The people of the Middle East, like people everywhere, yearn for economic and political freedom. Last week, Egyptians succeeded in taking a big first step in that direction. We still don't know, of course, how events will play out, but I am optimistic on their behalf. They demonstrated remarkable courage and resiliency as they faced down government thugs and Egyptian Army tanks for nearly three weeks. More than 300 people were killed, but 82 million Egyptians had a stake in the outcome.
In the February 3, 2011 edition of the Wall Street Journal, Peruvian economist, and author of The Mystery of Capital1, Hernando De Soto wrote a revealing op-ed2. Mr. De Soto is an internationally respected researcher, and as such he and his organization, the Institute for Liberty and Democracy, were hired in 1997 by the Egyptian government to determine how many Egyptians were economically marginalized; that is, how many people operated in the underground economy due to the lack of property rights protection, access to credit, and other impediments to commerce.
In 2004, De Soto and his researchers produced and presented a 1,000 page document, including a 20-point action plan, to the Egyptian cabinet. The plan was adopted, but before it could be implemented, the Minister of Finance, who had championed the project, was dismissed by President Mubarak.
In that 2004 report, it was estimated that 92% of Egyptians held no legal title to the real estate they occupied. One obvious result of that lack of protection was that the Egyptian underground economy was estimated to be 30 times larger than the value of all the companies listed on the Cairo Stock Exchange; and 55 times greater than all foreign direct investment since the time of Napoleon's invasion. That foreign investment included the cost of the Suez Canal and the Aswan Dam.
Briefly stated, the report concluded that it had been virtually impossible for the entrepreneurs of Egypt to operate legitimate businesses. To open a small bakery could take more than 500 days. To get legal title to vacant land required more than 10 years of bureaucratic haggling. An Egyptian entrepreneur could expect to deal with at least 56 government agencies and endure endless and repetitive government inspections. Then, of course, there was always the threat of violence and mayhem, with no means of protecting life or property from either government thugs or common criminals; but I repeat myself.
Yes, I am optimistic for the people Egypt. Indeed, I'm optimistic for the entire region, as Arab and Muslim populations have shown an increasing desire for liberty, economic opportunity, and self-government. They've made a courageous start. The once blustering tyrants are cowering, but they are still dangerous. The entire world is watching. In Egypt and elsewhere, American public support for the nature-given rights of life, liberty, property, and the pursuit of happiness may be the deciding factor. So, rather than obsess about the evil nature of Islamic fundamentalism and radical minorities like The Muslim Brotherhood, we and our leaders should match the physical courage of the Egyptian people with our own (long dormant) political courage. We should encourage people everywhere by the example of insisting on the re-establishment of economic liberty, respect for privacy, and property rights protection here at home. There is much to gain for all of us. Until next week,
PATIENCE, DISCIPLINE, and CONFIDENCE in the FUUTURE! mh
1 The Mystery of Capital, Hernando De Soto, Basic Books, 2000.
2 http://professional.wsj.com/article/SB1000 1424052748704358704576118683913032882.html