Middle Eastern countries – economically destructive

I couldn’t believe my luck when I read James Surowiecki’s Financial Page in this week’s New Yorker magazine. With my AS level class I am just completing Economic Systems so this article was particularly fitting. Surowiecki alludes to the fact that countries in this part of the world that have authoritarian regimes also have economies that are dangerously unstable. He mentions the following:

* Economic growth and job creation has not kept up with the growing labour force whcih has led to high unemployment – 25% of young workers in Egypt are out of work
* Inflation has been a major problem even before the oil and food price increases
* Corruption is endemic
* The government and big business are tightly woven as to be identical, and competition has been discouraged in favour of central planning and private monopolies.
* Political favouritism is rampant – this forces much activity into the informal sector. 85% of small businesses are not registered with the tax authorities. Growth tends to concentrated with those that work for the state

Although there has been some effort to reform their economies, many Middle Eastern countries failed to introduce genuine free-market competition, the most important feature of a healthy capitalist system. Political scientist Oliver Schlumberger calls these reforms patrimonial capitalism – a system in which the key determinant of success is how close you are to those in power.

Patrimonial capitalism’s legacy is that many people see reform as a substitute for corruption and self-dealing. Government employment is till the easiest way to get a job and subsidies have become of greater importance. What the region needs is less crony capitalism and more competition.

2 thoughts on “Middle Eastern countries – economically destructive

  1. Robin Watkins

    I note the comments on the Middle East. You might want to go to website: G. Edward Griffin. This is alternative media information. He talks about the USA and interference in this region..No Surprise! Look up the USA Foreign Relations Committee. They have possibly hijacked the USA, politically. The despots were put into these Middle Eastern/ North african countries by the USA and probably the Brits. The despots have gone but has the regime changed? The USA wants access to Iran and its 75,000,000 people. They are consumers and will add to the funding of the Western Capitalists system that doesn’t negotiate or inform the consumers who are the Machine.

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