March (US/Israel) Public Forum: Entrepreneurs vs. Oligarchy

Princeton study claimed U.S. governance is more an oligarchy now than a democracy  and offered this definition of an oligarchy:

An oligarchy is a system where power is effectively wielded by a small number of individuals defined by their status called oligarchs. Members of the oligarchy are the rich, the well connected and the politically powerful, as well as particularly well placed individuals in institutions like banking and finance or the military.

For the Public Forum U.S./Israel two-state topic, residents of the Palestinian territories currently lack an option to consent to their governance. Without consent, how can governance of the Palestinian territories be legitimate? From the U.S. Declaration of Independence:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed,

Opposition to Israeli policies unites Palestinians, but like other Middle East/North Africa countries and territories, tribal conflicts make democratic reform difficult. Would a future Palestinian state develop into a peaceful democracy, a seething tribal conflict, or something in-between?

7 Things to Consider Before Choosing Sides in the Middle East Conflict,” (Huffington Post, July 28, 2014), was written during the 2014 Israel-Gaza conflict. The author is critical of both sides in the conflict, but concludes a two-state solution is needed. The author notes a “tribal” conflicts in that Jewish people support Israel and Muslims side with Palestinians.

Across the Arab world though, deeper tribal and clan relationships play a major role. “Palestinian Tribes, Clans, and Notable Families,” (Center for Contemporary Conflict, 2008?) explains why clans are stronger when states are weaker:

The clan structure in Palestine is far more consequential than the Bedouin tribes, and has become even more important since the breakdown of the Palestinian Authority structures during the second uprising, or intifadat al-Aqsa, beginning in 2000. A clan, or hamula (plural: hama’il), will consist of at least several extended families (a’ila) claiming a shared ancestry, and linked through the father’s male line. …

Where states are strong and can reliably protect citizens, clans weaken; where states are weak, clans are strong. This has become the central reason why Palestinian clans have flourished both under Israeli occupation and under conditions of PA breakdown. …

The study also outlines the importance of “Notable Families”:

The third clan-like grouping in Palestine in the urban elite notable family, a social formation typical throughout the Arab lands of the Ottoman Empire. Many of the most well known and prominent Palestinian families come from this notable, or a’yan, social class: Husayni, Nashashibi, Dajani, Abd al-Hadi, Tuqan, Nabulsi, Khoury, Tamimi, Khatib, Ja’bari, Masri, Kan’an, Shaq’a, Barghouthi, Shawwa, Rayyes, and others. These are extended families that dominated Palestinian politics until the 1980s, and are still relatively prominent today.

For the March Public Forum topic, “Resolved: The United States should no longer pressure Israel to work toward a two-state solution,” all sides in any debate should be familiar with the role of tribes, clans and “notable families” as oligarchs across the Arab world.

Critics of U.S. politics can also point to notable American families: from the Rockefeller, Ford, and Kennedy families of the 1900s, to more recent families like the Waltons (of Walmart), Kochs (oil, chemicals), Mars (candy), Cargill-MacMillan (grain), Cox (media), and Johnson (cleaning products). Here is Forbes  2016 gallery of richest families). (More recent notable families in politics would include Bush and Clinton families, and now Obama and Trump families).

Most “oligarchic” families in the U.S. struggle to maintain wealth and power past a generation or two, and rarely are able to slow or  block upstart entrepreneurs from disrupting established business empires. Of all the successful tech entrepreneurs, few if any came from “ruling elite” families. The U.S. economy features a steady stream of self-made success stories, as suggested by the turnover in each year’s Forbes 400. From “How America’s Richest Self-Made Billionaires Built Huge Fortunes From Humble Beginnings“:

More than two-thirds of this year’s Forbes 400 are self-made billionaires. That’s 266 out of 400 who can say they built their fortunes from scratch. Among the self-made group are eight of the nation’s 10 richest, starting with the top three, Microsoft cofounder Bill Gates, Amazon CEO Jeff Bezos and legendary investor Warren Buffett.

