Experts on the Soviet Union used to examine everything except its economy. They
were subsequently surprised when economic dysfunction caused the empire’s
demise. Similarly, today, economic factors are largely ignored in current
analyses of developments in Iran, the Arab Spring and the Arab-Israeli conflict.
Disregarding economic history and dynamics leads to a misapprehension of the
region’s challenges, and how best to cope with them.
Few ask why Iran’s
mullahs are spending so much of their oil income, which they desperately need to
feed an impoverished population, on their nuclear project; why are they inviting
painful sanctions and risking a military assault? The answers might provide a
clue to Iran’s strategy.
The mullahs are spending a fortune and taking
high risks with their atomic project, primarily because a Shi’ite Iran seeks
“The Iranian revolution is not exclusively that of
Iran,” Ayatollah Khomeini averred, “because Islam does not belong to any
particular people. We will export our revolution throughout the world, because
it is an Islamic revolution.”
Besides constantly spreading its revolution
through terror and other means, Iran must feed nearly 60 million people who
cannot survive without welfare and subsidies. On assuming power Ayatollah
Khomeini slapped price controls on agricultural products to reward his
lower-class supporters, the Bazareens. He destroyed Iran’s once-prosperous
Millions of farmers migrated to shanty towns around
major cities. Welfare was allocated based on family size, so the birthrate
skyrocketed, doubling Iran’s population to over 80 million.
Because it is
sustained by income from oil, the regime’s survival depends on high oil prices.
Iran has been investing $200 million a year in Hezbollah and Hamas not to kill a
few dozen Jews, but to ensure that when the price of oil slumps, threats of war
can drive it up again.
The mullahs are also seeking nuclear weapons as a
deterrent, to secure Iran’s ability to control the price of
Possessing the bomb, Iran could block the Straits of Hormuz, cutting
off oil shipments from the Gulf – the source of the lion’s share of world
consumption – until it receives a “transit fee” on every barrel passing through
what it considers its territorial waters. This would eventually transfer so much
European wealth to Iran that in a few years Iran could dominate Europe without
firing a shot.
If anyone challenged Iran’s blockade, it could launch a
terror campaign involving chemical or biological weapons or dirty bombs. It
could also threaten to incinerate the Saudi and Iraqi oil fields, bringing the
world’s economy to a halt.
Iran would most likely ratchet up its toll
gradually, by, say, a mere $5 per barrel. Would Europe or the US go to war with
a nuclear Iran over an incremental $5 rise in the toll? Once it controlled the
flow of oil, Iran could depose the Saudi regime, the hated guardian of Sunni
Islam. It could engineer coups by Shi’ites who are a majority in Saudi’s
oil-producing provinces, and capture Mecca and Medina.
Islam under the Shi’a banner, a nuclear Iran could dictate terms to an impotent
It could eradicate the Little Satan – an isolated, emasculated
Israel – with little risk. It could also proceed with its jihadist mission to
establish Shari’a rule worldwide.
If Iran is not stopped now, it may be
impossible to stop it later. By effectively cutting Iran’s oil exports and
bankrupting the regime it may not be necessary to attack its nuclear
As for the Arab Spring: little attention has been paid to how
Egypt’s Islamic heritage and its socialist past and statist present have shaped
the current crisis.
Neither the rage that united the young, who defied
Mubarak’s dictatorship in Tahrir Square, nor the Islamic Brotherhood’s takeover
of the government in defiance of the generals, nor how the Arab spring may
unfold can be correctly assessed without understanding Egypt’s economic history
and dynamics and how they interacted with religious, cultural and political
In order to keep their impoverished citizens pacified, Arab
rulers – including the young officers who deposed King Farouk of Egypt in 1952,
copied post-WWII welfare regimes. They nationalized their economies and
strangled them with huge autocratic bureaucracies that totally subjected the
economy to politics, breeding inefficiency, waste, cronyism and
Arab as well as African states, most notably Egypt, that
under colonial rule was relatively prosperous, have become destitute because the
socialist and statist systems they adopted created dysfunctional economies and
governments that were eventually overthrown by military juntas.
enabling the poor to have larger families, welfare also created a demographic
bubble that led to massive unemployment. The many children who did not reach
productive maturity drained scarce family resources.
youngsters roamed the streets, ready to riot, increasing insecurity and
SINCE MUBARAK’S presidency, Egypt’s population has doubled.
