Advancing a Free Society

The Middle East Uprisings, their Economies, and the World Economy

Monday, March 7, 2011

The revolutions and protests in Tunisia, Egypt, Libya, Bahrain, and other parts of the MENA region (Middle East and North Africa) are the most important world development in the past 20 years, even though it is still highly uncertain about the types of governments that will emerge, the effects on their economic and political freedoms, and their production of oil. I expect, however, that these economies will become more competitive and less government-controlled, and that world oil prices would tend to be higher in both the short and long runs.

The larger MENA countries are mainly autocratic, and their governments tend to dominate their economies. Corruption is common, and political connections are usually needed to start and grow businesses, to gain access to raw materials and other inputs, to obtain protected positions in telecommunications and other sectors, and to get credit from government banks.  The Heritage Foundation and The Wall Street Journal prepare annual indexes of overall economic freedom for many countries, including those from the MENA region, that can be roughly compared across countries. Studies have shown that the degree of economic freedom in different countries in any year is positively related to their subsequent economic growth.

Saudi Arabia and Turkey have the highest index of overall economic freedom of any of the larger MENA countries. Their levels of economic freedom place them in the “moderately free” category. Then come Morocco, Egypt, and Tunisia, with indexes in the “mostly unfree” category.  Syria and Yemen have even less freedom, while Iran and Libya are close to the bottom of all 179 countries considered, with indexes of economic freedom in the “economically repressed” category.

None of the major oil producers of the MENA region are democratic, with the exception of Iraq that has a fledgling democracy. They have a mixed record on economic freedom. Qatar, The United Arab Emirates, Kuwait, and Saudi Arabia are in the moderately free category, while the others have much less economic freedom.

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