The Arab Spring and Economic Justice: A Missing Dimension for Political Self-Determination

By Dr. Robert D. Crane

I. The Illusory Political Dimension

The first glimmerings of think-tank analysis have begun to appear in response to the so-called “Arab Spring”.  This is the optimistic code-word for freedom from concentrated political power. 

The world’s premiere foreign policy journal, Foreign Affairs, devotes its May/June 2011 issue to a symposium entitled “The New Arab Revolt: Just What Happened, Why No One Saw it Coming, What It Means, and What Comes Next”.  The initial article, “Demystifying the Arab Spring: Parsing the Differences between Tunisia, Egypt, and Libya”, by Lisa Anderson, President of the American University in Cairo, discards the notion of a “singular Arab revolt”, but she initiates the single theme of the symposium by focusing on political self-determination as spelled out by President Barack Obama in his Cairo speech of June 2009.  She thereby sets the stage to ignore or at least marginalize the economic preconditions for any kind of political freedom, whether in North Africa, Southwest Asia, or the rest of the world, including the United States of America.

The following article, “Understanding the Revolutions of 2011: Weakness and Resilience in Middle Eastern Autocracies”, by Jack A. Goldstone, a professor at George Mason University’s School of Public Policy, focuses on the differences between the failed revolutions of 1848 in Europe against traditional monarchies and the Arab spring revolts against “sultanistic” dictatorships.  The Arab Spring, he says, shows that concentrated power in the modern world is difficult to maintain, but again he views political power as an independent variable seemingly unrelated to the economic institutions that make it possible.  Although the disparities in wealth between the corrupt elite and the masses of people are important prerequisites for revolt or even for revolutionary change, neither he nor any of the other symposium participants focuses on the defective institutions of “democratic capitalism”, which put a democratic veneer on institutions that make it impossible to even address the wealth gap either within or among countries.

Monarchies, Goldstone says, are normally more flexible than sultans and can survive by granting some measure of political freedom, but he does not address the question whether monarchies have ever changed the concentrated ownership of productive wealth, which unfortunately is the major challenge in the modern world for economic and political justice.

The next article, “The Heirs of Nasser: Who Will Benefit from the Second Arab Revolution?”, by Michael Scott Doran, formerly Senior Director for the Middle East at the National Security Council and U.S. Deputy Assistant Secretary of Defense, notes that the first Arab revolution blamed the concentration of power on Western imperialism, whereas the second blames it on internal corruption by elites who exploited the monopoly of coercion inherent in all states.  He sees a shift of the balance of power from the state to society, but he does not address the lack of power in society to accomplish this devolution of power from the top down, as distinct from the bottom up, when the economic institutions are designed to concentrate economic power and necessarily the political power that inevitably flows from this.

Like all the other participants in this symposium, Doran’s lengthy article is essentially pessimistic about the future of stability, as well as of justice, in the Middle East, as well he might be because he does not address the defective institutions of a globalized world that are the major challenges to enlightened policy.  He concludes, “A call for justice and dignity also drove the first Arab revolution.  The fact that a military man – Nasser – symbolized those aspirations in the l950s speaks volumes for the pan-Arab movement, which, in the end, was hijacked by men with guns.  In Bouazizi [the Tunisian fruit vendor] the second revolution has chosen as its representative an entirely different kind of personality.  His selection, too, speaks volumes, but the precise meaning of the message is ambiguous.  As a humble fruit vendor who wanted nothing more than a fair shake in life, Bouazizi could symbolize the triumph of the human spirit.  On the other hand, Bouazizi died a broken man.  The men with the guns are only hiding in the shadows, and they may yet play a decisive role in fashioning the new Middle East”.

Most disappointing is the article by Dina Shehata at the Al-Ahram Center for Political and Strategic Studies, in Cairo, who describes the rise of a “newly minted business aristocracy” under Mubarak and the development of a “two-tiered society”, wherein the factory workers, landless peasants, and government employees at first were bought off by the expansion of a welfare state but then suffered when the World Bank forced economic reforms that cut back the subsidies.  Although she does not use the “f” word, she explains how the “unholy alliance” of business elites and political/military elites produced the classical phenomenon of what in Europe has been called “fascism”.  She draws the correct picture of propertyless people, but does not connect this to the institutional barriers to expanded capital ownership.

