Guile on the Nile

Probably no nation is so constantly reminded that its best days are behind it than is Egypt. Tourists from around the world marvel at the extraordinary monuments, some over 4600 years old, erected by the people who lived and prospered on the shores of the Nile. The ancient Egyptians were not only accomplished builders and engineers but they developed an expressive form of writing, papyrus to write on, a reasonable calendar, and pioneered effective techniques in medicine and surgery. What have Egyptians accomplished since? Between Cleopatra and Omar Sharif the Egyptians haven’t played a leading role in much of anything.

We have been told for years that the Arab “street” was seething with hatred for western, especially American, thought and culture. In the past few weeks we have discovered that the people who actually go out in the street seem to share a lot of our values and wish we supported them instead of their government. We learned much the same thing last year when the Persian street tried to overthrow a stolen election but, shamefully, we watched as the mullahs crushed them. The government that condoned voter intimidation by the New Black Panthers extended the same courtesy to the Revolutionary Guards. We did a little better this time, although in truth, the Egyptian demonstrators neither looked to us nor relied on us. They seem to have been inspired by the earlier Tunisian uprising that booted out the long serving Ben Ali.

Most revolutions, including our own, are caused by economic forces, often related to foodstuffs. The Tunisian revolution was sparked by a frustrated and humiliated young vegetable vendor, Mohamed Bouazizi, who operated an unlicensed cart in the town of Sidi Bouzid. After a policewoman confiscated his cart and produce, slapped him, and spit on him, he attempted to complain to the municipal authorities who denied him an audience. As anyone who has ever dealt with the Registry of Motor Vehicles can appreciate, a frustrated Bouazizi then set fire to himself and, subsequently, to the political power structure of his country. Bouazizi’s despair and choice of death is symbolic of the economic stasis that has frustrated the aspirations of Muslims, especially Arab Muslims, since the end of their golden age 700 years ago. A lot of reasons are given for the decline of the Muslim Arab world but one is surely excessive government regulation and limitations on people’s economic lives. Some reports indicated that Bouazizi had tried unsuccessfully for five years to get the permits required for his vegetable stand.

Most of the discussion following the revolts has understandably focused on the political outlooks for the two countries. But the success of both will depend on creating effective and growing economies. Unshackling the Egyptian economy will be extraordinarily difficult; some like the Wall Street Journal’s Daniel Henninger think it nearly impossible. Tunisia looks to have the better chance. Tunisia is more economically liberal than is Egypt. Tunisia, one of the more liberal economic environments in the Arab world, ranks 55th on the World Bank’s index of ease of doing business. Egypt, the largest Arab country, ranks 94th. In perceived corruption, the Egyptians rank 98th while the Tunisians are only 59th. With respect to property rights, a decent proxy for economic freedom, Tunisia is tied for 40th, Egypt trails far behind tied for 73rd. Perhaps the most comprehensive rankings, the World Economic Forum’s Global Competitive Rankings place Tunisia 32nd and Egypt 81st. Every one of the restrictions, regulations, and impediments to a competitive market economy has an entrenched beneficiary who will fight to preserve his favored position. The Egyptian army, seen by many as the guarantor of political liberalization, has extensive interests in the economy; some estimate its holdings at 20 to 30 percent of the nation’s productive assets. Good luck getting them to part with it. Half the population is under 24 and most are unemployed or under-employed.

What can the Egyptians do to get their people usefully employed? Apart from the Nile and a little bit of oil, Egypt doesn’t have many natural resources. They have a lot of tolerably literate people and not much else. One possibility, suggested by Egyptian Keynesians, is to build some more pyramids; there is a precedent and constructing each would employ tens of thousands of people for decades. But the country already has about 140 of the things and its not clear that anyone even knows how to build one anymore. The Mexican option, sneaking across the U.S. border, is not practical since few Egyptians speak Spanish, which has become a requirement for getting an entry-level job in many parts of the U.S. The Greeks, a once-great people who retired early, were able to lie their way into the subsidizing arms of the E.U. but it’s unlikely the Europeans would fall for that again; they won’t even admit Turkey, a Muslim country with a real economy. Most of the rich nearby Muslim countries are either furiously trying to develop indoor golf courses and ski runs or buying off their own restless populations.

There is one nearby country that has a vibrant economy, a flair for developing innovative products, but a relatively small and expensive labor force and so might be interested in investing in Egypt and outsourcing production. That country has even fewer natural resources than Egypt but has a per-capita income six times as great. Many of that country’s citizens can even trace their ancestry to Egypt. Of course, they parted ways on very bad terms about 3000 years ago.

Posted by Bob

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