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 Freedom to Trade
 
The free market secret of the Arab revolutions
Financial Times, United Kingdom Tuesday, November 08, 2011

Hernando de Soto
In the wake of the overthrow of three autocrats, not enough credit has been given to the mighty consensus that triggered the uprising- the desire of a vast, underclass of people to work in a legal market economy. If Middle Eastern and African new leaders want to make a difference their agenda has to include tackling the nitty-gritty institutional deficiencies that make most Arabs poor, otherwise, they will eventually open the doors to the anti-democrats and enemies of modernity, says Hernando de Soto in ‘Financial Times’.

The family of the brave Tunisian fruit vendor whose self-immolation triggered the Arab uprising hopes his sacrifice would bring to the Arab World the poor’s right to buy and sell.

In the wake of the overthrow of three autocrats, not enough credit has been given to the mighty consensus that triggered the uprising- the desire of a vast, underclass of people to work in a legal market economy.

This huge shift began after all when the 26-year-old Tarek Mohamed Bouazizi, immolated himself in front of the governor’s offices in the town of SidiBouzid last December, after his merchandise was confiscated.

Like 50 per cent of all working Arabs, he was an entrepreneur, albeit on the margins of the law, who died trying to gain the right to hold property and do business without being hassled by corrupt authorities.

One day after he set himself alight, thousands of people in his town and neighboring villages took to the streets. Millions marched under banners for reform. According to research, at least 35 businessmen followed his desperate example and set themselves on fire (13 more in Tunisia, 17 in Algeria, four in Egypt, three in Morocco and so on).

If Marx taught us anything, it is that the powerless can crystallize into a revolutionary class when they become conscious that they share a common suffering –and especially when a martyr embodies that suffering.

Bouazizi flicked his lighter one hour after a policewoman backed by two municipal officers, had expropriated his working and he had lost his capital. Since his merchandise had been bought on credit and he couldn’t sell it to pay his creditors back, he was now bankrupt. As a businessman, Bouazizi had been summarily wiped out. Without property and trade, his reputation as a reliable administrator of goods was now undermined in the only market he knew.

He was a budding entrepreneur. According to his mother and his sister, his goal was to accumulate capital to grow his business. But this was impossible, looking at the records and the laws he had to comply with.

To reach his goal he needed: some kind of legally recognized collateral, and compliance requires 499 days of red tape at a cost of $2,976.
He would have had to establish a small sole proprietorship taking 55 administrative steps during 142 days and spending some $3,233 (12 times Bouazizi’s monthly net income, not including maintenance and exit costs). Even if he had found the money and the time to create a sole proprietorship firm the law did not enable him to pool resources by bringing in new partners, limit liability to protect his family’s assets, and eventually, issue shares and stocks to capture new investment.

If Middle Eastern and African new leaders want to make a difference, they have to appreciate the underclass of such aspirant capitalists, a supranational movement that spans Arab cleavages, different languages, political environments and cultures. If their agenda does not include tackling the nitty-gritty institutional deficiencies that make most Arabs poor, they will eventually open the doors to the anti-democrats and enemies of modernity.

This article was published in the Financial Times on Tuesday, November 08, 2011. Please read the original article here.
Author : Hernando de Soto is a Peruvian economist known for his work on the informal economy and on the importance of property rights. He is the president of Peru's Institute for Liberty and Democracy (ILD).
Tags- Find more articles on - Arab movement | Arab revolutions | Middle Eastern leadership | red tape | Tarek Mohamed Bouazizi

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