Exorcising Egypt

11/28/2011

Since the Arab Spring began with Tunisia's "quiet" revolt, the Middle East has undergone a distinct shift in the philosophy of national governance, one that has been long overdue. While the results of this shift are still being executed by the domestic citizenry, and contemplated by witnesses all over the world, the timing could not be better.

Western systems of capitalism and socialism are under extreme pressure as global markets continue to integrate, and the long-standing perception of private enterprise as both willing and competent in the service of the broader economy, particularly in financial services, continues to deteriorate. American banks and insurers took a piece out of the US economy, leading to such a chasm of goodwill that a movement with little focus and poor articulation like Occupy Wall Street was able to stake its claim to fomenting systemic change.

Meanwhile, in Europe, the fallout from UK bank risk in countries like Ireland and Iceland has converged with a greater Eurozone crisis in the bailouts of Greece and Italy. Portugal and Spain must also be dealt with, especially if further erosion of the Euro (and confidence in the EU) continues to affect equity markets and global investors in general. There are many people still making money in this troubled time, but the majority are primed for radical change. Just ask former PM Silvio Berlusconi.

So what does this have to do with the Middle East? Simply this: with the leading nations of the world in economic turmoil, the Middle East has a chance to upgrade into modern governance as the first step to competing in the global economy beyond energy.

Despite the history of repression and manipulation in this region, there exist examples of incredible productivity. Lebanon's banking system has flourished, bolstering annual GDP numbers to 9.3% and 7.0% in 2009 and 2010, respectively (aggregate 4.8% between 2001 and 2010). The Abu Dhabi Investment Authority (ADIA) boasts assets of nearly $625 billion making it one of the largest funds in the world, both diversified along assets classes and unrestricted by Sharia law. The West Bank economy grew at 9% in the first half of 2010; given the still tenuous relationship between Israel and Palestine, this figure is of tremendous value in theorizing growth given a more stable political environment.

All three of these examples have a common thread: despite political machinations from neighboring nations, Lebanon, Abu Dhabi and the West Bank all benefit from systems that allow more flexible governance relative to their sibling countries. That is not to say those systems are flawless; indeed, many would argue that the West Bank is in fact not a place of free expression or economy. And that Lebanon's decades-long, multi-secular Parliamentary system boils down to nepotism and corruption (it does). But there is an admirable, wild resilience to these aforementioned areas. 

The Middle East was once the center of global modernization and thought. Today, it is a high potential area teaming with educated youths, technically-skilled professionals, and an underlying need to break free from the historical bonds of tyrannical rule. That so many nations have thus far initiated their own revolutions is a very positive fact. There remain a few bad apples in the Mid-East basket, most notably Syria and Iran, that must fall for the rest of the region to pull away from the game of empires currently holding it hostage in the Age of the Crusades and push forward into the 21st century economy. Time will tell if this is even possible.

The toughest part has already begun: Arab citizens crying out for change. Still, Western officials seek diplomacy from known quantities of evil and global media struggles to tell an objective story.

But the benefits of modern governance, whatever system that might be for those nations, far outweigh the economic stagnancy the world has seen in Libya, Egypt, Iran and Syria.