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Is Islam To Blame For Lagging Arab Economies?

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Is Islam To Blame For Lagging Arab Economies?

Opinion

Is Islam To Blame For Lagging Arab Economies?

Is Islam To Blame For Lagging Arab Economies?

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New governments in Tunisia and Egypt are starting the process of rebuilding their economies. Some scholars argue that religious customs have held back Arab economies. But John Cassidy of the New Yorker says bad governance and colonialism, not religion, are to blame.

MARY LOUISE KELLY, host:

Here on TALK OF THE NATION, it's time for the Opinion Page. As uprisings continue in the Middle East, the new governments in Tunisia and Egypt are beginning the process of rebuilding, especially their economies. That starts with taking a long hard look at what has held back economic growth up to now. Some scholars asking that question placed their fingers squarely on religion, on Islam.

In a piece for The New Yorker, staff writer John Cassidy examines why the economies of Muslim nations have tended to lag behind the West. He concludes - and I quote - "The most immediate explanation involves not Islam, but predatory governance and colonialism."

If you have lived or worked in the Middle East or North Africa, tell us what's hindered economic growth, or from your point of view, what's helped. 800-989-8255. Our email address is talk@npr.org, and you can join the conversation at our website. Go to npr.org and click on TALK OF THE NATION.

Well, John Cassidy joins us by phone from his home in Brooklyn.

And, John Cassidy, nice to have you with us.

Mr. JOHN CASSIDY (Staff Writer, The New York Times): Thanks very much for inviting me on.

KELLY: Well, it's good to have you. So tell me, what is the argument that some scholars make when they look at Islam and say, that's it, that's what has limited economic growth?

Mr. CASSIDY: Well, the basic argument is that Islam itself is sort of antithetical to entrepreneurship and other forms of sort of capitalistic activity. The classic example is banking, because in Islam, paying interest on deposits is seen as a bad thing and is actually banned.

KELLY: Although a lot of countries and companies have found ways around that over the years.

Mr. CASSIDY: Exactly. But that's the sort of argument which has been made over the years. The sort of legacy of Islam has held back these countries from developing not just banks, but big companies, because there are also inheritance customs in Islamic countries, the sort of Western system of primogenitor, where the oldest son tends to accumulate most of the family wealth does not exist there. They have to split up most of the wealth equally among all the heirs.

What that tends to do is - means that fortunes don't last for generations. They get split up, so you don't have the emergence of a sort of Rockefeller fortune or a Ford fortune. Companies and sort of wealthy people tend to only last for a shorter timeframe.

So there are the sort arguments that have been put forward over the years, claiming that, you know, Islam is in itself somehow intrinsically bad for economic growth. I don't actually agree with that, and most of my piece is taken up with providing alternative explanations for why the Middle East is being left behind.

KELLY: Well, and what are some of the alternative explanations that you've found?

Mr. CASSIDY: Well, there's a number of them. The main one is sort of historical. If you go back and look at the history of this region, what you find is actually they started out as a very entrepreneurial region. The original caliphate, which today is associated with, you know, Osama bin Laden and radical fundamentalism, actually was a great trading empire, which had trading routes all the way from the Atlantic and Spain to the Himalayas and Central Asia.

The original Islamic partnerships which were put together to finance these trading routes were very modern for that day. And basically, Islam in those days, or the Islamic countries, were far more advanced than the West, which had fallen back into the Dark Ages. So you've got to say what changed between then and now, and I think a lot of it is to do with successive waves of colonialism in these countries.

Back in the 15th, 16th centuries, they were overran by the Ottomans, the Turks, and the Ottomans were not very interested in economics at all. What they were interested in was war and military glory. And they basically used countries like Egypt for tax purposes, to raise revenues for the sultan and his armies.

And a lot of the Egyptian industries which had grown up sort of paper manufacturing and trading and things like that, they went into decline because if you made any money, you had to give it a lot of it away to the sultan, especially a high-tax regime. So centuries of economic growth and relative prosperity, followed by centuries of economic decline and stagnation and very little innovation. It was in those centuries that the Middle East fell badly behind the West.

Then, of course, we have the Western wave of colonialism, basically. Again, issues in Egypt as an example, the French and the British basically ran the place for a couple of hundred years. And though they did some good things, but they didn't make much, if any, attempt to build up local industry. In fact, they tended to keep it down so it wouldn't compete with their own industries. There was an attempt in the 19th century by Egypt, for example, to build up a big cotton industry, but the British forced the Egyptians to - the Turks who ran the place to put big tariffs on Egyptian goods, and they couldn't compete. So there's a lot of historical reasons there why these countries haven't done very well.

And you get to the 20th century and, of course, they've done a lot of damage to themselves since independence by, you know, appointing - well, not appointing, but they've got governments which basically interest enriching themselves in a lot of these countries, certainly the Mubarak regime, the Gadhafi regime in Libya, the Saudi Arabian regime.

