Encourage Economic Freedom or Democracy for the Middle East?

NCFCA debaters spent the 2013-14 school year advocating federal election law reforms and arguing against opponents’ reforms. With next year’s Middle East topic we have an important, if not obvious, connections with the federal election law topic.

On Facebook recently, Alina Dimofte, a former debater from Romania, linked to a Princeton study noting that U.S. governance is more an oligarchy now than a democracy. (Who better than Princeton scholars to report on oligarchy?) The article offers this definition of an oligarchy:

An oligarchy is a system where power is effectively wielded by a small number of individuals defined by their status called oligarchs. Members of the oligarchy are the rich, the well connected and the politically powerful, as well as particularly well placed individuals in institutions like banking and finance or the military.

Middle Eastern countries are rules by oligarchies. Intermarried military, political, religious, and business elites make and enforce regulations that govern countries from Iraq to Egypt. These elites take positions in government enterprises and bureaucracies and find similar positions for their relatives. Efforts to remove oligarchies ruling in Libya and Syria led quickly to violence as tribal groups battle for regional and national political control.

This 2011 Freeman article, “The Roots of Egypt’s Revolt” reports on the history of Egypt’s oligarchic economic system (link to pdf handout). U.S. policy toward the Middle East has for decades helped maintain Egypt’s corrupt political and economic system. Consider: “United States has given the Egyptian government over $2.1 billion, including $1.3 billion in military aid, every year since 1980.” The Egyptian government is funded by tourism, the Suez Canal, and U.S. aid. That money flows to oligarchs who control the economy.

Okay, so what’s the link to federal election law reform? The Princeton study article above laments the U.S. shifting to oligarchy from democracy. By this they mean the claim that wealthy and connected elites now control the U.S. rather than American citizens “governing” through their elected politicians.

The ideal of citizens controlling a country through voting is itself, I would argue, part of the problem both in America and in the Middle East. Jefferson, Madison, and other Founders were critical of democracy, which they saw as a kind of mob rule. Direct voting was limited by the Constitution to the House of Representatives, and the Constitution was established not by a national vote, but by a state by state ratification process. Populist enthusiasm for democracy puts too much faith in government to address social problems. Too much democracy–as in “lets vote on how to solve Problem X”– is a constant source of conflict in both domestic and foreign policy. More voting won’t solve America’s problems, won’t bring peace or prosperity to the Middle East, and won’t reduce terrorism around the world.

U.S. policy to promote “democracy” around the world is understood to mean a political system with a constitution and representative democracy. Voting in theory gives people a say in their government. But constant elections and ever-changing constitutions add uncertainty and keep society politicized. The powers Constitutions give to governments are key, of course, and each new government shouldn’t be able to draft its own constitution for majority vote. Egyptian President Morsi had his 2012 constitution approved, replacing a 2011 constitution passed after Mubarak was removed from power. Then in 2013 the Egyptian military suspended the 2012 constitution, ousted Morsi, and had a new new constitution passed in 2014. Constitutions that can be so easily altered and replaced do little to limit the size and scope of government power.

Our purple finger policy for Afghanistan, Ukraine, and the Middle East pushes for everyone to vote and by that vote be obligated to submit to those elected. This is counterproductive in the U.S., and deadly for Middle Eastern countries. Students who advocated cases to encourage more voting by felons, District of Columbia residents, immigrants, folks in Guam or other U.S. territories, are apparently under the illusion that more people voting will make for a more just, peaceful, and prosperous societies.

Beyond the challenges of democracy in general are deeper problems of pushing political change on other countries, each with their own history and cultures. U.S. and U.K. governments, military, and aid agencies have been active in Middle East countries for over a century. This Cato Institution Commentary from 2003 reflects on President Bush’s initiative to promote democracy in the Middle East:

    In his recent speech before the National Endowment for Democracy, President Bush pledged that the United States would embark on a decades-long commitment to bring democracy to the Middle East. But democracy is not a gift President Bush can bestow on people in distant lands.
    Although the goal is laudable, the Bush administration will be disappointed with its effort to establish a stable liberal democracy in any Middle Eastern nation. That’s the verdict rendered by history, the contemporary reality of the region, and our own government experts.
    Today, the Middle East lacks the conditions, such as a democratic political history, high standards of living, and high literacy rates, which stimulated democratic change in, for example, central Europe and East Asia. Ironically, many Arab countries are ruled by authoritarian leaders who are more liberal than the citizenry they lead.

