Argument

The Bourgeois Revolution

How the global middle class declared war on democracy.

Most days, the scene around Democracy Monument, a set of giant statues in the center of the old part of Bangkok, seems almost like a carnival. Pushcart vendors hawk everything from dried squid to ripe mangoes, and backpackers haggle with tuk-tuk drivers for a ride in their tiny, three-wheeled taxis.

But over the past year, as public anger over the alleged corruption of a series of Thai governments has reached a crescendo, a different, angrier sort of crowd has been gathering there. Last fall, tens of thousands of Bangkokians dressed in the yellow symbolizing Thailand's monarchy descended to call for Prime Minister Thaksin Shinawatra's resignation and for a transformation of the country's electoral system. Now that a series of protests have forced Thaksin into exile and installed a new prime minister, Abhisit Vejjajiva, the yellow-shirts are facing protests of their own, from Thaksin's red-shirted working-class allies. But elite opinion in Thailand still views the yellow-shirted protesters, led by a group called the People's Alliance for Democracy, as reformers fighting for the rule of law, while the red shirts are seen as an unruly mob. Tactics aside, this is not a useful division: Abhisit's middle-class supporters are not reformers, but antidemocratic reactionaries. Their perceived status as progressives clouds the truth, and it also throws a veil over one of the most confusing evolutions in developing countries over the last decade: the rise of the democracy-hating middle class.

It wasn't so long ago -- just 17 years -- that many of these same activists also fought battles in the streets of the Thai capital: middle-class Bangkokians, students, and businesspeople, and other elites. Today's yellow-shirted protesters at first seem like the same crowd: shop owners and office workers, wielding expensive cellphones and the political power typically reserved for the most influential bloc of the electorate in any country.

But the difference is that the protesters in the 1990s were fighting for democracy against a coup that had toppled an elected government. Despite its name, the People's Alliance is explicitly antidemocratic. In its platform, the group seeks election reform measures that are basically meant to slash the power of the rural poor, who comprise the majority of Thais. In the minds of the Thai middle class, poor voters only vote for politicians like the populist Thaksin because they're offered incentives such as a few baht on voting day. One former U.S. ambassador to Thailand puts it bluntly: The middle class disdain[s] the rural masses and see[s] them as willing pawns to the corrupt vote buyers. Instead of fighting for democratic rights, in other words, the People's Alliance is protesting against them.

This shift from a reformist middle class to a reactionary one over a mere two decades should be surprising. But, unfortunately, Thailand is not alone. Across the developing world, from Russia to Venezuela to Mexico, as democracy faces new threats -- elected leaders who disdain its institutions, rising corruption, and nationalistic economic plans -- middle classes, once the vanguard of democracy, have increasingly turned against it. For the first time in decades, democracy activists are beginning to wonder whether building a strong middle class solidifies or threatens freedom's global spread. Yet because the middle-class-equals-democracy theory has become so entrenched, if it is proven wrong, activists, democracy-promotion groups, and world leaders will not know how to replace it. In other words, they won't have a clue about how to actually build democracy.

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For years, political theorists have argued that developing a healthy middle class is the key to any country's democratization. To paraphrase the late political scientist Samuel Huntington: Economic growth and industrialization usually lead to the creation of a middle class. As its members become wealthier and more educated, the middle class turns increasingly vocal, demanding more rights to protect its economic gains.

But over the past decade, the antidemocratic behavior of the middle class in many countries has threatened to undermine this conventional wisdom. Although many developing countries have created trappings of democracy, such as regular elections, they often failed to build strong institutions, including independent courts, impartial election monitoring, and a truly free press and civil society.

The middle class's newfound disdain for democracy is counterintuitive. After all, as political and economic freedoms increase, its members often prosper because they are allowed more freedom to do business. But, paradoxically, as democracy gets stronger and the middle class grows richer, it can realize it has more to lose than gain from a real enfranchisement of society.

Soon after acquiring democracy, urban middle classes often grasp the frustrating reality that political change costs them power. Outnumbered at the ballot box, the middle class cannot stop populists such as Thaksin or Venezuelan President Hugo Chvez. Once the middle class realizes it cannot stop the elected tyrants, it also comes to another, shattering realization: If urban elites can no longer control elections, all of their privileges -- social, economic, cultural -- could be threatened.

Recent antigovernment protests in Bolivia, for example, stem directly from a fear of loss in status. The demonstrators, led by leading businessman Branko Marinkovic, hail from the country's wealthier eastern half, where many locals disdain President Evo Morales, a populist former union leader and proud member of the poorer indigenous class. They claim he will weaken their traditional power and riches by instituting land reforms and continuing to nationalize the country's petroleum resources, which mostly come from the east. We're turning into another Zimbabwe, in which economic chaos will become the norm, Marinkovic told the New York Times two years ago -- even though Morales, despite his sometimes erratic policymaking, has overseen the strongest Bolivian growth in years.

