Peak Fragility: Why The Middle East Is Doomed

Peak Fragility: Why The Middle East Is Doomed, by Ehsani, a Middle East expert, Syrian-American banker and financial analyst.

It is important to note that excessive population growth is not fundamentally the issue here. …

The Arab World’s problem is that it suffers from shockingly low levels of “productivity”. … The answer lies in everything from excessive size of public sector, subsidies and overbearing regulatory system leading to corruption. …

Growing up in Syria, I can still recall the “Family Booklet”. The more dependents you had on that booklet, the more was your allocation of subsidized rice, sugar, tea, edible oil, etc. Your home electricity was also subsidized. So was your diesel. Schooling? Free all the way. Not only almost all your food staples and energy use was subsidized, the Syrian State used to give a prize (Nishan) to women who gave birth to 12 children or more. Syria at that time had about 6 million people (and produced 300,000 barrels of oil a day and had plenty of water).

Without having to pay full price for bread, sugar, electricity, tea, fuel or education (all the way to college) and with the State becoming by far the largest employer (job guaranteed), the Syrian population doubled every 22 years. Imagine the pressures on the State coffers.

There’s no need for much imagination about how Syrian State fared as its population doubled every 22 years while its oil reserves and production dropped by 50%. It was still expected to offer all those freebies to a populace that never once asked how the State was to pay for all this. …

Growing up in Syria, avoiding taxes was akin to breathing. It had to be done. Often times, tax rates were impossibly high (top marginal rate was once over 70%). …

On my trip to Syria few months ago, a young gentleman at my hotel explained to me how he was finding it hard to resist the pressure from his extended family and friends to stop at 5 kids. His father had 11. His brothers had 8-9. Having only 5 himself was insulting to his manhood. …

Corruption thrives in heavily bureaucratic centralized systems where civil servants suffer from frozen salaries and inflation rates that eats away at their real purchasing power. Without supplemental income, employees at all levels of the state apparatus will hardly survive.

Nice article explaining how Syria got where it is, by a Syrian.

hat-tip Adrian