The Israel Center
for Social & Economic Progress
an independent pro-market
public policy think tank since 1984
Winner of the 2005 Award for Institutional Excellence and the 2006 Templeton Award for Student Outreach
Log in or Register
The Jerusalem Post9 Mar ’11
Too little attention has been paid to how Egypt’s socialist past and welfare-state present shaped the current rebellion.
fundamentals • globalization • taxes • limiting government • welfare • world affairs
Too little attention has been paid to how Egypt’s socialist past and welfare-state present shaped the current rebellion. But neither the daring of the young people who defied a brutal dictatorship nor their passion and rage can be understood without knowing this history.
Many Arab and African states, including Egypt, are backward because socialism and statism created dysfunctional governments that were eventually overthrown by military dictatorships. Welfare especially worsened the desperate predicament of Muslim societies, where political, social, and personal repression is upheld by piety while women and the sexually repressed young, who cannot marry until well past 30, suffer terrible mistreatment and disabilities.
Welfare’s reduction in child-mortality rates helped create a demographic bubble, with millions of unemployed and probably unemployable youth roaming the streets, ready to explode in riots. This bubble has been draining what little resources these nations possessed; their investments in raising their youth have not seen appropriate returns, especially when they die young. The growing numbers and rage of the chronically unemployed have made it difficult for these countries to advance materially—even when their economies improved and fertility was dramatically reduced, as occurred in the last decade in Egypt.
About 40 percent of Egyptians are dirt-poor fellahin, farmers (in the West, only 3.5 percent of people work in agriculture). Tradition encouraged the siring of many children, to secure free labor and old-age support; consequently, about 50 percent of the population is under 25 (compared with 32 percent in Germany, 37 percent in France). Unemployment in Muslim countries is officially close to 10 percent but is probably much higher among the young.
Egypt’s population has doubled since the beginning of Mubarak’s reign. Welfare provided the means for the very poor to keep body and soul together and to have many children. But Egypt’s highly bureaucratized and corrupt crony system inhibited economic growth and denied the young employment and advancement beyond subsistence. Rising prices made marriage unaffordable until well into a man’s thirties. Sexual frustration and hopeless unemployment combined to create the rage that the Tunisian conflagration ignited.
What happened in Egypt between the end of the Second World War and the present rebellion illuminates what has happened economically throughout the Arab world (and much of Africa, too). In order to keep their religiously, culturally, and politically repressed citizens pacified, Arab dictators copied the West’s post-World War II welfare policies. Upon taking power, they nationalized industries and created socialist welfare states with autocratic governments.
When young Egyptian officers deposed King Farouk in 1952, they structured their “republic” on third-world models of military dictatorship. The Egyptian economy was totally subjected to politics, breeding inefficiency, waste, and corruption.
Dependence on Arab oil and on vast amounts of foreign aid (which was funneled through corrupt elites that squandered or stole much of it), together with Cold War politics, maintained these repressive dictatorships, however horrendous they were (e.g., Idi Amin). When the civilians ruling them messed up too badly, or lost in war against Israel, they were overthrown by the army, which then made bigger messes.
Repression, heavy taxation, and choking bureaucracy gradually did away with the small Arab middle class, the bearer of modernism and economic progress. Civil society disappeared. An ever restive “street,” composed of chronically unemployed “students” and many millions of idle or underemployed university graduates, was prey to incessant incitement by radicals, by the media, and recently—with the help of aid from U.S. labor—by the unions, which still hold to socialist ideas. “The street” became a wild card, a spoiler, an erratic but feared force in politics. Intellectuals (academics, the media, writers, lawyers, etc.) and their organizations also became captive of their most radical members, usually communists, socialists, or Islamists. There was not in the Arab world a countervailing classical-liberal tradition to resist this process of radicalization.
Nepotism and corruption made the wealth gap between the elites and the rest of the population grow into a gaping chasm. Dysfunctional governments could not deliver even the most elementary services. They destroyed the little blessings inherited from colonial rule: functioning health and educational systems, the rule of law, etc. Growing discontent was suppressed by ever-expanding security services (with instruction from East German “experts”) that acted with increased brutality and lawlessness.
