Us vs. Them, page 7
This is an interesting moment for Mexico. At a time when the center-right is making a comeback across much of Latin America, public anger in Mexico, fueled by new attacks from Donald Trump, may boost the popularity of the country’s most talented populist—just in time for a presidential election in 2018. Andrés Manuel López Obrador hopes to capitalize on frustration with corruption and fear of both criminal gangs and their enablers within the police to launch a full electoral assault on the current government. The rest of the political establishment fears that López Obrador will try to please voters by reversing policies designed to provide long-term economic gains, like opening the country’s energy sector to foreign investment, and that he’ll open investigations that might throw many of the country’s current leaders in jail. As in Brazil, the risk is that fed-up voters will treat the entire political class as “them,” creating an opportunity for a candidate promising to punish the country’s elite and protect its interests against assaults from the giant neighbor to the north and its bellicose president.
Finally, Mexico is a country where automation will have a big effect. Nearly two-thirds of jobs in advanced manufacturing of automobiles, aerospace products, and plastics can be automatized. That’s good news for companies and shareholders, but it’s bad news for the estimated 5 million workers who will be displaced.14 Add that disruption to the country’s middle class and the impact it will have on wealth inequality, and this will be a volatile and dangerous moment in Mexico’s history.
VENEZUELA
There are many types of shortages. In Venezuela, water was in such short supply by 2016 that citizens added to their meager rations by stealing water from swimming pools and tanker trucks. Electricity shortages forced the government to order public offices to open just two days a week. Power cuts and rolling blackouts became part of daily life. Aspirin disappeared off store shelves. Supermarkets closed because they had nothing to sell. In April 2016, Empresas Polar, Venezuela’s largest private company and producer of 80 percent of all beer consumed in the country, suspended production. “Let them drink water,” government officials might have said, if there had been any water.
Venezuela is blessed (or cursed) with the world’s largest oil reserves. Yet it has suffered much higher levels of unrest in recent years than any other Latin American country. Former President Hugo Chávez, an iconic populist firebrand, invested in improving the lives of poor people long ignored by Venezuela’s political class. State spending cut the country’s poverty rate nearly in half during his presidency, from 49 percent in 1999 to just 29 percent in 2012. Inequality was sharply reduced. Record high oil prices helped Chávez introduce the so-called misiones, which provided the poor with subsidized food, basic goods, housing, and health care. His popularity allowed him to consolidate power at the expense of the country’s democracy and to create all sorts of long-term economic problems.
In 2013, Chávez died. In late 2014, oil prices fell by almost half. A country that imports virtually everything except crude oil quickly faced serious (and lasting) shortages of food, water, and other basic goods. Nicolás Maduro, Chávez’s hapless successor, has struggled to beat back demands for political change. Venezuela’s economy has been in deep recession for many years. Scarce goods, an overvalued exchange rate, and the government’s attempt to manage its debt by printing way too much money have sent price inflation skyrocketing. Product shortages will get worse as the government vows to spend less on imports to ensure it can continue to avoid default on sovereign debt.
The black market has threatened to wreck what’s left of the consumer economy as state-imposed price controls create opportunities for Venezuelans to make more money buying state-subsidized goods and reselling them at higher prices, or smuggling them over the border into Colombia, than they can by working. Extreme poverty has nearly doubled during this crisis, from about a quarter of the country’s population to more than half, reversing the gains made under Chávez. Venezuela’s cities have some of the highest rates of violent crime in the world. Many young people with enough money are leaving the country.
Like Chávez, Maduro uses the ruling party’s control of the country’s courts to keep the opposition from power. When opposition candidates won a majority of seats in the national assembly in December 2015, a supreme court packed with Maduro loyalists dissolved the assembly. Street demonstrations have turned violent, and more than one hundred citizens have been killed. Chávez and Maduro have ensured that loyal allies command Venezuela’s military. That loyalty will continue—perhaps until the order is given to fire on Venezuelan men, women, and children.
Venezuela’s economy will not improve under the current system, and regime change is increasingly likely. It remains unclear, as of this writing, when and how the end will come—and how many will die in the process. It will take years for even the most capable opposition-led government to correct the distortions that Chávez and Maduro have imposed on Venezuela’s economy, particularly if they try to do it without imposing excruciating economic pain on those that Chávez lifted from poverty. All these changes must come at a time when diversifying the country’s economy away from deep dependence on oil exports has never seemed further out of reach.
TURKEY
Turkey has faced plenty of unrest of its own. Recep Tayyip Erdogan and his Justice and Development Party deserve enormous credit for making Turkey one of the world’s most exciting economic success stories of the first decade of the new century. Past governments had simply reinforced the power of elites in the country’s largest cities: Istanbul, Ankara, and Izmir. Wealth remained in the hands of the small number of families who dominated Turkish business. Traditions institutionalized by Mustafa Kemal Ataturk, modern Turkey’s founding father, ensured strict adherence to secularism in the nation’s political life and an orientation toward Europe as a model for political and social development. Turkey’s military has historically served as protector of these principles. Erdogan’s innovation was to empower citizens and small businesses across the country’s Anatolian heartland to join in the political and economic life of their country. He challenged secular dominance of government to allow Turks with conservative social values a greater role in the country’s development. Per capita income tripled during the first decade of his political dominance, and Turkey became a more influential actor on the global stage.