About 40 percent of Egyptians are dirt-poor fellahin, farmers (in the West, only
3.5% of people work in agriculture). Tradition encouraged them to sire many
children to secure free labor and old-age support.
50% of the population is under the age of 25, compared with 32% in Germany and
37% in France. Officially, unemployment in Muslim states is close to 10%, but it
is probably much higher among youth.
Even during the past decade, when
Egypt’s economy improved and fertility dropped, massive unemployment and
make-work projects hindered economic development.
Income from oil, or
vast amounts of foreign aid (which were funneled through corrupt elites that
squandered or stole much of them) and Cold War politics sustained these
Heavy taxation, choking bureaucracy and
cronyism gradually decimated a small Egyptian middle class, the engine of
economic progress. Civil society practically disappeared. An ever restive
“street,” manned by unemployable “students,” was fertile ground for incessant
incitement by Islamic imams, by radicals of all stripes and by a jingoistic
press. Labor unions kept promoting radical socialist ideas, absorbed when Egypt
was practically a Soviet satellite and its elites were trained in
The intellectual elites – academics, the media, writers, lawyers,
etc., and their associations became captive to radical elements – Islamists,
jingoists and communists.
The “street” became an erratic and feared
political wild card. With no countervailing classical liberal tradition in the
Muslim world, there was nothing to resist radicalization.
inherited from colonial rule – functioning health, educational, legal and
transportation systems – degenerated. Growing discontent was brutally suppressed
by security services that were originally led and instructed by Communist East
Islamic insistence on complete obedience to the ruler
legitimized political, social and personal repression.
made marriage unaffordable. It harmed especially women and the sexually
repressed young, who could not marry until well into their thirties if at all,
creating an emotional powder keg ready to explode politically, as it eventually
did in Tahrir Square.
Without profound social and economic changes,
Muslim rage will keep feeding unrest and rebellion.
Brotherhood takeover in Egypt may repress, for a while, internal strife, but it
will probably result in worse crises, especially economic, in the
The story of the putative Arab spring is only beginning to
unfold. If we keep ignoring the economic elements involved in the revolt, it may
be difficult to address correctly the challenge posed by Islamic radicals who
have proven to be most adept at exploiting popular rage and directing it to
foreign adventures, such as a war of attrition with Israel.
impressive demonstration of the positive force of economics was offered by the
remarkable “peace process” between Israelis and Palestinian Arabs that took
place from 1967, when Israel ejected Jordan from its illegal occupation of the
West Bank, until the 1987 first intifada.
While not officially recognized
as such because it was not a political process but an economically driven
development, this informal peace process saw an amazing, albeit partial,
reconciliation between the two peoples. Tens of thousands of Israelis shopped
and ate in formerly extremely hostile Arab towns and hundreds of thousands of
Palestinians Arabs were gainfully employed in Israel learning skills and
attitudes that had a great positive impact on their society.
spontaneous process, initiated by General Moshe Dayan’s policy of minimal
interference in internal Arab affairs, created a mutually beneficial exchange
between Israel’s developed economy hungry for less costly labor and the
Palestinian poor and labor-intensive economy.
The Palestinians’ standard
of living quadrupled. Trade and small manufacture flourished. Agriculture
was modernized and made productive. Health and education were greatly improved,
as was the status of women, children and the lower classes.
great success of this non-political process, a messianic peace camp in Israel
and the Palestinian Liberation Organization were one in insisting on a political
solution leading to Palestinian statehood. This despite the certainty that such
a state would be an irredentist and repressive state, like most other Arab
Israeli leaders made a pact with the devil Arafat.
foolishly established the terrorist PLO as the sole representative of the
Palestinians, gave it a territory and a population to rule, money to function
and even guns.
Upon assuming power, Arafat immediately sabotaged all
economic relations with Israel. He preferred that his people live in poverty so
that he could recruit their frustration and anger as a weapon against
Thus a great opportunity for a real peace between peoples was
missed and replaced by a conflict-prone political process. It is leading nowhere
except to greater division and war.
Let us not forget that it was not
politics that brought an end to centuries of the worst-ever bloodshed among
Christian European nations, but the defeat of violent regimes followed by a
gradual economic union. It apparently made people realize that economic
cooperation is preferable to military conflict.
There is no reason why a
similar process cannot take place in the Middle East if politicians will not
hinder the natural cooperation that economic exchange generates.