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For almost a year, diplomats, experts and journalists have been telling investors not to worry about the new Islamist governments emerging in the wake of the Arab Spring. They are wrong.
The optimist argument was simple: “democratic realities will force Islamists to maintain economic growth in order to win the next elections.” Arab spring will not immediately shift to winter; responsibility makes politicians responsible and so on.
Certainly, the Islamists talked a good game. Morocco’s Islamists, in their party platform and in their speeches, stressed that a freer economy would attract foreign investors and boost jobs. They said that reducing youth unemployment was their No. 1 issue. They said that they wanted to return annual GDP growth to 7% per year—making Morocco into an “Asian tiger.” They said they wanted free-trade agreements with their neighbors. (The kingdom already has free-trade deals with the United States and the European Union). They said they favored deregulation and privatization and even proposed a modest tax cut. So things looked good. And the fear of fickle voters was supposed to discipline the Islamists. When the Islamist parties won this past November, they even carried Morocco’s commercial center of Casablanca. They persuaded small-business owners and professionals to shift their allegiance from the liberal and socialist parties, which had commanded their votes in 2007, to the Islamists, in November 2011.
These swing voters expected economic reforms and modest social changes—not the reverse. If the Islamists don’t deliver on the economy, they will be out. To be sure, Morocco was never going to adopt F.A. Hayek’s constitution of liberty. The Islamist leaders said their economic models came from Turkey and the center-right parties of France, not Singapore or Chile. But, importantly, they weren’t looking at Iran or China either. Turkey was, until recently, a high-growth country that combined entrepreneurialism with a growing deference to Islam. (In the past 18 months, however, Turkey embodies the dangers of Islamism in politics; the ruling AKP has launched a jihad against the republics’ secular generals and its dissidents, grown diplomatically closer to Iran, economic growth has stalled, and investors are looking for the exits.) Now, after a few months in power, the ruling Islamist party in Morocco is revealing a new agenda—one that is already frightening the native business community as well as foreign investors. One Islamist government minister—in a series of private discussions—has suggested that government agencies, and even firms partly owned by the state, should no longer advertise in newspapers and magazines that also advertise alcohol, a legal product in Morocco. That means that the state airline, Royal Air Maroc, can no longer place ads in most major dailies. The problem for publishers: Both airlines and alcohol are major advertisers, losing either one would be painful. Indeed, some publications could close no matter which side they chose. So far, this is not a regulation, but a whispering campaign. But local publishers are getting the message. Another Islamist, the Minister of Communications, was publicly considering an order forcing television stations to pre-empt popular programs to run sermons instead, on prime-time weeknights. This is deadly for ratings and therefore for ad revenue. It also signals that Morocco is changing from its welcoming ways—philosophically moving from Paris to Riyadh. Where would a foreign investor rather spend a weekend? Even before the rule could be finalized, it was seen as an omen, a harbinger of the Islamists’ economically destructive ideas. The conversation in the business community here moves quickly from observation to extrapolation. Whenever politicians become more interested in symbols than realities, they are seduced by a poisonous poetry that forces their people into the clammy embrace of poverty. There doesn’t have to be a conflict between mosque and market; but the Islamists learned their economics from Arab and Eastern European socialists. Many of them still like the idea of a command economy and like the idea of issuing commands. That works no better in Iran than it did in Belarus. Why try it in Morocco, which has a diversified modern and relatively free economy? That’s why investors and local entrepreneurs are nervous. A few days ago, the king asked to see the head of the government and the communications minister. He reminded them that the new government had to respect the constitution, which gives broadcasters free speech, and he reminded the government leaders to respect the diversity of peoples in Morocco. Not everyone is Muslim, he said, and wouldn’t necessarily be served by a sermon. For now, the Islamist ministers seem to have gotten the point. The king is watching and any extreme move could be checked by the constitutional monarch. Only two men can save Morocco now—and save the promise of Arab Spring. One is the king of Morocco, the other the president of the United States. For years, the main liberalizing force was the king himself. Mohammed VI is a young and polished leader who is equally at home in French and in Arabic, in the European and Arab spheres. This gave him the unique ability to defend traditional and tribal cultures while seeing the wisdom of developing a diversified, modern economy based on individual achievement. Importantly, Mohammed VI has been one of the most aggressive liberalizers in the world. He championed and signed free-trade agreements with the United States and the European Union. He promoted foreign investment with favorable tax treatment and by cutting red tape. He maintained a stable currency and fought corruption that acts as a hidden tax on development. He poured billions in investment into the poorer southern reaches of his kingdom and then leveraged the infrastructure to attract foreign investment in hotels, farms and tourist operations. By encouraging foreign investment through deregulation, and local investment through greater access to credit (the king reformed banking laws), Morocco saw robust economic growth. Morocco grew an average of 3% per year in terms of per-capita gross domestic product in the years before Mohammed VI assumed the throne (1990-1999). That