Good
institutions and elected accountable governments,
as we have repeatedly said in this series of
articles, are at the
foundation of sustained
economic growth and development. But along with
good institutions, countries need supportive and
stable policies and a good dose of peace and
stability.
Here we elaborate a little on
institutions, political reform and the role of
foreigners, and in the next two articles in this
series we look at supportive economic policies
followed by the importance of peace and stability.
In the euphoria of the "Arab Spring",
observers began predicting the blooming of Arab
economies after a temporary slowdown attributed to
demonstrations, shortages, bottlenecks and ensuing
dislocations. The overthrows of Hosni Mubarak in
Egypt and Muammar Gaddafi in Libya were forecast
to bring democratic change, with Islamists as the
only roadblock to Nirvana.
The move toward
democratic governance was assumed to usher in
better institutions, stimulate business
confidence, jettison the corrupt policies of the
past and usher in enlightenment that would lead to
higher domestic and foreign (FDI) investment.
Higher economic growth and more equitable economic
benefits were assumed to follow.
Unlike
their brethren in democratic societies, the rulers
in the Persian Gulf, Arab and Iranian, are
autocratic dictators. They have no interest in
establishing and nurturing good institutions
(popular constitutions, rule of law, transparent
regulations, and so forth). The reason is simple.
A popularly adopted constitution would in
all likelihood call for an elected and accountable
government, create an independent judiciary and
confirm the equitable oil birthrights of every
generation of citizens. A popular constitution and
good institutions would thus undermine corrupt
rule and eventually throw rulers out of office.
The constitutions that have been adopted,
for example in Iran, were adopted at a time of
turmoil and change and the rulers will not
tolerate open discussions and amendments on an
ongoing basis. These rulers have a simple goal -
to amass fortunes and preserve their dynasty
(family or clerical) in any way that they can
(such as pampered intelligence and military
services, vast military expenditures to secure
foreign support and keep citizens in check, a
cadre of corrupt cronies, discriminatory
governance to divide the citizenry and foreign
support).
The result is that these
countries have an inhospitable business climate,
an underdeveloped private sector and little
economic and social progress.
The foreign
elite and foreign multinational corporations (oil
companies, oil service companies, manufacturers of
arms, engineering firms, large financial
institutions etc) support these rulers for gain.
For the powerful governments of East and West,
contrary to their altruistic representations,
short-run economic gains and gains for the
powerful in their own countries are all that
matter.
The United States, Europe, Russia
and China meddle in these countries and continue
to support their favorite dictators before and
after the Arab spring; the US supports the
Al-Sauds, Al-Khalifas, Al-Thanis, Al-Sabahs and
the Al-Nahyans; Europeans more or less tow the US
line; Russia supports the mullahs in Tehran and
any of the Arab rulers that are willing to cozy up
to them as they incur US displeasure; and China
supports any and all dictators, even those favored
by the US, until the moment when such support
becomes a lost cause.
Influential citizens
turned lobbyists (former and current senior
government officials, corporations, universities
and even charitable organizations - all
beneficiaries from the largesse of Mideast
dictators and their cronies) lobby these powerful
governments into supporting Mideast tyrants.
Favored tyrants who are overthrown get a
free passage to a life of luxury, enjoying their
ill-gotten wealth; unwanted tyrants are arrested,
tried and sentenced at the International Criminal
Court (ICC); and aggressors from the powerful
countries live where they always have with no
worry at all.
There is no such thing as
consistent and equal international justice.
Dictators are not motivated to respect the human,
economic and political rights of their citizens.
They only guard their own narrow interests and
those of their domestic and foreign supporters.
Again, meaningful economic progress will require
political reform (popular constitution and good
institutions) and an end to foreign meddling.
Where are the international institutions?
The United Nations masquerades as the guardian of
international peace but in reality supports the
interests of the powerful and the rich at the
expense of the weak and the poor. The powerful
sell lethal arms and invade countries with nothing
to keep them in check. The International Monetary
Fund (IMF), the guardian of the international
payments system and dispenser of good economic and
financial policies, says little to criticize Saudi
Arabia and fellow Gulf Cooperation Council (GCC)
countries about their needed political reform and
the management of their oil revenues as they have
been big lenders to the IMF.