Distributive politics, facilitated by huge oil income or by foreign aid, fragmented and radicalized politics. As government became the largest employer and purchaser of goods and services, the struggle for “benefits” and handouts became violent and corrupt. Cronyism became rampant. Laggard economic growth cut employment prospects and unemployment reached unbearable proportions . The need for welfare became desperate and forced governments to resort to deficit spending, causing high inflation. As distress and unrest grew, and as the welfare system increasingly corrupted both politics and the economy, power became a sole arbiter.
While this decline happened relentlessly in Arab and African states, in other parts of the underdeveloped world—such as India and China—prosperity advanced. The telling comparison with these prospering countries, let alone with a relatively successful Israel, inflamed the envy and rage of the Arabs.
As Indonesia teaches, there is no innate reason why a formerly repressive Muslim regime cannot nurture a democracy of sorts. To take root, however, the oppression bred by the failing states of welfare kleptocracies must cease, a tall order indeed. Also, Islamic strictures that reduced women to childbearing beasts of burden must be abolished.
Without such profound changes Arab frustration and rage will keep instability alive and provoke occasional rebellions. The army takeover in Egypt may bring about a lull in open hostilities, but army rule will probably result in worse crises in the future. Many of the top Egyptian officers were Moscow-trained, and they are either crypto-communists or socialists, devoted statists militantly opposed to a market economy. They have been great obstacles to some of the hesitant reforms that Mubarak tried to launch, insisting on maintaining state—namely army—control of the economy. They received much popular support because the Mubarak reforms, partially successful, created in Egypt a corrupt crony capitalism that helped spark the rebellion.
The second echelon of command in the Egyptian army, the colonels and majors—the likes of the officers who rebelled against King Farouk—are another story. A significant proportion, those not US-trained, are probably devout Islamists. There is a danger that they will join the Muslim Brotherhood in a takeover bid when the army botches up the economy, as it most certainly will as it pursues power and corrupting economic domination.
The story in Arab lands is just beginning to unfold. Those who ignore the economic elements involved in the evolution of the rebellion—as they ignore the role of the threat of economic bankruptcy in stimulating growing Iranian aggression—will be unable to correctly assess whether present events in Egypt are a prelude to greater democracy or to greater repression that will come about when Islamic radicals, with their supporters in the armed forces, may prove to more adept at exploiting popular rage, and take over the regime.
The Jerusalem Post30 Jun ’15
Israel’s last elections proved how right David Ben-Gurion was when he said that, in Israel, whoever does not believe in miracles is not a realist.
PJ Media20 Jun ’15
The security challenges facing Israel obscure other deep concerns about the viability of Israel’s economic system.
The Jerusalem Post7 Jun ’14
Unless the laggard Israeli economy is reformed soon, its problems—including its morally debilitating corruption—may threaten its future.
Israel Hayom15 May ’14
What does it say about Israeli society and the system of government when a prime minister is convicted of taking bribes?
Israel Hayom23 Feb ’14
What kind of education should it offer and at what cost?
The Jerusalem Post9 Jan ’14
The productivity of Israeli workers is only two-thirds that of Americans, and their salaries are much lower.
The Jerusalem Post11 Jul ’13
As he completes an exceptionally difficult 8-year tour of duty during a worldwide financial crisis, Stanley Fischer has achieved a unique status.
The Weekly Standard7 Jun ’13
When Israel finally discovered a bonanza of natural gas about five years ago everyone was happy. But then fierce arguments broke out—and rightly so.
The Weekly Standard22 Apr ’13
The economic future of Israel now rests in the hands Netanyahu, Lapid and Bennet. Will they succeed in fulfilling the most difficult and complex mission of liberating Israel’s economy?
Israel Hayom2 Jan ’13
The Israeli government could eradicate poverty by breaking the monopolies and spurring competition.
The Jerusalem Post7 Dec ’12
Our socialist and statist heritage bred our inefficient system. But foreign aid and remittances were serious enablers. The struggle against political and economic concentration could finally permit Israelis to overcome this destructive heritage.
Israel Hayom8 Nov ’12
The time to prepare the reforms is now, so that after the Israeli elections, the prime minister can immediately devote his time to moving them forward.
The Financial Times21 Jun ’12
Israel Hayom6 Jun ’12
To grapple with the impending crisis, Israel’s government must improve the nation’s competitiveness.
