Egypt faces the crossroads

Egypt has always been seen as the leading Arab state.  Not being flush with oil wealth, it was the centre of anti-colonialism and Arab nationalism under the populist dictatorship of Nasser, who confiscated the Suez Canal for the state and waged war on Israel.   After failing miserably to destroy Israel, but losing the Sinai Peninsula to it, he was deposed and replaced by Anwar Sadat, who had another attempt at Israel before deciding enough was enough - and agreeing a peace treaty, which resulted in Israel swapping land (Sinai) for peace.  

Sadat was assassinated by an Islamist and replaced by his deputy, Hosni Mubarak, who took a less friendly view of Israel, but was sustained by the US pouring more aid money into Egypt than any other country bar Israel (and more recently Iraq).  Mubarak was sustained because the alternatives were seen to be Soviet and then Iranian backed Islamists.   

Let's be clear, an Islamist run Egypt would pose a threat not only to Israel, but could be a base for terrorist activities in Europe and beyond.  It would have a stranglehold over shipping through the Suez Canal, and be leading the largest Arab state by population.   The Iranian military religious dictatorship is already claiming a new Middle East, Islamic dominated, is coming to the fore, let's hope not.

For if it were to happen, do not be deluded that it will cost in lives, and could create a new age of conflict that makes Iraq and Afghanistan seem like they were easy.

Yet the Mubarak regime is far from good, it was relatively open economically, but used torture, suppressed free political expression and has been corrupt and kleptocratic (although not as bad as some).  It has been moderately benign as far as dictatorships go, but it is hardly an endorsement that it is better than the alternative.   So the time has come, as relative moderate secular Egyptians demand political freedom, and the dignity and respect of being able to challenge government, politicians, political appointees and the regime.

My hope is that he steps down, announces free and fair elections, and provides the space for real political pluralism to flourish in a country where more suppression may only embolden Islamists.

For the future of not only Egypt, but Israel, the Middle East and the world is deeply affected by what happens in Cairo.   I sincerely hope that those on the left, who with some justification, criticise and despise the Mubarak regime (although I suspect somewhat motivated by anti-Americanism) will not celebrate or support an Islamist takeover of Egypt.  

For if it is a bad dream for Egyptians to be suppressed by the Mubarak regime, it would be one of our worst nightmares to have an Ayatollah of Cairo.

Arabs stand up, but where will they walk?

Tunisia

Tunisians stood up because they saw the contrast between their own recession (driven in some part by a drop in demand for Tunisian goods and tourism due to the recession in Europe) and the privileged kleptocratic lifestyle of former President Zine El Abidine Ben Ali and his thieving bitch of a wife, the gold-digging hairdresser.  Having appointed himself as President for an extra two years, and maintained a tight grip on media, speech and maintaining a personality cult, Tunisians had had enough and rightly turfed him out.  Even when some of his lackeys tried to take over, Tunisians weren't standing for that either.   Ben Ali took over from Tunisia's relatively moderate but dictatorial founding President Habib Bourquiba, a man whose record was described by Christopher Hitchens as follows:

he was strongly influenced by the ideas of the French Enlightenment. His contribution was to cement, in many minds, secularism as a part of self-government. He publicly broke the Ramadan fast, saying that such a long religious holiday was debilitating to the aspirations of a modern economy. He referred with contempt to face-covering and sponsored a series of laws entrenching the rights of women.

Bourquiba was no angel, but he was one of the more moderate of the Arab world's strongmen, look at who he had to the east with Muammar Gaddafi making Libya a personal fiefdom and sponsor of murder worldwide.   He wasn't an economic genius and left Tunisia with mounting inflation and debts.

Ben Ali took over when Bourquiba was pronounced too ill to continue, and resisted an Islamist terrorist campaign to take over the country in 1987.  Ben Ali naturally got extensive US and French support to suppress the Islamists, and Tunisia and its neighbours are no doubt the better for it.

Yet as with all dictators, power corrupts and absolute power corrupts absolutely.  Tunisia hosted the PLO for over a decade, and Ben Ali made considerable efforts to encourage it to reach out to Israel and recognise its right to exist.  He opened up the economy and living standards increased, but freedom of expression was not on offer. He hosted multi-party and multi-candidate elections that were for show, and as the economy has waned, and he has appeared aloof from it all, so Tunisians said enough.

