. The wealth in developed countries helps them maintain much stronger social safety nets than in poorer countries to help citizens who lose their jobs, fall ill, or need to care for sick children or aging parents. In short, wealthier countries are both more adaptable and more resilient than developing ones.
There’s also an important political difference. Developing countries are politically much more brittle than in Europe or the United States. Governments are more likely to carry less popular legitimacy, particularly if they are unelected. The institutions of government—parliaments, courts, and state ministries—are less well established, potentially more fragile, and less likely to impose useful checks on power. The embattled governments of developing countries are also more likely than those in the rich world to find their backs to the wall, to turn to repression to remain in power and out of jail, to enact policies that generate crises, trouble from which they are less likely to recover, and to concentrate power in ways that make economies more rigid.
It’s a reminder that developing countries have a history of populist repression that might be repeated. We don’t need to remember China’s Mao, Egypt’s Nasser, Argentina’s Perón, Indonesia’s Sukarno, Peru’s Alvarado, Pakistan’s Zulfikar Ali Bhutto, or Libya’s Qaddafi to know that economic insecurity in developing countries creates opportunities for charismatic populists to win votes from “us” by demonizing “them.” Think of Turkey’s Erdogan, Venezuela’s Chávez, or Russia’s Putin—a man able to consolidate enormous power by restoring order (with the help of historically high oil prices) after nearly a decade of post-Soviet economic crisis. As we saw in the last chapter, American and European politicians do this too, but the checks and balances of their political systems limit their ability to dominate their countries.
There is another important difference between developed and developing states. In American and European politics, “them” is often an immigrant hoping to come inside—the Mexican or Central American migrant hoping to enter the United States or the Middle Eastern/North African Muslim refugee hoping to live in Germany, France, Britain, or Sweden. In poorer countries, especially those with borders drawn by colonizers, “them” is often the ethnic, religious, or sectarian minorities with roots that are older than the borders themselves. Think of Muslims in India, in western China, or in the Caucasus region of Russia. Sunni Muslims in Iraq or Shia Muslims in Saudi Arabia. Think of Christians in Egypt or Kurds in Turkey. Think of Chinese and other ethnic minorities in Indonesia and Malaysia. There are many more examples. These groups become easy targets when times are hard and a politician looks to make a name for himself at their expense. Rwanda and the former Yugoslavia offer the most important recent cautionary tales of how developing countries with weak institutions can repeat the atrocities committed in earlier eras.
RESILIENCE
What are the factors that will determine how emerging countries and their citizens weather these building storms? First, survival depends on adaptation to change, and governments must have the means to adapt. Those that can’t afford to invest in the development of new technologies will see their economies lose their competitive edge. They won’t produce growth and jobs, leaving government without the revenue it needs to invest in the future. In particular, some governments that have traditionally pulled wealth out of the ground in the form of oil, gas, metals, and minerals are already discovering that this model won’t sustain them indefinitely.
But it’s not enough for governments to invest in new technologies. They must also invest in the process of training citizens to use them. If they don’t already have strong education systems, from early childhood through higher education, they will have to develop them. Some developing countries will make this leap, and some won’t. They must also work with industry to help retrain workers to minimize the number of those who can’t keep pace with evolving demand for new skills. They must invest in roads, bridges, ports, airports, schools and hospitals, and the digital-age infrastructure needed to ensure that energy and information flow efficiently.
In addition, governments must minimize inequality. This is especially important in a world where it has never been easier to find out how foreigners live. The point is not to prevent wealth creation or to reward people who have done nothing to deserve help and will probably squander it. It’s not a question of equality of outcome but of opportunity, a viable path toward a better life. The larger the percentage of people with good reason to believe that the system will prevent them from bettering themselves, the greater the risk of conflict for which everyone pays a price. As part of this battle, fighting corruption is crucial. If the less powerful have no means to protect themselves when the more powerful strip them of what they have, they will rebel. If ordinary citizens believe the political and economic system exists only to maintain the divide between privilege and poverty, they will find ways to fight back. A basic level of trust in government and its institutions is critical.
Given the changes that automation and artificial intelligence will bring to the workplace, there will be an important change in the relationship between demographics and political stability. As globalization created new opportunities for poor countries with low-wage workers to export products to wealthier countries, surging populations of young people offered an advantage for countries like India and appeared to put fast-aging China in long-term danger. But in a world where new technologies ensure that fewer jobs are created for each new unit of economic growth, an expanding population will create a dangerous disadvantage.
