Monday, January 30, 2006

Hamas, Islamism and Democracy: Smart and Dumb Corruption

As usual, Fareed Zakaria offered a wise analysis of the U.S. foreign policy towards Islamist governments in the Middle East. One mistake that he makes is attributing the rise of Hamas and its popularity to the corruption and ineptitutde of Arafat's Palestinian Authority. President Bush's advisors made the same mistake by convincing him that the vote for Hamas was simply a protest vote against the PLO/PA.

There is no doubt that people's frustration with corruption and government profiteers in the region more generally has contributed to the quick rise of Hamas to power (and potential for the Muslim Brotherhood in Egypt, Syria and elsewhere to reach power if relatively free elections were to be held). However, the Islamic issue runs much deeper in the Muslim psyche, and the problem with corruption (whether in Palestine or Egypt) is hardly a coincidence. It is very much part of the capitalism that the Washington consensus assumes to be the solution to the world's economic woes.

Whether in Eastern Europe, South and East Asia, or anywhere else, the effects of corruption in capitalist countries (and please don't lecture me about our US economy being free of corruption!) are amplified. The business elites that serve as bridges between newly freed economies and the world (the Rachids of Egypt, the Sha`aths of Palestine) generally succeed precisely because they are willing to cut corners. In the absence of complete markets, corruption is the grease that allows economies to move quickly -- it allocates resources to those willing to pay the most for them. Corruption becomes so systematic that those engaged in it don't see anything wrong with their approach (in the case of the young Rachid in Egypt, some of his ex-employees have even praised his honesty, integrity, etc. in my presence). It must be clear, however, that whether you are smart or not so smart, sincere or insencere, you can only make a difference in that part of the world by taking part in corruption.

This brings me to my thesis: no developing country can grow quickly without a significant dose of corruption. The difference between countries that succeed in crossing the poverty-trap threshold and those that remain trapped (despite numerous multi-millionaires) is the intelligence and intentions of their corrupt elites. Smart corruption cuts corners to allow for faster economic growth and domestic development [of which they can take a fixed and non-distortionary percentage, a la the Mafia]; dumb and selfish corruption extracts resources from a country and sends them abroad. Of course, there is no clear demarcation between the two, as even the smart and sincere corrupt would need to send some resources abroad, just in case things don't work out as planned, and they need to maintain their ultra-rich lifestyle elsewhere (or at least, to avoid nationalization of their wealth after a counter-revolution).

Corruption does not differ much -- formally -- from the (extra-legal and illegal) means used by Hamas, MB and other groups to circumvent the legal system and provide social services, etc. to those who cannot get them through formal channels. Thus, when such groups come to power, they already have the requisite tools to keep the creative wheels of economic growth turning. Moreover, there are many political and entrepreneurial individuals whose function and objective in quasi-religious groups is very secular in nature. Those individuals are likely to be the ones to control government when groups arrive in power.

There are two threats to worry about: The first is that the ideologues within those religious groups would be the ones to control government for extended periods of time (e.g. the Khomeini-types, rather than the Rafsanjani types). The second is that the more practical and business-minded elements would become too corrupt too quickly. A combination of those two threats can drive an economy into the dust, while extracting its limited resources, thus ensuring impossibility of growth in the longer term.

So, the thing to watch out for is not that "Hamas moderates its ways", as people in Washington seem eager to say. The question is who within Hamas will rise to power. One should watch out equally for the clueless ideologues (a la Ahmadi-Nejad), who think that they can run an economy on good intentions. One should also watch out for snake-oil salesmen, who hide their self-enrichment programs under religious and free-market-reform slogans (a la Rafsanjani). Either scenario would spell disaster for any country in the region. The worst of all worlds is when we have both scenarios working together: clueless ideologues in power being manipulated by snake-oil salesmen.

Watch out America/World for this scenario, which you may help unwittingly to bring about. The snake-oil salesmen will say all the right things to your Washington-consensus ears. You will be tempted to empower them. They will only be able to function if given the credibility by ultra-conservative and genuinely uncorrupt but clueless ideologues, and thus you may learn to tolerate the latter. The monster for which you hope may be much more dangerous in the long term than the monster that you fear.


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