Paying for Democracy

By Robert Presser on April 21, 2011

The revolutions taking place across Arabian North Africa are astounding for the rapidity with which they overthrew longstanding dictatorships and the confusion they provoked in Western governments.  The US, UK, France and Germany had to decide when and how they would abandon the leaders they had backed for decades, and in the case of Libya the first coalition of the willing since the 1991 Gulf war was created to pound Gaddafi’s forces into retreat to allow the rebels to retain Benghazi.

Revolutions are messy from an economic standpoint as well.  The flow of Libyan oil that kept the regime in power will remain a trickle because nearly all the foreign workers have fled, taking their expertise with them.  The tourism sector in Egypt, a critical source of foreign currency, is unlikely to begin its recovery until presidential elections this fall produce a leader to make the rounds of Western capitals and restore confidence that a civilian government is once again in control. Yemen had a barely functioning national economy to start with, and Tunisia was even more dependent on tourism than Egypt.  Unsustainable subsidies for basic foodstuffs and fuel allowed wages to remain low, and the mercantilist middle class invested their money abroad for safekeeping.  In short, we should not discuss “rebuilding” these nations’ economies, but rather, how to create viable economies from scratch.

The “we” doing the work this time should not be Western nations, nor their institutions like the IMF and the World Bank.  Intervention by these powers, whether political economic, will only be interpreted by the Arab street as the exchange of a home grown dictatorship for a restitution of domination by the modern inheritors of the imperialist empires which preceded them.  This is the Arab world’s moment to behave like mature nations and build their ownstructures to secure their future.

Map_Northern_Africa.jpgFirst, how about an Arabian version of the International Monetary Fund or the World Bank?  Let’s call if the PAB, for Pan-Arabian Bank.  The PAB should be funded by recovering the $70 billion in wealth accumulated by Hosni Mubarak over 30 years, the $30-40 billion collected by Gaddafi, and untold other tens of billions amassed by smaller tyrants.  Saudi Arabia could be called upon to contribute matching funds, like a wealthy donor capping off a charitable campaign.  The PAB could probably begin operating with a total funding base of $200 billion, which would go very far in the Arab world.  Note that I am not suggesting that all the money recovered from Mubarak should be returned to Egyptians, nor Gaddafi’s funds to Libyans, mostly because these funds were skimmed off cash taken in from foreign aid, hard currency income from Western nations, and payments demanded from multinationals operating within their borders.  The PAB would be mandated to fund infrastructure development projects and the creation of modern institutions of government in countries that don’t have any, like national banks similar to the Bank of Canada or the Federal Reserve.  These sovereign financial institutions would, in turn, direct free market reforms within their respective nations.

The time has also come for a new international forum for Arab diplomatic exchange to replace the current Arab League, which is ineffective and generally ignored on the wider diplomatic stage.  A poll taken among Egyptians several weeks ago indicated that over half of them would like to see the creation of an Islamic caliphate covering the entire region.  Rather than a religious institution, why not a democratically elected pan-Arabian parliament along the lines of the European parliament?  This institution would allow Arab nations to develop a forum in which legitimate representatives of each state can debate issues of regional interest and force the rest of the world to take notice of their concerns.  Arabia should seek to attract respect for more than just its dominance in oil and the influence wielded by OPEC.  If the region fails to act together to address the problems left unresolved by the treaties signed in Paris in 1919, then they will merely condemn themselves to another century of performance below their potential.

One has to be careful when we discuss what democracy means in the Arab world.  The American-style constitution and institutions impressed upon Iraq in the aftermath of the second Gulf war are probably not what is going to be adopted by these nations in the post-revolutionary era.  Where the West has to be clear is that these states must be peaceful and embrace international cooperation even though internally they may operate with less freedom than more mature democracies.  It took 70 years for the US democracy to evolve from the elitist approach of the early Federalists to the emancipation of Lincoln’s Republicans.  As Joe Biden said in 2004 when discussing Iraqi democracy, “they need a system where everyone has a seat at the table and a piece of the pie.”  The crafters of the region’s new constitutions should heed that advice.



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