So I'm not saying that it's all the fault of outsiders. But, you know, you've had a lot of, sort of, historical circumstances which have been unfavorable to Western-style entrepreneurship and growth.

KELLY: John Cassidy, I want to take a call. We've got on the line - this is Sammy. He's online from Fort Wayne, Indiana.

How are you doing, Sammy?

SAMMY (Caller): Yes. Hi.

KELLY: Hi.

SAMMY: I have a question for your speaker that...

Mr. CASSIDY: Yes.

SAMMY: ...I just want to ask: Why is that, in the entire Middle East, the entire countries hire expatriates, you know, and then the expatriates' ratio is more than the local population and then the local people don't get jobs, and even if they are educated? Can you answer this question, sir?

Mr. CASSIDY: Yeah. I mean, that's a very good question. I mean, the fact that there are large expatriate communities in a lot of these countries and that the expatriate communities tend to do very well - for example, Egyptians in the U.S., Libyans in Britain, tend to do a lot better than the people back home. What that says to me is that there's nothing wrong with the sort of entrepreneurship and effort of the people intrinsically. They're - most of them are all still Muslims. It's problems in the economy themselves. And as I say, part of it's history. A lot of it is to do with the fact that - in some of these countries now, the jobs are sort of monopolized by the elites, and there just aren't enough jobs to go around, because there's been enormous population growth, as well.

What has happened in places like Egypt and Tunisia and Sudan is infant mortality has fallen back a lot, which is a very good thing. A lot more babies survived than they used to do. But the fertility rate hasn't gone down. So you've had an enormous baby boom for the last 20 or 30 years. So the median age in Egypt is, I think, about 22 now. I think in Sudan or Yemen, it's about 19. At the same time, a lot of these countries have actually been building up their education systems, which is exactly what they should be doing. But what it means is you've got a lot of young, quite educated people who - when they graduate or drop out of college, can't find jobs.

That's what we found in Egypt, for example. A lot of the people in Tahrir Square who led the revolution were, you know, quite educated. And it wasn't just a sort of old-style, you know, revolt of the peasantry who can't have - don't have enough food or whatever. That's the sort of classic French revolutionary model.

KELLY: Hmm. It was a fascinating observation in your article, John Cassidy, that unlike here in the U.S. or other Western countries, the unemployment rate actually increases with the level of educational instruction.

Mr. CASSIDY: I know, I mean, that's amazing. I mean, if you imagine the - you know, among sort of Ivy League graduates or, you know, California State - California education system state university graduates, if they had a higher unemployment rate than the general population, you know, there'd be uproar in the U.S., as well, because these people have very high expectations. They graduated from college expecting to do well in life. They are, after all, the elite of their country's educated elite. And the economy's not just in place to deliver the sort of lifestyle and jobs they expect.

KELLY: All right. Sammy, thanks so much for that call. Thanks for reaching out from Fort Wayne. We appreciate it.

SAMMY: Thank you.

KELLY: Thank you.

And John Cassidy, let me circle back and ask what we can take away from all of this in terms of the political situation unfolding now. It's obviously hard to generalize across the various countries...

Mr. CASSIDY: Yeah.

KELLY: ...experiencing uprising at this point. But when you look at the economy and what maybe the way forward, any lessons you were able to draw?

Mr. CASSIDY: Well, I think there's two things. I mean, in the short run, it's very worrying, because these democratic governments - if they materialize in Egypt, Tunisia, Libya, wherever - are going to be faced with big economic challenges. People are going to expect things to improve quickly, which they always do after a revolution. But it's going to be very difficult for the government to deliver in the short term, because they do have these problems. I mean, it's just very - if you got 30 percent or 40 percent unemployment among people in their 20s, even if you introduce pretty radical economic reforms and if you get more foreign investment, which they probably will, it's going to take a number of years for that to feed through into sort of increased living standards, increase opportunities.

So there's always the possibility of a backlash. That's always a problem in revolutions, that the first wave of revolution, the people who come out on top don't satisfy the demands of the people in the streets. And then, you know, that can lead to more waves of unrest. That's, obviously, a threat. So that's very worrying.

But at the same time, I'm actually reasonably optimistic in the long term that there's nothing wrong with these countries intrinsically if they take the right policy decisions and if they open up to - their countries to international trade.

Tunisia actually provides a pretty good example of that. In the last 10 or 20 years, Tunisia has actually done pretty well economically by sort of integrating itself in with the European economy. A lot of these countries, remember, are just on the other side of the Mediterranean from the EU, so there's no reason why they couldn't have been producing goods for export to the EU.

And Tunisia is doing that. In fact, in the recent last year or two, I found out while I was researching the piece, Airbus, the enormous European aircraft company, is open to plant or is building a plant in Tunisia, just south of Tunis. And Hewlett-Packard, the American computer company, is - has opened a calling center in Tunisia to deal with inquiries from other countries.

