Egypt Rising

Via Free-Market.net comes this Steve Forbes' column in which the red light/yellow light/green light restaurant reviewer lays out a surprisingly upbeat picture of Egypt's future:

After several years of preparation, Egypt is about to commence a…makeover of its society, one that will profoundly and positively impact the rest of the Middle East and the developing world. Reforms will create easy access to private property for all Egyptians, including those in city slums. All enterprises will be able to easily turn themselves into legal entities; previously, obtaining a business license had been a costly process that could take nearly two years. Not surprisingly, most Egyptian businesses are extralegal, part of the country's shadow economy.

Forbes mentions the work of innovative Peruvian sociologist Hernando de Soto several times in the piece. Read de Soto's Reason essay "Citadels of Dead Capital". And here's an interview we ran with the man himself.

Comments

[Link]

Good point, Thoreau. Deposing a fascist leader and setting up a free country in an area where freedom doesn't exist otherwise couldn't possibly have any positive effects.

[Jean Bart]

Link,

Is Iraq a "free country?"

Right now it appears to be an occupied country. If you haven't done the act, don't claim that it has been accomplished.

[joe]

thoreau, your unwillingness to draw conclusions without any evidence proves that you're a communists. Or a terrorist. One or the other. Or both.

Wait. Let me get back to you.

[Mo]

As an Egyptian, I can say that things look a lot better now than when I was a kid. The infrastructure is getting better and internet access is only helping things faster. Mortgages, which were unheard of a decade ago, are a growing business. If this leads to greater political freedom in Egypt (and free-markets often do), this will help revolutionize the MidEast in the ways we dreamed invading Iraq would.

Bringing light to the shadow economy will help a great deal. For example, building collapses are relatively common occurances. These are not due to natural disasters, but to corruption and buildings not built up to code/design plans. Vigilantism was the most common solution, but not a stable one. If there is greater oversight (not necessarily governmental) and a way for disputes and liabilities to be settled, things should improve drastically.

[Mo]

Egyptian should read Egyptian-American. My pov is based on multiple visits in the past couple of decades and also word from relatives still out there.

[Andrew]

Well...

I couldn't say whether this IS a result of the war in Iraq,

(it COULD be a result of peace with Israel...Rick, isn't it interesting that all the reforms are occuring in the two "front-line" states who decided they had better things to do, than agitate for the Palestinean cause-- Egypt and Jordan-- rather than in the hard-case, Syria?)

but it is the sort of result we would LIKE the war to have...and the example proves that this kind of result is, at least, within the realm of the possible.

At least some war-sceptics seemed to have the attitude "Never gonna happen!" when it came to change in the Arab world.

If the Arab-speaking world consists of nothing but peaceful commercial republics a generation from now, Joe can insist it had nothing to do with the war...and I will be just as happy.

[joe]

Mo, where do they get these mortgages? Don't banks refuse to deal in interest?

[Jean Bart]

Andrew,

Well, the fact is that it hasn't happened yet; like the whole "Iraq is a democracy now" canard, you have the cart in front of the donkey.

[Jean Bart]

joe,

You can get interest-free mortgages in the middle east; do not ask me how they operate; but they exist in abundance in the Gulf States.

[Douglas Fletcher]

I've read that in Saudi Arabia they deal with this problem by adding the amount of interest in advance to the loan itself, so that the bank gets their money without the appearance of charging interest. This probably wouldn't fly with the Taliban, but apparently it works, and I suppose that is the model they would follow in Egypt.

I don't know how that would allow for making early payments to cut down the interest but I'd bet they could find some way to do it, when there's enough money at stake.

[Gene Berkman]

Interest is banned by the Koran, in a sever reading of the Biblical prohibition on "usury."
In the late 1970's and early 1980's wealthy individuals in Saudia Arabia, Kuwait & Libya began to establish Islamic Banks in various Middle East countries, including Egypt.

Islamic Banks don't charge interest, but in order to take a loan, the bank will take a "profit interest" or part ownership of your business until the loan is paid off.

That said, I believe Egypt, Lebanon and other countries have more normal (from our pov) banks which collect interest on loans in a more traditional manner. I think this is the case because the publicity I read for Islamic banks implied that they were needed to compete with the many "non-Islamic" banks functioning in the Middle East.