Perhaps the most important part of the symposium is the article co-authored by Nassim Nicholas Taleb, the author of forecasting in the shadow of a phenomenon that he explained in his book, The Black Swan: The Impact of the Highly Improbable.  He summarizes this phenomenon in a seeming reference to Chaos Theory: “Complex systems that have artificially suppressed volatility tend to become extremely fragile, while at the same time exhibiting no visible risks.  In fact, they tend to be too calm and exhibit minimal variability as silent risks accumulate beneath the surface.  Although the stated intention of political leaders and economic policymakers is to stabilize the system by inhibiting fluctuations, the result tends to be the opposite.  These artificially constrained systems become prone to ‘Black Swans’ – that is, they become increasingly vulnerable to large-scale events that lie far from the statistical norm and were largely unpredictable to a given set of observers”.

Taleb notes that, “Such environments eventually experience massive blowups, catching everyone off-guard and undoing years of stability, or, in some cases, ending up far worse than they were in their initial volatile state.  Indeed, the longer it takes for the blowup to occur, the worse the resulting harm in both economic and political systems”.

The universality of this phenomenon is indicated in his analysis of the American economy as a classic case of bad bi-partisan policy.  He writes, “In the United States, promoting these bad policies has been a bi-partisan effort throughout.  Republicans have been good at fragilizing large corporations through bailouts, and Democrats have been good at fragilizing the government.  At the same time, the financial system as a whole exhibited little volatility; it kept getting weaker while providing policymakers with the illusion of stability”.  He relates this to the American preference for supporting dictatorships as the price for stability, while the forces for instability build up to create what might be even worse than before.

In reference to the predictions of experts in what are inherently unpredictable domains, especially in failing to differentiate the linear from the complex, and when a naïve analysis of stability is derived from the absence of past variations, Taleb writes, “Humans must try to resist the illusion of control”.  Perhaps more properly he should have warned against reliance on the governing economic institutions that prevent the dissolution of political power, because ignoring these causative factors inevitably must destroy the political power that attempts to sustain them.

    The two remaining articles in this symposium on the Arab Spring are “The Rise of the Islamists: How Islamists Will Change Politics, and Vice Versa” by Shadi Hamid, Director of Research at the Brookings Doha Center, and “Terrorism after the Revolutions: How Secular Uprisings Could Help (or Hurt) Jihadists” by Daniel Byman, Research Director at the Saban Center for Middle East Policy at the Brookings Institution.  Both of these analyses warn against superficial attempts to understand the dynamics behind the most important factors in the evolution or revolution of the Muslim world.

II. Polar Scenarios: Nakba or Nahda

Professional long-range global forecasters have reason to be more pessimistic about our global future than ever before.  Just as President Obama abandoned President Bush’s “freedom and democracy” as a perhaps counter-productive slogan, and despite his one-time introduction of “justice” as a better synonym, it seems that nowadays there are no principles in either fact or fiction.

Two scenarios might best illustrate the fringes of scenario building, which was my specialty as Director of Third World Studies at the Hudson Institute from 1965 to 1969, including one year designing scenarios to justify American invasion of nine countries around the world.  The scenario at the pessimist fringe we might call nakba, and the optimist fringe might best be designated as nahda.  Nakba is what the Palestinians call their defeat in 1948.  Nahda is best translated as “renaissance”, as in the Nahda Party headed by Shaykh Rashid al Ghannouchi in Tunisia, the so-called “pacifist Islamist”, with whom I have been associated for the past quarter of a century.

The nakba or holocaust scenario restores tyrannies in an impending Arab winter.

The trigger for such a scenario assumes a Saudi invasion of Bahrain as a force to destroy seven Shi’a mosques and to burn the Qur’ans in them as works of the devil.  This would be beyond the bounds of credibility, but in fact this is precisely what happened in April 2011.


