Third World Quarterly, Vol. 25, No. 6, Pp. 1007 1030, 2004

mfe Carfax Publishing Third World Quarterly, Vol. 25, No. 6, pp. 1007–1030, 2004 *//jU^ Taylor & Francis Group

Globalisation, extremism andviolence violence in poor countries

RICHARD SANDBROOK & DAVID ROMANO

ABSTRACT Globalisation—understood as external and internal market liberalisation—generates conditions in poor countries that are conducive to the emergence of extremist movements, instability and conflict. Liberalisation and the accompanying requirement of macroeconomic stabilisation subject people to rapid and sometimes devastating changes in fortune. Yet globalisation has had vastly different effects in different countries. Many have succumbed to sporadic growth or stagnation, inequality and turmoil, whereas others have achieved a broadly based prosperity, peace and democracy. A comparison of two liberalising African cases—Egypt and Mauritius—is employed to explain this divergence in paths. Mauritius has so far deftly navigated the maelstrom of globalisation by achieving growth with considerable equity and genuine democracy, while Egypt has followed a path of belated and partial liberalisation, irregular growth, the rise of new inequalities and insecurities, repression and violent Islamist movements. The major reason for this divergence lies in certain contingent institutional and class processes.

That neoliberalism’s triumph would usher in a more peaceful and prosperous world—an ‘end of history’—was a popular post-cold war view. According to this position, the collapse of state socialism in the 1980s allowed all countries to adopt a market orientation and open economies. Free global markets, it was believed, facilitated the free movement of ideas as well as products, thereby opening closed states to the outside world. Free trade and investment, furthermore, 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 more peaceful world. But a darker view, that liberalisation foments extremist movements and conflict, competed with this sanguine viewpoint. Marx had memorably ex- pounded in The Communist Manifesto on the volcanic impact of market forces— how they introduce ‘everlasting uncertainty and agitation’, how ‘all that is solid melts into air’—during the first era of globalisation. Similarly, Karl Polanyi in The Great Transformation (published in 1944) famously labelled as ‘utopian’ 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 RICHARD SANDBROOK & DAVID ROMANO a project invariably instigated a counter-movement of societal protection, for a liberal economy would lead to the ‘devastation’ of society. However, where the movement towards liberalism and the societal counter-movement entered into deadlock, or where market-induced insecurity became extensive, conditions ripened for the rise of extremist, violent tendencies—fascism and Stalinism in the Europe of the 1920s and 1930s. More prosaically, yet with no less chilling effect, the US Central Intelligence Agency forecast, in its 2000 report Global Trends, 2015, that the second era of globalisation would be no less tumultuous than the first: [Globalisation’s] evolution will be rocky, marked by chronic financial volatility and a widening economic divide. Regions, countries, and groups feeling left behind will face deepening economic stagnation, political instability, and cultural alienation. They will foster political, ethnic, ideological, and religious extremism, along with the violence that often accompanies it. This darker view frequently surfaces in a neoliberal concern that economic globalisation may provoke a damaging populist backlash against the market economy.1 Are the forecasts of Marx, Polanyi and the CIA correct? Our current era is certainly not a peaceful one. Civil wars, insurgencies, ethnic/religious strife, riots, rampant urban crime and terrorism, often abetted by the weakening or collapse of state power, have marred the post-cold war era. Few safe havens exist when even the USA is subjected to a major terrorist attack. Is globalisation implicated in this record of instability and conflict? Definitely not, according to a recent cross-national quantitative study—at least if one restricts one’s focus to terrorist violence.2 The authors of this ambitious study affirm the liberal consensus in arguing that ‘economic globalisation’ (increased flows of foreign trade, foreign direct investment, and portfolio investment) dampens terrorist activities in recipient countries by promoting economic development (see p. 254). This study suffers, however, from two flaws in its reasoning. First, the authors assume that it is a country’s growing integration into global markets that produces its economic development. In fact, many factors other than an increase in trade and investment account for economic growth, and it may well be that growth promotes a country’s foreign trade and investment, rather than vice versa.3 Second, the authors do not consider the importance of reverse causation. That is, the low incidence of terrorist attacks in a country may itself bolster the confidence of investors and exporters, leading to higher rates of investment and trade in that peaceful country. The liberal theory remains unproven. In contrast, we contend that, as a general tendency, globalisation—which we take as synonymous with external and internal market liberalisation—generates conditions that are conducive to the emergence of extremist movements, instability and conflict. Virtually the entire human population has been drawn into a growing 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 demand strong, coherent states to take decisive defensive action and mediate domestic 1008 GLOBALISATION, EXTREMISM AND VIOLENCE IN POOR COUNTRIES conflicts; yet these new tensions, combined with externally influenced austerity programmes and anti-state ideologies, challenge the legitimacy and coherence of already weak states. The rise in tensions and grievances, coupled with an increasingly ineffective and unpopular regime, provide an opening for violent protest movements. Although competition-induced creative destruction may augment global efficiency, this goal is often achieved at the immediate cost of greater uncertainty and upheaval. But the actual political impact of market liberalisation in each country is heavily influenced by contingent domestic factors. Whereas the outcome in many cases approximates that of the darker scenario, in others globalisation has had just the benign impact that the sanguine neoliberal perspective forecasts: a broadly based prosperity together with democracy and peace. The pattern of pre- existing cleavages and dissidence, together with the capacity of institutions to manage distributional and value conflicts, shapes these divergent outcomes. This obvious point, however, simply pushes the analysis back one step. How and why is the institutional endowment of certain counties superior to that of others in handling the pressures of globalisation? To probe this issue, we employ a comparison of two liberalising country-cases —Egypt and Mauritius—both usually identified as part of Africa. Though sharing 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 achieving growth with considerable equity and genuine democracy, whereas Egypt has followed a path characterised by belated and partial liberalisation, irregular growth, the rise of new inequalities and insecurities, repression, and violent Islamist movements. If Mauritius is globalisation’s prodigy, Egypt is one of globalisation’s bastards. One important reason for this difference lies in the former’s institutional endowment and class/ethnic relations, both of which arise from a peculiar colonial experience. Not only did liberalisation’s success here, in contrast to Egypt, require merely minor institutional adjustments, but unusual class/communal dynamics generated, again in contrast to Egypt, an equity-en- hancing separation of political from economic power. Growth with a degree of equity also contributed to the survival of democratic institutions of conflict management. Certain contingent institutional conditions and political dynamics thus domesticated globalisation’s disruptive impact in Mauritius, though not in Egypt. Before examining how these contingent factors shape a country’s experience of globalisation, we need to explore how ascendant global market forces exert a destabilising influence in the global south.

