Us vs them, p.6
Us vs. Them, page 6
We’ll find out soon. That day is coming sooner than many think.
NIGERIA
Nigeria is profoundly divided too. Christian farmers and Muslims herders have fought battles that have killed hundreds. Muslim militants in the country’s north have killed thousands. Militia groups in the southern Niger Delta region have attacked state officials, police, foreigners, and foreign companies that they accuse of stealing the region’s oil wealth. It’s unusual in this country to see a large-scale urban protest against inequality and government corruption. Yet, in 2017, on one cloudy February afternoon in Lagos, the country’s commercial hub, hundreds of protesters stopped traffic and serenaded local police with chants of “Government of the rich, for the rich, making rules for the poor” against a backdrop of music from the late Afrobeat icon and political dissident Fela Kuti.3
With more than 180 million people, Nigeria is Africa’s most populous country and its largest economy. It’s also an increasingly unequal society. A 2017 study published by Oxfam and Development Finance International put Nigeria dead last on its list of 152 countries ranked by “commitment to reducing inequality.” The report labels Nigeria’s spending on public health and education as “shamefully low” and notes that “Nigeria’s richest man earns 8,000 times more in one day than a poor Nigerian will spend on basic needs in a year.”
The problem is getting worse. Nigeria’s economy has grown at a strong pace in recent years, but the study notes that it is one of the few countries where the number of people living in poverty has increased—from 69 million in 2004 to 112 million in 2010—over the past generation.4 That’s a rise of nearly 70 percent, and it means that more than 65 percent of the population is poor. “The number of millionaires increased by 44 percent during the same period,” according to the study, drawing a clear boundary between globalization’s winners and losers.5 The country’s per capita income is $2,200.
Nigeria has a population divided almost evenly between Christians in the country’s southern states and the underdeveloped Muslim-dominated north. To build confidence and a shared stake in the country’s future as democracy took hold in 1999, leaders of the Muslim north and Christian south struck an informal deal for a regional rotation of the country’s presidency. Yet southerners have held the job for thirteen of nineteen years since. The first northern president, Umaru Yar’Adua, died in 2010 after just three years in office and was replaced by his southern vice president. The second, current President Muhammadu Buhari, has been ill for much of his term. Failure to share power as promised hasn’t created a crisis yet, and the first peaceful transition of power from a defeated incumbent to his challenger in 2015 offered a positive sign for the country’s cohesion. But unresolved north-south tensions will become a much larger problem if economic growth slows sharply or if unemployment spikes. That’s exactly what’s begun to happen.
The lower price of oil, which accounts for more than 90 percent of Nigeria’s export revenue, has weighed heavily on economic growth in this OPEC member country, reducing the government’s ability to spend on education, better infrastructure, and other attempts to reduce poverty, particularly in the northern states. The percentage of northern children in school is half the percentage in the south, as money from the country’s oil industry and the service sector in Nigeria’s largest cities, both of which are centered in the south, is not shared with northern states. Boko Haram, an Islamist militant group based in the country’s northeast that has killed more than 15,000 people and pushed more than 2 million from their homes, makes matters worse by making a poor region poorer. In the far south, militants in the oil-producing region of the Niger Delta continue to plague production.
Nigeria, like Saudi Arabia, Russia, Venezuela, and others, needs to diversify its economy away from heavy dependence on oil exports, but its inequality will work against this process because, as the elite within developing countries amass wealth, they may lose the incentive to invest in the country’s future. The introduction of automation into the country’s manufacturing and artificial intelligence into its service sector will create turmoil in the country’s overcrowded cities mainly because, as in South Africa, the country’s education system is ill-equipped to prepare a fast-expanding population of young people for twenty-first-century jobs. The World Bank estimates that automation and machine learning will put 65 percent of all current jobs in Nigeria at risk. This may be the factor that finally tips Nigeria toward real turmoil.
EGYPT
“We want to eat!” It’s the simplest of protest slogans. In March 2017, bread riots erupted in a number of Egyptian cities as thousands of angry people blocked off busy streets and surrounded state-run bakeries to vent their fury at a government decision to reduce the number of subsidized bread loaves that each family was allowed to buy. Egyptians have many reasons to be angry with their government, but none is more basic than this.
Inequality is growing in Egypt. Nearly 30 percent of the country’s 90 million people live in poverty, the highest level since the turn of the century. Its per capita income is less than $3,500, and fallout from the Arab Spring continues. The problems that helped create that 2011 uprising—particularly public anger that the vast majority of Egypt’s people have never benefited from higher economic growth and that government exercised unchecked power over people’s lives—remain unresolved following the military’s recapture of government in 2014.
President Abdel Fattah al-Sisi has tightened his grip by isolating both the moderate and more radicalized supporters of Egypt’s Muslim Brotherhood. Yet resistance is growing. Terrorist attacks in Egypt have taken a human and economic toll, particularly on the important tourism sector, and the Egyptian government was forced to declare a three-month state of emergency in 2017 following attacks on Egyptian Christians.6 The resulting government crackdown on Sisi’s political challengers has discouraged both domestic and foreign investment in the country’s future. Financial help from Saudi Arabia and other Persian Gulf states has slowed sharply as lower oil prices force these countries to spend their money more carefully. Demands from the International Monetary Fund that Egypt allow a devaluation of its currency have pushed prices higher across the country, hitting the poor especially hard. Complicating matters further, the Egyptian military, anxious to protect political stability and its economic privileges, can veto the civilian government’s attempts to introduce reforms that might help Egypt solve some of its lasting problems.