However, wherever Tunisia ends up, it is unlikely to be Islamist and it is, after all, a small country.  It is hoped that its largely secularist past will bode well for the future.

Yet Arabs in Algerian, Egypt, Yemen and Jordan have all watched the protests on TV and online, and have seen how easy it is to topple a strongman.  None of the countries have political freedom, all have economic difficulties, but where will they end up?

Algeria

Algeria was born of a bloody civil war against the French, and it went through three Presidents in three years as power struggles and uncontested elections meant a volatile scene.  In 1965, Houari Boumedienne seized power in a coup and ran Algeria on strict socialist principles, with strong allegiances with the Soviet bloc and China, even giving an honorary doctorate in person to Kim Il Sung.  He wasted the country's oil wealth on developing state owned heavy industry which proved uncompetitive and unproductive, and ran a ruthless police state.

Boumedienne's death saw a brief interim Presidency, followed by his protege, Chadli Bendjedid who was unremarkable, as the economy stagnated with falling oil prices.   As debts grew and government spending was cut, protests emerged and Bendjedid liberalised politics to announced the introduction of multi-party elections.  That, as is well known, sparked the rise of Islamism.  Local elections in 1990 saw the Islamic Salvation Front win a majority of positions, and there was every risk it would win the central government election in 1991.  The Islamic Salvation Front was lukewarm towards retaining democracy, with the vice president of the party claiming "If the people vote against the law of God, this is nothing other than blasphemy. In this case, it is necessary to kill the non-believers for the good reason that they wish to substitute their authority for that of God".  The party opposed the widespread coalition of Operation Desert Storm that had UN Security Council endorsement to eject Saddam Hussein out of Kuwait.

Hardly surprising that the military intervened and stopped the election, but what followed was a brutal oppression and civil war.  Thousands were rounded up and locked up, prisons were full, and Islamists took to the countryside with weapons.  Islamists embarked on a policy of deliberate massacres of entire villages if they were not supported, the military responded and over 100,000 were killed in 11 years of war.  The war ending only because so many Algerians were tired of the slaughter.   The military supported Abdelaziz Bouteflika to become President, and an amnesty saw many Islamists give up.  He was elected in 1999 in an election boycotted by opponents, but in 2004 he was re-elected in an election described by the OSCE as free and fair.  He engaged in substantive economic reforms, taking advantage of rising oil and gas prices to rebuild infrastructure, construct housing and the economy recovered considerably.   His amnesty and reconciliation process gained much support domestically, except among militant Islamists.  He engaged in privatisation of heavy industries and the tourism sectors.

However, tensions have risen in the last two year as Bouteflika sought and gained a constitutional change to allow him to run for the Presidency for a third term, meanwhile Islamists have gained support in resistance to his attempts to retain power.  He held an election in 2009 described by Western observers as a sham, as many candidates and voters boycotted it, and he subsequently won.  In essence, Algeria's carefully won peace has been undermined by the hunger for power by a man who started by doing good, but has been unwilling to let free expression and pluralism rise against him.  As a result, those who are not scared of doing violence and unwinding the peace - Islamists - are gaining the upper hand.  Algeria's economy is in reasonably good shape, but tensions with rapidly rising food prices and dissatisfaction with corruption and suppression of dissent, are firing up protests.  None of this is helped by Islamist backing for a revolution. It would be fair to say that the greatest risk in Algeria is a second bloody civil war.

Yemen

Often forgotten is the fact that the Republic of Yemen was only united in 1990, as much of Yemen's post colonial history was spent as two governments and states.  The new united Yemen was promising as it established a multi-party democracy, guaranteeing equality under the law, basic individual rights.  However, the election didn't result in acceptance of all political leaders, as the President and Vice President came from the two former northern and southern republics.  Grievances spilled out into armed conflict between the two sides, not helped by the failure of the two state's armies to integrate.   The unified Yemen acted as if it were two countries, with Saudi Arabia supporting the socialist south because it was opposed to a united Yemen.  The UN Security Council and most other states sought a ceasefire, and the civil war ended quickly with dominance from the north.  Subsequently parliamentary and presidential elections saw dominance achieved by Ali Abdullah Saleh, who had been President on reunification, and had previously been President of the northern Yemen Arab Republic since 1978.   Although elections have widely been considered to be reasonably free and fair, Saleh has had considerable influence over the media and press.