General tendencies: liberalisation and turmoil With the ascendancy of neoliberalism in the early 1980s, ‘structural adjustment’ became 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 state ownership of productive assets. In the 1980s or earlier, these statist economies 1009 RICHARD SANDBROOK & DAVID ROMANO faltered, especially in Latin America and sub-Saharan Africa. These economic crises derived from multiple sources: exogenous shocks (world recession, interest-rate hikes, energy price increases) and domestic constraints (neopatrimonial politics, corruption, mismanagement, armed conflicts, instability). Something needed to be done. The neoliberal prescription involved a rapid shift from state- led to market-led development. To compete in global markets and attract capital, the new model enjoined governments to maintain low inflation, reduce production costs, cut corporate taxes and labour costs, limit subsidies, privatise land and public corporations, and liberalise markets. These changes, whatever their economic merits, have had profound social and political implications. Both the wider reach of markets and technological developments accentuate the disruptive potential of economic liberalism today. A century ago much of the world’s population lived in self-provisioning peasant societies in colonies and semi-colonies, or on family farms in industrialising countries. Large regions of the world were integrated into the world economy only through trade; land and labour had not yet been transformed into commodities. However, the decline of the family farm in industrial countries, the deepening commercialisation of agriculture in poor countries, and high rates of rural–urban migration have rendered a growing proportion of the world’s population more vulnerable to market conditions. Also, the collapse of communism and the USSR (1989–91) have further extended the sway of the market system. As the market penetrates every nook and cranny, no one escapes its fluctuations. Meanwhile, technological advances in transport, telecommunications, satellite transmission, the internet and computer-based information-processing have not only linked the destinies of people world-wide, but also accelerated the pace of change. Even a mighty mega-corporation such as Enron can evaporate into thin air. An apparent economic success-story like Argentina can self-destruct in a few months. And such 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 the following.4

Trade liberalisation In agriculture neoliberal policy typically prescribes a reduction or elimination of price controls and subsidies to producers, in addition to export orientation and low tariffs, as the best way to improve economic conditions. Such a programme can 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. The result was that subsidised imports from Western countries rose by 60% in the first year. ‘Prices crashed by more than two-thirds, and millions of oilseed-producing farmers had lost their market, unable even to recover what they had spent on cultivation. The entire edible oil production and processing industry was also destroyed. Millions of small mills have closed down.’5 The phasing out of fertiliser subsidies—often required under IMF conditionality—raises production costs, and helps drive many small farmers into insolvency. As policies such as these drive many smallholders to the wall, export-1010 GLOBALISATION, EXTREMISM AND VIOLENCE IN POOR COUNTRIES orientated large companies buy them out. Former farmers head for the burgeoning urban slums. Export receipts may increase and subsidised wheat and rice imports from the EU and the USA may lower food prices, but at the expense of declining food 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 productivity, it will lead to the failure of some firms, to widespread retrenchment of workers, and to unemployment in some sectors. Chronic insecurity grows, especially in industrialised countries like the USA, where unions are weak, as industries rapidly wax and wane, better-paid permanent jobs vanish, and unskilled and even skilled workers watch their real wages fall.6 That this insecurity fosters anger, intolerance, and extremism should not be surprising.

Financial liberalisation This policy shift breeds periodic currency crises that undercut living standards and employment. Liberalisation of domestic banking, followed by international financial deregulation, has opened up cross-border capital movements throughout the world since the 1980s. IMF conditionality presses developing countries in the direction of removing capital controls. Today, at least $1.5 trillion passes through currency markets each day in a world of instantaneous trading where markets never close. The result is a high volatility of financial flows leading to ‘turbulence’: a rise in the frequency and severity of financial crises. Mexico in 1994, Thailand, Indonesia, South Korea and Russia in 1997–98, Brazil in 1999, and Turkey and Argentina in 2000–03 are just the most recent instances of devastating financial crises resulting in a collapse in the local currency, in economic activity and in employment. One expert estimates that these crises raised the incidence of poverty by 7% in these eight countries—pushing an extra 57 million people below the poverty line.7 Financial liberalisation, therefore, is a 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 package includes exchange-rate devaluation, positive real interest rates, a sharp decline in money supply, and a cut in governmental expenditures. But slashing public spending will usually result in a reduction or elimination of popular subsidies, job losses, wage cuts, and a reduction of public investment and services. The net result may be to sabotage implicit social contracts, the tacit bargains whereby sectors of the population assent to rule in exchange for the public provision of customary services and material benefits. Not only will these sudden losses alienate strategically located public employees, but they will also weaken the government’s support in other key constituencies as services deteriorate and prices rise. Also, high interest rates and credit reductions will harm small producers and perhaps reduce the food supply to the cities. Rising tensions, accompanied by falling state capacity, are a recipe for political disaster in vulnerable economies. To compound the political crisis, the IMF usually imposes capital-account liberalisation as a condition of its stabilisation loans. This condition exposes the vulnerable economy to heightened volatility in the future. 1011 RICHARD SANDBROOK & DAVID ROMANO

Stabilisation, liberalisation and inequality Domestic and external liberalisation has also deepened certain inequalities within societies. 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-quality data were available revealed that inequality rose in 48 cases (accounting for 59% of the sample’s population), remained constant in 16 countries (although inequality rose in two of them, Indonesia and Bangladesh, in the late 1990s), and fell in only nine countries, accounting for 5% of the total population.11 Other studies confirm this general trend.12 Although data are limited, they also point to the growth of regional inequality. China, India and Thailand manifest growing regional gaps and high rates of rural–urban migration. Growing regional disparities may exacerbate ethnic cleavages, as ethnic groups are generally regionally based. This worsening income distribution is directly related to neoliberal policies. Economic stabilisation programmes induce deep recessions while cutting expenditures that benefit the poor (food subsidies, public employment, accessible education and health care). Financial liberalisation, besides inducing periodic recessions, shifts income to lenders and rentiers at the expense of wages and borrowers. Privatisation often concentrates the ownership of public assets in the hands of wealthy political insiders, further exacerbating inequality. Tax systems tend to become less progressive and more reliant on value-added taxes, less redistributive and more reliant on user payments, all of which promotes inequality. And the quest for more ‘flexible’ labour markets generally translates into reduced employment protection, lower minimum wages, curtailed union rights and falling public employment. In all these ways liberalisation and globalisation hammer the living standards and prospects of middle-class sectors and workers in many countries, while benefiting the owners of capital—physical, financial and intellectual.13 Growing inequality breeds political turmoil in two ways. First, rising inequality reduces the contribution that economic growth (where achieved) makes to reducing poverty. Defined as those who survive on less than $1 per day (1985 purchasing power parity), the very poor remained constant at about 1.2 billion people between 1987 and 1998, according to the World Bank. By the latter date, nearly half the world’s population still lived below the higher poverty line of $2 per day. Expectations that free markets would transform the living standards of the poor have, therefore, been dashed in many countries, with potentially disruptive effects. Second, relative deprivation is a more powerful motivator of inter-group violence than absolute deprivation. A large-scale quantitative study concludes: ‘The risk of political disintegration increases with a surge of income disparities by class, region and community’.14 This political disintegration can take two forms. On the one hand, in highly stratified class societies, growing inequality will deepen class conflict and often augment the appeal of left-wing movements. This pattern has characterised much of Latin America.15 Particularly explosive are the likely social consequences of the liberalisation of agricultural markets and the creation of private property in land where smallholders had hitherto held communal rights to land use. The 1012 GLOBALISATION, EXTREMISM AND VIOLENCE IN POOR COUNTRIES increased vulnerability and insecurity of rural populations have fomented conflicts along class or ethnic lines.16 On the other hand, in countries where deep communal cleavages have emerged since independence (as in parts of Africa and Asia), growing disparities have exacerbated regional, ethnic and/or religious divisions. As one expert succinctly observes: ‘When secular economic trends lead to low growth, debt crises, rising unemployment, and rising rates of immigration, and when the resulting hardships and benefits are disproportionately allocated among various cultural groups, existing political cleavages based on cultural differences are exacerbated and new ones are created’. 17 Secessionist movements, civil wars, pogroms, warlordism, or low-intensity insurrection kept in precarious check, are the unfortunate outcome. Most of the more than 30 violent conflicts that raged within the countries of what were formerly known as the 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 peace depend principally on two trends. First, if neoliberal reform actually increases general prosperity, then class or communal tensions may dissipate. But, in the context of a decade or two, such reforms have rarely fulfilled their promise in Latin America and Africa. Second, if political institutions emerge that prevent abuses of power, manage conflict by reconciling or repressing dissidents, and design and implement appropriate economic and social policies, the outcome may be peaceful. But effective yet limited political institutions are notoriously difficult to develop in societies riven by mutual distrust and hostility. So the outlook is bleak in many countries.

