From Madison, Wisconsin to the Shores of Tripoli
Posted by Larry Doyle on February 22, 2011 7:22 AM |
What do I see as recurring themes on our global economic landscape? Unrecognized financial losses lead to overreaching economic programs. Those programs influence political change, but also ultimately varying degrees of social and civil unrest.
Over the course of the last year, we have witnessed differing iterations of this scenario play out in Greece, England, Ireland, and elsewhere. The current hotspots on our global map are Middle Eastern and northern African nations, specifically Libya. The distance from Tripoli, Libya and Cairo, Egypt to Madison, Wisconsin is approximately 5000 miles and 6000 miles respectively. Is the distance between these locales actually much closer than that? Are there any similarities to the bloodshed being experienced in Tripoli, and previously Cairo to the tame protests on the university town of Madison, Wisconsin?
I believe there are. Recently, Wisconsin Representative Paul Ryan made this comparison as well. Let’s view Ryan’s comment and then navigate further.
Regardless of what you think of Ryan, I do believe there are real similarities between the unrest in the Middle East and that on display in Madison. How so? Well, what is the basis for the unrest in the Middle East? Rent.
What are you talking about, LD? What the hell is rent?
We learn more on this front from the Financial Times this morning. The FT writes, Arab Spring Will Not See an Economic Boom:
Rents are easy money: unearned wealth that flows to governments with little effort. In the Middle East much of this is about oil.
The history of economic development suggests that rent-ridden countries create governments with few incentives to build strong political institutions or listen to their people.
Weak economic institutions will be the consequences of these nations’ ongoing reliance on rents. These will fail to deliver essential services, such as education and skill creation, in turn limiting the pool of entrepreneurial talent. Such institutions also create bloated bureaucracies, weak legal enforcement of property rights, and obstacles for starting businesses, especially for those outside the regime’s inner circle. Without reforms the private sector will still likely thrive only through connections to a rent-addled state, not because of the raw dynamism found in many Asian countries.
Is the FT describing the stark economic reality of despair in Middle Eastern states or the dysfunctional bureaucracy on the shores of the Potomac, that is our nation’s capitol. Am I reaching? I do not think so. The unrest in Madison is poised to play out across many parts of our great nation. The Wall Street Journal provides an overview of further planned protests.
What is the future of the Middle East? The FT offers:
On this reading the long-term economic prospects for these nascent Middle Eastern democracies remain gloomy. The economic challenge they face is much more fundamental than the often-heard prescription of greater globalisation and more markets. A decisive break with their own national histories is needed, and this means ending their reliance on rents as a first step. Only then can economic institutions be developed that create job opportunities in the private sector for their large, young and unemployed populations.
I ask the very same question of our nation. What is the future for the United States? What is the future for each and every state within our nation?
The ‘rent in the United States is too damn high.’ The rent being the political payoffs, the regulatory capture, the kicking the can down the road, the backdoor bailouts, the lack of accountability and transparency in Washington and elsewhere.
What has become of our nation? What will our future hold?
Those on both sides of the aisle who have collected the rent for far too long need to be held accountable.
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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own and not those of Greenwich Investment Management. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.