Let's look back at some memorable moments and interesting insights from last year.

Your top 1 posts:

• "Happy Cakeday, r/globalistshills! Today you're 5" by u/AutoModerator

Let's look back at some memorable moments and interesting insights from last year.

Your top 10 posts:

• "how to use urban density to troll LIEberals 101" by u/nationalistsareRINOs
• "Imagine a world without borders" by u/o__l__o
• "Why Nations Don't Fail: Building Institutions in Romania" by u/gnikivar2
• "*Made on Earth by humans*" by u/o__l__o
• "Courage to the Point of Insanity: Alexei Navalny's Return to Russia" by u/gnikivar2
• "Socialism Without a Plan, Capitalism Without Markets: Ukraine's Economic Collapse in the 1990s" by u/gnikivar2
• "The Bitter Roots of Modern Hatred: The Origins of Genocide in Xinjiang" by u/gnikivar2
• "Stateless and Forgotten: The Continuing Plight of Rohingya Refugees" by u/gnikivar2
• "Don’t Cry For Me Argentina, Populism Never Left You" by u/gnikivar2
• "The Revolution Of Smiles: Can Algeria Go From Stagnation To Progress?" by u/gnikivar2

On February 1st, 2021 the military of Myanmar, called the Tatmadaw, launched a coup against the democratically elected government of Aung San Suu Kyi on paper thin claims of massive voter fraud. The people of Myanmar have decisively rejected the coup, with protests organizing almost immediately after the coup, with hundreds of thousands of people of all ethnicities regularly gathering to demand the Tatmadaw return to the barracks. The military has cracked down, with at least 18 people (note more people have died since I wrote this) killed by the armed forced on February 27th. The situation is rapidly changing on the ground, and todays podcast episode aims to give a historical background to Myanmar's conflicts rather than an analysis of the current situation. I will discuss Myanmar's long running ethnic conflict, the overwhelming force and power of the Tatmadaw, and the rise of a more liberal society in the last decade.

Ethnic Insurgencies in Myanmar

From the late 17th century, the Konbaung Dynasty rapidly expanded a state based around the Irrawady delta and the Bamar people, forming the basis of the modern state of Myanmar. However, this state building project was interrupted by the British Empire, which in a series of wars conquered and absorbed Myanmar into the British Raj. The new state created by the British marginalized the once dominant Bamar majority, who make up roughly 62% of modern Myanmar's population. Vast numbers of Chinese and Indian immigrants flooded into Myanmar, with these minorities dominating the cities, business and government. Moreover, the armed forces were dominated by ethnic minorities such as the Chin, Kachin and especially the Karen. Unsurprisingly, the Japanese invasion of Myanmar during World War II was initially seen as an opportunity to end not just British imperialism, but an opportunity to assert the rights of the Bamar majority as well. Japanese brutality caused even the Bamar to revolt. As World War II ended, a pan-ethnic movement led by Aung San, father of Aung San Suu Kyi and the founding father of Myanmar, took power and established a fragile democracy in the country.

Myanmar broke into war almost immediately after independence. The Kuomitang invaded Myanmar hoping to create a base of operation to retake China in the north of Myanmar, a communist insurgency calling for revolution emerged in the countryside, and the Karens attempted to violently carve out an independent state. The military, which became in increasingly Bamar institution after independence, launched a coup to restore order. However, the situation became only more violent after the coup, as other ethnic groups such as the Chin, Kachin and Shan joined the Karen in revolt. Armed groups with tens of thousands soldiers grabbed large swathes of territories in the mountaineous interior of the country. The armed forces responded with scorched earth tactics, making regular use of forced labor, destruction of villages, and civilian massacres. While the Rohingya genocide is the best known abuse of human rights committed by the Tatmadaw, it was part of a broader pattern of extreme brutality.

A complex political economy emerged in the border regions of Myanmar. From 1989 onwards, a new military regime took a more pragmatic approach to the insurgents. The government began signing truces with various insurgent groups, in order to concentrate its strength on others. Both the Tatmadaw and the ethnic insurgents engaged in illegal logging of teak, mining of jade. The Kokang and Wa states in the Shan State of Myanmar emerged as the most important source of heroin in the world in the 1980s. These same regions have become important hubs of the production of crystal meth, not just for Myanmar but for the broader region of southeast Asia. Ethnic insurgencies continue to run in Myanmar. Since 2009, the Arakan Army, representing the Buddhist majority in the Rakhine state where the Rohingya genocide occurred, has created an army of nearly 10,000 increasingly capable of taking the Tatmadaw head on. While many ethnic insurgents have been incorporated as semi-autonomous border guards, it is unlikely ethnic insurgency will end any time soon.

The TatmadawThe Tatmadaw has been the dominant political and economic force in Myanmar since Ne Win's military coup in 1962. The Tatmadaw imposed a xenophobic dictatorship cutting off contact with the outside world. The Tatmadaw expelled vast numbers of Indian and Chinese people, many of whom born and raised in the country and expropriated their businesses. Moroever, the Tatmadaw nationalized all private businesses, launching what they called the Burmese Way to Socialism. However, the Tatmadaw did not have the capacity to manage Myanmar's economy. Even as other nations in south east Asia such as Thailand, Indonesia and Malaysia saw spectacular economic growth, GDP per capita in Myanmar stagnated between 1962 and 1988. In 1988, the Tatmadaw's mismanagement reached an extreme when the government invalidated almost all currency, wiping out the savings of millions, because the government wanted a currency divisible by nine for astrological reasons.

A massive popular protest briefly unseated the Tatmadaw, but in 1989 the military reasserted its power. While the armed forces remained as brutal as ever, the Tatmadaw took a much more pragmatic approach to ethnic insurgents (as I discussed above) and the economy. From 1989, the military has allowed a partial liberalization, allowing economic growth the accelerate markedly from the early 1990s onwards. The Tatmadaw has profited mightily from these trends. Two of Myanmar's ten largest conglomerates are owned by the Tatmadaw, including UMEHL, one of the two largest conglomerates in the country.

These military businesses benefit from preferential treatment, with military linked companies gaining access to protected teak forests and foreign companies forced to partner with military companies when investing in Myanmar. Even businesses not directly connected to the military require connections to the ruling Junta to thrive with two of Myanmar's 10 largest conglomerates controlled by the sons of or married into elite military families. The Tatmadaw is so determined to stay in power in part because it wants to protect its control of private wealth, while at the same time the businesses the Tatmadaw controls gives it a level of independence from any civilian oversight.

The Rise of a Fragile LiberalismDuring 8888 uprising in 1988, massive protests mobilizing millions were able to force long time dictator Ne Win from power. Aung San Suu Kyi emerged as a leader, and her National League for Democracy was able to win an overwhelming majority in 1990. Although the military rejected the 1990 election results with extreme brutality, it also lost interest in running Myanmar. The military did not want to be in charge of irrigation of the Irrawaday, or traffic in Yangon and from the 2000s onwards began a slow process of letting an elected civilian government manage day to day governance, with the Tatmadaw controlling foreign affairs and security.

The legitimacy of the Tatmadaw was further tarnished by a series of massive policy failures. In 2007, a government petrol price hike caused snowballs that protested into the Saffron Revolution. Supported by the powerful Burmese monkhood, mass protests were only put down with government repression. In 2008 Cyclone Nargis killed over 140,000 people, but the Tatmadaw refused all international assistance. In 2011, massive protests forced the government to back down on the construction of a $3.6 billion China backed dam. The Tatmadaw felt pressured into transitioning to a civilian government led by former generals in 2010, and genuine multiparty elections in 2015.

Aung San Suu Kyi was released in 2010, and allowed to run in the 2015 elections. Her National League For Democracy again won an overwhelming victory, winning more than 80% of seats contestable. Myanmar's democracy from the beginning was deeply flawed. Most importantly, Myanmar's democratic leaders proved incapable of stopping the Rohingya genocide and actively defended it in to the world. Moreover, Aung San Suu Kyi proved to be more than willing to imprison journalists and critics. Most importantly, the Tatmadaw controls a quarter of all seats in the legislature and there is no effective civilian control of the military.

Despite the fragility of Myanmar's liberalization, massive real change has occurred. Myanmar has consistently been one of the fastest growing economies in the world, driven in particular by its ready made garment industry. Between 2019 and 2015 garment exports increased more than 6-fold from $900 million to $6 billion. Moreover, garments are largely by medium sized businesses either owned by international investors or local entrepreneurs with few ties to the big conglomerates. While still desperately poor by developed country standards, Yangon and Mandalay have seen rapid growth. Smartphones and internet are becoming widespread, giving people access to information beyond government censorship.

ConclusionAfter another overwhelming victory for Aung San Suu Kyi and the NLD, the NLD increasingly began discussing the structural limits to its power. The military responded with a coup based upon spurious charges of vote rigging, charging Aaung San Suu Kyi with illegally owning walkie-talkies. While some ethnic minority leaders initially saw opportunity in the coup, the overwhelming majority of people of all ethnic groups are backing the protests. Millions of protestors have flooded the streets, and strikes by civil servants and white collar professionals have given the pro-democracy real leverage. In particular, walkouts at the Myanmar Economic Bank has made it difficult for the government to pay civil servants. Nevertheless, the Tatmadaw has a long history of violence, and scores of protestors have already lost their lives. It is unclear what it will take to finally remove the Tatmadaw from power.

Select Sources:The Fall of the Burmese Kingdom in 1885: Review and Reconsideration, Ernest C.T ChewIndian and Chinese Immigrant Communities: Comparative Perspectives, Renaud EgretauBuilding the Tatmadaw: Myanmar Armed Forces Since 1948, Mung Aung MyoeThe idea of freedom in Burma and the political thought of Daw Aung San Suu Kyi , J SilversteinEven paranoids have enemies: Cyclone Nargis and Myanmar's fears of invasion, A SelthUnder the Iron Thumb: Forced Labor in Myanmar. Anil RajPROFILING NON-STATE ARMED INSURGENT GROUPS OF MYANMAR, Tripathi AnuragOvershadowed by kala India­‑Burma Relations, Michael Lubina"The Burmese Way to Socialism" , Fred R Von Der MehdenBusiness conglomerates in the context of Myanmar's economic reform , A Min, T KudoThe 1990 Elections in Myanmar: Broken Promises or a Failure of Communication? Derek TonkinBurma in Transition: On the Path to Democracy, David FaehnleBurma’s Military Blocks Constitutional Amendments, Congressional Research Service

www.wealthofnationspodcast.com
https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/Myanmar-History.mp3

In December of 2020, the first announcement of effective vaccines developed by Moderna and Pfizer heralded the end of the COVID-19 pandemic. Since then, additional vaccines developed by AstraZeneca, Johnson and Johnson, and by the Russian, Chinese and Indian companies have showed effectiveness. Nations across the developed world have raced to vaccinate as many people as possible, with the United States currently vaccinating 2 million people a day. However, the process of vaccination has been much slower in developing countries. Only roughly 10% of all vaccinations have occurred in developung countries despite the fact the overwhelming majority of the world’s population lives in developing countries. Rich nations have crowded out developing countries with advanced purchases for three times as many people as their populations, while many of the most effective vaccinations have extensive vaccination requirements beyond the capacity of many underdeveloped nations.

Currently, Brazil has given 5 vaccinations per 100 people, China 3 vaccinations per 100 people, Russia 3 vaccinations per 100 people and Mexico only 1 vaccination per 100 people. While most developing countries have struggled with vaccinations, Chile has been an exception to this general rule. So far, Chile has administered 23 vaccinations per 100 people, more than all but a handful of developed nations. Chile moved fast to acquire access to vaccines early on, with over 36 million doses of vaccines purchased by December of 2020, with overall government spending on vaccine procurement likely to exceed $300 million. The government of Chile has been willing to purchase vaccines from anyone selling vaccines, making large purchases of Sputnik and Chinese vaccines that have been scorned by developed countries. Chile’s efforts to purchase efforts likely benefitted from the fact that Chile is the only major source for Chilean soapbark , an adjuvant or ingredient that strengthens the body’s immune response.

Chile has also been ambitious in vaccinating people as fast as possible. The government of Chile has repurposed cold storage for it salmon industry for Moderna and Pfizer vaccines. The government created databases to keep better track of vaccine needs. The government has turned every public place into vaccination sites, with shopping malls and football stadiums. Between February 2nd and March 4th, the number of Chileans vaccinated increased from 80,000 to 4.3 million people. Chile’s vaccination success is especially notable given that 21,000 Chileans have died from COVID-19, with one of the highest mortality rates from COVID-19 in the world. As global vaccination production soars, hopefully other countries will be able to replicate Chile’s success in vaccinating its people, bringing the COVID-19 pandemic to a close throughout the world.

http://wealthofnationspodcast.com/
https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/Vietnam-Sri_Lanka-Bangladesh-Public_Health.mp3

Before the COVID-19 pandemic, the most dangerous public health threat faced by the United States was the spectacular rise of drug overdoses in recent decades. Between 1999 and 2019 the number of drug overdoses has increased from 19,000 to 77,000. While the early days of the drug overdose epidemic was driven by the unethical prescription and abuse of prescription drugs, in recent years overdose deaths are driven by synthetic opiates. Between 2013 and 2019, the number of overdoses from synthetic opiates from 2,000 to 38,000. Although coverage of the drug overdose crisis in the United States focuses overwhelmingly on its domestic causes and effects, the drug crisis has both international causes and consequences. In today’s podcast episode I will be discussing the role China plays in the manufacture of fentanyl and other synthetic opiates, the damage the trafficking of fentanyl is having upon Mexico, and effects of the drug war unleased by the Philippines Rodrigo Duterte to reduce consumption of narcotics in his country.