Top-down political control is far greater across Middle Eastern countries where oligarchies hold political and economic control. Intermarried military, political, religious, and business elites make and enforce regulations that govern countries from Iran to Egypt. These elites take positions in government enterprises and bureaucracies and find similar positions for relatives. Efforts to remove oligarchies ruling in Libya and Syria led quickly to violence as tribal groups battled for regional and national political control.

Intermarried ruling clans have political implications as “notable families” are more tightly related than in western countries. “Health fears question Arab tradition of cousin marriages,” (Al Arabiya EnglishArt & Culture, April 4, 2915) notes:

In a report in the Middle East Journal of Family Medicine, Dr. Aida Al-Aqeel, pediatric geneticist and endocrinologist at Riyadh Military Hospital, wrote, “ In Saudi Arabia like other Middle Eastern countries, first cousin marriages account for 60 – 70% of all marriages, leading to uniquely common disorders which are either rare by Western standards or are unknown.

Apart from health issues, intermarriage within and among leading families makes for powerful oligarchic control. Entrepreneurs outside the ruling families find access to investment capital and government permits difficult, plus face heavy regulations (the initial source of Arab Spring protests).

The PBS program with Hernando de Soto, “Unlikely Heroes of the Arab Spring,” explains:

Screen Shot 2017-03-13 at 11.36.33 AM… this public television special presents, for the first time, the basic human and economic events that led to the Arab uprisings in the Middle East and North Africa. The program shows that “The Arab Spring” was less a political event than it was about the coming of the industrial revolution to a region where over 90% of the population lives and works outside the rule of law…

Amid provocative images of the Arab uprisings of 2010 and 2011, De Soto introduces the people and events that recently rocked the Arab world…  it was his similarity to the 180 million informal Arab entrepreneurs; many of them under 30 and computer literate. Over 100 of them followed Bouazizi in acts of self-immolation.

A 2011 Freeman article, “The Roots of Egypt’s Revolt” reports on the history of Egypt’s oligarchic economic system (link to pdf handout). U.S. policy toward the Middle East has for decades helped maintain Egypt’s corrupt political and economic system. Consider: “United States has given the Egyptian government over $2.1 billion, including $1.3 billion in military aid, every year since 1980.” The Egyptian government is funded by tourism, the Suez Canal, and U.S. aid. That money flows to oligarchs who control the economy.

The ideal of citizens controlling a country through voting, critics argue, won’t solve America’s problems, won’t bring peace or prosperity to the Middle East, and won’t reduce terrorism around the world.

Voting can give people a say in their government. But constant elections and ever-changing constitutions add uncertainty and keep societies politicized.

The powers Constitutions give to governments are key, and each new government shouldn’t be able to draft its own constitution for majority vote. Egyptian President Morsi had his 2012 constitution approved, replacing a 2011 constitution passed after Mubarak was removed from power. Then in 2013 the Egyptian military suspended the 2012 constitution, ousted Morsi, and had a new new constitution passed in 2014. Constitutions that can be so easily altered and replaced do little to limit the size and scope of government power.

The U.S. purple-finger policy for Afghanistan, Ukraine, and the Middle East pushes people to vote and by their vote be obligated to submit to those elected. This is dangerous for tribal and clan-based countries. Kenya has some 42 tribes and when political parties were made legal, soon has 42 political parties.

Beyond the challenges of democracy in general are deeper problems of pushing political change on other countries, each with their own history and cultures. U.S. and U.K. governments, military, and aid agencies have been active in Middle East countries for over a century. This Cato Institution Commentary from 2003 reflects on President Bush’s initiative to promote democracy in the Middle East:

    In his recent speech before the National Endowment for Democracy, President Bush pledged that the United States would embark on a decades-long commitment to bring democracy to the Middle East. But democracy is not a gift President Bush can bestow on people in distant lands.
    Although the goal is laudable, the Bush administration will be disappointed with its effort to establish a stable liberal democracy in any Middle Eastern nation. That’s the verdict rendered by history, the contemporary reality of the region, and our own government experts.
    Today, the Middle East lacks the conditions, such as a democratic political history, high standards of living, and high literacy rates, which stimulated democratic change in, for example, central Europe and East Asia. Ironically, many Arab countries are ruled by authoritarian leaders who are more liberal than the citizenry they lead.