Yet Erdogan let success go to his head, and Turkey’s political system has not yet proved strong enough to restrain him. As he works to remain in power, he pushes economic policies that he believes will help in the short run but which are certain to deepen long-term problems. Prevented by the rules of his party from continuing as prime minister, he won election as president in 2014 and proposed a referendum that would allow a rewrite of Turkey’s constitution to give the presidency much more power. He beat back media criticism by putting journalists in jail. When criticism moved to social media, he tried to ban Twitter.
Well aware that Turkey has a history of military coups, he used warnings of conspiracy to periodically purge the army’s ranks. In July 2016, some parts of the army finally did try to see him off, but Erdogan eluded capture and declared a state of emergency that gave him extraordinary powers to imprison large numbers of enemies, real and imagined, and to further tighten his control of courts, the bureaucracy, the police, and the army. His supporters, many of them empowered and emboldened by his success in increasing the heartland’s influence in the life of the country, lifted him to a narrow referendum victory in 2017.*15 For these citizens, crisis can legitimize a tough authoritarian response.
Yet Turkey’s problems continue to mount. On the one hand, the percentage of those living in poverty has been dramatically reduced—from more than 30 percent in 2002 to just 1.6 percent in 2014. However, among thirty-five OECD countries, only Mexico has greater income inequality than Turkey. Erdogan is also endangered by the economic expectations created by earlier success. In 2012, his party promised that per capita income would climb to $25,000 by 2023. In 2016, it remained just above $10,700. He continues to amass power, but election results tell us there are a significant number of people in his country who oppose his plans to expand it indefinitely.
At the same time, his country’s economy remains stuck in low gear, capping even the gains made by his supporters in years past. Erdogan’s pressure to keep interest rates low to protect growth and his popularity, along with his reluctance to enact painful reforms that will strengthen the country over the long term, leave Turkey unusually vulnerable to external economic shocks. And as in other developing countries, the government has not kept pace with the need to spend more on urban infrastructure as more and more young Turks move to the country’s largest cities with hopes for a better life.
In response to tough times and heightened criticism, Erdogan has proved to be a master of the politics of us vs. them. Beyond political opponents, journalists, and Kurds, he has played to the grievances of many of his supporters—particularly conservative Muslims and hard-core nationalists—by picking colorful fights with European governments. During the referendum, he used the word “Nazi” more than once to describe both German and Dutch officials and their actions. But his most intense fights are with rivals at home, including at times members of his own party, whom he accuses of betraying the country and its president. He has accused journalists who criticize him of abetting terrorism. In the process, Erdogan has further polarized an already divided country. He will continue to push for more power. Those who fear him will continue to push back. There will be more confrontations in Turkey’s streets.
RUSSIA
In Russia, we find another smart, charismatic leader who could once claim credit for a major surge in living standards—one supported, as in Venezuela, by historically high oil prices. After the political and economic chaos of the first post-Soviet decade, capped with a financial crisis in 1998, per capita income tripled during the first decade of Vladimir Putin’s consolidation of power (2000–2010). The share of Russians living below the national poverty line fell from 29 percent in 2000 to just 10.7 percent in 2012. His government built state-controlled wealth funds, with vast sums generated by the export of oil, gas, metals, and minerals, as insurance against future economic turmoil.
But thanks mainly to the steep drop in oil prices since 2014, Russia’s per capita income remains stuck below $9,000 per year, less than in former satellites like the Czech Republic ($18,286), Slovakia ($16,499), Hungary ($12,778), and Poland ($12,316) that have joined the European Union. Oil now accounts for less than half of Russian government revenue only because the price has fallen sharply. State-controlled wealth funds have lost much of their cash as Putin invests in Russia’s military muscle and tries to protect entitlements for the country’s most vulnerable. Western sanctions haven’t helped.
In response to tougher times, state officials have stopped increasing pensions in line with inflation. They have halted most public-sector wage increases in a country where one-third of citizens work for the state or for state-owned companies. They have slashed financial support for regional governments, even as seventy-seven of Russia’s eighty-three regions run deficits and amass debt. Poverty, already on the rise in recent years, will continue climbing, particularly for pensioners and those who live far from the largest cities, the most reliable of Putin’s supporters. Well-educated Russians are leaving the country in search of better prospects. Russia’s life expectancy ranks 153rd in the world.