figure rose to an average of 8% per year on a per-capita GDP basis over Mohammed VI’s reign (1999-2010), according the World Bank. (Figures are not yet available for 2011.) Freer markets and modernized regulations brought in more foreign investment. Gross fixed capital formation, which measures national investment efforts relative to GDP, climbed to 35% of GDP in 2011. That is up sharply from 25% between 1990 and 1999, according to research by the Paris-based OECD. As a result, average net foreign investment surged during Mohammed VI’s reign to $1,456 million per year, up from $213 million per year in the reign of his predecessor Hassan II, according to the World Bank. Morocco’s total GDP has almost doubled in the past eleven years, under the new reformist king. According to a report presented by the UN Economic Commission for Africa in Addis Ababa, Morocco’s GDP growth rate (5.3%) in 2009, surpasses that in Egypt (4.7%), Tunisia (3%), Mauritania (2.3%), Algeria (2.1%) and Libya (1.8%). And that is before “Arab Spring” smothered growth rates everywhere across North Africa—everywhere, except Morocco. The poverty rate has been slashed almost in half, according to report by the U.N. Development Programme. At the start of Mohammed VI’s reign, some 4.5 million Moroccans were below the poverty line. Today less than 2.6 million are. The UNDP ties the massive poverty reductions to “the National Initiative for Human Development that Mohammed VI had launched in 2004.” Fighting corruption and human-rights abuses, the king launched the Advisory Council on Human Rights and the Equity and Reconciliation Commission. These are independent bodies that have paid financial compensation to the victims of police brutality and unjust imprisonment during the reign of the king’s predecessors. In addition, he has implemented wide-ranging reforms of local and national police and ended repression of political dissidents. As a result, a broad spectrum of unconventional people and parties operates openly in Morocco—from Maoist radicals and Salafists. Provided they avoid violence or other criminal activity (drug-running, kidnapping and the like), these groups are free to speak at rallies, publish newspapers and even run candidates for office. In many ways, Morocco now has greater political freedoms and greater political representation than, say, Romania or Moldova. Realizing that the millions of poor and near-poor are a threat to his kingdom’s stability, the king launched a healthcare program to provide care for 8.5 million people without access to it. Unlike Britain’s National Health Service, Morocco’s RAMED program is not free at point of service for everyone. Except for the very poor, everyone has to contribute a co-payment based on income—on average about $1 per month. This is not a nugatory sum in many parts of Morocco, but it is affordable. The principle of co-payment reduces demand, which would otherwise bankrupt the system through excessive costs. He also liberalized Morocco’s politics. Women and religious minorities (including Jews and Christians) have equal rights under the new constitution. He transferred power away from himself to elected national and regional governments. Moving to the U.S.’s necessary role, the Obama administration needs to more than make speeches. As soaring as President Obama’s Cairo speech was, it wasn’t followed by significant changes in policy. The Obama administration continued to work with parties, factions and figures that did not accept liberal values as a starting point. One telling sign: look at a party’s internal process of selecting its leaders. If a party doesn’t elect its leaders in fair, multi-candidate elections, then it is not going to be a democratic and peaceful force if it comes to power. Egypt’s Muslim Brotherhood and Tunisia’s Islamists meet this test. Hamas and the Polisario Front do not. Once a party meets the threshold, the Administration should continue to engage in order to influence it in a more liberal direction, respect for religious diversity, private property, free speech and free elections. How a party treats Christians and Jews is a good barometer, how it treats foreign investors is another. Perhaps the largest historic blunder of past 30 years occurred during the Bush years – Bush 41. President George H.W. Bush watched the fall of the Berlin Wall, the emergence of freer embryonic states in Eastern Europe and a transition in Russia itself. Yet aside from sending economic advisors and diplomats, Bush did little to guide the historic process. The Bush administration believed that any guidance would be seen as interference. And some of its advice was unhelpful. When reformers wanted to ban former communist officials from running for office in the new nations, the State department strongly urged them not to yield to that temptation. As a result, Bulgaria, Hungary, and even Poland were bedeviled by a decade of pointless political fights with the “post-communist” defenders of the ancien regime. (Similar advice regarding Baathist officials in Iraq also retarded progress there.) In the real world, the protection of liberalism sometimes demands illiberal means. To be accepted as a legitimate political party, the party should openly adhere to liberal values: freedom of conscience, a free press, private property, free exchange in open markets. These values made the West the richest region on Earth and they work in every place they have ever been tried. In Morocco, the Obama administration seems prepared to repeat the mistakes of the Bush years. Send over a few professionals, sit back and hope for the best. After all, it is their country. So far the laid-back approach isn’t working. It is time for Obama to meet with Mohammed VI. The summit would send a signal to reformers across the Arab world: You are not alone. Religion is a great source of morality, but the best way to fight poverty is with open markets and economic growth. Religious parties that seek to modernize nations must first modernize their own economic thinking. If Arab reformers are looking for a role model, Obama could say, they have one in Mohammed VI. His record of “hope and change” should be copied. If Obama decides to stay home, historians will put him in the Bush league: An observer of history, not a leader of transformations.