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Wednesday, February 23, 2011

A Libertarian Revolution in the Mideast?

Rising commodity prices and lack of market options lead to unrest


As I sit writing this the famed eccentric president of Libya, Muammar al-Qaddaffi, is fleeing from hordes of protesters in Tripoli after having stated he will “Die a martyr” defending his throne. Waves of unrest have spread across Africa and the Middle East in the past month as protests have brought down regimes from Egyptian dictator Hosni Mubarak to Tunisia’s Ben Ali. Right now, military officers in heavily armed gunships are deciding whether to open fire on protesters or to defect, as some have, rather than murder their own citizens. The entire region is in a full-blown revolt.

What’s going on?

Pundits and politicos scrambled in the last few weeks to find an answer to the puzzle of what is causing the unraveling of order in countries such as Libya, Egypt, and Tunisia. But the stories cobbled together of a sinister coup orchestrated by the Muslim Brotherhood or Iran doesn’t quite add up. Many indicators show that the revolutions in the Middle East are tied to less exciting factors: lack of market options and a rise in commodity prices. Stated differently, people are starving because of the higher cost of food and because they aren’t allowed a free market to earn a living. It’s a libertarian revolution.

Consider that the riots began with one man in Tunisia who was denied a license to sell fruit. With unemployment in the country at around 29 percent, Mohamed Bouazizi was faced with little options to enter the workforce and earn a living. Not having the means to find a good job, Mohamed resorted selling fruit without a license. When a young female police officer attempted to confiscate his inventory, he resisted and was slapped in the face by the woman. That afternoon he went to the local authorities office to demand his fruit back so that he could earn his living. The stifling bureaucracy denied him at every turn. He even sought an audience with the governor to no avail. At 2 p.m. that afternoon, Bouazizi drenched himself in paint thinner and lit himself up, dying later to become a true martyr. The fires he lit are still burning.

It must not have helped that Mubarak shut down the Internet as the protests began to swell across the nation. What initially was thought to be a measure to quiet the populous and drive down protests might actually have backfired. Web surfers who might have stayed at home to chat on the Net suddenly found themselves staring at a blank screen. Here’s a lesson to be had for any would-be dictator:

“Don’t stand between a grandpa and his baby pictures on Facebook.” I know a few dads and granddads who might get up set if denied access to their family photos and videos.

The final but most important factor driving the protests is the rising specter of commodity inflation. As Federal Reserve Chairman Ben Bernanke has embarked on a significant inflation in the past few years, prices of commodities have risen, although slowly. American consumers, who have more disposable income to spend on items like corn and wheat, have scarcely been affected by the recent rise in prices. However, that inflation has a heavier toll on developing nations such as Egypt, where people can ill afford higher prices for staples like bread.

In analyzing the political situation in the Middle East one has to be realistic. I have no illusions that the protests will lead to democratic constitutional republics. Totalitarian dictators generally arise in these regions due to the disconnected nature of the tribal cultures that hold sway over their sparse populations. It’s difficult for democratic nationalists to bring such disparate people together and convince them to take control of the monopoly instruments of plunder. What comes out of these riots and protests will not likely be libertarian, but the reasons for them are. Encouraging market competition, allowing for a free and unrestricted Internet, and curbing inflation would be wise lessons for new dictators to learn … unless of course they plan on following in Qadaffi’s footsteps.

Source: Commodity Research Bureau (CRB) and FactSet, as of February 11, 2011.