[Mo]

joe,
I don't know the precise dynamics of how interest payments are made koser, er halal. Gene's description is pretty accurate from what I do know. I'd have to ask my mom about that, she's bringing her 20+ years mortgage banking experience from here to there. She could probably give me a good idea of the precise dynamics.

IMO, mortgages and loans will be the great revolutionary influence in the MidEast. It will increase land ownership and through that, political power. I hope Andrew's right, but there's a lot of time and history until there are a bunch of commercial republics in the ME.

[Andrew]

I think there are a variety of "hidden interest" devices, similar to selling "zero-interest" bonds for less than face value: the repayment in full (at the stated face value) supplies the "hidden interest". Loans could actually amount to LESS money than the debtor will eventually repay.

[Rick Barton]

Andrew,

Wasn't it just yesterday that you were calling our attention to all of the anti-Zionist media coming out of Egypt? But now, after speculation of some very good prospects, you have them pegged as a "state who decided they had better things to do, than agitate for the Palestinian cause"

Of course, the cause of ending the Israeli government's thieving and murderous occupation of Palestinian land and stopping our government from paying for it is a worthy one regardless.

"it COULD be a result of peace with Israel."

The result?? That's not logical. Andrew, the Egyptian-Israeli peace treaty was in 1979! Egypt was then, bought off by our government for the Israeli government, and the cost to American tax payers is now up to several billion a year. Some Israelis have made a strong case that, every year some of those funds are involved in the ongoing smuggling or purchase of munitions from Egypt that are used against Israelis.

I will point out here, what we all already know;
peace and free enterprise do tend to coincide. Which, is another reason that the Forbes prospect is so cool.

"and the example proves that this kind of result(from the Iraq war) is, at least, within the realm of the possible."

It proves no such thing. A possible causal connection has to be established first. And, what might that be? After all, Egypt is not on anyone's list of nations that would be a target of US government aggression. Far from it.

Why do you seem so desperate to justify this war we were lied into? It is just another example of what libertarians and conservatives have been telling us for a very long time now; "You can't and should not trust the government"

[Rick Barton]

Is the Forbes' column accessible via the Free-Market.net link? I'm not finding it.

[Dingel]

I had to google for it - http://www.forbes.com/business/free_forbes/2004/0216/027.html

[Rick Barton]

Thanks Dingel. BTW, Free-Market.net is a great site!

[thoreau]

How many posts before somebody suggests this is positive fallout from the invasion of Iraq?

[Warren]

That would make it four, now wouldn't it?

[thoreau]

I didn't suggest it. I wondered if somebody else will suggest it. There's a difference.

[joe]

DeSoto should get nobels for Economics and Peace.

[Rick Barton]

What joe said.

[thoreau]

I might add that I don't think this is positive fallout from the invasion of Iraq. But since it has been asserted that the invasion of Iraq would transform the entire Middle East, I figure any good development in that region will eventually be blamed on the invasion of Iraq.

So I'm waiting for somebody to explain the cause-and-effect relationship.

[thoreau]

I third Joe's sentiment. All in favor say aye.

[Jean Bart]

I will believe the "reforms" when I see them. The Egyptian government is always promising reforms after all.

[Warren]

What Jean said

[Rick Barton]

This certainly is a hopeful prospect for the Egyptian people. Pro-free market reforms tend to benefit the masses. There is really not a case that this development is a ramification of the invasion of Iraq since Egypt is not on anyone's list of nations that would be a target of US government aggression. Far from it. If we found out that the reforms had been in the works predating the Iraq war, then of course we would have absolute proof of what seems obvious.

[Rick Barton]

Time to cut off the Egyptian government from US tax dollars. The Egyptian government originally started receiving funds from our government for the unprincipled purpose of a pay off for the Israeli Government. There is evidence that some of those funds actually wind up paying for munitions, which kill Israelis. Now, Egypt is no longer a credible threat to the Israeli military any way. The Egyptian government has such a brutal, shameful human rights record:

http://www.hrw.org/wr2k3/mideast2.html

http://www.hrw.org/doc?t=mideast&c=egypt

One could only guess our government has no standards at all governing who gets our money. Also, economic aid tends to slow free market reforms.