The New Opium Wars
In 1839 and 1856, a coalition of European armies went to war against the Qing Empire to force the Chinese government to allow the trade of opium. The Opium Wars are one of the defining injustices that fuel modern Chinese nationalism, and so it is highly ironic that China has emerged as the modern center for the production of deadly drugs. It is unclear to say to what extent fentanyl in the United States comes from China, but the DEA estimates the overwhelming majority of synthetic opiates entering the United States come from China.

The Chinese drug industry has its origins in China’s massive chemical and drug industry. China is the largest maker of APIs, active pharmaceutical ingredients, in the world with 40% of global chemical revenue coming from China. Indeed, the Chinese government has heavily subsidized this industry, offering a plethora subsidies to chemical and pharmaceutical industries including duty exemptions, VAT rebates and subsidized land with the government investing about $30 billion per year in these industries. While reasonable as part of a development strategy, they also helped fuel the current fentanyl crisis as subsidies were extended to firms for the production of NPP and 4-ANPP, the primary precursors compounds for fentanyl.

Yuancheng, a Wuhan based chemical companies, has long dominated not just the Chinese, but the global markets for the production of fentanyl precursors. One channel by which fentanyl arrives in the United States is through large numbers of small labs based in China. Yuancheng sells fentanyl precursor to these labs, many of which until recently operated almost entirely in the open. After the Chinese government first banned many fentanyl products in 2015, many small labs simply tweaked the formula of new fentanyl products to remain legal, or went semi-underground. US consumers and small scale drug dealers could then easily purchase fentanyl through the darkweb.

Fentanyl production and trafficking could occur semi-openly because for a long time the Chinese government put little emphasis on enforcement because synthetic opiates are rarely consumed in China. However, China has come under pressure from both the Obama and Trump administrations to clamp down on fentanyl. The Chinese government passed major restrictions of fentanyl production in 2015 and 2017. In March of 2019, China passed a landmark law that allowed the government to ban fentanyl and all tweaked analogues, as well as almost all precursors that could be used to make fentanyl. Moreover, the government has dramatically increased screening of parcels leaving China, and has shut down hundreds of fentanyl lab over the last year.

It is difficult to say to what extent these measures have been successful. For example, some potential fentanyl precursors have not been banned because they have potential dual uses. Moreover, those fentanyl labs not caught by the state have been able to use complex mail forwarding systems to obscure precisely where fentanyl analogues are coming from. Moreover, geopolitical conflict with the US will make it difficult for American DEA to develop the close cooperative relationship with their Chinese counterparts.

Chinese fentanyl labs have already developed complex mail forwarding systems to obscure the origin of narcotics. Finally, production fentanyl precursors are increasingly moving to other weakly governed developing drug markets such as India. India has long been the primary manufacturing base for illegal tramadol, another opiate heavily consumed in the Middle east and Africa, and DEA agents have caught Mexican drug cartels purchasing fentanyl from India. Increasingly, fentanyl precursors are smuggled to third markets such as Mexico, and processed into usable narcotics outside of China.

Fentanyl Fuels Cartel Wars in Mexico
Mexico has long struggled with drug related violent crime. Between 2007 and 2011 the homicide rate soared 8 per 100,000 to 24 per 100,000 driven by American demand for narcotics. However, between 2011 and 2014 Mexico appeared to be getting its violent crime problem under control. Chapo Guzman was finally caught by Mexican authorities. The Zetas, Mexico’s most viciously violent cartel, was defeated by the state and less murderous crime groups. In Michoacan, the state and local vigilante groups, not only defeated the largest cartels but allowed a certain measure of the rule of law to be enforced. Between 2011 and 2014 the homicide rate fell from 24 per 100,000 to 17 per 100,000. However, the rise of fentanyl has erased this progress. From 2014 to 2019, Mexico’s homicide rate increased from 14 per 100,000 to 29 per 100,000, a homicide rate five times that of the United States.

The primary points of entry for fentanyl into Mexico are the Pacific ports of Manzanillo and Lazaro Cardenas. Fentanyl precursors, smuggled in the shipping holds of ships, are then transported to small labs that process precursors into drugs and pressed into pills. Fentanyl is then trafficked northwards to the United States. Although many smaller criminal organizations are involved in this process, with many small groups specializing in specific aspects of this process, two cartels dominate the narco industry in China. The Sinaloa Cartel and the Jalisco New Generation have emerged as the largest cartels. Both cartels are based along the western coast of Mexico, and a map of narco dominance would show a checkerboard pattern across the west of Mexico.

Control of transportation routes has been fierce. While the port of Lazaro Cardenas is firmly under the control of the Jalisco New Generation Cartel, and does not have an unusually high homicide rate. However, Manzanillo lies in contested land, and as a result has a homicide rate of over 200 per 100,000 making it one of the most violent places in the world and Colima, the state Manzanillo is located in, is the most dangerous in Mexico. Today fierce battles over control of highways and border posts from where drugs are exported and guns imported have fueled unprecedented violence.

While the government of Mexico has had some success in capturing the leadership of the most powerful cartels, the result has been organized crimes splintering into ever smaller groups. Moreover, these smaller cartels, locked out of the most lucrative segments of the drug trade are increasingly turning to illegal mining, extortion and oil theft. Organized crime is embedding itself deeper into Mexican society, making its eventual eradication more difficult.

Phillipines Drug War
Drug consumption, just as much as its production and trafficking is a problem in developing countries. The primary drug consumed in the Phillipines is crystal meth, known as shabu, with precursors originating in China. Although overall levels of drug consumption are not unusual by global standards, with 1.1% of Fillipinos reporting using illicit substances in 2016. However, a moral panic emerged among Filipino people about drug use. Rodrigo Duterte in his successful 2016 bid to become the president of the Philippines promising to use extreme force to destroy drug abuse.

From January of 2016, Filipino police were given a license to kill suspected of using or dealing drugs. Local officials drew up lists of suspected drug users and dealers whom police were authorized to kill. Rordigo Duterte himself had long been affiliated with the Davao Death Squad, a vigilante death squad in the city of Davao where he was long mayor. Moreover, the government incentivized murder by paying bounties to vigilante groups for killing suspected drug users and dealers. The result was a cataclysm of death, with the Philippines Council on Human Rights estimating 27,000 killed in the drug war.

It is difficult to say to what extent the drug war has been successful. One one hand, Rodrigo Duterte remains overwhelmingly popular, with 82% of Filipinos supporting the drug war. However, only an estimated 1% of crystal meth has been interdicted by the police, and the price of Shabu has fallen from $164 per ounce to $132 per ounce suggesting the drug war has had limited effect on the flow of drugs into the Philippines. Indeed, many of the drug warriors have turned into criminals themselves, with innocent bystanders and the victims of score settling regularly losing their lives. The Kuratong Baleleng, once one of the Phillipines largest cartels, had its links in anti-Communist vigilante groups. At least one former head of national police has been indicted on reselling confiscated drugs to cartels. The manifest failures of the drug war has resulted in the government quietly shifting away from such poliies

Selected Sources:
2018 National Drug Threat Assessment, Drug Enforcement Administration
SECTION 3: GROWING U.S. RELIANCE ON CHINA’S BIOTECH AND PHARMACEUTICAL PRODUCTS, US China Economic and Security Review Commission
Fentanyl, Inc.: How Rogue Chemists Are Creating the Deadliest Wave of the Opioid Epidemic, Ben Westhoff
Fentanyl and geopolitics: Controlling opioid supply from China, Vanda Felbab-Brown
Mexico’s Role in the Deadly Rise of Fentanyl, Steven Dudley, Tristan Klavel, Deborah Bonello
DRUG WAR STORIES AND THE PHILIPPINE PRESIDENT, Dan Jerrome Barrera

www.wealthofnationspodcast.com

https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/China_Mexico_Phillipines-Illegal_Drugs.mp3

On March 17th 2014, Sergio Moro, a little known judge from the Brazilian state of Curitiba, authorized an investigation of suspicious money transfers at a gas station. The resulting investigation, known as Operation Car Wash or Lava Jato, uncovered a web of corruption that shook Brazilian society to its core. The largest construction companies in Brazil had created a cartel to bribe senior administrators in Petrobras, the state oil company, to overcharge for constructions and oil services. Conservative estimates show at least $2 billion in bribes and $17 billion worth of losses in overinflated assets. Three former presidents of Brazil, a third of the cabinet and 90 members of the legislature, and Brazil's wealthiest man were either accused or convicted of wrong doing in the resulting scandal. The corruption scandal spread outside of Brazil, roiling politics across Latin America, with scandal bringing down presidents and powerful politicians in Peru, Mexico and other nations.

While many hoped Operation Car Wash augured the beginning of creating a set of institutions that could fight corruption, the reform efforts were stymied at every corner. Although the government passed some important campaign finance reforms, the political class was able to undermine anti-corruption efforts. Dilma Rousseuf, the left wing President of Brazil, was impeached on dubious grounds despite their being no direct link between her and Operation Car Wash. The next president of Brazil, Michel Temer, was an exemplar of a corrupt political class and moved to block corruption investigations of centrist and right wing politicians. Lula, once the most popular politician in the world, was convicted of corruption in a trial considered by many to be politically motivated. By the 2018 elections, the Brazilian electorate had become cynical of the entirety of the political class, and instead voted in a crude, racist, sexist populist outsider Jair Bolsonaro to president in 2018.

Bolsonaro's appointment of Sergio Moro was interpreted by some as a sign that he retained a commitment to drain Brazil's swamp. However, it is clear Bolsonaro had limited interest in fighting corruption. One of his sons, Flavio Bolsonaro, has been accused of accepting bribes and funneling money to right wing vigilante groups. Sergio Moro resigned from his position as Minister of Justice after the president blocked attempts to prosecute another son of Jair Bolsonaro on charges of corruption. The COVID-19 crisis further put the fight against corruption on the backburner. Over 250,000 Brazilians have lost their lives, and new variants have resulted in Brazil suffering a second wave even as cases and deaths collapse in the rest of the world. In all this tumult, Operation Car Wash was quietly cancelled in February of 2021. The fight against corruption in Brazil ended not with a bang, but with a whimper.

https://wealthofnationspodcast.com/closing-the-shop-down-the-dispiriting-end-of-operation-car-wash-in-brazil/
https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/brazil-petrobras.mp3

On February 1st, 2021 the armed forces of Myanmar, called the Tatmadaw, under Min Aung Hlaing, launched a coup against the democratically elected leader Aung San Su Kyi ending Myanmar’s ill fated experiment with democracy. In 1962, the Tatmadaw launched a coup to create an unusually brutal and xenophobic dictatorship. Myanmar’s ethnic minorities have long been fighting a civil war against the Tatmadaw, the Rohingya faced massive discrimination, and Burmans of all ethnicities faced an economy dominated by the military and a state that offered only poverty. Cracks against the regime first emerged in 1988 when mass protests forced the military to promise free and fair elections. The opposition National League of Democracy, led by Aung San Suu Kyi won the elections in a landslide. Aung San Suu Kyi was a leader of the protest movement and daughter of modern Myanmar’s founding father. However, the military refused to accept the results, and forced Aung San Suu Kyi to house arrest for 15 of the next 21 years.

However, from the 2000s onwards Myanmar started to slowly liberalize. The liberalization began with the economy, with Myanmar’s economy growing by 8% a year. From the 2011 onwards, Thein Sein, a relative moderate in the Junta, became the president of Myanmar. He ushered a liberalization, freeing Aung San Su Kyii and eventually allowing elections in 2015. Once again, the NLD won the over 80% of the vote. However, the Tatmadaw retained substantial power with a quarter of all seats in the legislature, no civilian control of the military and control of the police. The last came to tragedy when the military orchestrated a genocide against the Rohingya people, killing 24,000 and forcing nearly a million to flee. While Aung San Su Kyii had little choice but to accept the genocide as a fiat accompli, she has shown little remorse for the actions of the Tatmadaw. Aung San Suu Kyi and the NLD won an even more overwhelming majority in the 2020 elections than in 2015. For most people in Myanmar, especially among the ethnic Bamar majority.

