Author: Alan Schwartz
Publication: The New York Times
Date: December 1, 2001
Since the terrorist attacks, Americans
have learned that in many Arab and Muslim nations there are large numbers
of angry young men with time on their hands, unable to find jobs - or jobs
that make use of their education - because of their countries' poverty.
We've also learned that many Muslims blame us for their poverty. But in
fact they are not poor because we are rich; they are poor because of the
policies their countries pursue.
What matters for economic growth
is what a country does, not what it has. Japan, Switzerland, the Netherlands
and Israel have no natural resources, yet they have successful, developed
economies; Nigeria and the Congo, with abundant resources, do not. Nor
is the availability of capital, by itself, the answer. In many Arab nations,
the local rich invest their money outside their own countries and may have
good economic reasons for doing so.
Perhaps the most important cause
for some countries' continuing to fall behind is the monopolies that many
of them tolerate or even create. The bin Laden family, for example, is
rich because it was given a monopoly over much construction activity in
Saudi Arabia. A recent estimate for sub-Saharan Africa estimated that the
growth rates in all but a few countries could triple with no infusion of
additional resources if state-created monopolies were dismantled in businesses
like buying and selling grain or exporting textiles.
Not only does the absence of competition
in a business lead to inefficiency, but monopolies also sustain an elite
class that may block new technology and new industries - or permit them
and tax them heavily - as it guards its own power and wealth. In some Arab
countries, state-protected monopolies distribute part of their profits
to people in the government, creating a powerful coalition against change.
Some Muslim and Arab countries also
fail to provide the basic certainties that investors receive from the rule
of law. Without an independent, noncorrupt judiciary and transparent laws,
the ability of an investor to reap the rewards of a good idea turns on
the discretion of the ruler and his favorites of the moment. Where whims
rule, investors vanish.
Then there is trade. Generally,
income for each citizen grows by 0.5 percent to 2 percent whenever the
amount of total national income that comes from trade grows by 1 percent.
Yet many Muslim nations discourage trade with import duties, as well as
with their broader economic policies.
And there is human capital. A modern
economy cannot grow without a population able to do its work. A good measure
is the skill of a nation's young people in science and mathematics. Since
most Arab nations do not give the usual standardized tests, it is not easy
to see how well their students are doing. But it is deeply disturbing that
countries like Egypt, Saudi Arabia and Pakistan have either turned their
national schools over to Muslim clerics or underfunded education so that
the clerics' schools fill the gap. Because they seldom teach math and science
or other modern skills, the ascent of these schools may retard economic
growth for decades. And of major importance is the failure of many Muslim
countries to invest at all in the human capital of half the population
- that is, women.
Even though the poverty of Muslim
countries is not America's doing, the United States may be able to help
these nations work their way out of it. We can push them toward more constructive
economic policies with free-trade treaties, like the one we have with Jordan,
and through our influence with the International Monetary Fund and the
World Bank. We can explain, loudly and often, the link between local economic
performance and local political institutions. We should support local democratic
movements not only because of the intrinsic merits of democracy, but because
it is more difficult to pursue bad economic policies when one's citizens
can openly criticize them.
Sept. 11 has taught us anew how
important it is for the United States to take this kind of active interest.
If we do not promote economic growth in Muslim nations, we will by default
promote growth in the supply of potential terrorists.
Alan Schwartz is a professor of
law and management at Yale.
