American Elephants

“Arab nations lag behind rest of world economically, despite oil and natural gas,” read the headline in The Washington Post.

“The nations of the Arab Middle East sit atop perhaps half of the planet’s oil and a third of its natural gas reserves, yet the economies of the region are among the most stagnant.” Growth per-capita ranks behind Asia, Latin America and even the rest of Africa.” Unemployment, particularly among young people, remains high, and the size of government remains high. IMF officials estimate that Egyptian government agencies or state-run enterprises account for upward of 77 percent of the non-agricultural employment in Egypt.

Public-sector wages are kept artificially high, and encourage workers to seek public sector jobs.  As a result, growth rates don’t keep pace with the population.  The UN’s 2009 Arab Human Development Report found that Arab states as a whole were less industrialized than they were in 1970.  Governments used revenue from oil and gas, and in the case of Egypt tourism and the Suez Canal,  to maintain a  large public workforce and cheap goods.

David Warren takes us back to 1952 in Egypt, in a short column, and reviews a bit of Egyptian history, with the overthrow of various kings and potentates, and resulting disorder.  Is the overthrow of Mubarak just another in a long list of failed leaders?

Americans are apt to sympathize with the downtrodden, and with popular revolts, remembering our own colonial rebellion.  But few countries have had our fortuitous path to democracy.

At the eve of the Revolution our population was around 4 million, widely scattered. We had enjoyed 156 years of relative freedom and little government, with plenty of opportunity for free land and freedom to do business. The people who came to settle in America were perhaps genetically selected (if that is possible) for courage, spirit and self-reliance.  And many came to get away from some kind of government regulation or oppression.  Philadelphia was our largest city, and the population in 1776 is estimated as somewhere in the vicinity of 35,000 to 40,000.  Though there were English governors, the British government was across the Atlantic. And perhaps, above all, we were fortunate in our first President, who resisted all pressure to become a King, a president for life, or anything but a citizen temporarily elevated to office, and when he completed his term, he went along home.

Contrast that with the situation of Egypt now.  Egypt is the 15th most populous country — at 82,079,636 according to 2011 estimates.  Cairo has a population  of an estimated 10.902 million, and the median age in Egypt is only 24.  Around half the population lives on less than $2 a day, and a spike in food prices leads to trouble.  Egypt is the world’s largest grain importer in most years — or to rephrase that, they can’t feed their own population.  In 2009, Egyptian imports were $55 billion against $29 billion of exports.  Subtract billions of tourism, and current news probably doesn’t have a lot of people going to see the pyramids, and they are in real trouble.

The general conversation suggests that it’s either democracy or the Muslim Brotherhood, so everyone is enthusiastic about Arab democracy.  But democracy is more than just elections.  It requires the freedom to organize, the gradual development of political parties, and the peaceful transfer of power.  It requires the rule of law, but our notions of the rule of law include things like property rights, the ability to start a business, to borrow and lend, a free market.  It requires a free press, or at least the free exchange of ideas. Perhaps in today’s world Twitter and Facebook must be a sort of substitute.

The U.S must support a freedom agenda. Our only agenda should be to help protect new nations against totalitarian  parties. We can offer guiding principles. That’s what Americans do. We can be a firm voice standing for freedom and democracy.  We should be clear-eyed about what we stand for.

The real terror that is eating away at the Arab world is socio-economic marginalization.  A report by Hernando De Soto, the Peruvian economist, noted that 92% of Egyptians hold their property without normal legal title.  The largest employer in Egypt is the extralegal sector.They do not have access to ordinary business organizational forms that would allow them to grow in the way that legal enterprises do. To open a small bakery in Egypt, they found would take more than 500 days.  Legal institutions fail the majority of people.  To get title to a vacant piece of land would take more than 10 years of dealing with red tape.

To empower the people, and allow economic growth from the bottom up for an aspiring people requires reform of existing legal institutions.  A freedom agenda is not supported by dithering and uncertainty.  It requires a firm voice standing up for American Principle.  That really isn’t so hard, it just means knowing what American principles are.