However, the seeds of her own demise lay in her popularity. The NLD called for amendments stripping the Tatmadaw of its power. The Tatmadaw, countered with accusations of voter fraud. While there were some irregularities in minority areas, international observers declared the elections free and fair. On February 1st, the Tatmadaw used these accusations as the justification for a coup removing the democratically elected government. The United States has promptly moved to condemn the coup and is currently mulling sanctions, while China has described it as a cabinet reshuffle. It is likely the Myanmar under the military will seek to move closer to China. Migrants from Myanmar have launched protests in Japan and Thailand. It is difficult to know what is happening in Myanmar itself, as the news is strictly censored and the internet shut down. However, there are reports of sporadic protests in Yangon, the largest city in Myanmar. Activists have encouraged over 1 million people to download Bridgefy, an app that allows for messages even when the internet is shutdown, hinting that more protests are to come.

https://wealthofnationspodcast.com/singing-the-irrawaday-blues-the-tatmadaw-overthrows-democracy-in-myanmar/
https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/Myanmar-Rohingya.mp3

In the last episode of the Wealth of Nations podcast, I discussed Ukraine's spectacular economic implosion in the aftermath of independence, democracy and market reforms. However, Ukraine's experience was far from universal. Nations such as Poland, Estonia, the Czech Republic and Slovenia successfully adapted to the political and economic transformations of the 1990s, and are now rapidly converging with western European standards of living. The nations that adapted most successfully to changing conditions benefitted from close geographic proximity to Europe, strong historic and cultural ties with developed markets, a previous history of industrialization and development, and leadership committed to fundamental reforms.

In today's podcast episode, I want to instead focus on Romania, a nation that like Ukraine, did not benefit from these initial advantages. Romania in both 1914 and 1989 was substantially poorer than Ukraine, does not have a border with a developed market, and had political leadership in the 1990s that was deeply ambivalent to reform. Understanding why Romania adopted more successfully to radical change than Ukraine is crucial to understanding under what circumstances massive political and economic reforms will result in human flourishing.

Romania and Ukraine's Different Experiences of CommunismImportant differences in the economic trajectories of Romania and Ukraine emerged early on in the days of communism. While Ukraine was incorporated into the USSR in 1919, Romania became a Communist state under soviet tutelage that imitated Stalinism from 1947 onwards. However, after Nikita Kruschev condemned Stalinist excesses in 1954, Romania's political leadership stayed loyal to Stalinist precepts. Ironically, this created a wedge between Romania and the USSR and from the 1950s onwards, Romania turned to the west as partners in trade and investment. By 1981, Romania had an external debt of $10.1 billion and had to make external payments of $3 billion a year.

The government of Romania was too proud to default on its debt, or turn to the IMF for support and instead created the fiscal space to repay this debt with harsh austerity. The Romanian dictator, Nicolae Ceaușescu, imposed some of the harshest austerity in the world. Daily blackouts became the norm even though Romania produced more electricity per capita than Spain or Italy. The government forced students to labor in the fields during "vacation" , but exported all the produce so that food calories consumption fell by 10%. Funding for education and health collapsed, and it was during this period that Romania's infamous orphanages came into existence.

By 1989, Romania successfully paid off the debt it owed to western creditors. Romania had ironically also undergone much of austerity and disconnection from Communist markets that Ukraine faced in the 1990s before communism fell. Moreover, the austerity destroyed the legitimacy of Ceaușescu's government. Protests against the expulsion of a priest in the town of Timosoara exploded into a nationwide insurrection. The government of Ceaușescu initially responded with brutal repression, with over a thousand people likely losing their lives. However, communist party elites were just as angry at the government as ordinary people, and the armed forces rapidly abandoned Ceaușescu. A coup by senior leaders overthrew the government, and Nicolae Ceaușescu and his wife were executed. The Communist party maintained its institutional integrity through all of this upheaval, and formed the Front for National Salvation (FSN) to guide Romania through the fall of Communism. Unlike in Ukraine, the Communist party partially recast itself as the Social Democratic FSN, and given the massive organizational advantages was able to dominate early years of transition.

The Political Economy of ReformThe new FSN initially followed the same path of reform as other post-Communist nations. The Romanian government engaged in mass voucher privatization, just as in Ukraine. Just as in Ukraine, these enterprises largely ended up in the hands of former managers more interested in extracting subsidies from the state, rather than in making ailing SOEs profitable. Moreover, Romania suffered a milder version of the collapse Romania saw, as the planned economy collapsed beforethe rules and institutions of a succesful market economy could be adopted. Between 1989 and 1992, GDP PPP per capita fell by 19%, causing widespread unhappiness. The FSN (which later became the PSD) government got cold feet about reform, and drastically slowed the liberalization process.

Unlike in Ukraine, the former Communists in Romania maintained organizational (if not ideological) coherence, and was wary of privatizing too fast. They did not want to create a class of oligarchs capable of financing opposition movements. While the new elite was extremely corrupt, rents were broadly distributed through society. No class of oligarchs comparable to Ukraine emerged in Romania, and only one billionaire in Romania has business roots during the period of transition. By 1996, center left administration was discredited. Unlike in Ukraine, those people representing the interests of the rising private sector needed to organize on an ideological basis beyond personal wealth accumulation. In 1996, Emil Constantinescu became the President of Romania on a platform of economic reform.

While the new government of Romania accelerated the privatization process, it also made deep institutional reforms to make it possible for capitalism to thrive. In order to gain EU membership, Romania made substantive reforms to the judiciary , strengthened anti-corruption bodies. Comprehensive efforts were made to simplify taxation, remove harmful regulations, and modernize business law. Moreover, bilateral investment treaties allowed foreign investors to demand arbitration by a neutral party if investors felt Romanian courts could not be neutral.

Although, to a certain extent, these changes had a greater effect on appearances than reality, real improvements in governance were made. By 2007, Romania was ranked 69 on the Corruption Perceptions Index, while Ukraine was ranked at 118. While Ukraine's oligarchs blocked efforts to improve the rule of law, the smaller businesses and foreign companies that dominated the Romanian business had a clear stake in good institutions. The reforms implemented by the center-right government after 1996 did not yield immediate results, and the center-left returned to power. However, as growth accelerated from 2000 onwards, reforms were maintained and strengthened, with Romania gaining EU membership in 2007.

https://wealthofnationspodcast.com/
https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/Romania-Succesful_Transition.mp3

On August 20th 2020, Alexei Navalny became violently ill on a flight to Moscow. Navalny, who was evacuated to a hospital in Germany, had been poisoned with the nerve agent Novichok by the FSB, Russian security services. Navalny, a long time pro-democracy and anti-corruption activist, had been a thorn in Vladimir Putin's side. Navalny was the closest Vladimir Putin had to a competitor in the 2018 Russian presidential election, and helped organize the unified front in the 2019 Moscow Duma elections that nearly saw the opposition take control of the municipal government of Russia's most important city. Until now, the Russian government has attempted to frustrate Navalny with spurious and absurd court cases that have seen him jailed 10 times in the last decade for short periods of time, and banned from running for all public office. The attempted assasination marks the government taking a much more aggressive stance towards political opposition.

After recovering from his poisoning, Navalny pretended to be an aid of a senior general and got a recording of the member of the team that attempted to kill him admitting his crimes and the methods that he used in one of the most bizarre stories of the year. Navalny, believing there is little he could do for his country from abroad, and returned to Russia on January 17th. Navalny was almost immediately arrested on charges of violating his parole by leaving Russia to get treated for poisoning by his own government. Navalny is currently facing 13.5 years in prison on fabricated charges of corruption and embezzlement. As Navalny was arrested by the government, his team released a documentary of Vladimir Putin's palace that covers grounds 39 times that of Monaco. Valued at $1.4 billion, the palace has luxuries like two helipads, and underground ice rink, a private strip club, and $800 toilet brush. Navalny alleges that oligarchs and cronies have paid for this palace, with the wealth ultimately coming from the Russian people. The video quickly gained over 50 million views worldwide, with it the most viewed Youtube video in Russia.

Protests from Vladivostok to St. Petersburg have been organized on January 23rd to call for Navalny's release. Over 40,000 people have taken to the streets in Moscow. Justas impressively, massive protests have been organized in smaller cities like Yekaterinburg and Kazan where approximately 10,000 have come into the streets. The government has arrested over 3,400 to keep the protests under control Russia has seen similar sized protests after 2018 and 2019, and it is far from clear these protests show any real risk to the government of Putin. Nevertheless, these protests are just more cracks in the firmament of Putin's dictatorship over Russia. Alexander Lukashenko, Belarus's long time ruler, is seeing truly dangerous protests destabilizing his regime. Opinion polls show support for Putin steadily declining, with polls show his disapproval for Putin rising from 17% to 34% from 2018 to 2020. The combination of stagnant growth, massive corruption, and spectacular mismanagement of COVID-19 have sapped Putin's support. While Putin remains firms in power today, the opposition to his regime is slowly gaining strength.

www.wealthofnationspodcast.com
https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/Russia-Economy.mp3

On August 24th, 1991 Ukraine declared its independence from and dissolution of formal ties with the USSR. Ukraine was supposed to be entering a new era of independent rule, democratic governance and a vibrant free market economy. However, this optimistic vision quickly proved to be a mirage. Between 1991 and 1999, Ukraine's GDP PPP per capita collapsed from $14,500 to $6,800, and democratic government meant the empowerment of greedy oligarchs. While Soviet era economic statistics, and economic statistics from the 1990s are difficult to interpret, it is clear Ukrainians suffered a collapse in their standard of living. Today's podcast episode will explore why Ukraine's transition to democracy, independence, and free markets went so disastrously. In part one, I will discuss the collapse of the old Soviet system of planning. In part two, I will discuss why the institutions necessary for markets failed to take root. Finally, in part three I will discuss some of the social and political repercussions of Ukraine's failed transitions.

Socialism Without A Plan

From the late 18th century onwards, the territory that is today was incorporated into the Russian empire. Ukraine's rich natural resources became central to future Russian governments plans. Ukraine's rich black soil produced massive grain surpluses, while Ukraine's ample reserves of iron ore, coal and manganese made eastern Ukraine one of the most important heavy industrial centers of the empire. These interlinkages only strengthened in the Soviet era. By 1972, the USSR had surpassed America in steel production despite having a smaller population than the US, with Ukraine at the center of its industrial empire. By 1989, Ukraine produced 34% of the USSRs steel, 40% of its iron ore, and 30% of its agricultural value added. The Ukrainian metallurgy received massive capital and fuel subsidies while benefiting from guaranteed markets for generally lower quality iron and steel. The collapse of the USSR meant a rapid withdrawal of oil and slower withdrawal of fuel subsidies, while at the same time untethered from old networks of exchange. Between 1990 and 1995, steel production fell from 52 million tons to 19 million tons, with total production recovering to 32 million tons by 2014.

The iron and steel industries were not alone in their struggles to compete outside of the protection of the Soviet system. The first wave of privatizations consisted of management buyouts of state owned firms. All workers were given shares in state owned firms, but usually sold their shares to management for nominal prices. These managers were bureaucrats rather than entrepreneurs. Instead of buying and selling on an open market, managers preferred to barter and trade favors. More than half of all transactions were non-market, as old relationships were preserved. In particular, privatized businesses were able to get subsidies from the government and a politicized central bank. Ukraine's budget deficit rose to 12.2% of GDP as a result of tax nonpayment and subsidies, while credits and loans to privatized firms led to unprecedented monetary emissions. The inevitable consequence was hyperinflation, with inflation soaring to over 10,000% in 1993.

Capitalism Without Markets
A new class of businessmen emerged from the wreckage of Ukraine's economy. The biggest path for wealth accumulation was natural gas. Although Russia rapidly rescinded its oil and gas subsidies, natural gas subsidies lingered through the 1990s. The Ukrainian government purchased natural gas $50 per mcm, and transferred it to politically connected governments at nominal prices. These same private businesses would resell to foreign purchasers at market prices 8 times higher. Total subsidies to oligarchs amounted to 7.5% of GDP. The state became a primary source for accumulating wealth, with businessmen often getting $3-5 billion transferred directly from the treasury. Ukraine did not allow open bidding for the generation of privatization after the first mass privatizations, but instead an opaque process that locked out foreign investors, and allowed the politically connected to accumulate vast amounts of wealth .Ukraine's 6 billionaires today control nearly $10 billion in wealth, double what one would expect for a country of Ukraine's level of economic development.

The political situation was just as chaotic as the economic one. Although Ukraine's first President Leonid Kravchuk, was a lifelong Communist bureaucrat, he quickly dismantled the Communist Party. The networks of the Communist party rapidly disintegrated, and new ideological forces struggled organize. During the 1990s, politics in Afghanistan were apolitical, with 87% of the vote going to independent candidates in the 1994 presidential elections. Politicians were either wealthy businessmen themselves, or relied on the donations and media backing of oligarchs to win elections instead political parties with ideological goals. As a result, politics became another arena for the business rivalries of oligarchs. Organized crime flourished as oligarchs used gangsters to seize property from the state and business rivals. Politics was about fighting over export/import quota, lucrative construction contracts, and direct subsidies to elites rather than about improving the standard of living of ordinary people. The oligarchs benefited from a system without the rule of law and good governance, and so in power perpetuated this same system.