Cultural globalisation Neoliberal globalisation is not just a matter of economics; it also threatens entire ways of life. The global penetration of the mass media and the values, images and tastes they purvey, have a powerful impact upon non-Western cultures. Television, films, popular music and advertising, industries dominated by US mega-corporations, pervade the world. These industries transmit a possessive individualism that fragments tightly knit communities; propagate consumer tastes that influence the dress, language, food and attitudes of young people; popularise notions of sexual, gender and authority relations that often clash with local notions of virtuous behaviour; and reflect a secular, narcissistic outlook usually in conflict with sacred worldviews defended by local elites. Media conglomerates are driven by a quest for profits, not hegemony; yet ‘the seemingly innocuous market quest for fun, creativity, and profits puts whole cultures in harm’s way and undermines autonomy in individuals and nations alike’.19 The dialectical reaction to ‘McWorld’—the homogenising, consumer-orientated and secular popular culture—is often ‘Jihad’—a reversion to a world defined by religion, hierarchy and tradition. As Benjamin Barber graphically depicts the latter: Jihad in its most elemental negative form is a kind of animal fear propelled by 1013 RICHARD SANDBROOK & DAVID ROMANO

anxiety in the face of uncertainty and relieved by self-sacrificing zealotry—an escape out of history…Moral preservationists, whether in America, Israel, Iran, or India, have no choice but to make war on the present to secure a future more like the past: depluralized, monocultured, unskepticized, reenchanted.20

This fundamentalist holy war assumes diverse forms—Christian, Jewish, Hindu, as well as Islamic—although only in the Islamic world do such protest movements threaten the stability of entire societies.

State disintegration Whether these tensions will afflict a particular country and foster conflict and instability depends heavily on the capacity of its state to mediate and disarm them. Yet neoliberalism can weaken the capacity of states to maintain order. If states had begun to disintegrate before the initiation of stabilisation and liberalisation, the latter processes undercut them further.21 Two tendencies undermine state effectiveness. First, the legitimacy and mediatory capacity of a state depends heavily on its provision of basic services—education, health, clean water, roads—together with its mounting of safety nets and its servicing of extensive patron–client networks. However, external shocks (reduction of aid, declines in the terms of trade, outflows of foreign capital), IMF-sponsored stabilisation programmes and privatisation of state corporations will curtail a government’s resources just as societal tensions rise. Central governments will then be less able to manage conflict by compensating the regions, classes and unemployed who bear the brunt of the adjustments; indeed, they may be unable even to maintain order, as emboldened rebels defy central authority. The latter may capture lucrative local resources—gold, diamonds, oil or timber—in order to build their own patronage networks.22 Second, the authority of the government will suffer if it is seen as the puppet of external forces, such as the IMF or the US government. When national elites buy into the Washington or post-Washington Consensus, this transnational consensus risks alienating those domestic groups that clamour for protection from unleashed market forces. The consequent political turbulence, in turn, motivates threatened political leaders to move towards more centralised and authoritarian governance, regardless of democratic constitutions. National disintegration is then manifest in growing regional, communal, or class challenges to state authority. This dynamic operates even in such a well established democracy as India since the early 1990s, according to a leading political analyst.23 Market liberalisation, therefore, not only heightens the insecurity and uncertainty of certain groups in characteristic ways, but also may deepen existing social cleavages (and create new ones) by widening the gap between winners and losers while circumscribing a state’s capacity to deliver valued services and patronage. The demographic trends tend to magnify the potential for political unrest. In many developing countries, half of the rapidly expanding population is under 25 years of age. Young men without prospects—the contemporary embodiment of Marx’s ‘dangerous classes’—are disproportionately represented among those adversely affected by market conditions. 1014 GLOBALISATION, EXTREMISM AND VIOLENCE IN POOR COUNTRIES

Transnational strains, national responses Yet rebellion and violence are not the necessary outcome of these stresses on the social fabric. An adept regime strategy either to buffer the losers’ living standards, enhance equity and build a new political base or, alternatively or concomitantly, to repress the dissidents, may quell the turbulence. Alternatively, the rise in insecurity and sense of inequity, if coupled with an increasingly ineffective and unpopular regime, provides openings for extremist movements and political violence. The domestic political consequences of transnational strains depend heavily on the depth of pre-existing cleavages, the organisation and goals of dissident groups, and the flexibility and coherence of institutions. Protest movements try to translate inchoate grievances into a sense of injustice and threat, and thereby to mobilise people for political action. Counter-elites manipulate ‘cultural tool-kits’—dominant symbols, myths, historical memories, and attitudes—to interpret events, attribute blame and sanction action, including political violence.24 Leaders compete to ‘frame’ issues in a way that will gain support among their target audience. The ideological content of these radical movements ranges from the far left to the far right. In Chiapas in southern Mexico, for instance, peasants have responded to a compatible blend of liber- ation theology and Marxism, together with the imagery of Emilio Zapata, in rallying behind the EZLN (Zapatistas) since the mid-1980s. ‘Globalizing economic, political and cultural forces merged with the impact of historically derived conditions and the activism of mobilizers, tying local realities…to wider world currents’, 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 in predominantly Islamic countries. Islamism offers a ‘religio-historical justifi- cation’ for revolt in a context where other protest ideologies—populism, nationalism, socialism and pan-Arabism—have failed to achieve their anti- imperialist, nationalist, egalitarian goals. Islamists provide basic services in poor areas, 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 by the Israeli–Palestinian conflict. Grievances arising from economic trends and persistent 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 movements focus popular frustration and anger. Therein lies the rationale for political violence, for how else can the powerful manipulators be defeated and the proper order 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 countries underwent economic crisis and structural adjustment in a postcolonial context of 1015 RICHARD SANDBROOK & DAVID ROMANO low per capita incomes and dependent economies, high unemployment and high population growth. However, their trajectories have sharply diverged since adjustment. Egypt has experienced sporadic periods of healthy growth, coupled with rising inequality and economic insecurity (especially in Upper Egypt), semi-authoritarianism and a simmering Islamist revolt. In contrast, Mauritius has attained 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 two countries 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 out from other similarly underdeveloped countries in the region. The country appeared to be a typical sugar colony, with a harsh history of servile labour, extreme racial inequality and a monocultural economy. France, which controlled the island until 1814, forged a colonial society in which a small French plantocracy exploited African slaves on its extensive landholdings. These estates were eventually converted into sugar plantations. The British inherited this inegalitarian system in 1814, although they abolished slavery in 1835. The new colonial power replaced slavery with a system of indentured labourers from South Asia, a system that persisted into the early 20th century. By the 1860s Mauritius had become the leading cane producer in the British Empire. At independence, sugar production occupied 94% of all cultivated land, and accounted for 93% of the country’s exports. Nineteen large estates dominated the sugar industry. Similarly, when Egypt officially gained independence in 1922, cotton accounted for 90% of the country’s exports. Land ownership patterns displayed extreme inequalities, with a powerful elite controlling most of the best land. The Egyptian royal family and a collection of about 2500 other elite families and companies, owned 27% of all cultivated land in Egypt. These large land holders ‘virtually controlled the government; on average, half the ministers, senators and deputies came from this class’.27 Under British dominance, Egypt’s plantation- style dependent economic status continued until Nasser’s revolutionary coup in 1952 initiated some land-reform measures.

