Saturday, February 26, 2011

Linkage Between Political And Economic Freedoms

There is lot of analysis on why revolts in Islamic lands are going on now. Ajay Shah tries to make the case between rigid prices and brewing revolts. We think Shah is making a case that doesn't exist. We think issues are, as usually excepted, more broadly about economic freedom & political freedom, not so much price rigidity & political freedom.

Shah tries to make the case citing several examples such as price of bread in Cairo markets to fixed exchange of renminbi-dollar. Can we really extrapolate price rigidity of bread in Cairo to entire Egyptian economy? Surely import prices in China changes when prices change in dollar terms - precisely by that change because exchange rate is rigid.

Shah is being unnecessarily technical.

From socialist India's example, we see that lack of economic freedoms can be masked by nonsensical socialist rhetoric of social justice, as has been done for decades in India, but lack of political freedoms can be masked only as long as anti-nationalist boogie - foreign or domestic - persist.

In many Islamic nations, from Tunisia to Egypt to Libya, the political freedom mask is peeling exposing the desperate lack of political freedoms in Islamic lands. In China, as well as in Saudi Arabia, while the lack of political freedom persists, the lack of economic freedom mask has already been peeled - in China, as long as one is part of Communist Party, and in Saudi, with distribution of oil-money.

When both political and economic freedoms are lacking, revolts and revolutions are certainly waiting to happen at a time when the oppressive regime is weakest and from an unlikely spark.

The larger question that is still unanswered is which system persists longer without revolts - those that have political freedoms but are oppressive regarding economic freedoms, meaning free poverty ridden people feeding on empty socialist rhetoric; or those that have economic freedoms, even of the Chinese Communist Party model, but are oppressive regarding political freedoms, meaning well-off people with little say in governance?

We would bet on the former.