  Since Secretary Gates gave the official go ahead the day before the invasion, America will be blamed, just as it was for the Florida pastor who burned a Qur’an in Florida.  This may make more difficult the compromise and reconciliation in Bahrain that I advocated in my keynote address at the Bahrain rally from the Saudi Embassy to the White House on April 15th. 

    Failure in diplomacy could provoke Iranian intervention.  This would assume enormous stupidity on the part of the splintered Iranian government, but Western-style rationality is not in vogue any more even in the West.  This, in turn, could be used to legitimize U.S./Israeli bombing of Iran, which would lower both of us to the level of popularity that until now was achieved only by Ghenghiz Khan, who destroyed half the population of Persia.

    The resulting radicalization of the “Muslim street”, in turn, would legitimize Western efforts to restore tyrannies with more effective tyrants throughout the Arab world among our “friends”.  Since this could not be justified on the principle of justice, we might reinvent our support for them as the “last best defense of freedom and democracy”. 

    Thus the Arab Spring, based on hope for economic and political justice, would turn into an Arab Winter.  Just as President Obama abandoned President Bush’s “freedom and democracy” as a perhaps destabilizing and counter-productive slogan, and despite his one-time introduction of “justice” as a better synonym, the real world in such a scenario would witness an era in which there are no principles in either fact or fiction.

This scenario is different from the nakba in 1948, because this time the result could be an economic, political, intellectual, and spiritual holocaust for global civilization.

      The second scenario, namely, to secure an Arab renaissance or nahda, addresses the economic bases of power, by diffusing economic power as the only means to avoid the re-concentration of political power.  This is based on the premise that both envy-based Communism and greed based Capitalism serve to concentrate political power in an elite serving its own interests either openly and baldly or through the subterfuge of a de fact power-concentrating ideology.

        The challenge is to develop a just third way that retains the benefits of private property ownership and a free market.  This requires a comprehensive national economic strategy to empower every citizen, including the poorest of the poor, with the means to acquire, control, and enjoy the fruits of productive corporate assets.

      This long-range agenda involves major restructuring of tax systems and central bank policies to lift unjust artificial barriers to more equitable distribution of future corporate capital and faster growth rates of private sector investment. This would shift primary national income maintenance policies from inflationary wage and unproductive income redistribution expedients to market-based ownership sharing and dividend incomes.

      The central focus is the democratization of capital (productive) credit.  By universalizing citizen access to direct capital ownership through access to interest-free productive credit, it would close the power and opportunity gap between today’s haves and have-nots, without taking away property from today’s owners.

      Examples in the energy sector of Muslim countries would include the privatization of all oil extraction and processing to every citizen of Iraq in equal inalienable shares of voting stock, so that every Shi’a, Sunni, and Kurd would have a common interest in supporting the central government that makes this possible.  Another example would be the similar privatization of all the oil in Libya, so that generating fear of foreign imperialized theft of the Libyan heritage would be shown as sheer propaganda.  Compared to the scenario of nakba, this scenario would be sheer nahda or renaissance.

III. The Missing Dimension: Capital Homesteading

    The specifics of such a new paradigm of economic and political justice have been
developed in what is known as Capital Homesteading designed to:

1) Generate millions of new private sector jobs by lifting ownership-concentrating   central bank credit barriers in order to accelerate private sector growth linked to expanded ownership opportunities, at a zero rate of inflation.

2) Radically overhaul and simplify the tax system to eliminate budget deficits and ownership-concentrating tax barriers through a single rate tax on all individual incomes from all sources above basic subsistence levels. Its tax reforms would:

a) eliminate payroll taxes on workers and their employers;

b) integrate corporate and personal income taxes; and

c) exempt from taxation the basic incomes of all citizens up to a level that allows them to meet their own subsistence needs and living expenses, while providing a “safety net” vouchers for the poor.

The following are the four major forms or vehicles for Capital Homesteading.

