Sunday 26 June 2011

Why Egypt & Arab States Need Social Liberalism & Centrism

Note (Feb, 2012) : I wrote this piece as a comment on something, not an actual long and edited proper article. As I review it months after writing it the first time, I realise that I have done a few over-generalisations, quite a few inaccuracies, but it remains in essence viable and correct.

This article explores meaning of Centrism, Third Way, and Social Liberalism, and talks about their future in a new Arab World.

Egypt is out of a revolution, or rather coming out of one. Some would even argue we are still in the middle of it. The economy certainly looks the part, going from a 5% growth in GDP to -4% at the moment, foreign reserves are dwindling, quite a deficit is building up (for Egypt, that is, somewhere between LE134-170bn as per official numbers), more than 10% unemployed, many more underemployed, many more employed with horrible pay and conditions, and there are the clear signs of a social crisis that has been in the making for decades.

The Previous regime has been alternating between remnant policies from the Nasserist era, imperfectly devised Capitalist policies that were supposed to stimulate the economy, and a bunch of disastrous policies intended to keep it in power such as horribly structured and executed subsidies. While I am not against subsidies in certain cases (very few of them, to be honest), subsidies should be structured in a correct, open, easily explorable and dissectible manner, and should benefit those who need them the most. Mubarak's regime was so afraid of doing any radical overhaul of the subsidies system for the fear of a public backlash. Food subsidies stand today at 2% of GDP, Fuel subsidies at 8% of GDP, and subsidies are almost three times the education budget (Source: The Economist).

There is a massive need to both streamline the economy while also attending to the explosive poverty situation. The socialist camp is gaining ground of course on a more grassroots level, while capitalism (of the centre right variety) is gaining ground in the upper strata of society. And there are people like myself. Sometimes we are defined as Social Liberals, Third Way Centrists, or Radical Centrists. For simplification, I will use these terms interchangeably here.

The Third Way Centrists believe that both Capitalism and Socialism do have something to offer. Capitalism provides openness, competition, stimulation for creativity and improvement and growth, international competitiveness, and wealth creation over wealth redistribution. Socialism on the other hand cares about the immediate rescue of the poor, does not share that true faith in the power of the markets to create fairness that liberal capitalists do, and cares about ensuring a minimum level of dignity and economic survival for everyone. Any degree of Capitalism should also involve direct attention to the very dangerous and differently definable term "Social Justice". Here, it means no one is left out, no one unable to feed or care for herself, himself or their families, people have a decent chance at healthcare and education, decent work and working conditions, and at a basic decent and dignified life, both by ensuring equal opportunity and by ensuring direct assistance at time. We, Centrists, could be wrong of course, but we are also very suspicious of both.

There are common accusations against Capitalism and Socialism, many of them are exaggerated. Capitalism, for example, is accused of having created income inequalities in many parts of the world, unfair market conditions in others, improper handling and pillaging of nature's resources, slow response mechanisms for social crises, imperfect healthcare and social nets, difficult working conditions for labourers and employees who are constantly under pressure and a supposed surge in materialistic consumption, the saying goes. Socialism, on the other hand, is accused of having created bloated bureaucratic police states, unable to handle or finance their social and healthcare networks, slower economic growth in many cases (the pre 1980s cold war era was a different case for specific reasons), state companies that are technologically backwards, create inferior products and services and full of corruption, under-productive labour, and whatever private sector that remained was overly-taxed and hurdled and weighted with corrupt officials who wanted a share of the action, and often uncompetitive internationally, the saying goes here as well.

