Comments About Egypt and The Arab World

Posted by Jeff Carter
on January 30th, 2011

Was reading as much as I could on the situation in Egypt over this week end. Nothing like the overthrow of a government to get you interested. I really didn’t pay close attention to Egypt.

Interestingly, the high price of sugar and wheat was the spark that set the tinder box off. Algeria, and Tunisia both had protests over higher food prices. Sure, food prices are higher but they have other problems in those countries too. Limited personal freedom and oppressive governments.

The Saudi’s have increased wheat purchases over the past couple of weeks. They want to make sure the dominoes don’t fall on them.

In the Financial Times, there is an opinion on the Egyptian situation and the US response to it. They point out that the US doesn’t exactly have a sterling track record. Okay, thanks for that Captain Obvious but what really struck me was this paragraph,

“These Arab states have young and growing populations. All lack the employment and job creation to serve their people. All have infrastructures that cannot meet popular needs. All have failed to shape their economies in ways that translate growth – to the extent it takes place – into equitable income distribution. All have relied too much on their internal security services. All have failed to address the causes of internal violence, extremism and terrorism. All have distorted their budgets and economies by a focus on security at the expense of governance.”

This goes right to the root of Milton Friedman and the free market. Countries, and their populations cannot be truly free without a free flow of goods and services with limited government involvement. If the Arab world really and truly seeks to become economically viable, and vibrant, they need to free up their economies. The only way to do this is emulate the Singapore model, or become a republic a la the free world. Unfortunately, I don’t think they can pattern themselves after Singapore.

Idealistically, the leaders in these oppressive countries would seek to have a peaceful transfer of power. The days that a monarch, or a centralized panel making decisions that are better than the decisions made by free market interactions are over.

Virtually all of these Arab nations would have lower unemployment, better economic opportunity, more job opportunities if they adopted free market laissez faire controlled financial systems. Until they make the leap of faith from their current systems, not much will change.

It’s not up to government to decide income distribution, who and what will be produced, and how much. Governments have focused on security, naming Israel as the great pariah. But, are the tyrants that rule these nations really afraid of Israel, or their own people that they continue to try and control?

Certainly, it’s a dangerous game. Obama is walking a tightrope. While many will wait to cast stones at his administration (the first obvious one was yet another Biden gaffe), I prefer to encourage Obama to work via every channel to see that a free market democratic republic is set up. The quicker this is done throughout the Arab world, the sooner the security of the US will be ensured. People that have jobs and economic opportunity are less likely to pick fights with Israel, and try and rain terror on the free countries of the world.

The market will watch Egypt and the region very closely. Murbarak would do history, and the entire Arab region a great favor by stepping down and setting up a provisional government charged with turning Egypt into a representative free market republic. A successful transition in Egypt can be an example to the rest of the governments in the region.

Thanks for the link Doug Ross

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