The “Capital Homestead Account” or “CHA” is the primary tax-sheltered vehicle for the democratization of capital credit through local banks. It would enable every man, woman, and child to accumulate wealth and receive dividend incomes from newly issued shares in new and growing companies, without being taxed on the accumulations (including property and shares gained through inheritance, savings, and arrangements like ESOPs, CSOPs and CLBs). In addition to serving as a source of capital credit for corporate workers, CHAs would also provide an ownership-building account for individuals who do not work for profit-making enterprises, such as school teachers, civil servants, military personnel, police, and health workers, and for individuals who have no remunerative employment, such as the disabled, the unemployed, homemakers, and children.

The “Citizens Land Bank” or “CLB” [also known as the for-profit Citizens Land Cooperative (CLC) or Community Investment Corporation (CIC)] allows residents of a community to share in the control and profits associated with land planning and development.

The “Employee Stock Ownership Plan” or “ESOP” channels low-cost credit for financing the needs of business corporations (such as expansion, capitalization, and ownership transfers), and links private sector workers to ownership shares and dividend incomes in the companies for which they work. Shares acquired on credit by worker-owners are paid for out of the future corporate profits they help to generate.

The “Consumer or Customer Stock Ownership Plan” or “CSOP” lets customers of utilities share in the governance and profitability of “natural monopolies,” like telecommunications, water and power companies, mass-transit, and cable television.

IV. Policy Objectives of Diffusing Capital Ownership

        The policy objectives of upending the source of power from an elite on top to universal citizen ownership of productive wealth from the bottom can be detailed as twenty specific programs.  This is the essence of the normative concept of economic justice developed over the centuries by enlightened scholars of the Islamic shari’ah, as explained in the three-volume, 850-page textbook, Islam and Muslims, by Muhammad Ali Chaudry of the Center for Understanding Islam (http://www.cuii.org, and myself )

      The most important purpose for any modern economy, whether in America or any other country, is to meet Social Security and Medicare entitlements, and provide for their eventual phasing out as the mainstay of retirement income and to shift the Government’s role from today’s income redistribution policies to the more limited and healthy role of encouraging economic justice through free enterprise growth and universal capital ownership as a basic human right in capital intensive economies.  Capital Homesteading would:

• Promote Private Sector Growth Linked to Broadened Ownership. Recreate in the 21st Century the conditions that resulted from the first Homestead Act of 1862 in America introduced by Abraham Lincoln, including full employment, declining prices, and widespread, individual and effective ownership of income generating assets. Set a realistic long-term target, based on the nation’s industrial growth potential, to achieve a minimum Capital Homestead stake for every family. As an initial measure, this could be geared conservatively toward an equity accumulation, for example in America, of $150,000 over the next 20 years.

• Stimulate Maximum Growth, with a Balanced Budget and Zero Inflation Rate.  Private sector growth to achieve a balanced government budget and a zero inflation rate under the Capital Homestead program.

• Establish a Tax System That Stimulates Economic Growth and Jobs, and is More Accountable to Taxpayers.  Re-write and radically simplify the existing tax systems to automatically balance the budget.  Keep more money in the pockets of taxpayers from their initial earnings to cover their own health, education, housing, and other basic household living expenses.  Make parliaments more directly accountable and responsive to all taxpayers. Eliminate all tax provisions, personal deductions, tax credits, and exemptions (except for the front-end exemptions for adults and dependents) that unjustly discriminate against or discourage property accumulations and investment incomes for poor and non-rich families.

For example, a single tax rate on all sources of labor or capital income over exemptions would be automatically set to meet all social entitlement and other programs, and to pay down past deficits. To meet personal living costs the basic incomes of all taxpayers up to nationally established limits would be free from any income or payroll taxes. To increase taxable income for all citizens, corporations could escape from the multiple tax on corporate incomes by deducting dividend payouts.

• Keep Social Security and Health Care Promises. Keep existing promises and reduce the unsustainable burden on these systems by enabling every citizen to accumulate sufficient wealth-producing assets to provide each person with an adequate and secure taxable income from property, independent of social and health care benefits and incomes from other sources.  Based on conservative projections in an increasingly capital intensive economy by age 65 a child born today, for example in America, could accumulate a capital estate of nearly $500,000, generating $1.6 million in after-tax dividends over that period.

