10 Nov 2011
The Arab uprisings and the free market
The latest contribution in this genre is an article in the FT by the Peruvian economist Hernando de Soto entitled ‘The free market secret of the Arab revolutions’. De Soto is keen to portray the Arab uprisings through his own prism of small-scale capitalism/informal economy:
‘A few weeks ago I met Salem, the younger brother of the brave Tunisian fruit vendor whose self-immolation triggered the Arab uprising. When I asked him what his brother in heaven would say if we asked what he hoped his sacrifice would bring to the Arab World, Salem did not hesitate: “That the poor also have the right to buy and sell.”’
De Soto uses this anecdote and the challenges that faced Mohamed Bouazizi of earning a living through his work as a fruit vendor to drive home his message about the need for encouraging small-scale entrepreneurs and removing the bureaucratic barriers that prevent them from expanding their business. He adds:
‘In the wake of the overthrow of three autocrats, not enough credit has been given to the mighty consensus that triggered the uprising – the desire of a vast, underclass of people to work in a legal market economy. In the culturally diverse Middle East and north Africa, the one common thread is its informal economy. This is the key to future growth and indeed stability.’
While I am strongly in favour of economic freedom and know the endless hassles that corruption and bureaucracy cause in the Arab world, I think de Soto’s reconstruction of the dynamics of the Arab uprisings is self-serving. His ‘magic formula’ of small-scale free market capitalism of market vendors belongs in the Arab past, not in a prosperous future. Street vendors aren’t ‘entrepreneurs’, they are pushed into marginal economic activities because they don’t have other options.
Furthermore, what is troubling with de Soto’s vision is that he doesn’t make a distinction between productive economic activities and peripheral and inefficient practices. Pushing a heavy fruit cart around is harsh, back-breaking manual labour and has to be one of the most backward retail methods there is. People like Bouazizi deserve a better life, not a few incentives to keep them locked into this type of labour. Not to mention that this type of selling perishables produces disproportionate amounts of waste because of the lack of refrigeration.
I agree with de Soto’s assertion about the need to tackle the causes of poverty in the Arab world, but we must do that in an ambitious and aspirational manner not by dressing up manual labour as ‘entrepreneurial activity.’ While the Arab left seems to have deluded itself into believing that redistribution alone will solve the problem of poverty, in reality countries like Egypt will need intensive economic growth to overcome the decades of decline and provide a decent life for their citizens. The free market is not a magical elixir either, we need more ambitious economic visions.