However, the main challenge to his rule since 2004 has been an Islamist insurgency from the north, which is partly tribal and religious motivated (as it has come from a sub-sect of Islam - the Shia Zaidiyyah).  Terrorism and attacks have persisted in Yemen, with the Yemeni government fighting a continuous campaign against the Islamist rebels.  Both it and the Saudis claims Iran is supporting the Islamists materially.  Saudi Arabia is now backing the Yemeni government, as Al Qaeda Saudi Arabia has shifted its base to Yemen.  The US has since provided direct military support to the Yemeni government to attack its bases in the north, including air combat support.

Yemenite discontent is from a combination of disenchantment with the almost continuous rule by one President since 1978, but also an economy which has performed poorly.  This was not helped by the repatriation of hundreds of thousands of Yemeni workers during the 1991 Gulf War because the regime supported Saddam Hussein.  Yemen's economy has been dependent on subsistance agriculture and modest oil and gas reserves, of which revenue is used to offset high subsidies for domestic petroleum.  Tourism is virtually non-existent, and the civil war has dissuaded foreign investors as well as driving more skilled Yemenis overseas.  In short, the country has been seriously hamstrung by ongoing conflict.

The great fear is that protests in Aden will be taken advantage of by Al Qaeda and its associated Islamist rebels, particularly as Yemen is in a strategic position on the approach to Suez.

As for Egypt? The news is unfolding... the consequences could be far reaching.... and I will write on it later.

However, the common theme amongst all of these state is resistance to political power, to absolute rule, to those who have used the state to enrich themselves and not ever been accountable for what they have done.  In short, Arabs in these states have wanted political freedom.

Yet more than a few have seen it as a chance not just to throw off the shackles of existing regimes, but to introduce a new order.  Akin to how Iranians threw off the authoritarian corrupt Shah, and supported the most well organised alternative - who has since proven to be more authoritarian and despicable.

The Western support for the likes of Hosni Mubarak has been because the apparent alternative would be far worse - yet the truth is nobody knows what will happen, and maintaining dictatorship and one man rule simply provides fodder for the Islamists, promotes hatred of Western values and civilisation as Islamists can say the West supports political freedom for all, except Arabs.   So support must be given for these regimes to change, to let people have their say, and for freedom to emerge in secular modern republics.  Yet if any look like becoming Islamist states that will harbour and promote terrorism and war, then it is a different story, for it risks the national security of the targets of that terror and war.  Hopefully most Arabs in these countries, having lived under relatively secular rule for some time, have little appetite for a new form of tyranny - but, one might have said the same of Iran in 1979.

Labour approved of part-privatisation in 2002

Cast your mind back to the last Labour Government.  A government opposed to privatisation? Not quite.

The evidence is clear, as Michael Cullen issued a press release on behalf of the government in 2002 approving Qantas buying 4.99% of the mostly nationalised Air New Zealand, and approved an application by both airlines to get Commerce Commission and ACCC (Australian Competition and Consumer Commission) approval for Qantas to ultimately buy 22.5% of Air New Zealand.

If it was good enough for Helen Clark, Michael Cullen, Trevor Mallard and Paul Swain (and the rest of Cabinet including Phil Goff, Annette King et al) then, why is it not any good now?

I opposed that at the time for the simple reason that the whole Air NZ nationalisation debacle was partly caused by the government sitting on its hands and not approving Singapore Airlines's request to lift its shareholding in Air NZ/Ansett Australia to 49%, because Qantas lobbied the government saying it had a "better idea" even though all of Air NZ's private shareholders opposed it.

It was a classic example of corporatist lobbying which successful killed off a competitor.  Qantas got what it wanted; the failure of Ansett (its biggest competitor) and a chance to gobble up Air NZ to ensure it was never threatened in its own patch again.  The latter didn't ultimately happen, but let's be clear.  Whilst Air NZ/Ansett did make poor business decisions, its collapse was precipitated because of government interference in a business decision that would have saved it.

That is the level of competence of those in the Labour Party who think, somehow, that they can manage large businesses well, when they have helped bring one to its knees, thanks to its competitor helping it out.  Then Labour sought to hand over part of what is now deemed to be a "strategic asset" (whatever that is) to its biggest rival.