State-led development, economic crisis and structural adjustment Mauritius’s development model following independence was typical in its reliance on extensive state intervention into economic life. The government controlled the exchange rate and capital exports, set nominal interest rates, established parastatals to promote its social and economic goals, imposed an export tax on sugar (with large producers paying a higher rate than the small producers), subsidised basic foods, mounted public works projects to absorb the unemployed, invested in public health and education facilities, and provided substantial protection for firms producing for the home market.28 Where the 1016 GLOBALISATION, EXTREMISM AND VIOLENCE IN POOR COUNTRIES government diverged from the African norm was in its promotion of manufac- tured exports—by means of a set of incentives and astute management of the exchange rate—at the same time that it encouraged import-substitution industrialisation. It established an Export Processing Zone (EPZ) in 1970. Sugar revenues were used to diversify and industrialise the economy, as well as support a modest welfare state. Mauritius, like most other African and Latin American countries, suffered an economic crisis in the late 1970s. Although the government addressed the crisis before it became as severe as elsewhere, the economy nonetheless exhibited these common symptoms: a decline in the terms of trade, a worsening of the balance of payments, a tripling of the external debt throughout the 1970s, a reduction in output, high unemployment and persistent inflation. The roots of the crisis are also familiar. The government was unable or unwilling to reduce entitlements 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 cyclones and droughts that devastated sugar harvests. Unremitting pressure exerted by the union movement and a radical opposition party dissuaded the government from adopting an early austerity programme. Between 1979 and 1985 Mauritius carried through a series of stabilisation and adjustment programmes with loans from the IMF and the World Bank. These programmes combined orthodox measures (devaluation, demand reduction, cuts in subsidies, decline in government spending) with some unorthodox (non-market) policies, such as continued import controls and job security provisions, price controls 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 statist approach, its ensuing economic crisis, and its subsequent combination of economic liberalisation with state controls. After the coup of 1952, Gamel Abdel Nasser’s new government presented Egyptians with the promise of substantive independence and economic development. These goals were to be accomplished by a heavy reliance on state intervention in the economy, import-substitution industrialisation (ISI) and land reform. Nasser greatly expanded the parastatal sector and civil service, guaranteed employment to virtually all Egyptian university graduates, and increased the public’s access to education and health services. These policies, together with land reforms and wealth redistribution policies, displaced some elements of the former ruling class and narrowed income disparities.30 The 1967 Arab–Israeli war, however, marked the end of Nasser’s Arab Socialist experimentation. Egypt, Jordan and Syria were badly defeated and lost a good deal of territory to Israel in a war that lasted only six days. This defeat was combined with the economic strains of militarism and increasingly evident government inefficiency. As well, Nasser’s earlier successes at reducing class inequalities had petered out by 1967, as a new class of government and military elites became entrenched in their positions and allied themselves with the large landowners not displaced by the reforms of previous years. Anwar Sadat introduced a new direction after Nasser’s death in 1970. In 1974 he inaugurated infitah—a limited market opening. He needed to find a way to 1017 RICHARD SANDBROOK & DAVID ROMANO deal with Egypt’s large debt, which was high even before the collapse of oil revenues in the early 1980s. The mammoth Egyptian bureaucracy, inefficient state-owned enterprises, military expenditures, price and currency controls, and extensive state subsidies on basic goods such as bread and sugar, were the most evident sources of economic drain. Sadat’s reform accomplishments, however, were largely limited to privatisation of some agricultural lands, the removal of many import and foreign investment controls, and attempts to encourage foreign investment. Although negotiations with the IMF in 1975 led to a stabilisation package in 1976 that included the removal of subsidies on bread and other basic foods, the food riots in 1977 prompted the government to retreat from the agreement. Meanwhile, the new class of bureaucratic and military elites blocked reductions 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. The country 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 growth from 1987 to 1989.31 Yet the government of Hosni Mubarak dithered, unwilling to do more than tinker with the existing strategy of state-led ISI and extensive welfare provision. Only in 1991, following the Gulf War, did the government address its economic crisis with more wide-ranging reforms. In exchange for a World Bank loan and substantial debt relief from the Paris Club, Egypt complied with an IMF stabilisation agreement (1991–95) followed by liberalisation. The reforms undertaken in the 1990s reduced public sector investment and subsidies on everything from food and electricity to capital imports, eliminated many price and currency controls, introduced a general sales tax, sold off many government enterprises, and lifted several import and export restrictions.32 Nonetheless, the Egyptian bureaucracy remained extensive and military cutbacks were entirely absent from the reforms. This combination of reforms with foreign debt forgiveness and assistance yielded some respectable growth during the 1990s. Real GDP growth per capita averaged 2.5%. This growth did lead to some diminution of poverty; however, this achievement was accompanied by increasing income disparities in certain regions (especially Upper Egypt) and declining purchasing power for many Egyptian households.33

Demographic situation At independence, rapid population growth and high unemployment raised fears in Mauritius that overcrowding and political unrest would pose obstacles to economic development. At an annual rate of 3% in the 1960s and 1970s, the country’s population grew at about the norm for the region. Unemployment ranged as high as 20% between independence and 1982 While the expanded educational system generated increasing numbers of graduates in the 1970s and early 1980s, many of the jobs that were available were unskilled, poorly paid and 1018 GLOBALISATION, EXTREMISM AND VIOLENCE IN POOR COUNTRIES seasonal. Unemployed, well-educated young men rallied to the radical Mouve- ment Militant Mauricien (MMM). In desperation, the government created an agency 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 has since declined to an annual rate of under 2%. The employment policies of Nasser’s government led to unemployment rates of only around 3% during the 1960s. By 1984 measured unemployment had climbed to 6%.34 With roughly 500 000 new jobseekers entering the Egyptian market each year, unofficial unemployment estimates in 2001 lay between 17% and 19%, roughly double the government’s official estimates.35 The Economist Intelligence Unit (9 October 2001, 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 the government’s decision, in 1984, to cease guaranteeing jobs for post-secondary graduates. Although both countries shared these three features of the underdeveloped world when they undertook market liberalisation, they were dissimilar in two important ways. The first is scale: Mauritius is an island with a population of only 1.2 million, whereas Egypt is a continental country with some 70 million inhabitants. Surely, many people would surmise, this difference makes the developmental 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 Mauritius’ developmental prospects over those of Egypt. First, is it true that small states have ‘small problems’? No, according to a detailed statistical comparison of small and large countries.36 This study discovered no significant difference between the two categories in income level and economic growth, when region was held constant. Small states, however, do exhibit a greater vulnerability to harmful shocks than large countries, owing to their typical reliance on exporting a limited range of commodities to just a handful of trade partners and their typical susceptibility to cyclones. Mauritius suffers from both forms of vulnerability. Second, Mauritius is similar to many African countries in its extreme cultural diversity. Hindus comprise just over half the population. Most Hindus are the progeny of 294 000 indentured labourers who were recruited from the Indian subcontinent 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 and regional/linguistic origins. Hindus predominate in the public service, some professions, and are heavily engaged in agriculture as labourers and small planters. Muslims, also the descendants of indentured labourers, form about a sixth of the population. They are disproportionately involved in commerce in the towns 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 1019 RICHARD SANDBROOK & DAVID ROMANO earn their livelihood mainly as urban workers and fishermen. A small minority of light-skinned Creoles form an educated and more prosperous elite. Adopting the French language and culture, these Creoles have succeeded in the professions and private firms. The Chinese, though few in number (2%–3% of the population), 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 by class. ‘From 1948 onward Mauritians were repeatedly asked to make political choices that required them to decide whether class or community interest took priority. With rare exceptions, communal claims took precedence.’38 Indeed, several instances of communal violence marred the transition to the island’s independence, just as ‘tribalism’ marred decolonisation in many mainland African countries. British troops intervened to quell Hindu–Creole clashes and Creole rioting in 1964–65 and Creole–Muslim riots just six weeks before independence in 1968. The emergent country seemed headed for communal disaster. Egypt, on the other hand, has no sizeable ethnic or religious minorities. The population is at least 94% Sunni Muslim, with Coptic Christians accounting for most of the remainder. Moreover, the vast majority of Muslims are of Hamitic origin. Egypt has, however, experienced periodic Muslim–Coptic communal strife since the late 1970s, culminating in demonstrations, sit-ins and protests in 2001 as Copts asserted their rights. In short, Egypt and Mauritius shared several initial circumstances and differed on dimensions that should, on balance, have favoured Egypt’s development.