Middle-class conservatism may even be preventing some countries from making the leap toward democracy. In China, the biggest global exception to democratic change, the past three decades of economic reform have delivered most of the fruits to the urban east coast. There, per capita income in some provinces is now 10 times that of China's interior, and the country's income inequality rivals that of the most stratified Latin American societies. For its benefit, the Communist Party even plays upon middle-class status anxiety by tacitly stoking fears that full democracy, with real freedom of movement for all Chinese, would result in millions of rural peasants swamping the cities.

At first, middle-class status fears usually just lead to fighting within the political system: forming new political parties, launching anti-government newspapers or Web sites, or other traditional tactics. Malaysia is now in this stage, with opposition parties led by longtime activist Anwar Ibrahim just beginning to form into a cohesive bloc.

But, as urban elites realize their impotence, they are increasingly abandoning the system, as in Bolivia, the Philippines (where protesters have launched massive street rallies intended to topple the government), and many other countries. And once they turn against elected leaders, angry middle classes, convinced they are right, seem willing to use any means to topple presidents, with catastrophic results. Even if the bourgeois revolutionaries successfully carry out an armed coup, the failure rate for governing is high: Compared with the past, when militaries could just appoint a few capable technocrats to run the government, today even developing economies like Thailand or Pakistan are closely linked to global markets and require far more advanced management to maintain domestic and international investor confidence. After the Thai Army took power in 2006, for example, it bumbled from one economic mishap to the next, such as when it suggested it might instill capital controls, a move that led to a run on the Thai stock market.

If military control doesn't work, a return to soft authoritarian governance, as by a prime minister essentially chosen by elites, will frequently fail as well because the public will no longer accept this kind of oligarchic rule. In the past, the poor in many of these societies might have accepted a government ruled by elites, but not any more, now that they have tasted real voting. In Nigeria, for example, oil-rich provinces that have become accustomed to democratic rule are no longer willing to hand over nearly all petroleum revenues to the central government. Instead, they have launched massive demonstrations in the Niger Delta, sometimes holding oil workers hostage while they wait for their demands to be met.

And in Thailand, masses of working-class voters, furious that the People's Alliance pushed out the prime minister they supported and replaced him with a leader sympathetic to the old elites, have launched their own sieges of parliament. In recent weeks, the red-shirted working-class protesters, following closely Thaksin's calls for change from abroad, have stormed through Bangkok and the resort area of Pattaya, forcing the Thai government to cancel the conference of the Association of Southeast Asian Nations that was meant to be held there. Clashing with Army troops in the streets, the protesters wielded sticks and Molotov cocktails, provoking the government to institute a state of emergency.

As with the Thai example, by sparking counterprotests and, in some cases, outright anarchy, the middle class is actually undermining its very claims. Taking to the streets, they argue that they are bolstering freedom of expression and thereby strengthening their countries' democratic institutions. In reality, by undermining the decisions of elected leaders and fomenting chaos, they are actually weakening these institutions.

This cycle of protest and counterprotest, then, could be the most damaging blow inflicted by the middle class. Where rich and poor once worked together in fighting for democracy, they now wind up pitted against each other, leaving a permanent rift in society and an ominous cloud over their country's democratic future -- and over the future of democracy-building efforts around the world, as we struggle to come up with a new blueprint for making democracy work.

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Argument

New Jack Emirate

A key to understanding the history of Dubai's seamy underbelly.

The wooden dhows docked along the Dubai Creek sail trade routes that are centuries old, connecting this small city-state on the Persian Gulf with the outside world. But the boats have served a double purpose in Dubai's history. A symbol of Dubai's vibrant shipping industry, the dhows have also been used by generations of smugglers exploiting Dubai's strategic position between East and West to move contraband back and forth across the Arabian Sea. Now, despite Dubai's recent rebranding as an international hub for finance and education, it remains a hub for the darker side of the global economy, with modern-day smugglers using Dubai as a base for everything from property-based money laundering and illegal banking to the Afghan opium trade.

Dubai's struggles during the global financial crisis will only strengthen its underworld, according to Christopher Davidson, a lecturer in Middle East politics at Durham University and the author of Dubai: The Vulnerability of Success. As Dubai's efforts to fully liberalize its economy come undone and its attractiveness to foreign investors declines further, the international spotlight will eventually move away and it may become more attractive than ever to human traffickers, gunrunners, and money launderers, he says. Dubai's new smugglers may be Indian mobsters or Chechen strongmen instead of dhow sailors, but the old dual structure of legitimate and illegitimate business remains robust.