The Greens did oppose any sale, because the growth in the public sector is seen as a "good" by those who think the people = the state.   However, it's sad that while Labour has no credibility, National can't have the courage of its convictions to argue that government should be in the business of owning businesses at all. 

Just one day

The day to remember what happens when the philosophy of selfless sacrifice, the belief that the common good is more important than people pursuing their own ends, the belief that the ends justify the means, the belief that people's ancestry is more important than their deeds, and when individualism is snuffed out completely and absolutely.

Holocaust Memorial Day is a day to recall the millions who were systematically removed from their homes, transported as cattle, enslaved, tortured and murdered industrial style in a manner that has yet to be paralleled by any regime.

It is also a day now to remember how the radical anti-capitalist Red Khmers took over Cambodia, declared Year Zero, abolished money, abolished property, systematically emptied the cities and shot, terrorised, tortured and starved between a quarter and a third of the population of that impoverished country - with the full material and moral support of the People's Republic of China.

A day to remember when the Orthodox Christian Serbian fascists went from town to town in Bosnia Hercegovina and ordered out the non-Serb men and boys, marched them out of town and shot them, and then went about raping the women and girl children of the towns (and one should not forget the Catholic Croatian fascists who did the same on a less organised scale to non-Croats).

A day to remember when the Hutu people of Rwanda had the fear and hatred struck into them to slaughter and butcher the Tutsi people, on a scale and extent that most has never really fully understood.

AND especially a day to remember when the Islamist thugs backed by the Sudanese dictatorship entered Darfur to slaughter, starve, rape and maim thousands of those who were not of them.

Many other mass slaughters and murders should also be part of today, and hopefully they will also be noted, such as the murder of Armenians under Turkish rule in the early 20th century, the Soviet slaughter of ethnic minorities and deemed class enemies under Lenin and Stalin, Mao's mass starvation of Chinese people in the 1960s, the murder, disappearance and purge of one third of the people of Equatorial Guinea in the early 1970s.  The list goes on.

It is why the use of the term "holocaust" should not be used lightly.  It is about the systematic slaughter and indiscriminate murder of vast numbers of people because of their background.   A scourge that the 21st century has sadly not yet purged from the desires of some politicians or religious leaders.

Being rational about privatisation

If there is one issue that is guaranteed to result in hyperboles, reality evasion and emotive banality from New Zealand’s left, it is raising the issue of privatisation of state owned enterprises. I think sometimes that those who claim to be “centre-left” are really hardline Leninists, who react as virulently as Mao’s Red Guards to those who don’t follow the “correct line”.

As a libertarian, I don’t believe the state should be engaged in owning and running businesses at all, because nobody should be forced to have their money tied up in any business. Some businesses the state owns are unviable in their own right and should either shut down, or be severely scaled back. They destroy wealth, and sustaining them is nothing more than taking from taxpayers to subsidise the customers of these businesses, who would otherwise either pay a full market price or go elsewhere. Kiwirail being a good example. If it was properly privatised it would still exist, but not on the scale it currently is at, which is driven by politics, not economics. Bear in mind though that key competitors of Kiwirail are state and local government owned, in the form of roads and ports. This significantly blurs questions of fair competition.

Others are profitable in their own right, but are constrained to expand because they don’t have enough capital and because the state, as a shareholder, tends to resist such expansion. Winston Peters stopped the Airways Corporation, an efficient operator by world standards, from expanding into other countries. An outrageous destruction of opportunity by a New Zealand company that could have taken its international best practice and earned foreign exchange from doing so. NZ Post is in somewhat of a similar position, being an excellent operator which was shoe-horned into entering the local banking sector by Jim Anderton, instead of entering foreign postal markets where it has true world-class expertise.

Some undermine competition and investment from the private sector, because the private sector knows state owned companies don’t fail. Ask yourself why there has been next to no new entry in the electricity generation market as the state has maintained ownership in 70% of generating capacity. Indeed perversely, after nationalising Air New Zealand, the last Labour Government deliberately tried to engineer the suppression of competition in the New Zealand aviation market, by promoting a Qantas part purchase of Air New Zealand. This would have effectively handed the state owned airline virtually all of the domestic, and 80% of the trans-tasman airline market. As it happens, competition authorities stopped the government creating this monopoly, which was not one of entrepreneurs, but the state colluding with a company that itself had its hands manipulating its government.