Divergent trajectories Yet Mauritius, unlike Egypt, has achieved a high measure of social peace in the context of rapid economic development, broadly based prosperity and (for a developing country) a well articulated welfare state. The island has diversified from its initial dependence on sugar by successfully promoting export-orientated manufacturing (especially textiles and knitwear garments), tourism, offshore banking and business services and, most recently, information and communica- tions technology. Mauritius is also one of Africa’s rare consolidated democra- cies, having held eight national elections and witnessed three changes of government. Not that the ‘miracle’ is unblemished. For one thing, many Creoles evidently believe that they have been left out of the general prosperity. Creole anger was starkly revealed when violence punctured the country’s two-decade-old social peace in February 1999. The death in police custody of a popular Creole singer precipitated severe rioting and looting by Creoles, followed by ‘limited ethnic cleansing’ by Hindus in several predominantly Hindu villages.39 Five people died, hundreds were injured and several dozen Creole families had their homes burned. The government quickly moved to heal the wounds by undertaking a programme to assist the marginalised. In addition, many economic uncertainties 1020 GLOBALISATION, EXTREMISM AND VIOLENCE IN POOR COUNTRIES cloud the future of a small open economy that must constantly adapt to changing global market conditions.40 Nevertheless, the Mauritian success, though qualified, must still be regarded as a breakthrough in a region suffering from internal wars and economic calamities. This breakthrough, however, was not preordained or easily achieved. In the early 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 the urban and rural proletariat and petty bourgeoisie. It captured control of organised labour in the docks, road transport and sugar plantations, established youth and women’s wings, and organised sports and cultural activities for its members. In a context of high unemployment among young, educated Mauritians, and vast racial 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 the country’s postcolonial history. Spurred by extensive labour unrest and a deterio- ration of its popular base, the social-democratic government declared a state of emergency between 1972 and 1975, imprisoned MMM and union leaders, and deferred national elections. The MMM emerged as the largest party in the Assembly in the delayed elections of 1976. But the party had to wait until 1982 to enter government. By then, political realities and economic development had moderated the MMM’s radical platform. Paul Be´renger, the MMM’s founder, as minister of finance, implemented the neoliberal reform programme negotiated by the previous government with the IMF. Be´renger, observes a World Bank study without apparent irony, “was impressed by the force of the logic inherent in the IMF recipe and adopted it despite its unpopularity’.42 The party thereafter accommodated itself to the imperatives of coalitional politics, in a society experiencing rapid growth, diminishing inequality in income distribution, an expansion of a modest welfare state (featuring free health services, free education at all levels, public housing and public pension schemes), and a marked reduction in unemployment. Egypt, in contrast, has experienced halting and belated economic liberalisation, accompanied by the rise of extremist, violence-prone Islamist movements linked in part to the uneven and traumatic pattern of socioeconomic change, and by a repressive, semi-authoritarian government. Although Islamism in this country predates globalisation, its most violent manifestations have surfaced since 1980. The modern world’s first Islamist political opposition emerged in Cairo in 1928. The Muslim Brotherhood advocated a ‘return’ to Islamic government, law and cultural practice, as well as economic equality and charity to help the poor. After being banned in 1948 for its anti-British and anti-government agitation, the movement assassinated Egyptian Prime Minister Nuqrashi that same year. By 1949 the Brotherhood boasted an estimated two million supporters.43 During the 1960s government repression combined with the appeal of 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 nonetheless continued to see its access to the electoral arena blocked or severely restricted, 1021 RICHARD SANDBROOK & DAVID ROMANO although an uneasy accommodation with the government allows it to function within civil society today. Since the 1970s, however, Egypt has suffered from increasing levels of civil strife, concurrent with the neoliberal reforms. That era saw the founding of the most violent terrorist groups in Egyptian history—Gama’a al-Islamiyya (Islamic Group), Gama’a al-Jihad (Islamic Jihad, or Jihad Group), and Gama’a al-Mus- limin (Society of Muslims, or Takfir wal-Hijra). Their political tactics included assassination of officials (including Sadat in 1981), attacks on Copts and the slaughter of tourists in 1997. Egypt had also become a major recruiting ground for international terrorist groups, especially al-Qaeda, by the late 1990s. 44 The emergence of these Islamist movements coincided with several significant trends: Sadat’s peace overtures to Israel, the emergence of a conservative regional order in which the oil-rich Gulf states were increasingly influential, as well as the increasing dislocations and insecurity brought about by economic liberalisation. The Islamists, both through peaceful demonstrations in which the Muslim Brotherhood retained a prominent place and through political violence, capitalised on popular frustration with the government’s neoliberal reforms and diminishing provision of services.45 ‘Triumphant neoliberal economic and social policies’, observed one expert, ‘became the midwife of Islamist ascent in civil society.’46 Following standard IMF dictates to reduce government spending, Egypt in the 1970s and 1980s cut or phased out some food subsidies and services to the poor, ended guaranteed employment for university graduates and rationalised state- owned enterprises. The threatened cuts in food subsidies led to the aforemen- tioned bread riots of 1977, the ‘worst civic upheaval in Egypt in 25 years’. 47 Islamist movements played a high profile role in these riots and in the continuing spiral of protests and government crackdowns, which culminated in the assassination of President Sadat. Some scholars locate the source of this civil unrest in the deteriorating economic situation of poorer segments of Egyptian society: ‘the average Egyptian has become more impoverished at a time when the affluence of a small number of Egyptians has been made ever more apparent’.48 While the state withdrew from the provision of public services and cut subsidies, the Islamists moved in to provide medical, educational and welfare services to the poor. Through networks of mosques, educational foundations, charity organisations and other associations, the Islamists were viewed as being more honest, effective and concerned with the poor than the ruling bureaucracy. During the 1992 Cairo earthquake, the Muslim Brotherhood was on the scene assisting people before the government was. The recipients of Islamist aid were also exposed to the Islamist alternative ideological vision, out of which many eventually found their way into the radical opposition movements. Land reform since 1986, designed to remove impediments on private property, formed another vector of radicalisation. One major effect was to deprive tenant farmers of the gains they had made from Nasser’s revolution. Not only did tenant farmers lose their security of tenure, but they also bore the removal of rent controls and a rise in rents to market rates.49 Forced off the land, many poor farmers headed for the cities, where employment prospects were bleak. In Upper Egypt, where the land reform had its greatest impact, the rural poverty rate, 1022 GLOBALISATION, EXTREMISM AND VIOLENCE IN POOR COUNTRIES according to a forthcoming USAID study, nearly doubled between 1995–96 and 1999–2000, while it rose from 29% to 34% in the region’s urban areas. And it is in Upper Egypt, and among rural–urban migrants from this region, that radical Islamist movements have their greatest popularity.50 Although the economic reforms began to show some positive results by the 1990s, with incidences of poverty declining in metropolitan and Lower Egypt, these gains were not evenly distributed. We have already alluded to regional inequality and the plight of tenant farmers. But middle and lower-middle class youths have also suffered. With more than half the population under the age of 25, many graduates of secondary schools and universities face long-term unemployment since the government terminated its policy of employment guarantees. About 36% of male graduates and over 50% of women graduates are unemployed. While 20%–30% of the people live below the poverty line, ‘there is 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 their activists from the middle classes, especially the unemployed, but more recently they have drawn much support from the marginalised poor.52 To build support in these circumstances, Islamists have cast their message in a religious idiom that all Muslims will find accessible. Islam offers a belief-system from which movement leaders and ideologues draw selectively to formulate and legitimise a programme of action. Islamists in Egypt, as elsewhere, call for a return to the principles of an idealised golden age of Islam (during the time of the Prophet and the first four Caliphs in the seventh and eighth centuries), when ‘correct’ 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-Gama’a al-Islamiyya, Islamic texts are interpreted in a manner 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, virtue and sin. The complex mechanisms and effects of neoliberal globalisation are explained simply and forcefully by these movements. Lowered standards of living for the masses, unemployment, weak states, lost wars against Israel, the influence of multinational corporations, and materialist ‘cultural assaults’ on ‘Muslim values’ are simply the consequences of having strayed from ‘fundamen- tal’ Islamic belief and practice. The rulers of countries such as Egypt are then portrayed as puppets of foreign infidels bent on exploiting and leading Muslims astray.53 Cairo has ruled out negotiation with these radical Islamist movements, offering no carrot to accompany the stick of repression. Twenty thousand people were detained without trial in Egypt in 2002, according to The Economist, the bulk of whom were Islamists. Mubarak’s government has periodically undertaken mass arrests and sweeps of Islamist areas, particularly in Upper Egypt and the poorer neighbourhoods of Cairo. At the same time, the regime has attempted to head off Islamist criticisms by casting itself as more pious and Islamic, taking control of independent mosques and licensing imams whose sermons reach the masses. The net affect of this policy has been an increasing Islamisation of Egyptian society, as the government essentially concedes the Islamists’ demand for a more Muslim way of doing things.54 By conceding the field, the govern-1023 RICHARD SANDBROOK & DAVID ROMANO ment lays the foundations for a never-ending conflict centred around who is acting as a better Muslim in resisting non-Muslim cultural and economic penetration. When the regime–Islamist contest became framed in this way, the Egyptian regime found itself at a severe ideological disadvantage thanks, among other things, to its neoliberal economic reforms. The reforms left the government vulnerable to accusations of being a puppet of foreign interests (the IMF and the US government), at the same time as these reforms reduced the regime’s ability to co-opt potential opposition through patronage networks.