You know, so some of these big foreign multinationals obviously are looking on Tunisia in very much the same way, a few years ago, they were looking on places like Ireland or India as potential sources of cheap labor and, you know, good places to locate. As long as the new Democratic regimes can guarantee some political stability and deal with the threat of sort of radical fundamentalism, which is a threat, I don't see any reason why they can't attract quite a lot of foreign investment and build up their economies.

KELLY: We're talking with John Cassidy. He has a new article out in The New Yorker magazine, looking at the economies of the Middle East.

And you're listening to TALK OF THE NATION, from NPR News.

John Cassidy, we've been talking, for obvious reasons, about Egypt and Tunisia, obviously very different economies from some of the big Persian Gulf oil states. So far, Saudi Arabia has not erupted in the same kind of upheaval that we've seen elsewhere in the region. Well, what does that say to you about the economy? Are their economies better poised to transition into the 21st century and balancing the competing traditions of Islam we've been talking about and the need for a modern economy?

Mr. CASSIDY: Yeah. Well, you make a very good point. Obviously, there's not one Middle East. There's basically two Middle Easts. There's the countries who've got oil and the countries who haven't. An oil economy is very different from a non-oil economy. Egypt's got a bit of oil. Tunisia's got very little. Libya and Saudi Arabia, for example, have obviously got a lot of oil, as has Kuwait.

Now, in those countries, what you've got are basically ruling despots, in Libya and - I don't know if you call the ruler of Saudi Arabia a despot, but he's certainly a autocratic ruler, you know? It's not a democracy. And the question is: How do you use the oil wells to develop the economy at large? That has proved very difficult for lots of countries, because what tends to happen is the governments tend to skim off as much of the oil revenues for the royal family and for the - or for the president and his friends as they can. That's exactly what we've seen in Egypt - sorry, in Libya, and it's also true to a lesser extent in Saudi Arabia.

Saudi Arabia, basically, the royal family takes quite a lot of the wealth, and then the rest of it is used to finance a very large welfare state, basically, buying off the rest of the population, saying, you don't need democracy. Look, we're using all these oil wells to give you a generous - what amounts to a generous welfare system.

The problem with that is, if that doesn't build up for their industries. And when the oil runs out, you know, these countries are going to be in very poor shape. It's not as if they developed high-technology industries or exporting industries to take the place of oil once it runs out.

KELLY: All right. Let me see if we can get one more call in. We're going to talk to Daniel. He's on the line from South Bend, Indiana.

Hi, Daniel.

DANIEL (Caller): Hi, yes. I studied in Cairo at AUC for a couple of years, for a master's degree. And what I found in Egypt specifically was a lot of the problems economically had to do with a lot of monopolization of the companies there.

Gamal Mubarak, for example, was the only one with a license to sell BMWs in the country. And there's other people within the regime that were able to monopolize on industry. And I know that that hurt the - hurt private industry a lot in the country.

KELLY: What do you make of that, John Cassidy?

Mr. CASSIDY: I mean, I think that's a very good point. I mean, that -that goes to the point I was making about how in the 20th century, the, you know, these countries have done themselves no favors by allowing these basically kleptocratic regimes - that means thieving regimes - to take over. I mean, Mubarak is a classic example because, you know, when he came to power, he didn't seem be from that tradition. But over the last 20 years, it's turned into a sort of a, you know, a family firm and, as you say, basically keep a lot of the most lucrative businesses for the royal family, and in Egypt, also for the military. The military - the senior generals basically have their own private economy, too.

Now, it seems to me once you have a democracy, you know, you can tackle that. The military itself is probably going to be reluctant to give up some of its economic prerequisites. But the, you know, the Mubarak family and its extended sort of hangers-on, I mean, they will presumably all either leave the country or, even if they stay, their sort of, you know, monopolies will be taken away from them - at least I hope they are.

KELLY: All right. Does that answer your question, Daniel?

DANIEL: Oh, yeah, definitely.

KELLY: Thanks so much for calling.

All right, John Cassidy, just quickly - we just have a moment left. But if - as you look across the region, are there any common lessons you draw as we look at the upheaval now in the economies?

Mr. CASSIDY: Well, I mean, the common lesson I try to draw in my piece, and I think it's a justified one, is that you can't reduce economics to religion. Religion does play a role - and obviously a big role in society and a large role in these Islamic societies. But economics is a sort of separate - is a separate area which isn't reducible to region. People used to say, for example, that Ireland, where my family originated from, was being held back by Roman Catholicism. They used to say that China was being held back by Confucianism. They used to say that India was being held by the Hindu caste system.

KELLY: Okay.

Mr. CASSIDY: And what we've seen in the last 20 years is that all these different religions are perfectly compatible with economic growth if you made the right (unintelligible).

KELLY: John Cassidy, I'm going to have to cut you off. Thanks so much.

That's John Cassidy from The New Yorker. And you're listening to TALK OF THE NATION, from NPR News. I'm Mary Louise Kelly.

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