While Ukrainian oligarchs thrived in this system, it scare foreign investors away. Between 1991 and 1999, FDI in Poland increased from $700 million and $7 billion, and FDI to Romania increased from $80 million and $1.2 billion. FDI in Ukraine stagnated in comparison, going from $200 million to $500 million. Countries across central and eastern Europe developed deep interlinkages with multinational corporations that took advantages of the high level of education and low wages to move large scale production to the region. Total exports in Romania and Poland doubled during the 1990s, and accelerated even more in the 2000s even as Ukraine's external trade collapsed. Ukraine's steel and iron industry were desperate for capital and technical expertise in upgrading the capital stock and Ukraine has tremendous potential to serve as a labor intensive export hub. However, the chaotic economic and political institutions of Ukraine meant that this investment was directed to other countries instead.

The Consequence of Failed Transitions
Ukraine suffered a peacetime collapse in standards of living only matched by the collapse in Venezuela and Zimbabwe. Ukraine suffered a grim collapse in social outcomes as well. Between 1987 and 1995, alcohol consumption in Ukraine nearly tripled. Rates of crime soared, as the homicide rate doubled from 5 per 100,000 to 10 per 100,000. Male life expectancy in Ukraine fell 5 years from 1989 to 1995. The old communist government in theory offered comprehensive social benefits to all Ukrainians. The old Soviet welfare state consisted of in kind goods such as free housing, food and electricity provided by the state. Post-Communist governments initially tried to maintain the same system for vulnerable groups such as the elderly, but no longer had the money to actually provision necessary services. The increase in poverty and human suffering soured many Ukrainians to the transitions the country had undergone.

Ukraine started recovering from the early 2000s onwards. GDP per capita growth averaged at 8% a year from 2000 to 2007. However, this rapid growth has been interrupted by geopolitical conflict, with revolution and civil war interrupting Ukraine's recovery. The conflict stems, at least in part, from two very different interpretations of the 1990s. To many, especially those in the east of the country which is the most culturally Russian and where the old Soviet heavy industrial complex was concentrated, the reforms and transformations of the era changed too much, too rapidly. The reforms caused spectacular corruption and a collapse in standards of living. For many in Kiev and the west of the country, the problem was that not enough change had happened. Market reforms had to be accelerated, democratization strengthened and integration with Europe deepened for Ukraine to reach its potential.

While the transition from Communism was a painful process for Ukraine, it was a spectacular success for money other countries in the region. The Baltic countries, Czech and Slovak Republics, Poland and Slovenia after an initial shock started rapidly converging economically with western Europe. The countries that adapted fastest to these economic changes were those that were the most prosperous before the imposition of Communism, with the closest geographic and historic ties to developed Western markets and the most ambitious and capable leadership.

Nevertheless, there were many countries leaving Communism that did not have the historical experience of development or leaders committed to the reform agenda that also saw rapid economic development as well. For example, in 1991, Romania had a GDP PPP per capita 20% less than that of Ukraine. Today, Romania's GDP PPP per capita is 2.4 times that of Ukraine. Romania did not benefit from close historical and economic ties to the West, nor had leadership with a firm desire to transform Romania. In the second installment of this series I want to explore how and why Romania rapidly moved towards markets and democracy despite the weight of its socialist legacy.

Selected Sources:
UKRAINE AND BELARUS - (UN)LIKELY TRANSITIONS? , Silva Kantareva
Implicit Subsidies in Russian‐Ukrainian Energy Trade
UKRAINE’S GAS SECTOR
The Iron and Steel Industry in the USSR M Gardner Clark
A Comparison of Soviet and US Industrial Bases
Privatization in Ukraine: Economics, Law, and Politics Matthew S.R. Palmert
Why Has Ukraine Returned to Growth Anders Aslund
Inflation in Ukraine, Past Present and Future Olexandur Zholud
Implicit Subsidies in Russian‐Ukrainian Energy Trade, Gregory Krasnov Josef Brada
The Sustainability of the Iron and Steel Industries in Ukraine: Challenges and Opportunities, Volodomyr Shatokha
THE OLIGARCHIC DEMOCRACY THE INFLUENCE OF BUSINESS GROUPS ON UKRAINIAN POLITICS, Slawomir Matuzsak
Alcohol-Related Causes of Death and Drinking Patterns in Moldova as Compared to Russia and Ukraine, Olga Penina

www.wealthofnationspodcast.com

https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/Ukraine-Economic_Collapse.mp3

On August 13th, 2021 Uganda held general elections for president and parliament. The elections pitted Yoweri Museveni, the 75 year old president of Uganda since 1986 seeking a sixth term, against Robert Kyagulanyi, a 38 year old Reggae star better known as Bobi Wine. The results of the elections themselves are not in question. Businessmen have been donating generously to the National Resistance Party, the party of Museveni, and government propaganda is everywhere. Museveni has used the spectre of COVID-19 to ban opposition rallies . Moreover, he has unleashed massive violence against the opposition. Robert Kyagulanyi has been arrested by the government three times. Supporters protesting have regularly faced extreme force and gunfire, with scores gunned down by the police. International observers have cancelled missions, as pre-election actions of Museveni make it impossible for the election to be considered fair in any way. The government has further blocked internet access, and deployed massive security to make sure there is not uprising from the streets.

The election between Museveni and Kyagulanyi highlight the vast divides in Uganda. Museveni came to power in 1986, ending decades of brutal rule by dictators like Idi Amin and civil war. Museveni restored stability, and implemented market reforms that have resulted in the Ugandan economy consistently growing between 6-7% since then. His pro-market economic policies has gained him support among the business elite, especially among Asians who were welcomed back after being expelled by Amin. In many rural areas, Museveni’s government is credited with Uganda’s modest prosperity, and the government has been more successful in quashing opposition organizing in these areas. Many in the older generation remember the chaos and violence Museveni ended and continue to support him.

However, Uganda is one of the youngest countries in the world, with a median age of 15.8. Most voters, including Kyagulanyi, do not have memories of the bad old days. In Kampala and other major cities, anger against the government. Since 2000, the population of Kampala has nearly tripled, with most of this growth coming in the slums. Public services are atrocious, and the only jobs poorly paid informal sector jobs such as day labor and hawking. Kyagulanyi, who hails from the slums of Kampala and calls himself the ghetto president, has successfully channeled the anger of the young and poor. The opposition has also gained support from parts of the urban middle class, angry at corruption and a lack of democratic freedoms in Uganda.

Although Museveni is already claiming a large lead in polling, he is 75 and cannot remain president forever. Family members, retired generals, powerful politicians are circling around the aging dictator. It might even be possible for the people to have a say, especially if donors demand political reform. The United States has long supported the government of Uganda as an ally in the war on terror, and a bastion of stability in an unstable region. US aid and support has long helped prop up Museveni’s dictatorship and adventurist foreign policy. Uganda has reached a crucial moment in its development. Its neighbors South Sudan and the Democratic Republic of the Congo are as unstable as ever, and Uganda hosts more refugees than almost any other country in the world. Major discoveries of oil could either unleash a boom, or rot the countries weak institutions. It is likely that genuine democratic government will be far better placed to deal with these challenges than a continuation of Uganda’s autocratic system.

www.wealthofnationspodcast.com
https://media.blubrry.com/wealthofnationspodcast/content.blubrry.com/wealthofnationspodcast/Chad-Uganda-Botswana_Oil_Curse.mp3

On February 16th, mass protests, bringing nearly 1 million people onto the streets erupted in Algeria. These protests were in response to Abdelaziz Bouteflika, long serving president and dictator of Algeria, announcing his ambitions to run for a fifth term in office for the presidency. Bouteflika had suffered a massive stroke in 2013, and had widely been rumored to be almost completely incapacitated since then. The decision of a decrepit, 83 year old man, to continue as dictator of their country was the final straw that caused the Algerian people to rise up in revolt. The president and senior members of the regime were forced to resign in March, and Algeria is looking forward to a government responsible to the will of the people. In today’s podcast, I will discuss the political origins of Bouteflika’s regime and the political tools it used to stay in power. In part two, I will describe the self serving political and economic system created by Bouteflika and his cronies. Finally, in part three, I will describe the series of events that led to the ultimate downfall and collapse of the regime.

The Political Origins of Bouteflika’s RegimeThe roots of the current government in Algeria lay in the brutal civil war in the 1990s. The refusal of the military to accept Islamist victory in free and fair elections led to a brutal civil war . Between 1991 and 2002, and estimated 200,000 people losing their lives with atrocities committed by both the government and Islamists. The war only came to an end when Abdelaziz Bouteflika, with the backing of the military, became president and implemented conditional amnesty laws that coaxed many fighters in the mountains to lay down their arms. Bouteflika, a career civil servant and diplomat, restored civilian rule and achieved peace gained him a certain level of legitimacy with the Algerian public. The stability he brought is part of why the Algerian people accepted the regime Bouteflika built so long.

It would be a mistake to think of Bouteflika as an all powerful dictator of Algeria. Instead, he stood atop and intermediated conflicts within broad networks of military officials, civilian bureaucrats, old revolutionary families and new rising elites. The armed forces, labor unions, managers of state owned enterprises, and association of employers all wielded substantial power. While the regime created was a dictatorship, it relied more upon co-opting potential opponents than pure repression. For example, the UGTA, the state backed union, served to keep workers quiet rather than represent the interest of workers. As a result. SNAPAP, an independent union emerged, that actively organized strikes and walkouts against employers. The government responded in part with arrests and legal harassment of organizers. The government also engineered a split within SNAPAP, promising jobs and subsidizing an identically named union that cooperated with the government and sapped the strength of the independent union.

The Political and Economic System Built By AlgeriaThe base upon which the Algerian economy is built is its massive hydrocarbon reserves. Algeria has the 16th largest oil reserves, and 11th largest natural gas reserves in the world. Over 95% of Algeria’s export earnings come from oil and natural gas exports, and over 40% of government revenues come from hydrocarbons. However, it is unlikely the hydrocarbon sector of Algeria’s economy will be able to sustain prosperity forever. The combination of the global shale revolution, the growing impetus to abandon environmentally damaging forms of energy, and Algerian oil wells running out of oil has meant that this economic base is much weaker than it was. Between 2008 and 2019, total hydrocarbon exports have fallen from $72 from $32 billion, and it is likely will continue falling in the coming decades.

Algeria’s oil wealth for a long time supported a bloated state sector. Until the 1980s, the Algerian state employed two thirds of all workers. Although the Algerian government was forced to cut jobs due to the oil crisis of the 1980s, one third of employed Algerians work for the state. The Algerian government employs a greater share of the population than any other country in the middle east aside from Saudi Arabia. Many state owned enterprises are massively overstaffed. For example, Air Algeria, the national airline employees over 10,000 but could easily function with half as many employees. The power to give jobs and contracts to clients is one of the most powerful tools in Algerian politics. The most important SOE in Algeria is Sonatrach, the state oil company that controls 80% of reserves and employs over 120,000 people. Sonatrach’s oil profits have financed government spending, and control of Sonatrach gives massive power to give contracts to favored businesses. However, as a result, Sonatrach has been forced to underinvest in new technology and exploration, and total oil production have fallen by one third over the last 10 years.

Since the late 1990s, the government of Algeria has started a selective liberalization of the economy that has been more successful in enriching a narrow class of regime insiders than in reviving the Algerian economy. Many bureaucrats, officers and their children and friends have built business empires through selective liberalization. For example, industries ranging from pharmaceutical manufacture to import / export businesses are dominated by regime insiders who use their close connections to the state to gain subsidized loans from state owned banks, and favorable regulatory treatment. Moreover, a new class of rising businessmen built up close ties to existing elites. For example, Ali Haddad became a billionaire through lucrative contracts on privatized infrastructure projects. He was head of the FCE, the powerful employers organization, and was able to get senior officials such as the head of Sonatrach fired at his will.

One of the industries that most shows the failures of the system was the car industry. The Algerian government recognized the damage the complete dependence on the declining oil industry did to Algeria’s economy, and aimed to replicate Morocco’s success in fostering an export oriented car industry. In 2014, the government of Algeria banned the import of cars less than 3 years old. Instead, the government asked foreign carmakers to set up factories in joint partnerships with Algerian businessmen. While these joint ventures would initially largely import all their parts from abroad in knock down kits, the government wanted to push carmakers to rely more on domestic parts makers and eventually export cars to international markets. However, connected businessmen lobbied to keep tariffs high, and block domestic content requirements. While imports of cars dropped dramatically, automative exports from Algeria remain minimal. Moreover, while a substantial domestic car industry has emerged, the cost of cars in Algeria is approximately 60% higher than in neighboring countries. The only beneficiaries from the policies were powerful connected Algerian businessmen, and some Algerians even called for a boycott of “Made in Algeria” cars in frustration with the system.

The Final Collapse of the SystemAnger over the last decade has intensified over the last ten years. For example, the government’s decision to spend $2 billion to build the third largest mosque in the world in competition against Morocco showed seriously misguided priorities. Although Algeria was hit with protests during the Arab Spring, the government was able to hold protests at bay with temporarily increased social spending. Many Algerians saw the civil wars in Yemen, Syria and Libya and remembered their own civil war years, and were afraid of overthrowing the current government. However, in 2013, Bouteflika suffered a massive stroke. It is unclear wat the status of his health is, but it is widely rumored to spend most of time getting treatment in France, and suffering severe cognitive effects from the stroke. In February of 2019, Bouteflika announced his intentions to run for a fifth term for office. The absurdity of an 83 year old man who could barely speak running the country for a fifth term was the straw that broke the camel’s back and the Algerian people finally rose against the government. Nearly a million people massed in the streets, as a largely leaderless movement coalesced in its opposition to the government.