But this country’s greatest challenge will come from its exploding population, which has grown from 66 million in 2000 to more than 90 million today. It is projected to reach 120 million by 2030 and 150 million by 2050.7 Population growth and urban sprawl leave less room for agriculture, exacerbating alarming shortages of food and water in a country that is already the world’s largest importer of wheat. There have been protests over rising prices for food and fuel, as in November 2016, when the government devalued Egypt’s currency and cut fuel subsidies to try to get its financial house in order, and again in March 2017, when it took that extraordinary step of cutting bread subsidies.8
More than half of Egypt’s population is under twenty-five. Some 750,000 Egyptians graduate college each year, but few have the skills needed to succeed in the current workforce.9 Some young people with little hope for a better life will blame their government. Others will blame the IMF, an institution closely identified with globalism, which insists on state spending cuts in exchange for its loans. Near-term, large-scale automation is unlikely in Egypt, because a government that can’t supply bread is unlikely to spend on development of new technologies or on programs to train workers how to use them. The inability to innovate will only leave Egypt that much further behind, and more people with fewer opportunities will surely need someone to blame.
SAUDI ARABIA
In May 2012, a group of men serving as religious police, known in Saudi Arabia as the Commission for the Promotion of Virtue and Prevention of Vice, approached a young woman in a shopping mall. They told her that since she was wearing polish on her fingernails, she would have to leave. “I’m staying, and I want to know what you’re going to do about it,” the young woman replied. She recorded the encounter on her phone and posted the resulting video on YouTube, where more than a million people saw it within days of the incident. The battle between us and them, between those who want greater personal freedom in Saudi Arabia and those who believe these values are foreign and will contaminate the kingdom, played out vividly in the YouTube comments section with strong opinions, colorfully expressed, on both sides.10 Not all young Saudis want a more open society. Many have become Twitter followers of some of the kingdom’s most outspoken conservative clerics. In other words, some young Saudis have embraced globalism and others have not.
Five years later, a woman was arrested for posting a video of herself walking through the streets of a small Saudi village wearing a short skirt and sneakers. Twitter users posted evidence that Riyadh police had issued an arrest warrant that charged the young woman with “disrespecting and violating the teachings of Islam.”11 Nearly half of the country’s 32 million people are under the age of twenty-five, but a close look at social media in the kingdom reveals that even the youngest Saudis are divided over questions of freedom and religious conformity. These tensions have existed for years, but they will run much higher if the Saudi government can’t provide them jobs, income, or greater opportunities to live as they choose.
There is no country quite like Saudi Arabia. Its per capita income is above $20,000, more than five times higher than in Egypt and nine times higher than in Nigeria, but that’s only because it’s a much smaller country that sits on a lot of oil. It has a large and growing population of young people, but two-thirds of the workforce is employed by the government, many of them in undemanding positions created to make work rather than to fuel growth. Physical labor is virtually always performed by foreigners from poor countries hoping to send money home. Expats and foreign guest workers with no path to citizenship make up nearly a third of Saudi Arabia’s population of 32 million and about 75 percent of the private-sector workforce, according to the IMF.
The Saudi economy doesn’t depend for growth on productive workers or technological innovation. The state doesn’t depend for revenue on taxes paid by citizens. For decades, the answer to every question has been crude oil, which accounts for nearly 90 percent of total exports and more than 90 percent of the government’s budget revenue. That’s where the money comes from to pay all those government workers with so little to do.
But the world’s energy markets are undergoing revolutionary change. New technologies are helping oil companies find energy deposits they would not have found ten years ago and extract the oil from new places, and in new ways, that were recently impossible. The result is that known global reserves of crude oil are now almost 2.5 times higher than in 1980, and abundant available supply ensures that prices won’t anytime soon recover to the peak they reached in 2014, if ever.12 Add the fact that economies around the world will rely more over time on a fuel mix that’s less dependent on oil, and the Saudis will find themselves without the seemingly endless inflow of petrodollars that they’ve enjoyed for decades. That won’t happen tomorrow or the day after, because the Saudis still have plenty of cash on hand. But the day of reckoning is coming, the impact will be permanent, and the Saudi leadership knows it.
That’s why King Salman has launched the Vision 2030 project, an enormously ambitious plan, directed by his enormously ambitious son, to enact the economic, technological, and social changes needed to modernize the Saudi economy and create millions of good jobs for young Saudis. Bring women into the workforce by allowing them to drive. End harassment of young people by the religious police. Persuade citizens that the state will wage war on corruption, even if it’s committed by members of the royal family. Change society to change the economy. Will it work? Unlike countries such as South Africa, Nigeria, and Egypt, the Saudi government has money to spend on education. About 90 percent of Saudi children are now in school, and women outnumber men among university graduates. This is the foundation that makes Vision 2030 possible.
