…Arvind Subramanian wants to bring you down. Writing in the FT:
Even if the people of Libya and Bahrain join those of Egypt and Tunisia in overcoming their cursed political systems, the economic manifestations of their rent curses will remain. Even if they become more democratic, because these countries benefit from substantial rents they will have less need to tax their peoples. This precludes the need to reform state controlled industries to create private sector wealth. It also will stop the development of genuine democratic systems, the usual basis for the legitimate taxation of citizens.
…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.
…Venezuelan politician PÃ©rez Alfonzo once said that oil’s effect on development should see it labelled the “devil’s excrement”. This counts double for economic rents in general. Political change in the Middle East is well under way, but the economic clean-up job is barely begun.
He may be glum but he may also be right.
To have me rain on your parade, look back at my post after Mubarak fell.