Now For An Arab Economic Revolution

Saifedean Ammous in Project Syndicate:

In several Arab countries, most notably Saudi Arabia, rulers have sought to quell popular discontent by providing a combination of cash, subsidies, guaranteed jobs, and free goods and services. Such largesse betrays a fundamental misunderstanding of the causes of today’s discontent, because it assumes that these causes are purely material.

But any examination of the protesters’ slogans and demands clearly indicates otherwise. The protests are much more about political and economic freedom than about material needs, reflecting a keen awareness that such needs are merely a symptom and consequence of the absence of political and economic freedom.

The dominant “handout approach” is not sustainable, and, if continued, would likely exacerbate the Arab world’s current economic malaise. Economic wealth cannot be created by government decree; it comes from productive jobs that create goods and services that people value.

Governments that hand out benefits are not making their citizens richer by generating new wealth; they are simply redistributing existing wealth. This also applies to government-created and guaranteed jobs: if a job is indeed productive, its output would be rewarded by other members of society who benefit from it, without the need for government subsidies and guarantees. The fact that government guarantees a job implies that its output is not wanted. Such jobs are a liability for society, not an asset.

As citizens start relying on redistribution, productive work is discouraged, and real wealth creation suffers. Economic rot sets in as the ranks of dependent citizens grow, productive citizens dwindle in number, and society eventually runs out of other people’s money.

More here.