Thursday, February 24, 2011

Egypt, Libya et al.: Demographics, the Oil Curse and Post-Colonial Karma

What is unfolding in North Africa and the Mideast is a full-blown crisis of legitimacy.

To reach an integrated understanding of current events in the Mideast and North Africa, we must place them in these broad contexts:

1. Demographics. These nations have experienced the usual population explosion which accompanies reduced opportunities for women, and as a result the majority of citizens are young, better educated than their elders, and unemployed, underemployed or scratching out a living in the informal economy.

2. The oil curse, or more generally, the the resource curse, since it works just as well with diamonds, gold, etc.

Nations "blessed" with abundant extractive resources such as oil have few incentives to nurture innovation, opportunity, democracy or a broad-based integrated economy, as the Ruling Elites find controlling the resource (oil) to be more than adequate for their basic needs: acquiring personal wealth via diverting the profits from the resources into their personal palaces and Swiss bank accounts, and in providing sufficient funding to feed and bribe an Army and oppressive secret-police to control the populace.

Nations rich in extractive resources become progressively more impoverished compared to their resource-poor counterparts: Venezuela, for example, once had a per capita income far above that of South Korea. Now Venezula is the backward, corrupt poverty-stricken cousin of developed-economy Korea: the oil curse in full flower.

3. Post-colonial Karma. Most of the "developiing" world is still working through the consequences of 19th century Imperial/colonial domination--the "karma" of post-colonialism. Even the rare exceptions which avoided direct Imperial control such as Thailand were still shaped by the carving up of the globe by European Empires in the 19th and early 20th centuries.

Though entire volumes have been written about the post-colonial era, here is a quick sketch of the critical issues playing out now.

Arbitrary national borders. The Imperial/colonial powers carved up the world to suit their own needs of the moment, in many cases literally establishing national borders (Iraq, for instance) on a map spread out on a table in London.

Rewards, punishments, quasi-idealistic notions, haste, expedient "solutions" and subterfuge were all played out in this process of setting national borders. The prime example of unintended and unforeseen consequences might be India and Pakistan: India once included the lands now called Pakistan and Bangladesh. Pakistan was carved off in the post-colonial partition partly as a reward for those groups which had supported the Allies (in effect, Great Britain) during World War II.

As for Muslim and Hindu populations: today, India contains as many Muslim citizens as does Pakistan.

Creating nations with a stroke of the pen, so to speak, does not create cultural equivalents: nations poor in infrastructure, education and legitimate institutions were shoved into the nation-building process with few resources and no road maps.

Nations such as Thailand which evaded direct control of Imperial powers were still hobbled by backward governance (Monarchy) and stagnant or narrow educational and economic institutions. Which is to say, successful development is not guaranteed by an avoidance of Imperial intanglements; it is at best rendered somewhat less complicated.

Reliance on local despots and Power Elites to enforce governance. At the height of the British Empire, the Empire required less than 10,000 people "in theater," so to speak, to control the vast nation of India. They accomplished this remarkable level of remote control by empowering the local Power Elites which they had conquered or won over by military force.

This pattern can be seen in Vietnam (France), Indonesia (The Netherlands), India (Great Britain) and elsewhere.

The key (and generally under-appreciated) feature of this system is its reliance on the willingness of the governed to accept it. The U.S., which haltingly approached the Imperialist roundtable only in the waning days of the 19th century as a fledging wannabe-Empire, found to its dismay in the Philippines that peoples who refused to consent to foreign rule could not be controlled at a distance, no matter how brutal the repression and war waged on the resistance.

The French discovered the same truth in Algeria in the 1950s, when the people walked away from consent, and in Vietnam in the early 1960s.

The people in the Mideast and North Africa are withdrawing their consent to be governed, and no amount of repression can force that genie back in the bottle.

Local Power Elites simply transferred the colonial machinery of expropriation to themselves. Though high-minded idealism flourished in the initial euphoria of the post-colonial era, on the ground local Power Elites simply took over the reins of concentrated political and financial power (control of the media, resources, whatever infrastructure had been constructed to serve the colonial resource extraction, etc.) and carried on the colonial pastime of suppressing dissent and amassing personal fortunes.

A senior economist from India recently told me that there is an estimated $400 billion in Swiss accounts owned by the Power Elites of India. That is of course only a guess, but it is indicative of the great wealth that has been plundered even in post-colonial democracies: expropriation as a model of governance remains extremely attractive.

Perhaps the key feature of colonial rule is the suppression of any other legitimate institutions other than those directly required for colonial rule. Unfortunately, the post-colonial karma of most former colonies is a continuance of this policy, for one basic reason: legitimate institutions eventually offer up challenges to concentrated, central control, and thus the Power Elites have chosen to weaken their nation's institutions, except for those required to enforce passivity and compliance: the Army, the government-controlled media and the secret police.

Keeping institutions weak is only the visible part of the trade-off: for all the critical elements of broad-based development must also be sacrificed: innovation and opportunity, for example, must be limited, as both innovation and economic opportunity could eventually threaten the Status Quo.

This is how you get a situation in which most people in the formal economy work for the central government and the Army controls a significant chunk of the entire economy. This is true of Egypt and was once true of China, where the Peoples Liberation Army retains shadow ownership of vast companies and industries.

Delegitimizing every institution other than the Army is the acme of backwardness and misallocation of capital.

What is unfolding after four decades of suppression is a full-blown crisis of legitimacy. Regardless of their purported ideological flavor, the ruling Elites all relied on the same system of governance: offer a simulacrum of public purpose to the world and the populace, and ceaselessly pursue private confiscation of national income and resources.

Now, at long last, the consent and compliance of the ruled has dissolved.

It's certainly valid to place responsibility on the colonial powers for leaving behind socially and economically crippled nations with hastily drawn borders; but that would be leaving out the opportunities squandered for half a century by the local Power Elites which took the reins of power from the colonial empires.

What could have been done in the post-colonial transition--the slow, careful construction of legitimate, transparent institutions to channel development, education and investment--was not done. Instead, the concentrated control and culture of expropriation of national assets and income streams for private consumption and acquisition was continued. The iron fist of Empire was neatly covered with the attractive glove of "freedom," but that freedom was elusive and illusory.

What was not done in 1947-1967 remains to be done: the assembly of legitimate institutions, the diversion of national resources from Power Elites to the common good, and the unleashing of innovation, not just technical but institutional, and lastly, of opportunity.

Until those processes are underway, then these regions cannot escape backwardness, oppression and turmoil.

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