Capitalism and the Arab Spring

grand-bazaar

Middle Eastern economies largely consist of oligarchs overseeing monopolies. Ironically Mubarak Jr. was supposedly attempting to implement some reforms when Mubarak Sr. was overthrown. The two sets of events may not have been entirely unrelated.

Two years ago, the West thought it recognised what was happening in the Arab world: people wanted democracy, and were having revolutions to make that point. Now, recent events in Egypt have left many open-mouthed. Why should the generals be welcomed back? Why should the same crowds who gathered in Tahrir Square to protest against the old regime reconvene to cheer the deposing of their elected president? Could it be that the Arab Spring was about something else entirely?

I believe so. The Arab Spring was a massive economic protest: a demand that the poor should have the basic rights to buy, sell and make their way in the world…

This is the case not just for most of the Arab world, but for most of the third world. The phrase ‘black market’ suggests, to western ears, dodgy dealing on the sidelines. But in the Arab world legality is what happens on the sidelines. Economists look only at the official statistics, and imagine, for example, that Egypt has a massive unemployment rate. If you were an out-of-work Egyptian, however, you would be dead after three or four months because you would not have enough food. Most Arabs are working, but in a way that has become invisible not only to their governments but to the West.

Most economies are black market economies. That is especially true in the Middle East. There are three types of work. Formal work for a Western or even domestic corporation requiring a degree, or work for the government that requires family and political connections or some sort of manual labor or local enterprise that pays poorly but stays off the books.

Cairo is massive and its human scale is nearly impossible to take in.

This derives from the old feudal split between peasants and landowners that still dominates the “modern” economies of the Muslim world.

 In Egypt alone, the extra-legal sector accounts for 84 per cent of businesses and 92 per cent of land parcels. My organisation, the Peru-based Institute for Liberty & Democracy, estimates that some 380 million Arabs derive most of their income from the ‘shadow’ economy.

Population scale makes this inevitable. It’s virtually impossible to regulate or tax the populations of former peasants who have crowded into super-dense cities like Cairo or Baghdad.

In Egypt, for example, to legally own a small business such as a bakery requires dealing with 29 different government agencies and navigating 215 sets of laws. In Arab countries, the poor entrepreneur’s right to transact derives from the goodwill of local authorities, not the law.

So much like California.

If the West places Egypt and the Arab Spring into the category of ‘Islamist uprising’, it will not only misunderstand the hopes of millions but miss a remarkable opportunity. By our estimates, entrepreneurs who want a legal system with property rights like those in the West outnumber al-Qa’eda members in the region by a ratio of about 100,000 to one.

It’s not necessarily one or the other. The Brotherhood has run on economic reforms and prosperity. Most Arabs believe that economic and political reforms are tied to integrity. And they believe that Islamists can be trusted to have that integrity. They’re not particularly impressed by legal reforms, what they want is what they think of as a more moral system as a check on corruption.