• Restructure the Credit and Tax Systems to Encourage Universal Health Care through the Private Sector. Capital Homestead reforms, supplemented by health care vouchers for the poor, would provide a sustainable way to finance the health care system. These reforms would empower each citizen and family with the means to enjoy and pay for affordable, quality health coverage of their choice.  Through market-disciplined, comprehensive health care enterprises that are owned and controlled by health care providers and health care subscribers (patients), the doctor-patient relationship could be restored, while providing greater insurance portability, accountability, and lower administrative overhead costs throughout the system.

• Make Home Ownership Accessible to all Citizens.  Resident-owned Homeowners’ Equity Corporations (HECs) could receive interest-free credit to buy up properties in default. As occupants of the homes in default pay the HEC their monthly rents (which could be supplemented with housing vouchers for the poor), these would be applied toward debt service, using pre-tax earnings to pay off the loans that the HEC used to purchase the foreclosed properties. As they make their regular monthly lease payments, these renters would become full owners of HEC shares and their dwellings.

• Stop Monetization of Government Debt. Terminate use of the central banks’ powers to create debt-backed money, to support foreign currencies, or to buy and sell primary or secondary governmental securities. This would reduce excessive government spending and improve accountability. It would force every government to borrow for deficits directly from savers in the open markets.

• Stabilize the Value of the Currency. Require the central banks to create a stable, asset-backed currency to encourage ownership by all citizens of productive private sector assets rather than non-productive public sector debt or future ownership monopolies.

• Reduce Dependency on Past Savings for Financing Growth. Require the central bank to distinguish between “sound” and “unsound” uses of credit, by providing interest-free money to expand bank credit to enable every citizen to become an owner of a viable accumulation of new income-producing assets. This would reduce dependency on past savings, corporate retained earnings, or foreign government wealth funds.

• Require the central bank to supply sufficient money and credit through local banks to meet the liquidity and broadened ownership needs of an expanding market-disciplined economy.  Such “monetized” loans would be subject to appropriate feasibility standards administered by the banks and limited only by the goal of maintaining a stable value for the currency.

Unsound uses of credit, such as the speculative credit that created the global financial meltdown, would be financed from the accumulations of those wealthy citizens and foreigners who could afford the risks.

• Democratize Ownership of the Central Bank.  Provide every citizen a single, lifetime, non-transferable voting share in the nation’s central bank and in one of its regional banks. This will ensure that the bank’s board of governors is broadly representative of all groups affected by central bank policy, and that power over future money creation is spread widely among all citizens.

• Discourage Monopolies and Monopolistic Ownership. Link all economic reforms to methods that discourage privileged access to monopolistic accumulations of private property ownership of the means of production. Introduce and enforce anti-trust laws designed to provide access to interest-free capital credit in order to encourage broadly owned new competitors to enhance and sustain market-oriented growth.

• Introduce a Market-Driven Wage and Price System. Gradually eliminate rigid, artificially-protected wage and price levels and other restrictions on free trade that afford special privileges to some industries, businesses, and workers at the expense of customers.  Replace subsidies with interest-free credit incentives to farmers who wish to associate voluntarily in cooperatives and in enterprises jointly owned by farmers and workers, including integrated agribusinesses.  The income generated by farmer-owned enterprises would supplement farm incomes and reduce the need for subsidies.

• Restore Property Rights in Corporate Equity.  Restore the original rights of “private property” to all owners of corporate equity, particularly with respect to the right to profits and in the sharing of control over corporate policies. Preserve traditional powers of professional managers held accountable by corporate governance through justice-based management.

• Offer a More Just Social Contract for Workers. A top priority during the next decade would be developing a more just “social contract” for persons employed in the private sector. This should be geared toward establishing maximum ownership incentives.  Instead of inflationary “wage system” increases, employees would begin to earn future increases in income through production bonuses, equity accumulations, and profit earnings. These “bottom-line” rewards would be linked to workers’ individual contributions, and to the productivity and success of their work team and the enterprise for which they work.