In cases where competition exists or can reasonably exist, it seems difficult to sustain any argument that the state should be in that market. Examples of this range from banking, to farming, retail energy production, exploration and supply, transport services, broadcasting outlets, telecommunications, postal services to housing. A state owned competitor at best can perform moderately well and be seen as any other player (how many people think electricity supply has been privatised and don’t realise most of the companies in the sector are state owned?). At worst it can distort competition and investment, as competitors see it as the player that cannot fail, even if it underprices and performs badly.

However, is there a case for the state owning any businesses, particularly ones some economists refer to as “natural monopolies”? I would argue no, and measures can be taken at privatisation to manage this over the medium term (such as requiring certain terms and conditions to be applied to competitors, and transitional measures of price control such as happened with Telecom). Yet this isn’t the issue presented by the Prime Minister’s announcement.

He is talking about a part-privatisation of five government companies.

One, Air New Zealand, is already part privately owned, because the last Labour government did not nationalise all of the shareholding. Given the Labour Party sought to sell 20% of Air NZ to Qantas (and Qantas did acquire 5% which it has since sold), the credibility in opposing any sell down of Air NZ is completely empty. Air NZ faces intense competition in some parts of its business, particularly Trans Tasman and long haul traffic to/from Europe. However, it isn’t individual kiwi shareholders it needs, it actually needs a massive injection of capital so it can expand and work more closely with its foreign partners. Whilst it has performed adequately, this is a highly volatile sector, and the airline is weak if it does not have strong support from highly capitalised partners.

Another, Solid Energy, is a commodity producer and exporter in a competitive international market. Some people find what it produces (coal) to be immoral, such as environmentalists. Quite why they should be forced to own a coal mine is beyond me. Quite why the Greens think so is beyond me even more. Solid Energy isn’t a great performer, it doesn’t make a good return on its capital. It has been erratic in paying dividends. There appears little value in the state holding onto it.

The other three are competitive electricity generators and retailers, Mighty River Power, Genesis and Meridian. They all compete with each other, and with the main private generators/retailers Contact and Trustpower. If it is fine for the private sector to have 30% market share, you may wonder quite why it can’t have all of it. Providing adequate power generating capacity to meet demand is a serious issue, and one that isn’t facilitated by companies that dominate the market but are themselves undercapitalised.

By no means would part or even full privatisation of any of these companies deliver harm to consumers, but are taxpayers losing out?

Well it depends on the following:

- Are the companies constrained from success by a lack of capital? In all cases, the answer is probably less. Extra capital means government borrowing or more taxes to “invest”. I doubt whether really faced with the question, most New Zealanders want to be forced to do this.

- Are the companies making returns better than the government debt their sale would retire? Bernard Hickey says yes, but I’d argue that this snapshot is a poor representation of the long term capital value. Solid Energy and Air NZ have not been good returns over a longer period, so these can be ruled out.

So if the electricity companies are making good returns does it still mean the state should hold onto them, because they make more money than the interest on debt that would be saved if they were sold? Well no. It does not make it moral to continue to force people to indirectly “own” any companies at all.

You see the underlying premise of state ownership of companies is force. You are all forced to have a stake in these companies, without actually having any of the privileges of ownership. You don’t get a dividend, the state uses it to spend on what it chooses (which the left assume you benefit from, but it is all in the mix). You get to inject money into the company without your consent. Most of all, you simply can’t get out of this deal and use the money yourself, since you may make more money if you simply had the money in your own hands.

Which raises the question of whether privatisation might better be carried out in some cases, not by selling shares, but by issuing them to New Zealand citizens in equal quantities. That would be true public ownership, and then the “average” “ordinary” “Kiwi Mums and Dads” or whatever sugar-coated adjectives are used, can decide using their own minds, whether they want to be shareholders in power companies, banks, a postal operator, farms, service stations, a railway, an airline etc. Many will want to, many would rather use the money to pay their mortgage, or put into their own business or put into savings. What would be wrong with that, except that an awful lot of socialists don’t actually like people making their own decisions with their own money, because they want to make the decisions for them.

So when the left talks about thinking about the average person, what they are saying is they want to think for them. Ownership by the public is not what the left wants, it is ownership by the state, controlled according to what politicians think is good for the public.

Paternalism pure and simple.