The crisis now gripping the Arab world is not only about the suppression of democracy, it's the story of what happens when economies are gripped by crony capitalism.
Libya is a case in point. While Gaddafi has decried the corruption that allowed a limited number of Libyans to accumulate tremendous wealth, he and his family is believed to have amassed a fortune. As reported here, Gaddafi is believed to have accumulated an estimated £60 billion ($US97 billion) in accounts, investments and wealth funds across the globe. The main investment vehicle for Gaddafi's state funds is the Libyan Investment Authority (LIA), which has an office in Mayfair in London. His second son, and heir, Saif al-Islam owns a £10 million ($16 million) mansion in Hampstead, near Millionaires' Row, which he bought through a company registered in the British Virgin Islands. The eight-bedroom neo-Georgian property boasts a swimming pool and suede-lined cinema and is guarded by its own private security team. The LIA's British investments at £10 billion include three per cent of publishing giant Pearson, which owns the Financial Times and Penguin Books, and several prestigious office blocks including 14 Cornhill, opposite the Bank of England, and Portman House, off Oxford Street, home to fashion retailer Monsoon, a branch of shoe-maker Russell & Bromley and lingerie firm La Senza.
Compare that with the rest of the population in Libya where, according to the CIA, one in three live at or below the poverty line.
Former Egyptian leader Hosni Mubarak and the king of Bahrain, Sheikh Hamad bin Isa al-Khalifa, also have extensive links with London.
And then you have the Saudi royal welfare system where, according to Wikileaks, royal family members get monthly stipends to finance their lavish lifestyles. Their tricks include siphoning off money from "off-budget" programs controlled by senior princes, sponsoring expatriate workers who then pay a small monthly fee to their royal patron and, simply, "borrowing from the banks, and not paying them back."
Meanwhile, they run regimes where it's impossible for people to start and run a business. You can't get a license and you can't register property. Crony capitalism has fueled the revolutions. It's not insignificant that the revolutions in the Arab world started in Tunisia with Mohamed Bouazizi, a 26-year-old Tunisian with a computer science degree, who was forced to sell fruit and vegetables from a cart. He did not have a license to sell, and it was his sole source of income. On December 17, authorities confiscated his produce. Bouazizi became incensed, drenched himself in gasoline and set himself on fire outside the governor's office. The unrest started after that, and spread through the Arab world.
James Surowiecki in the New Yorker blames the upheaval on the systemic crony capitalism where political favoritism, corruption, self-dealing and greed by the rulers is rampant. And the prospects of turning that around, he says, are remote.
"Nervous rulers have been less keen to offer real reform than simply to bribe the population into quiescence,'' Surowiecki writes. "Hosni Mubarak, before he left, promised to boost public-employee salaries, as Ali Abdullah Saleh has done in Yemen. In Libya, Muammar Qaddafi has promised to boost some public salaries by a hundred and fifty per cent, and has offered every family in the country four hundred dollars. King Abdullah of Jordan fired his cabinet and increased subsidies, and King Abdullah of Saudi Arabia is giving his people some thirty-five billion dollars in various benefits. What the region needs is less crony capitalism and more competition. What it may get is political reform accompanied by economic stasis. When it comes to solving people's economic woes, toppling the tyrants could turn out to be the easy part."
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