The gap between rich and poor is now wider in Russia than in all but four of thirty-five OECD countries, though the growth of Russia’s black market mitigates the damage. In 2014, at a time when oil still sold at well above $100 per barrel, Russia’s shadow economy already amounted to an estimated 40 percent of GDP, while 24 percent of the country’s wealth was held offshore. There’s no reason to believe that either statistic has improved since then.
For now, the greatest source of public anger at Russia’s government is the corruption that continues to drive the protests described in the last chapter. State dominance of Russian media, his tough-guy image, and his ability to deflect blame for corruption and a weakening economy onto subordinates have helped Putin continue to defy political gravity. Yet questions remain. Without an unlikely lasting surge in oil prices, what force can reverse the steady decline of Russia’s economy and living standards? How will Russians respond to the repression of political dissent when trouble becomes commonplace in parts of the country where support for Putin remains high? What foreign policy gambles might Putin take to divert public attention from Russia’s decline?
Remember that Levada Center poll from the last chapter? More than half of Russians surveyed in 2017 said they were tired of waiting for Putin to improve their lives. How long can he escape blame if things don’t improve? In the past, many Russians have been reluctant to challenge a government that pays their salaries or those of a family member. How long will that reluctance last as wages stagnate and living standards fall? Protests have already expanded well beyond Russia’s largest cities. How long before public frustration becomes a major political challenge for the Russian government? Putin remains broadly popular, protesters can be punished, there are no credible challengers available to voters, and Russia still has lots of money for rainy days. Yet this country is headed slowly but steadily in a bad direction, and it’s not clear what force might finally turn things around.
INDONESIA
One warm morning in December 2016, 200,000 Indonesian Muslims descended on Jakarta, the country’s capital, to demand that Basuki Tjahaja Purnama be thrown in jail. According to the mob, he had insulted Islam by publicly quoting a verse from the Koran with an interpretation they didn’t like. The crowd’s real motive? This ethnic Chinese Christian governor of Jakarta province, better known as Ahok, was locked in a close battle for reelection, and Muslim populists wanted to see him lose. “Jail Ahok. The law must be fair,” read the banners.16
Though Indonesia is officially a secular country, religious freedom and diversity remain enshrined in the country’s constitution, and Ahok remains a friend and ally of Indonesia’s reformist president, a court convicted him of “blasphemy” in May 2017 and sentenced him to two years in prison. This is the latest sign that the politics of us vs. them is now playing a larger role in the life of the world’s most populous majority-Muslim country, as radical Islam, populism, and nationalism expand their political appeal.
Indonesia is home to an estimated 260 million people. It’s a poor country, with per capita income of just $3,600. Beyond large-scale poverty, Indonesia is burdened with a large gap between rich and poor, one that has grown much wider since the East Asian financial crisis twenty years ago. That’s one of the most important reasons that Indonesians elected the former reformist governor of Jakarta province, Joko Widodo, as their president in 2014. Jokowi, as he’s widely known, is the country’s first president to come from outside Indonesia’s traditional elite, and he has attacked inequality through a sharp increase in state spending on the country’s ramshackle infrastructure, as well as its education and health care systems.
But Indonesia is yet another developing country where politicians and the business elite eat at the same table and corruption remains endemic. So far, the wealthy and well connected who oppose reform continue to target Jokowi’s plans rather than the popular president himself. That will change if failure to deliver higher living standards leaves Jokowi vulnerable. There is also a geographical divide within the country. About 120 million of the country’s 260 million people live far from major cities on Indonesia’s more than 17,000 underdeveloped smaller islands, and they have a lot of catching up to do. The private sector sees little profit opportunity in investing in these islands, and the state lacks the money to make up the difference, because this is a country where government isn’t good at collecting taxes.
Jokowi presses on. The number of Indonesians over age fifteen grew by more than 3 million between 2014 and 2015, while the number of jobs grew by just 200,000.17 The poor can expect more cash transfers and education subsidies to give them a better chance at middle-class life. The rich can expect higher taxes. Yet Indonesia’s vast population (the world’s fourth largest), its youth bulge (half the country is under twenty-eight), its urban-rural divide, and the very large number of poorly educated, low-skilled workers make the country especially vulnerable to the coming revolution in the automation of manufacturing. If Jokowi can’t raise enough revenue and pass legislation to invest much more in better roads, better schools, and more electricity beyond Java, young Indonesians will never develop the skills they need to compete in a digital-age East Asian economy. The country’s divides will grow, its reform movement will be discredited, and tens of millions of Indonesians will slide back into poverty.
The elite will build more gated communities and private schools. The poor will turn to local schools and organizations that promote an Indonesian brand of Sunni Islam that rejects the government’s traditional “unity in diversity” message of tolerance, an idea that has helped keep the peace for many years in a country with large ethnic and religious minorities. Given their numbers, an aggrieved underclass might then use the ballot box to elect leaders who promise to use any means necessary to right what they believe is wrong. That’s not difficult to imagine in a country where we already see Islamist parties promote Muslim dominance and nationalist parties demand loyalty to patriotic values as they define them.