Even if these trends simply change the nature of work, rather than reducing the overall number of jobs, the demands on education systems and worker retraining programs will be much more expensive in countries with larger populations. Finally, everyone—and every nation—sometimes needs to express frustration. Here, democracies have an important advantage over authoritarian states by allowing space for protest and other demonstrations of public anger. Protesters in states with free speech, free media, and freedom of assembly are less likely to face police or soldiers ready to use live ammunition, making it less likely that a small local protest will become a large national riot. This pressure valve allows a nation to absorb shock while minimizing the risk of a broader upheaval.
TWELVE COUNTRIES
With the need for resilience in mind, we turn to twelve of the world’s largest and most important developing countries: China, India, Indonesia, Russia, Turkey, Brazil, Mexico, Venezuela, Nigeria, Saudi Arabia, Egypt, and South Africa. Begin with trust in government and its institutions. According to the 2017 Edelman Trust Barometer, trust in government is highest among the large Asian markets: China, India, and Indonesia. It’s certainly possible that will change over time as public expectation of ever higher standards of living are dashed, but the evidence says that these countries have the advantage of starting from a higher base of confidence. Brazil and Mexico earn middle-of-the-pack scores, which is remarkable given the public scandals that have dominated local news in those countries in recent years. South Africa and Turkey score lower. Despite the continuing popularity of President Vladimir Putin, Russia scores very poorly, an ominous sign for what his successors might expect.23
Beyond this study, we can say that Saudi trust in government is based largely on the state’s ability to employ two-thirds of the working-age population in government jobs.24 In sharply polarized Venezuela, attitudes toward government are shaped almost entirely by allegiance (or lack thereof) to the ruling party. In Nigeria, split evenly between Christians and Muslims of the north, confidence in government and its institutions is shaped largely by the identity of the president.
The force most likely to further undermine confidence in government is the pace and scale of technological change in the workplace. There are two factors to consider. The first is vulnerability to automation and its disruptive effects. The second is the state’s capacity to respond to it. Think of it like this: Is your home built on a fault line, and is it strong enough to withstand an earthquake?25 The nature of their economies and the limitations of their politics make India, Indonesia, Russia, Nigeria, Saudi Arabia, Egypt, and South Africa especially vulnerable. Oil exporter Venezuela is less likely to automate. Mexico, Brazil, and China have more capacity than the rest to respond to the changes that automation will bring.
To measure demographic vulnerability, look to the share of a given population under the age of twenty-four and to national incomes per capita. Countries with large populations of young people need more jobs, and per capita income helps us account for big differences in size of the countries in question. According to statistics provided by the International Monetary Fund (IMF) and United Nations Development Programme (UNDP), the most vulnerable countries are Nigeria, Egypt, Venezuela, India, Indonesia, and South Africa. Mexico, Russia, Turkey, Brazil, and especially China are less vulnerable. South Africa, Brazil, Mexico, Saudi Arabia, China, Nigeria, and India suffer from the highest levels of income inequality. Indonesia, Russia, Turkey, Argentina, and Venezuela are less vulnerable. Egypt is the least vulnerable in this category.
But beyond these broad comparisons, we need a much closer look at the unique pressures squeezing each of these twelve countries. The next chapter will provide one.
CHAPTER 3
FAULT LINES
We learn geology the morning after the earthquake.
—RALPH WALDO EMERSON
South Africa, Nigeria, Egypt, Saudi Arabia, Brazil, Mexico, Venezuela, Turkey, Russia, Indonesia, India, and China have all undergone enormous changes over the past twenty-five years. Each has its strengths and vulnerabilities. Together, these countries contain well over half the people on earth and an even higher percentage of the world’s youth. Their fate will determine the future of the entire twenty-first-century global economy.
Begin in sub-Saharan Africa, a region with fast-growing cities and economies, swelling populations of young people, weak political systems, underdeveloped infrastructure, and long histories of religious, sectarian, and tribal conflict.
SOUTH AFRICA
In recent years, student rage has taken center stage in South Africa. Cameras beam images of flying rocks, rubber bullets, riot gear, pepper spray, stun grenades, and flames across the country and around the world. This is a nation where young people understand the past very differently than their parents and have much deeper fears for the future. Bubbling beneath the surface of these protests is the fear that their country has no place for them, that their degrees won’t earn them a chance at a better life, and that government doesn’t care. There are nearly 20 million South Africans between the ages of fifteen and thirty-five, and just 6.2 million of them have jobs.1
How did this happen? From 2004 to 2008, a moment of high growth across the emerging-market world, high prices for the gold, platinum, diamonds, and coal that the country produces in abundance, along with the surge in state spending that the commodity boom enabled, helped South Africa grow by a robust 4.8 percent. From 2009 to 2013, as both rich and poor countries struggled to recover from a global economic slowdown, growth tumbled to just 1.9 percent.