People should have a say in their governance, but not a say in how other people’s lives should be governed. Richard Pipes in Property and  Freedom explains that government was considered just when it enforced the laws already existing in society. Grotius and other legal scholars emphasized that society was not the state, and the state’s legitimate reach did not extend to private life, liberty and property. These views of just government were debated and those defending divine rule and absolute authority for English kings lost the debate. The Dutch model of a commercial society self-governed with royalty of limited power came to England with William of Orange, replacing the French model James II had recently installed by force across the country. (Highly recommended summer reading:  1688: The First Modern Revolution.)

A lot depends on what people are voting for. With nearly fifty millions Americans using food stamps, would it be a good idea to make voting a requirement for those receiving food stamps? This would boost voter turnout. Though most people would rather have rewarding and well-paid jobs than be on food stamps, if faced with a choice between candidates”for” and “against” food stamps, they would likely vote their interests.

Imagine if food stamps were awarded by ethnic or tribal group, and candidates’ campaigns promised to deliver more food stamps to their ethnic group. This is what much of democracy in the Middle East and Africa is about. Mideast governments tax, subsidize, and regulate the economy and they direct foreign aid and foreign investment through politicians, the military, and extensive state bureaucracies.

When the candidate from one ethnic group or tribe loses, so does the entire ethnic group or tribe. All of a sudden they lose subsidies and their protection from complex and detailed regulations. When their politicians are out of power, police and other government officials see their property and businesses as fair game for exploitation or expropriation. When we in America hear news from abroad of “ethnic unrest” or “tribal conflict” it is usually between those in political power and those out of power. “Terrorists” and “revolutionaries” are mostly tribal and ethnic gangs battling rival groups in government. When the Irish ran Boston, Irish entrepreneurs had an advantage in business. During the Jim Crow era in the South, African-American entrepreneurs and businessmen had to get permits from white government officials to run or expand their businesses. (Echos of Jim Crow laws still survive in local licensing regulations, like this one restricting hair-braiding in Utah.)

Economic freedom is the key to peace and prosperity in the Middle East. Democracy can as easily fuel conflict as contribute to stable governance. Voting should be for deciding who will run the government, but not for what the government will do once in power. Constitutional economics is all about limiting government authority so that voting doesn’t turn into a war of all against all, of each ethnic, tribal, and regional group against all others.

Across the Middle East, fast population growth has crashed into closed economies where elites find jobs in government and connected businesses, while majorities struggle to make a living in the informal sector.  By “informal” we mean they work in enterprises without business permits. They live in houses their families may have lived in for generations, but they can’t get title for the land under their home.  Life is insecure because livelihood is insecure. Only elites in the oligarchy have access to the formal legal system.

Because the U.S intervention in Iraq wasn’t able to promote economic freedom there, and secure opportunities for everyday people to start business enterprises, Iraq continues to be a failed state. Megan McArdle’s Atlantic article reports on the lack of economic freedom in Iraq. McArdle’s blog post on the story is here.

Hernando de Soto led a research team to detail economic problems in Egypt, and writes about the findings in a 2011 WSJ article “Egypt’s Economic Apartheid More than 90% of Egyptians hold their property without legal title.” (google full title for access to article.) This short post in The Atlantic quotes from the article:

     The examples are legion. To open a small bakery, our investigators found, would take more than 500 days. To get legal title to a vacant piece of land would take more than 10 years of dealing with red tape. To do business in Egypt, an aspiring poor entrepreneur would have to deal with 56 government agencies and repetitive government inspections.
     All this helps explain why so many ordinary Egyptians have been “smoldering” for decades. Despite hard work and savings, they can do little to improve their lives.