The army, unwilling to massacre the public, decided to accede to the protestors demands. Abdelaziz Bouteflika and other leading politicians were forced to resign from their posts. Free and fair elections were promised, and a bloodless revolution seemed to have been accomplished. In December 2019, Abdelmadjid Tebboune, a reformist politician won presidential elections with 58% of the vote. However, most of the opposition movement believed that insufficient reform to the media and electoral laws had been accomplished, and called for a boycott of the election. According to the government, turnout was 38%, but opposition movements claim it was only 8%. Similarly, a new constitution was passed with only 24% turnout. It is far from clear that the current government has a genuine democratic mandate.

The government has made some progress in reforming the system. The ban on car imports will be lifted. Senior politicians and businesses that benefitted from the old regime have been sentenced to long terms in prison. Both Ali Haddad and Said Bouteflika will spend over ten years in jail. There is a clear popular demand for fundamental change. However, it is far from clear what this change should be and how it should be implemented. What is clear is that Algeria faces dire economic and political threats. Algeria’s economy has been stagnating since the mid 2010s, and is GDP PPP per capita is expected to shrink by 8% over the next 7 years. Building better political and economic institutions will be vital for Algeria if it is to break out of its current pattern of political and economic stagnation.

Selected Sources:Algeria Under Bouteflika: Civil Strife and National Reconciliation, Rachid TlemcaniLimiting Change Through Change, The Key to the Algerian Regime’s Longevity, Dalia Ghanem-YazbeckAutonomous Trade Unions in Algeria An Expression of Nonviolent Acts of Citizenship, Karim MaicheTrading High Unemployment for Bad Jobs Employment Challenges in the Maghreb, Lahcen AchyPublic Wage Bill in the Middle East and North Africa, Natalia Tamirisa and Cristoph DuenwaldWhy did not authoritarian regime fall in Algeria? Gianni Del Panta

note: Since writing and recording this, Said Bouteflika has been released from prison, the President suffered severe COVID-19, went to France for treatment and tried to keep it a secret,

www.wealthofnationspodcast.com
https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/Algeria-Hirak.mp3

Between October 2016 and January 2017, the Tatmadaw, the armed forced of Myanmar, massacred more than 6,700 Rohingyas. Nearly a million Rohingya fled the genocide, the overwhelming majority of whom ended up in refugee camps in Bangladesh. The Kutupalong refugee camp has emerged as the largest refugee camp in the world, with a population of 600,000, with the remainder spread out through the Cox’s Bazaar region of Bangladesh. The situation faced by the Rohingya was desperate at arrival, as existing refugee camps in eastern Bangladesh had no time to prepare for the massive influx. Malnutrition was disturbingly common, with 7.5 percent of Rohingya ad 15% of Rohingya children suffering life threatening levels of hunger. In Kutupalong, the largest camp, 600,000 people were crowded into only 13 square kilometers of land, making it the densest place in the world. There wasn’t enough time to dig adequate drainage ditches, and deaths from waterborne diseases common.

Over time, the Rohingya have rebuilt their lives in refugee camps. The government of Bangladesh initially took a sympathetic view of the Rohingya. However, over time, resentment of the Rohingya grew. While, Rohingya are trying to rebuild their lives, many in Bangladesh are placing roadblocks. Rohingya have been blocked from getting local SIM cards, and internet access is severely curtailed. Rohingya were blamed for drug smuggling and petty crime. The government has refused to grant Rohingya work permits, although many are working illegally and starting microbusinesses. Food voucher systems have dramatically cut levels of hunger.

Although the government of Bangladesh did not extend the national school system into the refugee camps until January of 2020, informal schools and learning centers ensured Rohingya children got access to basic learning. However, due to COVID-19, the schools were forced to close down almost immediately. Lockdown policies shut Kutupalong and other refugee camps from broader Bangladeshi society, and there were fears that COVID-19 could be devestating in such a crowded location. So far, COVID-19 seems to have been contained, but it is unclear how long this can last.

The Rohingya crisis is increasingly forgotten, and their plight likely to made permanent. It seems increasingly unlikely that the Rohingya will ever return to Myanmar. The government of Myanmar has refused to acknowledge its guilt in the genocide. Moreover, the local Buddhists of Rakhine state have revolted against the national government, with tens of thousands displaced by new waves of violence. It seems impossible for the Rohingya to resettle in Myanmar with any degree of safety.

The latest crisis is the government of Bangladesh’s desire to resettle 100,000 settlers to Bhasan Char. Bhasan Char is an island that emerged from Himalayan silt in 2006. The government promises houses made of concrete with running water, and claims refugees resettled are moving voluntarily. However, rumors of coercion are widespread. This is hardly surprising given that the low lying island is at extreme risk from cyclones and rising sea levels. Moreover, the government has not allowed independent groups to verify the amenities and safety of the island. Many Rohingya fear that the true motivation of the project is to isolate Rohingya from each other, and to make it easier for the increasingly authoritarian government to monitor the Rohingya more closely. CCTV cameras monitor every inch of Bhasan Char, and the 15 man governing committee for the new camp has 10 representatives from the security sector, and none representing the interests of the Rohingya. It is a grim situation, likely to get grimmer as sympathy for the Rohingya fades, and refugees expelled from their home become problems to be solved.

www.wealthofnationspodcast.com
https://wealthofnationspodcast.com/stateless-and-forgotten-the-continuing-plight-of-rohingya-refugees/

At the turn of the 20th century, Argentina was one of the wealthiest nations in the world with the GDP PPP per capita comparable to Western Europe and the United States. Argentina’s high standards of living attracted massive flows of immigrants, and Buenos Aires culture and sophistication earned it the title the Paris of Latin America. However, since its early 20th century peak, Argentina’s economy has suffered a series of booms and busts due to its dependence upon the export of agricultural commodities. Since the rise of Juan Peron in the post-war period, these cycles have been exacerbated by populist economic policies. The IMF has been forced to bailout Argentina 21 times, and a detailed history of the ups and downs of Argentina’s economy would require far more space than I have here. Instead, I want to focus on Argentina’s most recent boom and bust cycle. I will discuss the populist policies of Cristina Fernandez, Mauricio Macri’s attempts to clean up the resulting mess, and the economic nightmare faced by the current government of Alberto Fernandez.

Cristina Fernandez Takes The Populist Road
Cristina Fernandez assumed the presidency of Argentina in 2007, replacing her husband Nestor Kirchner, in a bid for the family to circumvent term limits. Although Nestor Kirchner had railed against the IMF and neoliberalism, and followed a heterodox economic policy, Cristina Fernandez’s 8 years in office marked an intensification of populism in Argentina. Between 2007 and 2015, welfare expenditures increased welfare payments 1.7 fold in real terms, and utility subsidies amounted to 5% of GDP. Cristina Fernandez inherited a modest budget surplus, but by the end of her presidency the budget deficit was 5% of GDP. Argentina under the Kirchners had taken a hostile stance towards international creditors, and so could on finance the budget deficit by printing money.

The inevitable consequence was high levels of inflation, with inflation reaching 25% by 2015. High inflation rates, combined with a fixed exchange rate led to a heavily overvalued currency putting Argentine manufacturers at a disadvantage. The government responded with a system of tariffs and subsidies to keep Argentine manufacturers afloat. The most absurd example of this is the heavy tariffs Argentina on electronics that made most consumer electronics prohibitively expensive. Some domestic manufacturing thrived, with Blackberry building a factory in Tierra del Fuego at the southern tip of South America. While there were some winners from this policy of populism, the costs were much higher than the benefits.

The government of Argentina was forced to take increasingly drastic steps to raise revenue. The government nationalized the oil industry, and the $30 billion pension industry. The government tried to keep people from knowing how dire the situation by publishing fake inflation statistics, using the courts to harass the opposition supporting media, and attempting to quash corruption investigations by the judiciary. Argentine growth was strong so long as soy and wheat prices were high, but agricultural commodity prices stagnated from 2012 onwards. The populist policies ceased to be sustainable under less favorable conditions, and Argentina saw per capita income increase from 2012 onwards. Ordinary Argentinians, angry with the state of their economy, chose to elect Mauricio Macri to power.

Mauricio Macri Fails to Get the Job Done
Mauricio Macri, a moderate candidate who recognized how toxic the IMF was in Argentina, aimed to stabilize the economy of Argentina by first pursuing popular economic liberalization to build the political capital necessary for more painful reforms. Investors cheered symbolic steps such as the publishing of accurate inflation statistics. The government cut tariffs, liberalized capital controls, and cut export taxes. The liberalizing policies bore important fruit, including attracting $14 billion in FDI . Moreover, Macri’s crackdown on corruption resulted in dramatic reductions in the cost of building infrastructure. While some unpopular policies were pursued, including steep reductions to utility subsidies, the net result was the budget deficit steadily increased to 6.1% of GDP by 2017.

The Macri government’s ability to borrow from international capital markets made these large deficits manageable, as the government did not need to print money to keep the lights on. However, long term economic sustainability demanded Macri reduce this deficit and many investors were nervous about the worsening debt situation. One of the key promises Macri made an independent central bank, which tried to impose a strict inflation targeting to keep inflation under control. However Macri wanted greater macroeconomic flexibility, and tried to push the central bank to push for a higher inflation target, undermining the central banks independence. Global financial markets panicked at this misstep, and combined with rising US interest rates and a major drought, caused a sudden stop. Investors pulled massive amounts of money out of Argentina causing the exchange rate to collapse from 20 Argentine Pesos to the Dollar to 40 Pesos to the dollar with little warning.

Argentina found itself in a nightmarish political economy situation. If Mauricio Macri failed to raise taxes and cut spending, the currency would collapse and inflation soar because the budget deficit was too high. The government as a result was forced to implement austerity measures. However, these same measures were deeply unpopular, making it more likely left wing populists would come to power, causing financial markets to panic and sink the economy further. The IMF attempted to take an accommodating stance towards Argentina, offering Argentina a $57 billion bailout, the largest ever. However, the IMF’s bailout only postponed necessary reforms, associated Macri with the IMF which is hated by many Argentine voters, and failed to quell investor panic. Inflation soared to over 50% and per capita income fell by 5%. Unsurprisingly, in the 2019 general elections, Argentine voters turned against Macri and returned the populist left to power.

No Solutions to the Left Either
In Argentina’s 2019 elections, Alberto Fernandez (no relation to Cristina Fernandez) narrowly won against Mauricio Macri. The Justicialist Party chose to have Alberto Fernandez lead the ticket, as he was a far less polarizing figure than Cristina Fernandez. However, Cristina Fernandez ran as his running mate and it has never been clear where real political authority lay. From the very beginning, Alberto Fernandez’s presidency was dominated by the COVID-19 pandemic. The Argentine government reacted with alacrity at the beginning of the pandemic, and Argentina was hit much less hard by the first wave of the COVID-19 pandemic than other countries. Moreover, the reprieve was only temporary and COVID-19 eventually hit Argentina with the same gale force it hit other parts of Latin America. More than 41,000 people have died so far, more deaths per capita than any country in Latin America other than Peru.

The lockdown measures and global economic crisis resulting from COVID-19 have proven to be immensely costly to Argentina’s struggling economy. The IMF is currently projecting Argentina’s economy to collapse by 12%. While global wheat and soy prices have grown through the current crisis, providing cushion to the Argentine economy, international capital markets have reacted to rising instability by pulling massive amounts of money out of risky emerging markets like Argentina. The government of Alberto Fernandez has had some success in renegotiating $65 billion of debt with private creditors. Moreover, the government hasp provided generous social security supports to help ordinary Argentinians get through the crisis. However, the result is a budget deficit soaring to 6% of GDP, that the government has been forced to finance by printing money. Monthly inflation rates are consistently over 3%.

The government has tried a variety of measures to contain the crisis. However, the capital control it has imposed have widely been circumvented. The government has moved to nationalize failing firms, only to be blocked by the courts. Argentina raised export taxes to close the deficit, but cut them after exporters reduced grain deliveries. The government has imposed a 3.5% wealth tax, yet wealthy Argentinians are increasingly choosing to depart the country altogether, with countries such as Uruguay offering Argentines incentives for leaving. Entire industries are choosing to depart from Argentina, with companies ranging from software companies to car manufacturers choosing to uproot their businesses entirely.

Argentina’s current woes are part of a broader pattern of boom and even deeper bust. Argentina finds itself locked into persistent cycles of large government deficits, currency crises and populist government. The current presidency of Alberto Ferndandez is increasingly unpopular, with the current administration’s approval rating falling to 35%. It’s likely the next government will inherit the same set of dynamics, and given this next government will have the same set of tools and incentives it is difficult to see how it will perform better. Nevertheless, Argentina will need to find a way to break out of this cycle if it wants to leave economic stagnation behind and see sustained development.