The necessary ingredients for a thriving underground economy were present in Dubai from the start. Unlike the oil-rich Gulf sheikhdoms of Saudi Arabia and Kuwait, Dubai -- one of seven self-governing entities that constitute the United Arab Emirates (UAE) -- was not built with petrodollars, or at least not directly; oil accounts for around 5 percent of the emirate's economy. Instead, Dubai's supercharged development strategy was property-driven, fueled by a tsunami of cheap credit and excess liquidity. Semipublic corporations with close links to the ruling Maktoum family borrowed an estimated $80 billion on global capital markets to fund iconic developments such as Burj Dubai and Palm Jumeirah. But as Dubai went in search of investors, it found some unsavory elements as well.

Laundering money through the city's booming property market was relatively simple. Property paid for in cash could be quickly resold, often before the development broke ground. The vendor would then receive a check redeemable anywhere in the world. However, as Dubai's property boom crashes -- the Dubai Khaleej Times reported drops of up to 50 percent in prices in 2009 -- experts like Davidson see signs of a change in strategy by the local authorities, with an increased focus on putting corrupt businessmen on trial, especially foreigners. Still, despite the added attention, a large number of developments sit empty, owned by investors instead of occupiers. And the fact that criminal elements may own large amounts of property in Dubai means that the real estate market will still be tainted with illegality.

Dubai's unregulated economic markets have also offered a safe home for dubious financiers and shadowy entrepreneurs. Just this month, a local group of Iranian businessmen was named in a U.S. indictment relating to the illegal export of U.S. military aircraft parts to Iran. And Dubai might soon be forced to make some tough decisions about how much to police its resident white-collar criminals. At the recent G-20 meeting in London, world leaders called for a crackdown on tax havens like the Cayman Islands and Liechtenstein -- and Dubai. But this puts Dubai in a bind: If the new Dubai International Financial Centre adopts stricter regulations than its neighbors, Bahrain and Qatar, it could lose much-needed business. Dubai must either continue with its laissez-faire attitude toward international financial regulations and risk pariah status, or adopt more stringent monitoring practices for its banking system and risk financial collapse. If the past is any hint, however, Dubai is not likely to accept regulatory measures that trim back growth, no matter how sublegal that growth may be.

Of all the black arts practiced in Dubai, none is more dangerous for the current U.S. administration than the Afghan Connection. Since 2003, poppy cultivation in Afghanistan has more than doubled, and a U.N. report valued the opium trade at $4 billion in 2007. A good deal of this money is coming to Dubai. John Cassara, a former CIA officer and author of a recent book on terrorist financing, describes how Dubai is used as a clearinghouse for opium profits: Afghan drugs lords swap opium for luxury European vehicles, and drug shipments are paid for not in cash but with commercial goods such as building materials, electronics, and foodstuffs that are bought in Dubai and shipped to Afghanistan. According to Cassara, such transactions are difficult to find, a proverbial needle in a haystack. Dubai officials don't help, either: Cassara accuses the authorities in Dubai of willful blindness when dealing with this hidden trade.

Thanks to its financial laxity, plus the lack of extradition agreements and the luxurious lifestyle, international underworld figures have flocked to Dubai. Dislodging them may prove difficult, as many operate under the protection of their respective governments. This is especially true when dealing with states from the former Soviet Union, East Africa, and South Asia. Except for those rare high-profile criminals like Mumbai underworld chief Dawood Ibrahim or alleged arms dealer and merchant of death Viktor Bout, who simply became embarrassments, fugitives from justice are only rarely forced out of Dubai. And their presence has brought a new level of violence to the normally very safe emirate. Recently, a former Chechen rebel commander was gunned down in the parking lot of a luxury apartment block -- the result of an ongoing power struggle between groups involved in Chechnya's wars with the Russian Federation.

If Dubai is to mend its ways, the impetus will have to come from outside -- and it will have to be coupled with significant pressure. In the past, Dubai has generally only paid lip service to U.S. demands to tighten sanctions on Iran or regulate the hawala transfer system. Cassara says, The authorities do enough to get the West off their back, but no more. What is particularly lacking is initiative, enforcement, and the political will to go after their own. Until all of those happen, nothing will change.

Abu Dhabi could help. This most powerful emirate in the UAE recently bought $10 billion of Dubai government bonds and may yet buy another $10 billion. A bailout-by-another-name, the move gives Abu Dhabi significant leverage over its smaller neighbor and could be a backdoor channel for those seeking to effect a change in policy from Dubai's ruling family. It was telling that in the wake of this bailout, Dubai quickly announced new guidelines regarding personal behavior and dress for expatriates outside the city's tourist resorts -- a possible sop to Abu Dhabi's religious conservatism.

By embracing the deregulation and openness so fervently preached by Western governments, Dubai is now a nexus for both money and people from across Asia and Africa seeking to connect with the global economy. Because this global economy works underground as well as in the sun, it's inevitable that Dubai should keep a hand in both. In recent days, reports have emerged in the London Independent that ransoms paid to pirates hijacking ships off the Somali coast may have been partially laundered through Somali businessmen based in Dubai, among other places. Sound familiar? It's been part of Dubai for as long as the dhow has.

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