Power of the Poor is online, including terrorism segment.

U.S. policy has for decades contributed these problems with foreign aid. Here is a Jim Bovard study for the Cato Institute from 1986 (nearly three decades ago!) on The Continuing Failure of Foreign Aid. A search for “Egypt,” finds these costly US Agency for International Development failures:

   AID has provided almost $200 million to help Egypt establish a domestic cement industry to enable the country to produce at home what it previously purchased from abroad.[51] The idea was that a domestic cement industry would save Egypt valuable foreign exchange. AID funds were channeled into a “public/private” cement company, with cement production scheduled to begin in 1980. Hundreds of millions of dollars later, the factories are still not producing, owing to construction delays, faulty machinery, inept labor, and dismal contracting practices. The company that was hired to construct one cement plant was so incompetent that its employees could not even read blueprints. Plant construction was slowed on account of a persistent shortage of hand tools for workers. The Egyptian construction company refused to sign contracts that would obligate it to complete tasks within a specified time frame, in order to avoid being fined for delays.

And from concrete failures to failed baking centralization:

   AID spent $24 million in Egypt over five years trying to construct 29 government-run and 10 private bakeries.[52] Egypt decided to decrease bread-production costs by centralizing bread baking, but the project was badly mismanaged: rather than hustling to build the bakeries, the contractor placed the original grant money in interest-bearing accounts. The first loaf of bread has yet to be baked in the AID bakeries. But even if the project had succeeded, the results would have been undesirable because the government would have driven scores of small private bakers out of business.

Oligopolies try to control elections and voting
As posts on the federal election topic argued, campaign financing is crucial for politicians in power. FEC and IRS policies serve to make it much harder for outsiders to raise campaign funds which by their nature threaten elected officials. In the Middle East, as everywhere in unfree economies, governments control newspapers and television and block news reporting critical of the government. Text messages, Facebook, Twitter, and blogs help those with wireless access stay informed and organize resistance.

Federal election laws that limit campaign funding also limit freedom of speech and press by reducing access to newspaper and television advertising critical of those in power. IRS investigators challenge the tax-status of associations critical of politicians and oligarchs, and threaten donors with fines and jail for “illegal contributions.” Similar policies and threats exist wherever government officials claim power to regulate freedom of speech or of the press.

The fear is that “the rich” will have too much influence if campaign donation limits are lifted. But if Microsoft spends billions to advertise Windows 8, will that make people buy it? Bill Gates and Warren Buffett are the richest in America. They have significant influence in being able to get on Oprah Winfrey or 60 Minutes or late night television to promote whatever campaign they favor. But Bill Gates can’t make people buy Windows 8 or XBox (or Common Core) nor can Warren Buffett make people eat at Dairy Queen or buy Geico insurance (no matter how many times the Brit lizard is on TV trying to charm and amuse).

Background to federal election reform cases is the U.S. Constitution. What role should elections play in a free society, and what limits are set or should be set by the U.S. Constitution on elections?

Whichever political party receives the most votes claims a “mandate” to put it’s transition team to work modifying and expanding policies across this whole spectrum of industries, drafting new regulations, subsidies, and tax proposals. The Obama Administration’s targeted subsidies to solar and wind energy firms and to electric car companies are just a few examples, and nearly all President since Nixon have rolled out large scale subsidies said to reduce “dependence” on imported oil.  (Oil “dependency” being the justification for energy policies and subsidies, as well as military intervention and bases in the Middle East. And U.S. military bases in the Middle East were the spur to Islamic terrorists.)

And all this in our relatively free society and open economy. The U.S. economy is free relative to Middle Eastern economies. Turkey and Qatar are important exceptions where relatively more economic freedom has enabled local entrepreneurs and enterprises to create more prosperity for the entire economy. Below are images from Qatar and Istanbul.