-by Shamus Cooke
July 2, 2011- With revolutions sweeping the Arab world and bubbling up across Europe, aging tyrants or discredited governments are doing their best to cling to power. It's hard to overexaggerate the importance of these events: the global political and economic status quo is in deep crisis. If pro-democracy or anti-austerity movements emerge victorious, they'll have an immediate problem to solve – how to pay for their vision of a better world. The experiences thus far in Egypt and Greece are proof enough that money matters. The wealthy nations holding the purse strings are still able to influence the unfolding of events from afar, subjecting humiliating conditions on those countries undergoing profound social change.
This strategy is being ruthlessly deployed in the Arab world. Take for example Egypt, where the US and Europe are quietly supporting the military dictatorship that replaced the dictatorship of Hosni Mubarak. Now, Mubarak's generals rule the country. The people of Egypt, however, still want real change, not a mere shuffling at the top; a strike wave and mass demonstrations are testing the power of the new military dictatorship.
A strike wave implies that Egyptians want better wages and working conditions; and economic opportunity was one of the central demands of the revolutionaries who toppled Mubarak. But revolutions tend to have a temporarily negative effect on a nation's economy. This is mainly because those who dominate the economy, the rich, do their best to sabotage any social change.
One defining feature of revolutions is the exodus of the rich, who correctly assume their wealth will be targeted for redistribution. This is often referred to as "capital flight." Also, rich foreign investors stop investing money in the revolutionary country, not knowing if the company they're investing in will remain privately owned, or if the government they're investing in will strategically default and choose not to pay back foreign investors. Lastly, workers demand higher wages in revolutions and many owners would rather shut down – if they don't flee – than operate for smaller profits. All of this hurts the economy overall.
The New York Times reports:
The 18-day [Egyptian] revolt stopped new foreign investment and decimated the pivotal tourist industry … The revolution has inspired new demands for more jobs and higher wages that are fast colliding with the economy's diminished capacity … Strikes by workers demanding their share of the revolution's spoils continue to snarl industry … The main sources of capital in this country have either been arrested, escaped or are too afraid to engage in any business …" [June 10, 2011]
Understanding this dynamic, the rich G8 nations are doing their best to exploit it. Knowing that any governments that emerge from the Arab revolutions will be instantly cash starved, the G8 is dangling $20 billion with strings attached. The strings in this case are demands that the Arab countries pursue only "open market" policies, i.e., business-friendly reforms, such as privatizations, elimination of food and gas subsidies and allowing foreign banks and corporations better access to the economy. A separate New York Times article addressed the subject with the misleading title, "Aid Pledge by Group of 8 Seeks to Bolster Arab Democracy":
"Democracy, the [G8] leaders said, could be rooted only in economic reforms that created open markets … The [$20 billion] pledge, an aide to President Obama said, was “not a blank check" but “an envelope that could be achieved in the context of suitable [economic] reform efforts." [May 28, 2011]
The G8 policy toward the Arab world is thus the same policy the International Monetary Fund (IMF) and World Bank have pursued against weaker nations that have run into economic problems. The cure is always worse than the disease, since "open market" reforms always lead to the national wealth being siphoned into the hands of fewer and fewer people as public entities are privatized, making the rich even richer, while social services are eliminated, making the poor even poorer. Also, the open door to foreign investors evolves into a speculative bubble that inevitably bursts; the investors flee an economically devastated country. It is no accident that many former IMF "beneficiary" countries have paid off their debts and denounced their benefactors, swearing never to return.