Selected Sources:
The Integration of Italian Immigrants into the United States and Argentina: A Comparative Analysis, Herbert Klein
Populist Leaders and the Economy, Manuel Funke, Moritz Schularick, Christoph Trebesch

The political left, the export boom, and the populist temptation, Robert Kaufman
Macroeconomic Policy in Argentina During 2002–2013 , Mario Damill , Roberto Frenkel, Martin Rapeti
When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options, Guillermo Calvo
Macri’s Macro: The Meandering Road to Stability and Growth, Federico Sturzenegger
The Growth of Debt and the Debt of Growth: Lessons from the Case of Argentina, Pablo Lopez, Cecilia Nahon
Default Positions: What Shapes Public Attitudes about International Debt Disputes? Stephen Nelson, David Steinberg

www.wealthofnationspodcast.com
https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/Argentina-Economic_Populism.mp3

On October 5th 2020, Indonesia passed the Omnibus Law on Job Creation, a massive overhaul of all laws related to business, will rewrite of amend 77 separate laws, marking a fundamental change to Indonesia’s institutions. The law makes massive changes to labor law, including reducing severance payments for fired workers from 32 months to 19 months of wages. The omnibus law reduces the number of businesses where foreign investment is banned from 300 to 6. The omnibus law dramatically reduces the power of district level governments , especially on land use regulations. Proponents of the omnibus rule argue that Indonesia is likely to see contraction for the first time since 1999, and the economy is desperate for the investment this law promises to bring. Moreover, while rising wages and sanctions by the US have caused an outflow of labor intensive export oriented manufacturing outside of China, few of those businesses have relocated to Indonesia.

While Indonesia’s businessmen have cheered the omnibus law, the ambition of the bill has made it inevitable that the law has drawn fierce criticism. In part, this criticism comes from the fact that the law was drawn up in extreme secrecy and rushed through the national legislature. Labor organizers, environmental groups, students and Islamists have all protested against this bill. From a global perspective, the greatest fear is that the law could accelerate palm oil cultivation on peat bogs, one of the most important global drivers of climate change. At their peak, organizers claimed one million people attended protests across the nation, and pockets of protests are ongoing today. However, it is difficult to say to what extent the law is unpopular as President Joko Widodo have stayed in the high 60s in the aftermath of the omnibus law.

From the perspective of many on Indonesia’s left the omnibus law is only the latest betrayal in a presidency that has been deeply disappointing. Jokowi, once described as the Indonesian Obama, has been increasingly captured by the old guard of politics. He has co-opted Islamists and generals guilty of human rights abuses with powerful positions. He had declawed Indonesia’s anti-corruption agency. Jokowi’s supporters argue that the steps were necessary steps for maintaining stable governance, attracting investment and completing infrastructure programs. His detractors argue that these are all the excuses of a politician captured by the establishment. Its impossible to know how the Omnibus Bill, and Jokowi’s broader legacy, will have on Indonesia but it seems likely that their importance will be pivotal.

https://wealthofnationspodcast.com/omni-bust-or-boom-how-will-sweeping-business-reform-effect-indonesia/

https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/indonesia_jokowiomnibus.mp3

Since the beginning of the COVID-19 pandemic, the world has seen a massive economic crisis of unprecedented scope. Just as COVID-19 has hit the elderly, those suffering from pre-existing health conditions, the poor the hardest, the economic crisis resulting from COVID-19 has disproportionately harmed the most economically most vulnerable. In particular, individuals and countries in the developing world with unsustainable debt loads have been hit hardest by the economic effects of COVID-19. In today’s podcast episode I will be describing the interaction between the economic aftershocks of COVID-19 and debt. In part one, I will describe how unsustainable growth of microfinance in Cambodia collapsed when COVID-19 hit the Cambodian economy. In part 2, I will discuss how systematic misgovernment by Edgar Lungu resulted in Zambia accumulating enough debt to capsize the Zambian economy when COVID-19 hit. Finally, in part 3 of the podcast, I will discuss how responsible economic management in Peru allowed the country to impose some of the toughest measures to protect public health in the world.

Microfinance in Cambodia has its roots in attempts to rebuild the Cambodian economy after decades of devastating misrule by the Khmer Rouge and civil war in the aftermath of its fall. Local Development Authorities, financed by international donors, offered business development services to rural women and demobilized soldiers to start businesses. At first, microfinance loans started as secondary to LDAs broader regional development mission. However, as donor funding declined after the initial surge at the end of the war in 1991, LDAs curtailed business development programs and instead focused on the more profitable microfinance sector. The various LDAs merged to for ACLEDA, today Cambodia’s largest microfinance institution, and organized itself into a for-profit bank in 2000. ACLEDA proved to be phenomenally profitable, with ACLEDA’s net profits in 2019 at $120 million. Many other smaller microfinance institutions were created by local businessmen, often in with the support of government officials, rapidly grew to compete with ACLEDA. Since the 2010s, international investors seeking higher returns increasingly poured capital into Cambodian microfinance. By the end of the 2010s, microfinance in Cambodia was growing at an astonishing rate, with credit growing by 40% a year. By 2019, more than 20% of Cambodians had a microfinance loan outstanding, with the average amount outstanding at $3,320, more than double the income of the average Cambodian.

The microfinance industry has provided real benefits for the Cambodian people. The percent of Cambodians using microfinance increased 8% to 30%, while the percentage of people using informal finance decreased from 32% to 6% with interest rates in microfinance half of that of informal sources. Moreover, for profit microcredit lenders are often just as efficient at reaching the poor as their non-profit counter parts. However, worrying trends have emerged in Cambodian microfinance. Until the COVID-19 pandemic, default rates on loans rarely went above 1%. However, these low default rates can be highly misleading as many borrowers take loans from multiple sources to pay back old loans. Moreover, substantial amounts of debt are resolved informally, with peasants forced to sell land to stay solvent. While forced land sales are technically illegal, local government officials often pressure farmers to sell land. The percent of rural landless increased from 32% to 51%, although it is difficult to say to what extent it is microfinance driving these trends.

However, some government steps to slow down the growth of micofinance have backfired. For example, 2017 regulations that capped interest rates at 18% made it unprofitable for MFIs to make loans less than $500, causing MFIs to push larger more unsustainable loans on borrowers. The brewing crisis has become much worse in the aftermath of COVID-19. Roughly one third of Cambodia’s garment workers have lost their jobs due to COVID-19, while tourism to Cambodia’s beaches and Angkor Wat has shut down. Default rates have doubled, and the government has been forced to bailout borrowers, and banks have restructured a quarter million loans. The COVID-19 economic crisis has made it clear that stronger regulations and greater prudence from banks is necessary for microfinance to be sustainable in Cambodia in the long run.

While debt in Cambodia was primarily contracted by individuals, it is government debt that threatens to sink the economy of Zambia. In 1991, trade union leader Frederick Chiluba galvanized the public in a mass protest movement in the country’s first multiparty elections. Chiluba moved to dramatically liberalize Zambian politics. Zambia has held regular multiparty democratic elections since then, with the opposition party unseating the ruling MMD for the first time 2011. Chiluba also liberalized the economy, most importantly privatizing the copper industry. The Zambian copper industry in 1993, the year in which it was nationalized, produced over 700,000 tons of copper. However, government mismangement resulted in copper production declining to 280,000 in 1992. After privatization in 1993, copper production rapidly returned to pre-privatization highs with total production at 750,00 tons in 2011. Moreover, Zambia benefited from a massive boom in copper prices, with the price of copper increasinig five fold from 2000 and today. The government used this windfall to pay down its debt load, with Zambia’s debt to GDP ratio falling from 277% of GDP in 1991, to just 18% of GDP in 2011. Economic growth accelerated through the 1990s and 2000s with GDP growth in 2010 at over 10%.

However, in 2011 the election of the populist Michael Sata marked a turning point in Zambia’s trajectory, with the deterioration of Zambia’s political and economic fortunes accelerating under Sata’s successor Edgar Lungu. Lungu forced his primary political opponent, Hakaine Hichilema in jail for 100 days before courts forced his relief. He has attempted, but failed, to rewrite to constitution to give the president more power. Edgar Lungu isn’t a dictator, but a leader with worrying autocratic tendencies bending his countries institutions. Lungu has spent massively to enrich his cronies, and win votes. From 2014 to 2020, Zambia’s debt to GDP ratio soared from 36% to 95%. However, much of this spending has been unwise. Cost of new road construction is double the African average, with billions spend on China financed infrastructure projects. Individual government departments have taken on large loans bypassing the finance ministry, fertilizer subsidies have been tripled. The Zambian government, facing a budget deficit of greater than 10% of GDP. To raise revenue, the government has attempted to effectively nationalize the largest mines, although so far have been blocked by the courts. COVID-19 has turned a complex situation into a disaster. Although copper prices have held steady since the start of the crisis, capital has fled risky markets. Zambia has been forced to default on its debt, and the Zambia GDP per capita expected to decline by 7% over the next 5 years.

Peru’s experience has been the opposite of that of Peru. Like Zambia, Peru is a major copper exporter and since the early 1990s, Peru has followed responsible fiscal policies. Peru’s debt to GDP ration has fallen from 189% to 23% from 1991 to 2019. The Peruvian central bank has accumulated $72 billion of foreign exchange reserves, and the government has deposited $5 billion in a fiscal stabilization fund. Although Peru has been mired in a long running political conflict that has seen the country go through three presidents in the last two years, and 6 of its last 7 presidents charged with corruption, Peru’s economic system has gained a reputation for sober management on international financial crisis. The purpose of amassing such massive reserves was to put Peru in a strong position is copper prices were to fall for a sustained period of time. However, in 2020, this sound fiscal management proved essential for withstanding COVID-19.

Peru has been one of the countries in the world hardest hit by the COVID-19 pandemic. Peru has suffered more than 36,000, more deaths per capita than any country except for Belgium. The rapid growth of COVID-19 cannot be blamed on inaction by the government. The government moved fast to contain COVID-19, closing all schools just 5 days after the first case of COVID-19 was detected. The government launched one of the strictest lockdowns in the world, with a universal mask mandate, strict limitations on intercity travel, and a ban on leaving the house on non-essential business. Lockdown measures were maintained these strict policies until July. A quarter of all Peruvians earn less than $5.50 a day, and 42% of Peruvians were left with no source of income by the lockdowns. To make the lockdown policies fiscally sustainable, the government of Peru unveiled one of the biggest stimulus programs in the world. The Peruvian government has announced a $26 billion stimulus, 12% of GDP, the largest stimulus in the world. The Peruvian government has made payments to businesses to limit bankruptcies, and payments $250 to 6.8 million poor households. The Peruvian government was able to implement this stimulus because Peru could borrow from international markets at terms similar to those of developed countries. Decades of responsible fiscal policies have convinced investors that there is little risk of lending to the Peruvian government, making undertaking massive stimulus possible.

The experiences of Cambodia, Zambia and Peru show that debt that seems sustainable in non-emergency situations will become much less sustainable when the economy is hit by a shock. The COVID-19 crisis is instructive in highlighting the importance of responsible budgeting in normal times, precisely because it makes massive spending in an emergency possible.

Selected Sources:
Microfinance and post-conflict development in Cambodia and Timor-Leste , S Allden
Are profitable microfinance programs less efficient at reaching the poor? A case study in Cambodia , A Crawford, MT Skully, DWL Tripe
Regulating Over-indebtedness: Local State Power in Cambodia’s Microfinance Market, W Nathan Green
NGOs in Banking: Institutional Transformation and Ownership and Control of Cambodia’s ACLEDA Bank, Edmund Terrence Gomez, Kee-Cheok Cheong
MICROFINANCE AND HOUSEHOLD WELFARE, World Bank
Political and Economic Liberalisation in Zambia 1991–2001,
Copper mining in Zambia – history and future J. Sikamo
Post-populism in Zambia: Michael Sata’s rise, demise and legacy, Alistair Frasier

On August 9th, 2020 Belarus Alexander Lukashenko, dictator of Belarus since 1994, claimed to win an overwhelming victory against the opposition. However, it was clear that the election was rigged, and a massive protest movement that at their peak brought more than a quarter million people to the streets demanded Lukashenko resign and free and fair elections held. Since August, tens of thousands of protestor have gathered every week, and unrest spreading in rural areas and state owned factories, once considered bastions of government support. While the government vacillated between modest concessions and harsh repression, it became clear that neither the protestors or Lukashenko were going anywhere.

However, on November 26th, Lukashenko announced that he would resign from his position as president as soon as a new constitution that would strip the presidency of its overwhelming power. Opposition leaders have voiced suspicion of Lukashenko’s overture, and promise to continue protests until Lukashenko resigns. It is possible that Lukashenko’s promise is just a ploy and that he will not step down from office, or will write a constitution where political power authority and Lukashenko will move to a new office, similar to what Putin did in Russia. On the other hand, it is possible that Lukashenko is genuinely being forced out of power not by the protestors, but by Vladimir Putin. Lukashenko and Russia have long held a complex relationship. Some have argued that Lukashenko is to be demoted so that a more pliant leader can be placed in office.