The World
Bank, the institution with all the answers for
economic development and growth, does not mention
the official plunder of revenues in these
countries. The record of the ICC is almost
non-existent as it has largely tried a few cases
of African tyrants.
In such a setting, the
overthrow of a dictator does little to promote
fundamental political and economic change. Again,
as a dictator is overthrown, another tyrant to be
steps up and takes his place. His motivation is
simple - follow in the deposed rulers footsteps
but learn from his mistakes and hold on to power.
Rob the country and amass a fortune.
Similarly, foreigners - governments,
individuals and corporations - take up where they
had left off with the deposed ruler. It's business
as usual.
Just look at Iran. The mullahs
and their supporters are robbing their people and
amassing their fortunes. They have not been
supported by the US but have until recently
enjoyed European backing and have the backing of
the Chinese and the Russians.
Look at
Iraq. Yes, there is more freedom with regime
change, but the economy is no tiger. A new group
is robbing the country, with no incentive to
establish good institutions - corruption and
economic mismanagement with widespread foreign
acquiescence and support rules the day.
Egypt seems to be going down a similar
path. It is the same old story over again in
different clothes. Would regime changes in the GCC
countries - Bahrain, Kuwait, Oman, Qatar, Saudi
Arabia - yield better results? No. It would be the
same story all over the region.
A number
of simultaneous initiatives, in addition to regime
change, are called for. First and foremost, all
Mideast rulers must be reminded and shamed into
accepting and acknowledging one simple truth. The
oil and gas is not their's to plunder but is the
inheritance of all generations, current and future
citizens. Rulers must not enjoy any special access
to oil revenues. There can be no exception to this
simple truth.
Yes, rulers in Abu Dhabi and
Qatar have more resources to keep their populace
content. But for how long? What about all the
generations to come? The acceptance and
implementation of this truth would not only remove
the biggest impediment to better economic programs
and policies in the Middle East but also would
reduce resentment and conflict in the region.
All international institutions must
support this fact. The IMF must not be allowed to
hide behind its economic mandate by labeling this
as a political matter. It is in fact the central
economic issue in these countries. What economic
issue could be more important than the management
of oil resources in these countries? And this has
to begin by settling the central economic question
- whose oil is it?
Oil revenues must not
be used to buy citizens, finance consumption, buy
weapons, suppress citizens, wage armed-conflict
and fill the bank accounts of rulers and their
cronies. They must be used in a way to benefit all
citizens and all generations equitably.
The recommended policy to achieve this is
simple. (i) Over a period of say 10 years, oil
revenues must be taken away from the governments
(and immediately from rulers), (ii) oil
revenues should be placed in a fund and invested
in a diversified portfolio, (iii) every
citizen should be issued an annual check of equal
purchasing power, (iv) the size of this check
(of equal purchasing power) to be the same for all
present and future generations of citizens (this
calculation is standard and would be updated
continuously), and (v) the government to
initiate a process of financing its expenditures
from taxation, with all expenditures financed from
taxation within 10 years. More on this in a later
article.
To encourage a process of
economic renaissance in the region, foreigners
could be supportive in a number of ways. In the
quest to discourage foreign rulers from robbing
their own countries and adopting policies that are
harmful to business development and growth:
They could develop laws that limit and more
readily expose lobbying on behalf of foreign
rulers and governments.
They could adopt laws that expose the wealth
of foreign rulers and officials in the same
fashion as Americans running for office in the
United States.
They could pledge that all wealth illegally
acquired by rulers and their cronies would be
subject to confiscation and return to the country
of origin.
The global community has
adopted protocols to limit money laundering but
has done nothing to reduce the ongoing plunder in
these countries, arguably the mother of all money
launderings. All of this would signal an important
fact to tyrants. They will not get the support of
foreign powers, their influential citizens and
corporations and of international courts to rob
their countries.
The message should be
clear. There will be no meaningful economic and
political turnaround unless a number of associated
policies are adopted and implemented
simultaneously. Changing regimes and hoping that
it will in time lead to political reform and
economic resurgence is but a dream.
NEXT:Bad performance, failed
policies
Hossein Askari is
Professor of Business and International Affairs at
the George Washington University.
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