But there are reasons for doubt, despite the talent and sincerity of the man leading the project, Crown Prince Mohammad bin Salman. Changing the Saudi economy means changing Saudi society, by creating a national work ethic in a country that has never had one—and by welcoming women not just into the classroom but into the workforce in much larger numbers, even if they don’t all dress in ways that satisfy religious conservatives. It’s one thing to change the law, another to abolish long-observed traditions. King Salman has imposed austerity measures for the sake of a more sustainable economic system. Subsidies have been reduced, raising the prices that citizens pay for water, electricity, and fuel. Free health care and free education could be eliminated next. It’s a short-term gamble that the king hopes will build a more sustainable long-term strategy. But the larger question is how this country will create the jobs its rising population of young people will need.
And what happens if the Saudi public can no longer be satisfied, if ambitious members of the royal family use public anger to boost their own standing within the ruling elite, creating discord in the process? In the search for a “them” to rally “us,” the Saudis are likely to pick more fights with regional rival Iran, creating more frustration and anger inside the kingdom and across the region. Many Saudi young people, meanwhile, will continue to push for a new way of life.
BRAZIL
Brazil is the classic example of a country where government has become a victim of its own success. The country’s middle class grew from about 35 percent of the population when the Workers Party government came to power in 2003 to nearly 60 percent by 2013. That’s a major leap forward for tens of millions of people. It has less to do with well-diversified trade—Brazil’s economy is much less open than other major emerging markets—than with the resource-rich country’s ability to ship commodities to China and its government’s willingness to redirect wealth toward people who had long been excluded via programs like Fome Zero (Zero Hunger) and Bolsa Familia (Family Grant) that have helped poor people afford food, gain access to water, borrow money, vaccinate children, and send them to school.
Yet enormous numbers of people who have been lifted from poverty, and those already in the middle class, now demand much better government—and their expectations have been heightened at an especially difficult moment for Brazil. In recent years, prices of Brazil’s commodity exports have fallen sharply. Brazil’s currency lost one-third of its value in 2015. Government, companies, and consumers have accumulated mountains of debt. In a country mired in recession for the past several years, with a public infuriated by daily updates on the biggest political scandal in the nation’s history, millions of Brazilians are fed up—with corruption, crime, a lack of good schools and quality health care, and gross government incompetence.13 It’s one thing for government to transfer large amounts of wealth to people who need it. It’s another to provide them with the services that middle-class citizens expect. That requires large amounts of investment. Investment requires careful planning, intelligent policymaking, painful reform, and political compromise. All have been hard to come by in postboom Brazil.
Per capita income remains at just $8,700, and Brazil needs to spend much more on basic infrastructure—better roads, bridges, schools, hospitals, ports, and airports—if it is to escape the ongoing economic slowdown that threatens to reverse many of the Brazilian people’s gains. Yet the slowing economy makes that more difficult every year, and the inability of politicians to sustain their popularity for very long makes tough-minded reform that much harder to impose. Anger is rising against an entire political establishment that has not found an effective response, and protests have reached historic heights. This is a country where the battle of us vs. them now pits citizens against the entire political and business elite.
MEXICO
Brazil’s political and business scandals have grown so big that they’ve spilled over into a number of other countries. Odebrecht, an enormous Brazilian construction company and a key player in the Lava Jato scandal, was accused in 2017 of bribing officials in Mexico in exchange for big state contracts. This was just the latest stain on the presidency of Enrique Peña Nieto, who was elected in 2012 with an approval rating of 54 percent and a mandate to undertake ambitious reforms, including a historic opening of the oil industry that promises to bring large amounts of foreign investment over time to modernize the oil sector. He achieved that goal, but it will be many years before Mexico sees substantial return.
So much has gone wrong. The kidnap and murder of forty-three students in the southern Mexican state of Guerrero in September 2014—a landmark case that produced accusations against criminal gangs, local police, federal police, and even the army—provoked nationwide protests in October 2014 and again in August 2015. The story continues to haunt the country, because it suggests to many people that the rule of law remains arbitrary and that the country’s political culture is hopelessly corrupt. Add a financial scandal involving the president’s wife, the state’s suspicious inability to keep drug kingpin Joaquín “El Chapo” Guzmán behind bars, a weaker currency, and the decision to withdraw a popular gasoline subsidy, and Peña Nieto’s popularity had fallen to 17 percent by 2017.
In Mexico, citizens are increasingly frustrated with corruption at all levels of government, rising inflation, mediocre growth for the past generation, and a worsening security situation. Mexico has not experienced the sudden surge in income and expectations that we’ve seen in Brazil and some other emerging markets. In fact, the country’s real minimum wage hasn’t grown in twenty years, and the rate of poverty hasn’t much changed in twenty-five, leaving few Mexicans with confidence that tomorrow’s living standards will be better than yesterday’s. A surge in U.S. oil production is bad news for a country that still sends more than 70 percent of its oil exports to the United States. This is another developing country that badly needs revenue for investment: Mexico ranks thirtieth of thirty-five OECD countries in education spending and thirty-second in health care spending.