Explaining turbulent versus peaceful market adjustment The divergent trajectories in Egypt and Mauritius are contingent upon a combination of specific factors in each case. Both countries initially appeared to be typical developing countries. Yet Mauritius has largely succeeded in managing distributional conflicts, neutralising tensions and responding nimbly to the challenges of market opening, whereas Egypt has not. It is doubtful that any deterministic theory can account for this contrast. At the most obvious level, the dissimilar institutional environments shaped divergent outcomes. The contrast, to put it bluntly, is between liberalisation engineered by a developmental state within pre-existing capitalist relations of production (Mauritius), and liberalisation refracted through a neopatrimonial state that is unwilling to abandon the clientelism and personalistic ties on which it has rested (Egypt). That Mauritius scores much higher than Egypt on every indicator of institutional quality is consistent with this contrast.55 On the one hand, a developmental state has held sway in Mauritius, one guided by governments with sufficient autonomy from a capitalist class and sufficient bureaucratic capacity, together with sufficient incentive, to promote both growth and redistribution through selective engagement with market forces. Democratic institutions not only were fortified by the resulting broad-based prosperity, but also provided the mechanisms to achieve ethnic accommodation and equity. A virtuous circle of democratic development maintained peace, reassured investors and reflected the capacity of the state to respond to the challenges of shifting market conditions. On the other hand, the neopatrimonial state in Egypt fuses economic with political power, in the sense that the political elite uses the distribution of rents, personal favours and state contracts to ensure its survival. The institutions of a market economy—for instance, the rule of law, the administrative apparatus, the regulatory framework, the tax administration—thus remain weak and arbitrary. This institutional environment diverts entrepreneurs from productive activities to the cultivation of personal ties to powerful officials and graft; this route opens access to state-generated rents, contracts and exemptions from regulations. When confronted with the challenge of liberalisation, this symbiosis of the public and private spheres produces crony capitalism rather than arms-length market competition. Crony capitalism, in turn, alienates those weaker classes who bear the burdens and insecurities of this incomplete liberalisation. But to adduce these institutional dynamics as a definitive difference only pushes the explanation back one step. Institutions (‘rules of the game’) do not 1024 GLOBALISATION, EXTREMISM AND VIOLENCE IN POOR COUNTRIES appear out of thin air; they reflect, in turn, the configuration of power and privilege in society. Successful developmental states, not to mention democratic developmental states, are rare. In Africa, neopatrimonial states, akin to that in Egypt, 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 independence, whereas Egypt is still in the midst of this transformation, is critically important. Because of its peculiar colonial history, Mauritius undertook structural adjustment in the early 1980s within a society that had already developed the full panoply of market institutions: people were accustomed to treating land and labour as commodities, a local capitalist class had emerged which invested heavily in the island’s economy, and a modern, or capitalist, state with a Weberian-type bureaucratic apparatus held sway. An interventionist state, therefore, 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 the other hand, liberalisers, to succeed, had to struggle against an entrenched neopatrimonial elite, a highly politicised bureaucracy and military, and business cartels whose success depended on personal linkages to the politically powerful. Rather than a Weberian-type bureaucratic apparatus as in Mauritius, Egypt remains saddled with one of the developing world’s 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 understanding its 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 in commerce and estate agriculture. This class transformed itself into a plantocracy when the British promoted Mauritius as a sugar colony following its conquest; its members depended largely on local resources to expand their holdings and productivity.57 (There were few foreign-owned plantations in this remote colony.) Local capital accumulation continued in the postcolonial era, when state incentives channelled the plantocracy’s surplus into the Export Processing Zone and tourism.58 Labour was treated as a commodity from the outset, first in the form of slaves, and later as indentured labourers. After the end of the indentured labour system in the early 20th century, strong unions emerged to cater to the interests of a rural and urban proletariat (especially dock workers and transport workers in the towns). Throughout the 19th century, too, an educated and mainly Creole commercial and bureaucratic class developed (les gens de couleur, along with a largely Hindu yeomanry who purchased land, beginning in the 1860s, from Franco-Mauritian plantation owners who were forced to retrench in hard times. These small planters, by investing in their children’s education, had engendered by the 1940s a substantial Hindu professional and bureaucratic class that competed with, and partly displaced, the Creole elite in the colonial and postcolonial bureaucracy.59 Finally, the French and British imperialists imposed a bureaucratic and centralised state in Mauritius that, because it did not compete with any traditional political system, did not appear, as elsewhere, to be an alien imposition. 1025 RICHARD SANDBROOK & DAVID ROMANO