Things have gotten worse. From 2014 to 2016, the figure fell to 1.1 percent, and the average number of violent protests climbed from 21 per year during the good times (2004–2008) to 164 per year in recent years (2014–2016). Youth unemployment is double the rate for adults, and it’s nearly four times higher for black youth (40 percent) than for white youth (11 percent). Those numbers translate fear and frustration into us vs. them.2 “Them” can be the governing elite or the police or white people or foreign investors or an older generation of South Africans who don’t understand the younger generation. Or it can be unwelcome foreign workers from places like Somalia, Nigeria, or Zimbabwe, particularly in parts of the country where poverty and joblessness are especially high. Guest workers have been the victims of attacks many times over many years.
The peaceful end of apartheid and the transition to genuine democracy in South Africa in the early 1990s stands among the greatest human achievements of the twentieth century. This success was a reflection of the wisdom of Nelson Mandela and the courage of South Africa’s people. But a quarter century later, this remains one of the most unequal societies in the world. Despite hopes for rapid development with broadly shared benefits after apartheid fell, per capita income stands at just $5,200, and much of the country’s wealth remains in white hands or with the black political and business elite. Poverty and joblessness remain chronic problems, particularly for young people, boosting what is already one of the highest crime rates on earth. World Bank statistics show that inequality has increased since the turn of the century.
Under former presidents Nelson Mandela and Thabo Mbeki, the state spent a lot of money to create opportunities for people who needed them most, but unemployment has risen above 25 percent during the scandal-plagued presidency of Jacob Zuma. Only about 30 percent of South African households qualify as middle income. A generation ago, many expected South Africa to lead sub-Saharan Africa toward a development model that reduced inequality. That hasn’t happened, and the country is now headed in the wrong direction.
Some of South Africa’s weakness comes from falling global demand for the commodities it exports, reducing the money that government can invest. But some of these failures flow from the physical legacy of apartheid, the townships and underdeveloped rural areas that continue to separate poor people from the chance to learn and work. Drive the highways that separate South African cities from the dusty, sprawling townships, and you’ll see people of every description, most unable to afford the transportation that might take them to a job, trudging along the side of the road.
Some of it comes down to chronic corruption and poor leadership from the African National Congress (ANC), which has ruled in coalition with the Congress of South African Trade Unions and South African Communist Party since apartheid’s end without a serious electoral challenge. That’s now changing, as both the moderate Democratic Alliance, which has won control of many local governments in recent years, and the Economic Freedom Fighters, a party of young people with a talent for political theater, inspired by Cuba’s Fidel Castro and Venezuela’s Hugo Chávez, capitalize on growing impatience and frustration with the ANC. The ruling party itself is increasingly divided. There is a globalist old guard that remains committed to private-sector-driven growth and openness to foreign investment. There is also an increasingly populist wing, still loyal to Zuma, that accuses foreigners of stealing South Africa’s resources and white South Africans of continuing to control more than their fair share of the country’s land and wealth.
Today, no South African under the age of thirty is old enough to remember apartheid. For many of these young people, the ANC is not the party of liberation but of power and privilege. They see globalization not as a source of personal empowerment, a rising tide that lifts all boats, but as a tool that foreigners use to steal South Africa’s natural wealth. In that sense, they have more in common with Steve Bannon than with Nelson Mandela.
Younger people are voting in smaller numbers than in the past, a sign of cynicism toward the entire political class, but the number of campus protests is on the rise. There’s a government plan to subsidize youth wages to encourage employers to hire young people, but the country’s powerful trade unions oppose the subsidy on behalf of their members and will use their political influence to prevent it from becoming permanent.
South Africa is also especially vulnerable to the disruptive effects of automation of the workplace, because unemployment is already extraordinarily high, leaving much of its surging population of young people without even the most basic job skills. The South African government doesn’t have the money to address that problem by upgrading primary, secondary, and higher education or to invest in research and development of new technologies at home. What is the future for South Africa’s growing youth population? What happens when their frustration reaches a tipping point? And how will the ruling African National Congress—once the beating heart of resistance to apartheid-era oppression—respond when its dominance of South African politics is no longer assured?