The Jerusalem Post7 May ’12
The Wall Street Journal3 May ’12
Reform-minded Prime Minister Benjamin Netanyahu is stymied by bureaucrats and monopoly tycoons.
Middle East Quarterly30 Mar ’12
As the high hopes for a brave new Middle East fade rapidly, Western policymakers must recognize that promoting market economics and its inevitable cultural changes are far more critical to the region’s well-being than encouraging free elections or resolving the Arab-Israeli conflict.
The Jerusalem Post17 Feb ’12
The choice is between an efficient, growth-inducing market economy or a welfare state, meaning a huge government that actually harms the poor and inhibits prosperity.
The Jerusalem Post25 Oct ’11
Aversion toward the rich has had strong roots in Zionism since its early leaders embraced Marxist practices.
Is capitalism in crisis? Of course.
The Jerusalem Post10 Aug ’11
The tent-dwellers’ revolt calls for the enforcement of ‘the will of the people’ (like all autocrats). It refuses to rely on Democracy.
The Jerusalem Post9 Aug ’11
David Lewis, the exceptional entrepreneur and philanthropist, and head of the Isrotel Group dies at 87
The Jerusalem Post20 Jul ’11
Although MKs appear concerned over rising costs, it was they who allowed this injustice to occur in the first place.
The Jerusalem Post28 Jun ’11
Who is to blame for the shameful situation in which millions of Israeli workers – who earn about half what American workers earn – have to pay double for goods?
The New Republic19 May ’11
A Middle East peace strategy that could actually work.
The Jerusalem Post15 Mar ’11
Israel needs to slash its state budget by as much as possible if it wants a chance at fighting waste and corruption.
The Jerusalem Post7 Feb ’11
The Herzliya Conference has become an important international event, but one central issue is absent: Israel’s debilitating economic concentration.
The Jerusalem Post22 Jan ’11
It’s highly unlikely that government can ever learn to make long-term plans and execute them efficiently.
The Jerusalem Post23 Dec ’10
How can one dare compare narrow-minded religion with the all-embracing faith of universality and equality that is socialism?
The Jerusalem Post1 Dec ’10
Many of the social and economic troubles we are experiencing are due to the public’s lack of understanding of the need for economic literacy.
The Jerusalem Post17 Oct ’10
The PM’s courageous decision to tackle economic concentration was misrepresented by several of our media publications—owned of course by tycoons.
The Wall Street Journal8 Oct ’10
Economic concentration hurts the country’s viability and the chances for peace.
The Jerusalem Post4 Oct ’10
A damaging ethos of ‘welfarism’ and distributive politics has come to dominate not only academia but our cultural, military and even our business elites.
The Jerusalem Post19 Aug ’10
The reformers must know the importance of the reform’s success both for Israel and for their careers, and what damage they will incur if it fails.
The Jerusalem Post13 Jul ’10
Kagan’s admiration for Justice Aharon Barak’s philosophy may have revealed her own predilection for radical judicial activism.
The Jerusalem Post30 May ’10
We must dismantle the oligarch-owned monopolies that impoverish the Israeli consumer and choke our economy.
The Wall Street Journal18 May ’10
The OECD’s invitation to Israel is a “seal of approval” but the country still needs more reforms.
The Jerusalem Post10 Feb ’10
The world’s astonishment at Israel’s response to the Haiti disaster is insulting. What we saw there was Israel’s true face.
The Jerusalem Post10 Jan ’10
Individual initiative and freedom are essential for creativity—in hi-tech as in all other spheres.
The Jerusalem Post14 Oct ’09
As far as Rose Friedman was concerned, public kudos did not matter that much. She persisted in being a rose, no matter what.
The Jerusalem Post22 Sep ’09
Lasting peace must grow from the bottom up, from an “economic peace process” that proves what advantages peace has to offer on a daily basis. It cannot come from signing peace agreements with radical and corrupt entities propped up by corrupting Western handouts.
Recognized by the IRS as a charitable organization pursuant to Section 501(c)(3) of the Internal Revenue Code.
Tax ID # 13-3129249
Copyright © 2001-2022
The Israel Center for Social & Economic Progress
“Where there is
there is no Torah.”
Pirkei Avot (Ethics of the Fathers)
Contributions made out to Friends of ICSEP can be mailed to:
Fox Associates, 100 Front St., West Conshohocken, PA 19428, USA