Career bureaucrats, the bulk of whom were Mauritians, developed an esprit de corps and managerial tradition long before independence. This state has avoided the disintegration of administrative capacity that has all too often accompanied decolonisation on the mainland. Twenty-two years after independence a detailed study of the Mauritian civil service concluded that it ‘remains neutral and has not been politicized. It has achieved ethnic and gender representation, and its public servants exhibit a high level of technical competence coupled with an appreciation of the institutional setting of governance.’60 Because the main political parties (excepting the MMM before 1982) shared a Fabian socialist ethos, civil servants worked within this consensus to develop long-term social and economic policy. If the preceding capitalist transformation accounts in part for the unusual smoothness of neoliberal reform in Mauritius, it does not explain why redistributive policies and peaceful democratic politics accompany (and promote) economic success on the island. The answer seems to lie in the peculiar class and ethnic dynamics that, in separating economic from political power, allowed a relatively autonomous state to carry through a social-democratic programme in the unlikely context of a racially stratified society. None of these dynamics obtains in the case of Egypt. Mauritius’s democratic developmental state emerged from the logic of class and ethnic antagonisms, as well as from the Fabian socialist proclivities of the fathers of independence. At independence, economic power resided in the hands of a small Franco-Mauritian and Creole elite who owned and ran the sugar plantations. The colonial state depended upon sugar revenues, yet British governors never felt close to the French-speaking elite, who held them at arm’s length. Meanwhile, the educated offspring of the predominantly Hindu small planters felt excluded from the upper echelons of the sugar industry, and therefore sought upward mobility through the colonial state and independence movements. A frustrated Hindu intelligentsia in the postwar period established the Mauritius Labour Party and entered bureaucratic employment as fluent English speakers. Politics and the state provided the majority Hindus with a way of countering the economic power of the plantocracy. Democratic politics would empower the Hindus in particular, for leaders could tap the support of voters whose hostility to the plantocracy ran deep—a hostility deriving from a harsh history of indentured labour and slavery, from the fact that most small planters had family members who worked seasonally on the large plantations, and from an exclusionary and stratified racial system. In addition, the state, through its top posts and control of contracts, offered an alternative route to economic success. Although the plantocracy and Creole elite opposed both independence and majority rule for fear of Hindu domination, the British nonetheless passed power to a largely Hindu leadership and state bureaucracy in 1968. Those members of the local capitalist class who chose to remain accepted an implicit bargain: they yielded their political dominance and accepted substantial redistribution from growth in exchange for the legitimacy and order that a modest social democracy would generate—provided that social reform was limited to a welfare state supported by progressive taxes, and excluded asset redistribution. This consensus has prevailed since independence; even the radical MMM joined the consensus in 1026 GLOBALISATION, EXTREMISM AND VIOLENCE IN POOR COUNTRIES

1982.61 Hence, Fabian socialist ideas, imbibed during lengthy stays in Britain, united the leaders of the major parties and unions, and provided the ideological basis for a welfare capitalism that drew support from the descendants of slaves and indentured labourers. There was obviously much more behind the ‘Mauritian miracle’ than these class, ethnic and institutional legacies. The Labour Party, which held power until 1982, devised a workable economic strategy that diversified the sugar economy, promoted growth through export-orientated manufacturing, tourism and offshore banking. But this miracle, if such it is, is not a free-market miracle. Mauritius has skilfully benefited from protectionist policies at home and abroad. Drawing on the experience of Taiwan and Singapore, an interventionist state protected its import-substitution sector while providing a panoply of incentives to the EPZ. Moreover, the country negotiated preferential access to the EU and the USA for its exports. Luck has also played an important role. Mauritius hosts three diasporic communities with transnational commercial links—the Indian, the Chinese and the Franco-Mauritian. Chance also played a role when Hong Kong investors, who had exhausted their own apparel quotas in the USA, discovered Mauritius with its new and unfilled quotas after it established its EPZ. And Mauritius has benefited heavily from foreign aid as a result of its strategic location and ownership of Diego Garcia. Finally, ingenious electoral arrangements—involving shifting governing coalitions and a ‘best-loser’ rule that ensures ethnic representation—together with a system for consulting all groups on policy initiatives have managed most ethnic tensions and prevented electoral democracy from becoming an all-or-nothing ethnic struggle.62 The contrast between Mauritius’ developmental state and Egypt’s neopatrimonial state is striking. Market reform where neopatrimonial states prevail is almost invariably tumultuous. The clientelistic basis of states saps their administrative capacity and biases economic reform in favour of political cronies. As one observer bluntly notes of Egypt: an openly competitive capitalist economy requires real capitalists, rather than soldiers and managers lurking in the interstices of the network that links the public and private sectors. After all, if Arab Socialism foundered because there were no real 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 states are poorly equipped to mediate global market pressures equitably and peacefully.

Conclusion Market liberalisation has often proved destabilising in poor countries. The breakdown of implicit social contracts between rulers and ruled, the deepening of regional and social inequalities, the increase in economic insecurity, the challenge to local values and the waning of state legitimacy breed conditions conducive to extremist movements and political violence. To counteract these tendencies, well organised and relatively autonomous states are required: to formulate and implement astute economic strategies that encourage investment, 1027 RICHARD SANDBROOK & DAVID ROMANO to negotiate the equitable sharing of gains and burdens, and to mount welfare programmes. Yet such states are rare in the global south. Mauritius has constructed such a state. Its relative peace and prosperity have flowed, not from a wholehearted embrace of the neoliberal creed, but from an activist state that selectively implemented market opening and negotiated preferential trade arrangements. Mauritius is blessed with strong institutions, which have facilitated efforts to promote investment while managing distributional conflicts and mounting a welfare state and safety nets. These strong institutions flow from contingent historical conditions: the early imposition of capitalist relations of production, and peculiar class and ethnic dynamics that have separated political from economic power. A relatively autonomous state in a democratic system has used that autonomy to pursue redistribution with growth in 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 inimical to a market economy. Liberalisation in such cases is a tumultuous process: the strains and stresses of economic and social change aggravate existing fault lines in society. To take advantage of global markets requires precisely the flexible and effective state structures that are missing because they lack the requisite social foundations. The mammoth size and corrupt, authoritarian proclivities of the state in countries such as Egypt drain away its effectiveness and flexibility, as well as the resources needed to soften liberalisation’s blows. These conclusions are unsettling, for they suggest that a harmonious route to global economic integration in poor countries depends on unusual social and political conditions. The Mauritian case, for example, offers limited guidance to those who have not yet traversed the Great Transformation, nor witnessed a separation of political from economic power in the context of an effective capitalist state. We must, therefore, conclude that the darker scenario of globalisation will more often prevail than the sanguine neoliberal scenario.