As mentioned before, Third Way, Social Liberals or Centrists don't buy these arguments in their entirety, but do accept some of them. We believe that a lot of the failures were due to Human Nature and corruption rather than correct theory, some were circumstantial, and some were just bad theory and bad practice, full stop. We, at least our pragmatic wing, do not believe necessarily that one of them is perfect, but we believe that a combination of both, one that differs from time to time, from society to society, is the safe bet. We believe that there aren't many Singapores or Luxembourgs and we do not believe that the Swedish Socialist model of the 1980s with a State Share of GDP of 65% is necessarily still viable. We believe that essentially the markets should be able to play their role. Competition might bring out the worst in us, but it also brings out the best. It helps create (most of the time) the best usage of resources, the quickest adaptability to external stimuli, as well as the fact that it is natural for people to be free in their undertakings and their actions, and that there is nothing wrong with wealth or being rich. On other hand, we believe that, even at the expense of proper economic theory sometimes, the state cannot wait for the markets to "trickle down" and help the most needy and the most impoverished, and that state and civil society actions are needed without delay. We accept the possibility of welfare/workfare, publicly provided or assisted medical insurance, sufficiently strong labour unions, and decent tax rates, among other measures. The state also has a responsibility to protect common and public resources, like the environment and energy resources, but also with conditions on how much power it should exercise.

This is not a new thing I am expounding, but this is the current state of affairs in many parts of Europe and the world, in one degree or shape or form to another, and it has been associated (in its modern form, as Western Europe and even America has had its experiments before) all the way back Australia's New Labour governments from 1983, with a massive spur of interest following the Blair-Clinton Third Way coalition of the 90s, joined by the German SPD under Schröder and to some extent Merkel, and the list continue. There are trials we can study here in Egypt and the Arab World, and extract lessons from.

So how much freedom and how much State? There is no full consensus in the centrist camp. Yes, some of in our camp are staunch theorists who have their conceptions of the "perfect combination of socialism and capitalism", but I am more on the pragmatic camp. I am extremely cautious of anyone who feels they know with absolute certainty what is best for an economy, specifically or in general. While I argue that that pragmatism is my own honest and intellectually earned position, some will argue that is merely an attempt to avoid the question. Either way, I believe that every country with its current conditions and culture, external situation, and other somewhat measurable indicators, should have its own workable combination of State and Freedom. I also believe that every while, we will need to adjust, recalibrate or even reverse that mix. Too much state after a while might (notice the italics) create some the problems associated with enlarged public sectors, and too much capitalism might (italics again) can lead to improper handling of extreme poverty situations and certain injustices. To restate, it seems that, at least in my own theory, assuming no great changes in international laws or technological breakthroughs that change how we deal with our daily lives, a society would alternate between more freedom to remove the result of a bloated state, and then some State action (possibly temporary) to remedy any injustices. But this is all very simplistic, abstract, and introductory. My essential point is that there is no perfect balance for every country in the world, and that balance could need continuous readjustments on the long runs.

As for Egypt, in my opinion, the country needs a dynamic free market to spur creativity, investment, entrepreneurship, growth and wealth creation, and more. But it needs urgent social involvement in terms of wage assistance and welfare (I prefer conditional handouts rather than minimum wages in most, not all, cases, out of belief that minimum wages have been shown to actually slow down the economy, job creation & entrepreneurship in most cases, according to my own research thus far), medical insurance and assistance, housing projects, at least some degree of freedom of education (preferably even through college, if we can afford it, and private universities can offer more premium alternatives as always), and so forth.

This could also apply to many Arab countries, like Jordan, Algeria, Morocco, Tunisia, Yemen (could prove tricky there), and others. The important thing is that we need both, each to some degree. That is what Centrism or Social Liberalism or Third Way Economics mean and believe, with varying prescriptions. One thing we do hate for sure: staunch ideologues who believe that one economic and social model applies to all countries at any given time under any given circumstances. We dislike how Capitalism became a negative word in developing nations, and how Socialism became a negative word in many developed nations. We dislike shiny slogans that do not offer the debate forward, such as "Capitalism is the great evil", and "Socialism will destroy everything we created", and so forth. Every human idea has something to offer.


First PostScript: I have been getting recommendations to read John Rawls' "A Theory Of Justice". I read that book years ago and it has affected deeply own way of thinking. I suggest you read it. While you may disagree with the conclusions, the methodology itself and the assupmtions (Original Position, Veil of Ignorance, etc...) are quite stimulating.

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