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Democracy’s touch pushes growth, productivity

Tucker Slosburg

Tucker Slosburg

“The peoples in hot countries are timid like old men,” -Montesquieu, The Spirit of the Laws, 1748

Egypt, a warm country with an average winter low of 55 degrees, has a population pouring into the streets demanding democracy. They seem anything but timid, and the violence only seems to increase with each passing day.

Although they identify themselves as an oppressed people, the Egyptian economy has improved over the last 20 years, with a seven percent growth rate pre-recession. The World Bank recently reclassified their status to ‘Lower Middle Income.” Moving to middle income with a growing GDP signifies future productivity.

That’s not to say Egypt’s economic outlook is coming up roses. In the short run, they will face some tough times, considering that Standard & Poor’s and Moody’s recently downgraded Egypt’s debt.{} Egyptians abroad now face trouble sending money back to families because the banks remain closed, which is problematic because remittances make up a large portion of the country’s foreign capital.

From a geographic and historical perspective, Egypt’s shot at democracy is unprecedented. History shows the temperate climate of northern nations in Europe – and thus by extension the Americas (thanks to colonialism) – developed the market economy more quickly than the Middle East.

These markets and democratic ideals developed not because they were in a temperate climate, but because geographically, these nations sat next to each other as feudalism expired and the merchant class arose during the Renaissance. This co-evolution of the free market and democracy arose in Europe, but not in the Middle East.

Recall, the revolutions of 1848, when the people of France, Denmark, Poland, Switzerland, the German states, and several others revolted. They were all near or adjacent to each other. One could wonder if Tunisia, Yemen, and Sudan will echo this pattern.

What makes Egypt fascinating, though, is its isolation, unless you count Israel as the democracy next door, but I think Egypt would prefer to go it alone.

Still, Israel and Egypt have plenty of reasons to work together. There exists a strong correlation between democracies and peace. That is to say, democracies rarely find themselves engaged in war with other democracies. Israel and Egypt have the potential to emerge stronger, which might help introduce democracy into the rest of the region.

What was the tipping point for Egypt? For the last 20 years, Egypt moved slowly toward privatization and a competitive market economy, but not fast enough to keep up with a growing population. Wealth coupled with globalized communications spread among enough of the population to make them realize how much Mubarak’s regime stifled their growth as individuals, as a community, and as a nation. I suspect the rising middle class, the taste of private enterprise coupled with global pressures and new technology, paved the way for the Egyptian population to finally assert themselves to their leader, and by extension, the rest of the world.

Milton Friedman argued convincingly that competitive capitalism “also promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other” – hence nineteenth-century Europe. Still though, any state can implement a capitalist-like economic system while maintaining totalitarian control over the population – China, for example – but even China is facing pressure to loosen its political reigns.

Technology can spread communication, but it can’t change the will of a people or a dictator, at least not yet. The revolutions in 1848 resulted in years of internal conflict, ultimately emerging into modern democracies, with a few world wars tossed in the mix. That’s not to say the Middle East won’t dissolve into conflict, but I suspect that external pressures from the rest of the world will mitigate any major acts of violence or war.

The Egyptian people, who have tasted freedom and demand more of it, can grow into a productive and prosperous nation with the support and encouragement of leading free market democracies around the country.
Tucker can be reached at tslosburg@gmail.com or follow him on twitter @Tucker849.

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One comment

  1. Mubarak has fallen and he can’t get up