Notes 1 G Soros, ‘The capitalist threat’, Atlantic Monthly, 279 (2), 1997, pp 45–58; 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 230–258. 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 country’s exposure depends on many factors, including the severity of its preceding economic crisis and the extent and pace of its market opening. 5 A Mittal, ‘Land loss, poverty and hunger’ in D Barker & J Mander (eds), IFG Special Report: Does Globalization 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 conference on Social and Economic Impacts of Liberalisation and Globalisation, University of Toronto, 19–20 April 2002, pp 3–6. 8 R Kaplinsky, ‘Globalisation and economic insecurity’, Institute for Development Studies Bulletin, 32 (2), 2001, pp 13–24. 1028 GLOBALISATION, EXTREMISM AND VIOLENCE IN POOR COUNTRIES

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. 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. Ibid. RH Wade, ‘Is globalization reducing poverty and inequality?’, World Development, 32 (4), 2004, pp 567–589; and A Berry & J Serieux, ‘All about the giants: probing the influences on world growth and income inequality at the end of the 20th century’, CES-ifo Economic Studies, 50 (1), 2004, pp 133–170. Cornia & Court, Inequality, Growth and Poverty, pp 14–18. EW Nafziger & J Auvinen, ‘Economic development, inequality, war, and state violence’, World Development, 30 (2), 2002, p 156. 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: Globalization’s Paradox, New York: Routledge, 2002. 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 Studies Quarterly, 21 (3), 1999, pp 13–34. 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. J Snyder, From Voting to Violence: Democratization and Nationalist Conflict, New York: WW Norton, 2000. B Barber, Jihad vs McWorld: How Globalization and Tribalism are Reshaping the World, New York: Ballantine Books, 1996, p 81. Ibid, p 215. 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 293–319. 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. W Reno, Warlord Politics and African States, Boulder, CO: Lynne Rienner, 1998. R Kothari, ‘Under globalisation, will nation state hold?’, Economic and Political Weekly, 1 July 1995, p 1596. 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. Tschirgi, ‘Marginalised violent internal conflict’. For an elaboration of this argument, see RAF Woltering, ‘The roots of Islamist popularity’, Third World Quarterly, 23, 2002, pp 1145–1158; and AK Cronin, ‘Behind the curve—globalization and international terrorism’, International Security, 27 (3), 2002, pp 35–45. A Hourani, A History of the Arab Peoples, Cambridge: Belknap Press, 1991, p 380. R Gulhati & R Nallari, Successful Stabilisation and Recovery in Mauritius, EDI Development Policy Case Series No 5, Washington, DC: World Bank, 1990, pp 11–17. 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. JA Bill & R Springborg, Politics in the Middle East, New York: HarperCollins, 1994, p 217. D Wiess & U Wurzel, The Economics and Politics of Transition to an Open Market Economy, Paris: OECD, 1998, p 32. Ibid, pp 35, 54. L Haddad & A Ahmed, ‘Chronic and transitory poverty: evidence from Egypt, 1997–1999’, World Development, 31 (1), 2002, pp 71–85; and T Mitchell, ‘No factories, no problems: the logic of neo- lib-eralism in Egypt’, Review of African Political Economy, 82, 1999, pp 455–468. 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 today’s statistics vary according to the source. US Energy Information Administration, ‘Country Analysis Briefs: Egypt’, 2001, at http://www.eia.doe.gov/ emeu/cabs/egypt.html. W Easterly & A Kraay, ‘Small states, small problems? Income, growth and volatility in small states’, World Development, 28 (11), 2000, pp 2013–2027. WF Miles, ‘The Mauritius enigma’, Journal of Democracy, 10 (2), 1999, p 92. LW Bowman, Mauritius: Democracy and Development in the Indian Ocean, Boulder, CO: Westview, 1991, p 33. 1029 RICHARD SANDBROOK & DAVID ROMANO

39 B Carroll & T Carroll, ‘Trouble in paradise: ethnic conflict in Mauritius’, Commonwealth and Comparative Politics, 38 (2), 2000, p25. 40 For example, uncertainties arising from the phasing out of preference for the country’s three major exports—sugar, textiles and clothing—under the Lome Convention and the Multifibre Agreement. J 41 Houbert, ‘Mauritius: politics and pluralism at the periphery’, Annuaire des Pays de l’Ocean Indien, 9, 1982-83, pp 242-243. 4 Gulhati & Nallari, Successful Stabilisation, p 40. 2 DJ Sullivan. & S Abed-Kotob, Islam in Contemporary Egypt: Civil Society vs the State, London: 4 Lynne Rienner, 1999, p 41. 3 K Duran, ‘Cairo: a torrent of frightening disclosures’, The World and I, 15 (11), 2000, p301. Bill & Springborg, Politics in the Middle East, p 222. 4 P Lubeck, ‘Antinomies of Islamic movements under globalisation’, WP 99-1, Center for Global, 4 International and Regional Studies, University of California, Santa Cruz, 1999, p 13. Bill & 4 Springborg, Politics in the Middle East, p 222. 5 RM Burrell & RK Abbas, Egypt: The Dilemmas of a Nation, 1970-1977, Beverly Hills, CA: Sage, 4 1977, p 32. 6 R Bush, ‘An agricultural strategy without farmers’, Review of African Political Economy, 80, 2000, pp 235-249. 4 Tschirgi, ‘Marginalized violent internal conflict’, p 8. 7 Economist Intelligence Unit, Country Profile: Egypt, 9 October 2001, p3, at http://db.eiu.com/ 4 reports.asp?title = country + Profile + Egypt&doc ’ id = 918057&valn. 8 Tschirgi, ‘Marginalized violent internal conflict; and Lubeck, ‘Antinomies of Islamic movements’. D Zeidan, ‘The Islamic fundamentalist view of life as a perennial battle’, Middle East Review of 49 International Affairs, 5 (4), 2001, p 12. G Abdo, No God But God, London: Oxford University Press, 2000. 5 Compare the scores on rule of law, government effectiveness, graft, and the overall ‘polity score’ in 0 United Nations Development Program, Human Development Report 2002, New York: Oxford 5 University Press, 2002, Table A1.1. For a discussion of the high institutional quality in Mauritius, 1 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, 5 2003, pp 229-232. R Sandbrook, Closing the Circle: Democratization and Development in Africa, 2 London: Zed Books, 2000, pp 17-19 and ch 5. 5 RB Allen, Slaves, Freedmen, and Indentured Labourers in Colonial Mauritius, Cambridge: 3 Cambridge University Press, 1999. Note that about half the total equity of firms in the EPZ is owned by Mauritians—which is a high 5 level of local ownership even in comparison with South Korea and Malaysia. See Subramanian & 4 Roy, ‘Who can explain the Mauritian miracle’, p210. 5 This interpretation draws on Houbert, ‘Mauritius’; A Darga, ‘Autonomous economic and social 5 development in democracy: an appreciation of the Mauritian miracle’, Africa Development, 21 (2/3), 1996, pp 79-88; and Allen, Slaves, Freedmen, and Indentured Labourers. B Carroll & SK Joypaul, ‘The Mauritius senior public service since Independence: some lessons’, International Review of Administrative Sciences, 59 (3), 1993, p 434. This interpretation draws on T Meisenhelder, ‘The developmental state in Mauritius’, Journal of Modern African Studies, 35 (2), 1997, pp 278-297; Houbert, ‘Mauritius’; and R Seegobin & L Collen, ‘Mauritius: class forces and political power’, Review of African Political Economy, 8, 1977, pp 109-118. 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 120-142. R Springborg, Mubarak’s Egypt: Fragmentation of the Political Order, Boulder, CO: Westview, 1989, p 11.