30 June 2004 Blog Home : June 2004 : Permalink
Israel has been paraded as the excuse for failure in the Middle East, but it is surely just an excuse. Israel as a country has gone from nowhere to the second richest country by per capita GDP in the region in about 50 years. It has done so despite fighting numerous wars and with no natural resources to spend. Indeed the economies of the rest of the middle east have stagnated despite population growth and large oil revenues - see this good economic review of the region albeit one a year or so old.
In order to distract attention from this failure the ME rulers claim that Israel's existence is what is stopping their development despite the fact that Israel has not in fact attacked them or done anything to them. There have been no new floods of palestinian refugees in the last 20 years. There have been more than a handful of Israeli raids on neighbouring countries and aside from its involvement in Lebanon - whence Israel has been steadily retreating during this time - Israel has done nothing to its neigbours. But Israel makes a convenient external focus for rage which means that a generally uneducated priest-ridden society does not feel the need to demand reform at home. The problem is exactly as President Bush has stated a number of times - lack of free-market democracy. In all countries in the region bar Israel the populace has no way to replace its rulers except through revolt and the economy is tightly controlled by the ruling elite who tend to own and run the major industries.
Israel has genuine elections and has seen numerous governments of different complexions over the last couple of decades. If you look at this Wikipedia entry you can see that Israel has had some 6 different leaders during this time. On the other hand the supreme power in all the other countries in the middle east has changed at most once during the same time - generally going from father to son. Iran may have done slightly better but the recent hobbling of elections shows that democracy there is not quite the same as in other places. Likewise with the economy. I don't know how many Israeli companies have been IPOed and quoted on Nasdaq, been spun off from foriegn comapnies, bought by foreign companies etc but it is a lot. There is no clique that owns Israel and there are no more tariffs and trade-barriers than one sees in the rest of the developed world.
In the rest of the middle east the rulers own and run everything and the poor stay poor. Its not for lack of entrepreneurial spirit in many cases (although that is also lacking sometimes) but a culture that tends to punish success and/or systematic corruption that means than anyone who prospers beyond a certain level gets his profits taken away in bribes and extortion from the government. The same goes for most foreign investment. In most cases foreigners are not allowed to own the assets they wish to use and must rely on a local partner who is normally related to the ruling elite and may decide sometime later to just take the entire business for himself. Since the rule of law in these countries is also less than evenly applied the result is a situation where there is a strong disincentive towards workign hard unless you are a member of the ruling elite sicne if you do so you are likely to see your hard work assumed by some member of thst elite.
Iraq may in fact be just what the region needs. Liberals have sneered about the Iraqi currency reform as the onyl thing the CPA did but trust in the currency was one thing that was lacking during the Hussein era. Since the new currency was introduced it has been stable and universally accepted neither of which was the case before. It remains to be seen whether Iraq will succeed but economically Iraq is blooming and the rewards are being widely distributed. Iraq's agricultural sector has thrived since the change in regime and Iraq will probably not need to import food in 2004 for the first time in decades. But it seems to me that the big thing in Iraq is a change of attitude towards groups taking control of their own affairs rather than passively waiting for permission/approval from the government. Sometimes of course the attitude results in robber baron style capitalism but in the long term this is better than no capitalism as seen elsewhere in the region.