I suspect it is likely that Lukashenko, a canny political operator, is stepping back from the political limelight to buy time for his regime. The opposition has so far shown remarkable unity so far, with opposition leader Sviatlana Tsikhanouskaya has been adamant that her only goal was to get Lukashenko to step down and for Belarus to hold free and fair elections. The opposition has refused to discussed what happens after free and fair elections because there is little that unifies it beyond opposition to Lukashenko. Many, especially older, less educated and more rural Belarussians want Belarus to democratize, but change as little as possible beyond that. They want Belarus to remain a staunch ally of Russia, to orient the Belarussian economy towards the state and maintain the strong role of the state in the management of economic affairs. Others, especially younger and more urban Belarussians demand total transformation. They want Belarus to orient its geopolitics and economy towards Europe and the west, and to see rapid promulgation of economic and political reforms. Most Belarussians likely have complex views spanning both extremes.

Now that Lukashenko has stepped down, the opposition will have to start thinking about what the future of Belarus will look like after Lukashenko leaves office. Cracks will emerge, and exploitable divisions will multiply. Lukashenko will be in a much stronger position position if the opposition loses its unity, and able to play the west, Russia, and various opposition factions to retain as much political maneuverability as possible. However, the fact Lukashenko has to step back from politics at all is a startling show of weakness. The opposition, as long as it can keep internal division in check and continues to push for change, has the power to demand the permanent removal of Lukashenko from power and see Belarus transition to democracy.

www.wealthofnationspodcast.com
https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/Belarus-Lukashenko.mp3

On January 30th, Nathuram Godse assasinated Mohandas Gandhi, the founding father of India, as Mahatma Gandhi conducted a multi-faith prayer meeting because Godse saw him as too accommodating to Muslim interests. Nathuram Godse had long been a member of multiple Hindu nationalist organizations, although the most powerful the RSS (Rashtriya Swayamsevak Sangh) has disclaimed any assosciation with Godse. Hindu nationalism has deep roots in the politics and history of India stretching back to the 19th century. However, the salience of Hindutva has increased dramatically since the election of Narendra Modi in 2014, who has championed an aggressively Hindu nationalist political philosophy. Modi has succesfully asserted the Hindutva agenda by mass disenfranchisement of suspected undocumented people in the state of Assam, the construction of a temple to Ram in Ayodhya on the rubble of a mosque destroyed by Hindu mobs, and the stripping of the state of Kashmir its political autonomy. However, Hindu nationalism goes beyond just Modi. The purpose of today's podcast episode is to discuss the historical roots, and deep consequences of discrimination against Muslims in India.

Riots between Hindus and Muslims, especially where the overwhelming majority of deaths are among Muslims are not a new phenomenon in India. The city of Ahmedabad alone has seen three major waves of communal violence in 1969, 1985 and 2002 where approximately 500, 300 and 2,000 people, the overwhelming majority Muslim lost their lives. India has seen major riots both before and after elections. In recent years, we have seen the disturbing rise of lynchings by groups of vigilantes accusing Muslim men of slaughtering cows. Perhaps most disturbingly, the current Prime Minister of India, Narendra Modi, was Chief Minister of Gujarat at the time of the 2002 riots. Although there is no proof that he planned or had foreknowledge of the violence, he has maintained a conspicuous silence about the atrocities committed while he governed Gujarat. While violence between Hindus against Muslims is often described as the natural anger of the majority community against the minority community, there are many organizations such as the RSS, the VHP (Vishwa Hindu Parishad) and Bajrang Dal organizing people for violence.

Underlying this violence between Hindus and Muslims are dangerous logics of communal political and economic competition. The Hindutva movement has long tried to make Hindu identity the most salient identity. For instance, from the 1960s to the 1980s, large numbers of textile workers in the city of Ahmedabad lost their jobs due to government economic mismanagement. Hindu textile workers in general fared worse than their Muslim counterparts as Muslim textile workers tended to be more experienced and were better positioned to set up powerloom businesses. Hindutva agitators worked hard to cast these economic struggles in a communal perspective, and blame Muslims for rising poverty. Moreover, participating in political violence often strengthens identification with the Hindutva movement. In the aftermath of the 2002 riots, the Hindu nationalist BJP gained more votes in areas hit hardest by communal violence, and those police officers who allowed violence to continue consistently saw promotion.

There are economic factors behind these of violence as well. Violence against Muslims increases by 5% for every 1% reduction in the growth of Hindu incomes, while violence against Muslims increases dramatically as the economic gap between Hindus and Muslim decreases. The incomplete nature of Indian housing markets is especially relevant, as competition over rent controlled housing units has emerged as one of the most important drivers of Hindu Muslim violence as Muslims are often loathe to move away from rent from rent controlled units, while Hindus wish to acquire this property for themselves and their families. In some towns, such as Surat and many other coastal cities, community leaders worked to keep communal tensions at bay to protect businesses from violence. In many other places the desire to assert political, cultural and social superiority gets tightly wound together with economic motives, in order to ensure all conflict is seen as conflict between Hindus and Muslims.

Discrimination against Muslims extends beyond the violence they face from Hindu mobs. India's political and economic system allows for social mobility to those groups that are able to politically organize to grab them. Muslims have been at a disadvantage politically since the partition of India, when the majority of Muslim leadership supported Pakistan and emigrated to Pakistan. Between 1980 and 2019, the percent of India's parliament that was Muslim declined from 10% to 4% despite the fact the Muslim share of the population increased from 11.8% to 14.8% during this same period. There has only been one Muslim Chief Minister of a non-Muslim state so far. The BJP, India's primary Hindu nationalist party, rarely fields Muslim candidates for office due to their own Hindu nationalist ideology. Even secular give little political power. On one hand, secular parties fear being tarred as "appeasing" Muslim interests by Hindu nationalists if they are too closely associated with Muslims, while secular parties can be confident that Muslim voters have nowhere to go even if they largely ignore Muslim issues.

The lack of political power has real consequences for India's Muslim community. For example, India runs one of the largest systems of affirmitive action, known as reservations, in the world. However, Muslims have only recently gained limited access to reservations in 2011, although some states offer affirmative action at the state level. The low level of Muslim reservations is striking given many well off communities such as the Jats and Marathas have gained access to quotas showing that political power is more important than group socio-economic status when it comes reservations. The importance of lack of access to government jobs quotas become visible when one looks at Muslim struggles to get government jobs. Only 4% of public sector workers are Muslims, even though Muslims make up 14% of the Muslim population. Lack of access to government jobs is especially important because public sector jobs consistently pay more than double private sector jobs even after taking education into account. Moreover, there is substantial disparities in access to public infrastructure. For example, over 45% of Muslim majority villages have a bus stop, compared to 60% of non-Muslim majority villages, with similar disparities visible in many measures of public investment. Muslims face discrimination in the private sector as well, with formal employers three times more likely to reject identical resumes with Muslim names than Hindu ones, although other studies find no discrimination.

I do not want to exagerrate the extent to which Muslims face discrimination in India. Muslims on average have incomes only around 6% lower than the national average. Muslims tend to be better off than Hindus in much of the south and west of India, and in many rural areas. Muslims are in particular disproportionately successful as small and medium size business owners. However, looking in the aggregate it is clear that Muslims have faced consistent downward mobility, with this mobility more evident in education rather than income. At independence, Indian Muslims were similar to Hindus in their level of education. Today, their levels of education are below that of the average Dalit , with declining educational mobility especially concentrated among the children of poor Muslims.

The combination of deliberate discrimination, and downward socioeconomic mobility have had disastrous consequences for the Muslim community through the COVID-19 pandemic. India does not collect data on deaths by religion from COVID-19. Muslims make up a vastly disproportionate share of the urban poor, and it is the slums of India's megacities that have been hit hardest by COVID-19. For example, in Mumbai, one study of seroprevalence found that 57% of Mumbai slum dwellers had contracted COVID-19, compared to just 19% of non-slum population, with similar trends in other cities. Much of the Muslim concentration in slums can be explained by the systematic discrimination Muslims face in getting access to housing.

On top of this, Muslims have disproportionately faced the burden of Islamophobia through COVID-19. One of the first major superspreading occurred at a convention of the Tablighi Jamaat, a conservative Islamic missionary organization. While it is likely that the Tablighi Jamaat behaved irresponsibly, many Hindutva populations have made not just the Tablighi Jamaat, but the broader Muslim community, a scapegoat for the rise of COVID-19. Prominent politicians have accused Muslims of launching a Corona-Jihad, and misleading videos of Muslim street vendors deliberately spitting on fruit have gone viral. Hospitals have rejected Muslim patients, and many Muslims have faced abuse while getting treatment. Unsurprisingly, resentment has grown in the Muslim community, with public health workers in Juhapura, a ghetto created by Muslims fleeing the Ahmedabad riots of 2002, pelted with stones as they tried to enforce curfew laws.

The COVID-19 virus does not differentiate between Hindu and Muslim. Failure to contain COVID-19 in one community will inevitably lead to the spread of COVID-19 to other communities. Similarly, discrimination against Muslims will in the long run rebound against all Indians. Hindu nationalist political parties have gained substantial ground in Indian elections in recent years. If the dominance of parties not committed to secular ideals continues, it is likely structural discrimination against Muslims will be further entrenched.

Selected Sources:
Communal Riots in Gujarat: Report of a Preliminary Investigation, Ghanshyam Shah
From Gandhi to Violence: Ahmedabad's 1985 Riots in Historical Perspective, Howard Spodek
The Political Logic of Ethnic Violence: The Anti-Muslim Pogrom in Gujarat, 2002 Raheel Dhattiwala and Michael Biggs
The Rise of Hindu Nationalism in India: The Case Study ofAhmedabad in the 1980s, Ornit Shani
Economic growth and ethnic violence: An empirical investigation of Hindu–Muslim riots in India , Anjali Bohlen, Ernest Sergenti
IMPLICATIONS OF AN ECONOMIC THEORY OF CONFLICT: Hindu-Muslim Violence in India , ANIRBAN MITRA AND DEBRAJ RAY
Segregation, Rent Control, and Riots: The Economics of Religious Conflict in an Indian City, Erica Field, Matthew Levinson, Rohini Pande, and Sujata Visaria
"UNFINISHED BUSINESS" ETHNIC COMPLEMENTARITIES AND THE POLITICAL CONTAGION OF PEACE AND CONFLICT IN GUJARAT, Saumitra Jha
Adjustment and Accommodation: Indian Muslims after Partition, Mushirul Hasan
Political Economy of Demand for Quotas by Jats, Patels, and Marathas Dominant or Backward? , Ashwin Deshpande
WAGE DIFFERENTIALS BETWEEN THE PUBLIC AND PRIVATE SECTORS IN INDIA, Elena Glinskaya and Michael Lokshin
The Legacy of Social Exclusion A Correspondence Study of Job Discrimination in India, Sukhadeo Thorat
Labor market discrimination in Delhi: Evidence from a field experiment, Abhijit Banerjee , Marianne Bertrandy , Saugato Dattaz , Sendhil Mullainathan
Wealth Inequality, Class and Caste in India, 1951-2012, Nitin Kumar Bharti
Sachar Commission Report, Sachar Commission
Intergenerational Mobility in India: Estimates from New Methods and Administrative Data, Sam Asher Paul Novosas
Vidya, Veda, and Varna: The Influence of Religion and Caste on Education in Rural India, Vani Boorah, Sriya Iyer
For whom does the phone (not) ring? Discrimination in the rental housing market in Delhi, India, Saugatta Datta

www.wealthofnationspodcast.com
https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/China-Tech.mp3

On November 5th, 2020 Ant Group, China’s leading fintech company, was slated for an IPO expected to raise $30 billion. However, Ant Group was forced to cancel its IPO as financial regulators in the PRC had intimated to Ant Group that new regulations would make its business model untenable. Ant Group controls Alipay, the dominant payments platform in China, and Ant Financial has leveraged the massive amount of data to enter the business of consumer lending. Ant Financial loaned more to households non-mortgage purposes and to small and medium businesses in the first half of 2020 than any other Chinese bank. Ant Group’s business model relied upon packaging these loans and selling them to traditional banks, so that Ant Group would not retain the risk of default on its balance sheet. Chinese Financial regulators felt that the business model encouraged Ant Group to make an excess of risky loans, and wanted Ant to hold on to a greater percentage of all loans.

However, the Chinese state’s reasons for targeting Ant Groups IPO go beyond concerns about financial stability. Jack Ma, CEO of Alibaba and its subsidiary Ant Financial group, has long been an outspoken voice in Chinese business unlike most Chinese CEOs. In 2008, Jack Ma declared “If the banks don’t change, we’ll change the banks.” and went on to do so. In particular, Jack Ma, earlier in 2020, derided the “pawnshop mentality” of state owned banks for demanding collateral on loans instead of trusting advanced credit ratings. Jack Ma’s criticism enraged many in the Chinese Communist Party, and Xi Jinping was personally involved in scuttling Ant Groups IPO.

