Freedom in Mideast Carries Cost We All Might Pay

For the most part, economic markets have shrugged while the turmoil in Egypt has escalated. If President George W. Bush was right about the long-term impact of the Iraq War, that might change.

We may all have to share in economic hardship as the price for a freer world.

There are sound arguments, to be sure, that the economy will remain calm. On its own, the uprising in Egypt seems unlikely to cause a spike in oil prices, even if it disrupts production and transportation, which it hasn't so far.

Egypt is a relatively unimportant oil producer, accounting for less than 1 percent of the world supply. If its production stopped altogether, other nations probably could pick up a good deal of the slack.

Even the closing of the Suez Canal would be a small event today. Back in 1956, the Suez was shut by the conflict that ensued after Egypt nationalized the canal. When 40 ships were sunk, blocking the canal for months, it was an economic calamity of the first order.

the world will ultimately be a much better place. That's a soothing notion to keep in mind if the price of democracy is felt at the gas pump.

Back then, about 10 percent of the global crude-oil supply made its way to markets through the canal, according to the International Energy Agency. Today, that number is only about 1 percent.

So the real risk of global economic hardship is that the popular revolt in Egypt spreads to other nations that account for a larger share of the world's oil production. The case for a contagion of this sort is uncomfortably strong.

Heat Is On

There are already signs that a political epidemic is under way. Just look at the sequence of events. Tunisia's president flees, Egypt erupts in mass demonstrations, Lebanese cabinet ministers resign, and then thousands take to the streets in Yemen and Jordan.

Clearly, a fire has begun. Whether it spreads or not depends on the quality of the tinder in neighboring states, and the Middle East is home to some of the most oppressive regimes on the planet.

One metric of political freedom is the Economist Intelligence Unit's Democracy Index, which for 2010 graded 167 nations and territories in categories such as elections and civil liberties.

Saudi Arabia, a monarchy that outlaws political activity and still performs brutal public whippings, mutilations and executions, came out at No. 160, tied with Equatorial Guinea, making them the seventh-most-authoritarian regimes on Earth. (The six worst, for the record, are judged to be the Central African Republic, Myanmar, Uzbekistan, Turkmenistan, Chad and, at most authoritarian, North Korea.)

Ample Company

Other key Middle East nations with scores well into the authoritarian category include Kuwait (ranked 114 in democracy), Algeria (125), Qatar (137), Yemen (146), the United Arab Emirates (148), Sudan (151), Syria (152), and Libya and Iran (tied for 158). Counting Saudi Arabia, these nations account for 30 percent of the world's oil supply. If even a subset follows the path of Egypt, then we are looking at a high risk of a historically unprecedented oil shock.

Which brings us to former President Bush and the eight-year war in Iraq, both of which may deserve a kind reevaluation in light of today's headlines.

Bush, you'll recall, cited the promotion of democracy in the Middle East as one rationale for the U.S. invasion in March 2003 -- less pressing than the search for weapons of mass destruction, true, but a rationale nonetheless.

'Example of Freedom'

"A new regime in Iraq would serve as a dramatic and inspiring example of freedom for other nations in the region," Bush said in a February 2003 speech at the American Enterprise Institute's annual gala.

He envisioned political reform spreading through the region because "the human heart desires the same good things everywhere on Earth. In our desire to be safe from brutal and bullying oppression, human beings are the same. In our desire to care for our children and give them a better life, we are the same."

If Bush's domino theory proves correct, the world will ultimately be a much better place. That's a soothing notion to keep in mind if the price of democracy is felt at the gas pump.

Kevin Hassett is a Director of Economic Policy Studies at AEI.

Photo Credit: Flickr user Mahmoud Saber/Creative Commons

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About the Author

 

Kevin A.
Hassett
  • Kevin A. Hassett is the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (AEI). He is also a resident scholar and AEI's director of economic policy studies.



    Before joining AEI, Hassett was a senior economist at the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at Columbia (University) Business School. He served as a policy consultant to the US Department of the Treasury during the George H. W. Bush and Bill Clinton administrations.

    Hassett has also been an economic adviser to presidential candidates since 2000, when he became the chief economic adviser to Senator John McCain during that year's presidential primaries. He served as an economic adviser to the George W. Bush 2004 presidential campaign, a senior economic adviser to the McCain 2008 presidential campaign, and an economic adviser to the Mitt Romney 2012 presidential campaign.

    Hassett is the author or editor of many books, among them "Rethinking Competitiveness" (2012), "Toward Fundamental Tax Reform" (2005), "Bubbleology: The New Science of Stock Market Winners and Losers" (2002), and "Inequality and Tax Policy" (2001). He is also a columnist for National Review and has written for Bloomberg.

    Hassett frequently appears on Bloomberg radio and TV, CNBC, CNN, Fox News Channel, NPR, and "PBS NewsHour," among others. He is also often quoted by, and his opinion pieces have been published in, the Los Angeles Times, The New York Times, The Wall Street Journal, and The Washington Post.

    Hassett has a Ph.D. in economics from the University of Pennsylvania and a B.A. in economics from Swarthmore College.

  • Phone: 202-862-7157
    Email: khassett@aei.org
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