People should have a say in their governance, but not a say in how other people’s lives should be governed. Richard Pipes in Property and  Freedom  points out that governments were considered just when they enforced the laws already existing in society. Grotius and other legal scholars emphasized that society was not the state, and the state’s legitimate reach did not extend to private life, liberty and property. These views of just government were debated and advocates of aristocratic divine rule and absolute authority for English kings lost that debate.

The Dutch model of a commercial society self-governed with royalty of limited power came to England with William of Orange, replacing the French model James II had installed by force across the country. (Highly recommended summer reading:  1688: The First Modern Revolution.)

When the candidate from one ethnic group or tribe loses, so does the entire ethnic group or tribe. All of a sudden they lose subsidies and their protection from complex and detailed regulations. When their politicians are out of power, police and other government officials see their property and businesses as fair game for exploitation or expropriation. When we in America hear news from abroad of “ethnic unrest” or “tribal conflict” it is usually between those in political power and those out of power.

“Terrorists” and “revolutionaries” are mostly tribal and ethnic gangs battling rival groups in government. When the Irish ran Boston, Irish entrepreneurs had an advantage in business. During the Jim Crow era in the South, African-American entrepreneurs and businessmen had to get permits from white government officials to run or expand their businesses. (Echoes of Jim Crow laws still survive in local licensing regulations, like this one restricting hair-braiding in Utah.)

Economic freedom is the key to peace and prosperity in the Middle East. Democracy can as easily fuel conflict as contribute to stable governance. Voting should be for deciding who will run the government, but not for what the government will do once in power. Constitutional economics is all about limiting government authority so that voting doesn’t turn into a war of all against all, of each ethnic, tribal, and regional group against all others.

Across the Middle East, fast population growth crashed into closed economies where elites control jobs in government and connected businesses, while majorities struggle to make a living in the informal sector.  By “informal” we mean they work in enterprises without business permits. They live in houses their families may have lived in for generations, but they can’t get title for the land under their home.  Life is insecure because livelihood is insecure. Only elites in the oligarchy have access to the formal legal system.

Because the U.S intervention in Iraq wasn’t able to promote economic freedom there, and secure opportunities for everyday people to start business enterprises, Iraq continues to be a failed state. Megan McArdle’s Atlantic article reports on the lack of economic freedom in Iraq. McArdle’s blog post on the story is here.

Hernando de Soto led a research team to detail economic problems in Egypt, and writes about the findings in a 2011 WSJ article “Egypt’s Economic Apartheid More than 90% of Egyptians hold their property without legal title.” (google full title for access to article.) This short post in The Atlantic quotes from the article:

     The examples are legion. To open a small bakery, our investigators found, would take more than 500 days. To get legal title to a vacant piece of land would take more than 10 years of dealing with red tape. To do business in Egypt, an aspiring poor entrepreneur would have to deal with 56 government agencies and repetitive government inspections.
     All this helps explain why so many ordinary Egyptians have been “smoldering” for decades. Despite hard work and savings, they can do little to improve their lives.

On the upbeat side, here is success story: “Palestinians attempt to create their own start-up nation,” (Financial Times, May 1, 2016):

   Less than five years later, Yamsafer is one of the region’s largest hotel booking sites, according to its founder. It recently closed a $3.5m funding round in one of the biggest venture capital deals the Israeli-occupied Palestinian territories have seen.
   Yamsafer employs 70 people in Ramallah, a place where too many young university graduates are chasing too few jobs. “The people we hire are more hungry than people you would have hired in Dubai, Jordan or elsewhere,”

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