• Encourage More Harmonious Worker-Management Relations. Promote the right of non-management workers to form democratic unions and other voluntary associations. Instead of promoting the traditional “conflict model” of industrial relations, however, “labor” unions would be encouraged to transform themselves into democratic “ownership unions.” These ownership unions could become society’s primary institutions for promoting a free market version of economic justice, while continuing to negotiate and advance workers’ economic interests, including worker ownership rights and Justice-Based Management policies.

Under Capital Homesteading, unions could expand their role in a free market system by educating and expanding their membership to include all citizen-shareholders.  Ownership unions would enhance the property rights of all shareholders by enhancing management accountability and transparency, and protecting against unjust executive compensation schemes.

• Promote a Life-Enhancing Physical and Cultural Environment. Encourage special ownership incentives for those engaged in research and development, especially in the search for new and sustainable sources of energy, ecological restoration, and labor-saving technologies. Provide sufficient low-cost credit and royalty-free licensing for enterprises capable of commercializing life-enhancing technologies. Subsidize the development of new methods of conserving and recycling non-replenishable and limited natural resources that are vital to civilization’s long-term survival, at least until suitable substitutes can be discovered and developed.  At all levels of education promote universal principles of personal morality and social morality that are based on the inherent dignity and sovereignty of every human person within all institutions of a just social order, including the State.

• Reduce Public Sector Costs. Provide the military, policemen and firemen, teachers, and other public-sector workers with a growing and more direct equity stake in the free enterprise system, both as a supplement to their costly pension plans and so that they will better understand and defend the institution of private property. Whenever feasible, transform government-owned enterprises and services into competitive private sector companies, by offering their workers (and customers and other stakeholders in capital-intensive operations) opportunities to participate in ownership, governance, and profits.

• Establish Workable Demonstrations of Capital Homesteading at the Community, State, Regional and Global Levels. Launch several Capital Homesteading demonstrations. These would be most effective in areas of high unemployment.  A major objective would be to evaluate ownership-broadening reforms, innovative broadened ownership mechanisms, advanced concepts of worker participation in decision-making, and servant leadership developments like justice-based management.

Encourage State and local governments and other countries to promote widespread capital ownership as a basic Just Third Way for building a sound market economy.

Study the feasibility of a national and global citizen-owned “Land and Natural Resources Bank” to plan development of Nature’s resources, receive rentals for use of land and natural resources, and distribute citizen dividends among the population. Urge the United Nations and other international agencies to encourage the use of such economic development vehicles in order to bring about “peace through justice” in such conflict-torn countries as Iraq, Afghanistan, Pakistan, the Sudan, Kashmir, the Democratic Republic of Congo, Somalia, Burma, Sri Lanka, etc.  Such an approach could provide a model “Abraham Federation” solution for resolving the conflict between the Palestinians and Israelis.

• Initiate New Challenges for Multinationals.  Provide special encouragement to multinational corporations and global financial institutions to become instruments of peace and a more just world economic order, by broadening access to their ownership base to all citizens of the world community. Encourage businesses to open up future ownership opportunities as they begin harnessing the resources of nature.

• Promote a New Global Monetary System. Encourage the convening of a second “Bretton Woods Conference” to consider the implications of the above paradigm of peace, prosperity, and freedom through justice for the feasibility of a single global currency, and more just foreign exchange rates. The new policy should seek to reform global financial markets to address the challenge of global poverty and sustainable development, as well as to level the playing field among nations for global free and open trade.

V. Conclusion

    The Arab Spring can fulfill its potential only if the missing economic dimension is addressed as the sine qua non to secure lasting political justice.  Both dimensions, the economic and the political, must be spelled out with specifics by competition among political parties in every Muslim country without outside intervention.  These two bases of civilizational renewal, in turn, are essential foundations for a spiritual renaissance in the interfaith rehabilitation of religion as the key to peace, prosperity and freedom.