It would be a mistake to think of the cancellation of Ant Group’s IPO as a one off event based upon the personal animosity of CCP elite to one entrepreneur. Rather, it represents a broader shift in attitudes of the Chinese state to its technology sector. The Chinese state has historically seen its role as supporting and protecting the nascent Chinese tech companies. However, as China’s tech start-ups became tech giants, the Chinese state has become increasingly skeptical of the economic power of these companies. The Chinese state has released new draft regulations on the tech sector that aim to curb the monopolistic practices of its largest tech corporations. The use of exclusivity deals to lock companies into the economic spheres of the largest tech corporations, below cost pricing that only allow firms with the deepest pockets compete, and limit the use of financial structures that allow these firms to raise capital abroad.

It is difficult to say what the long term consequences of this hardened attitude towards the tech sector will mean for the rise of Chinese tech firms. In the short run, the result has been a collapse in share prices. Major companies such as as Tencent and Alibaba have lost nearly 10% of the value with tech corporations hemorrhaging $280 billion in value. It is likely in the long run, the government and Communist Party will get a greater say in the business operations of Chinese tech firms.

https://wealthofnationspodcast.com/like-crushing-ants-chinas-changing-relationship-with-its-emerging-tech-giants/
https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/China-Tech.mp3

Let's look back at some memorable moments and interesting insights from last year.

Your top 10 posts:

• "Half naked women get thousands of upvotes; how many for our boys in blue?" by u/Kersepolis
• "Globalization is beautiful sometimes" by u/Sten_te
• "How Angela Merkel’s great migrant gamble paid off"
• "No Checkout From Hotel Rwanda: The Arrest of Paul Rusesabagina" by u/gnikivar2
• "Free Trade, Open Borders and Weak Institutions: Why Is Development In Côte d'Ivoire So Fragile?" by u/gnikivar2
• "American Support for Taiwan Must Be Unambiguous"
• "Probably the only place I can drop this meme without a ban." by u/mal221
• "Re-inventing globalistshills again?" by u/Freak472
• "Democracy Is The Baby, Not the Bathwater: How Authoritarian Leadership Has Hindered Brazil and Turkey’s Fight Against COVID-19" by u/gnikivar2
• "No Migrants In My Backyard: How Bad Urban Planning Created a Humanitarian Disaster in India" by u/gnikivar2

In 2017, the the world first heard of horrific human rights violations against the Uighur people of Xinjiang, in the northwest quarter of China. An estimated 1.5 million people, out of a total ethnic Uyghur population of 12 million people in China, have been interned in approximately 380 "re-education" camps. The region has been turned into a police state, with people sent to prison for refusing to drink alcohol, or praying regularly. The Chinese government has made it all but impossible to buy knives and scissors, Uighur people must pass through three to four checkpoints every kilometer, half of all families are assigned a policy spy who regularly makes house-visits, and a technological panopticon of unprecedented proportions is taking place. Birth rates have fallen by one third, because of forced sterilizations and a desire to not bring up children in a prison.

Today's podcast episode is not about the ethnic cleansing taking place in Xinjiang, but rather a look at the historical circumstances that have led us to this point. In part one, I will discuss the process through which the Uighur people were incorporated into the Chinese state under the Qing dynasty. In part two, I discuss the policies of the government under Mao Zedong, especially the policy of mass Han settlement that created anger and resentment among Uighurs. Finally, in part three, I will discuss the cycle of protest and violence that led to the current human right abuses.

In 1755, the Qianlong Emperor, ruler of China ordered his army to exterminate the Dzungar people, descendants of the Mongols, in what is Xinjiang today. 600,000 Dzungars were killed by Qing forces, with the remnants succumbing to disease or fleeing soon afterwards. The violent extermination of the Dzungar people, and the incorporation of Xinjiang, was part of the broader process of Qing Dynasty expansion westwards. At this point in time, the Uyghur did not yet exist as a distinct people. However, there were large numbers of settled farmers living in the oasis towns of the Tarim Basin who spoke Turkic languages and practiced the Islamic faith. These peoples rebelled against Dzungar rule and allied with the Qing in their conquest and extermination of the Dzungar people, and rapidly expanded into northern Xinjiang that had historically few Uighur.

During the 17th and 18th century, the Qing Empire expanded rapidly westward, incorporating modern Tibet and Mongolia into the Qing state. The period also an unprecedented quadrupling of Chinese population, in part due to the adoption of new world crops. The Qing Empire encouraged mass settlement of ethnic Han westwards. Tensions with older populations, especially Hui peoples (Muslims, but ethnically similar to Han Chinese), led to some of the most brutal wars in recorded history, with over 15 million losing their lives in these conflicts. In Xinjiang a brutal three way war between ethnic Han, Hui and Uighurs led to absolute devastation.

It was during this region that Xinjiang, which translates to New Territories, was created as a province. Southern Xinjiang, the Tarim Basin, remained overwhelmingly Uighur but northern Xinjaing was populated by a mix of Uighurs, Hui, Kazakhs and ethnic Han. The military had a large garrison, settling substantial numbers of farmer soldiers in the region. While the Qing state formally annexed Xinjiang into the Chinese state, local elites wielded day to day power. Indeed, as Qing power declined and China became dominated by warlords, local governors developed a policy of deliberately isolating the region so as to keep destabilizing outside forces away from Xinjiang. However, Soviet influence and later control from China would completely transform these traditional relationships.

Xinjiang was incorporated into the Peoples Republic of China in 1949, marking a fundamental shift in the trajectory of Xinjiang. One of the most important aspects is the changing nature of ethnic identity. The Soviet model of governance put a great emphasis on defining and taxonomizing ethnicity. The settled Muslim Turkic people of oasis in Central Asia have not historically had a fixed identity. There was no clear differentiation between other settled Muslim Turks such as Uzbeks and Uighurs, and the boundaries between nomadic Turkic group such as the Kazakhs were less clearly defined. The imposition of a much harder border between the USSR and China severed many of these connections. At the same time, the Chinese state tried to co-opt the budding religious and nationalist movements of the region by taking actions such as creating patriotic religious associations.

Further strengthening the sense of ethnic Uyghur identity, and undermining Chinese attempts to win Uighur loyalty, was a massive influx of ethnic Han into Xinjiang from the 1960s to the 1980s. Between 1949 and 1980, the ethnic Han share of Xinjiang's population increased from 7% to 40%. The driving force behind the rising share of Xingiang's ethnic Han population was the Xinjiang Production and Construction corps, known in Chinese as the Bingtuan or corps. Relations between the USSR and the PRC were strained, with the two countries coming close to war on multiple occasions. The Bingtuan's purpose was to settle large numbers of veterans, working as farmers or in other professions in peacetime, but ready to mobilize in case of war. The overwhelming majority of ethnic Han settlers lived in northern Xinjiang, a region that historically had a multi-ethnic society, while the oasis of southern Xinjiang remained overwhelmingly Uyghur. Unsurprisingly, there were major tensions between ethnic Han and ethnic Uyghurs in Xinjiang. For example, during the cultural revolution mosques were burned, and cemeteries desecrated.

Tensions between Uyghurs and Hans have only intensified since liberalization. Xinjaingwas seen as a hardhip post, and the booming coastal cities have drawn for more ethnic Han than the distant frontier, with the ethnic Han share of the population staying constant between 1980 and 2010. However, economic disparities between Uyghur and Han have grown dramatically since the beginning of liberalization. For example, the Bingtuan currently grows massive amounts of cotton and other crops on its farm. However, the Bingtuan has privileged access to land and water, forcing many Uyghur to become sharecroppers. Moreover, while senior administrative positions in Xinjiang often go to ethnic Uyghur, there is a parallel Communist party bureaucracy where real power lies. Since the early 2000s, the central government has invested heavily through its "Western Development" scheme in Xinjiang.

However, the fruits of this investment have not been evenly distributed. For example, the National Petroleum Company has hired almost the entirety of the staff necessary for running the regions substantial oil reserves from outside the region. Moreover, there are massive differences in access to high quality formal private sector jobs. One study on phone call backs found the call back rate on identical resumes nearly double for Han than for Uyghurs, with the greatest disparities in ethnic Han owned private companies. The result of all of these factors are massive disparities between Han and Uyghur. According to 2005 mid-census data, ethnic Han incomes were nearly two and a half times ethnic Uyghur incomes. In urban areas, Uyghurs earned 30% less despite having the same level of education as Han.

Unsurprisingly, Uyghur resentment has turned into peaceful, and in some cases violent opposition. Throughout the 1990s peaceful protests against discrimination, and for autonomy and in some cases for independence became increasingly common. However, violent insurgency also emerged. Insurgents briefly took over the township of Baren in April of 1990, and Xinjiang suffered a bombing campaign by terrorists. The government used brutal tactics, including a massacre of hundreds at Ghulja to put down this incipient revolt. The government launched a strike hard campaign in 1997 that severely disrupted all organized opposition to the state, and from the late 1990s onwards opposition to Chinese domination would take the form of mobs and lone wolf terrorist attacks.

A car ramming resulted in the death of 18 police officers in the city of Kashgar just before the 2008 Olympics. In July of 2009, protests against the death of two Uyghur men at the hands of a Chinese mob in Guangdong turned into indiscriminate violence against ethnic Han in Urumqi. Knife wielding Uyghur terrorists killed 31 people in the city of Kunming, well outside Xinjiang. Many other violent incidents made Xinjiang feel increasingly insecure. However, it is important to emphasize that there was little organization behind these violent acts, and little risk of the state losing control. While some Uyghur dissidents have established contacts with radical international Islamists, it seems that connections between radicals and Uyghurs have been caused rather than hindered by government repression.

Since Xi Jinping assumed power, abuses of human rights have grown more and more common. Human rights lawyers have been imprisoned, Christian churches have faced, and censorship has grown more intense. The greatest victims of the growing willingness to opresss have been Muslims, especially Uighurs. In 2014, the government launched a new strike hard campaign in Xinjiang. In 2017, Chen Quangguo was appointed the Communist Party Secretary. He was previously noted for the harshness of his repression of Tibet. After taking command of Xinjiang, the government hired more police in one year than in the previous seven. Xi Jinping, Chen Quangguo and the Chinese Communist Party thus began constructing a monstrous apparatus of oppression in Xinjiang.

The purpose of today's podcast episode is not to discuss the current ethnic cleansing campaign in Xinjiang. However, I wanted to conclude this podcast episode with the steps currently being taken to assist the Uyghur people. The state department in some ways has been active in the issue. Sanctions have been placed on Chen Quangguo and other top officials in the crackdown. Similarly, sanctions have been placed on the Bingtuan. New regulations barring the import of goods made with forced labor in Xinjiang have been placed. There is scope for expanding sanctions, such as banning any cotton made in Xinjiang. However, I feel it is more important to make it clear to the government of China that these sanctions are first and foremost about the human rights of Uyghur people, and not about other differences with China. Moreover, I think it is essential to create a broad international coalition. For example, Japan is moving towards adopting an act similar to the Magnitsky act to sanction human rights violations in Hong Kong. Steps can be taken to encourage Japan to use these powers against those offending Uyghur human rights as well. However, much more action needs to be taken to get Muslim countries, who have overwhelmingly been silent on the issue, to take a stance against Xi Jinping's oppression of Muslims.

Ultimately, it is likely that there is little that can be done through sanctions to protect Uyghur people. We need to be willing to massively increase the number of asylum seekers and refugees we will take. However, the Trump administration has been notably harsh on asylum seekers, including Uyghurs. We need to live up to the words on the pedestal of the statue, and taken in the world's huddled masses yearning to be free.

-
Selected Sources:
China, imperial: 8. Qing or Manchu dynasty period, 1636–1911, HENRY CHOI SZE HANG
Brainwashing, Police Guards and Coercive Internment: Evidence from Chinese Government Documents about the Nature and Extent of Xinjiang’s “Vocational Training Internment Camps” , Adrian Zenz
China’s Population Expansion and Its Causes during the Qing Period, 1644–1911, Kent Deng
THE TUNGAN REBELLION: AN EXAMINATION OF THE CAUSES OF THE MUSLIM REBELLION IN MIDNINETEENTH CENTURY NORTHWEST CHINA , Lewis Oeksel
Neo Oasis: The Xinjiang Bingtuan in the Twenty-first Century, Thomas Cliff
The Kings of Xinjiang: Muslims Elites and the Qing Empire, David Brophy
Maximizing Soviet Interests in Xinjiang The USSR’s Penetration in Xinjiang from the Mid-1930s to the Early 1940s, Liao Zhang
The Uyghurs: Strangers in Their Own Land, Gardner Bovingdon
‘Old Bottle, New Wine’? Xinjiang Bingtuan and China’s ethnic frontier governance, Yuchao Zhu & Dongyan Blachford
Defining Shariʿa in China: State, Ahong, and the Postsecular Turn, Matthew S. Erie
Commanding the Economy: The Recurring Patterns of Chinese Central Government Development Planning among Uyghurs in Xinjiang, Henrik Szadewski
Ethnic discrimination in China's internet job board labor market, Margraret Mauzer-Fazio
Ethnic stratification amid China's economic transition: evidence from the Xinjiang Uyghur Autonomous Region , X Wu, X Song
Charting the Course of Uyghur Unrest, Justin V Hastings

www.wealthofnationspodcast.com
https://media.blubrry.com/wealthofnationspodcast/s/content.blubrry.com/wealthofnationspodcast/China_Uighur.mp3