Egypt and the Next Economy

Events in Egypt (as well as in Tunisia and elsewhere in the region) tell us a lot about oil, democracy, human rights and the green economy.  First I'll dispense with the proximate point that Wall Street is worried about: Egypt controls the Suez Canal. If Egypt lands in the control of ideological extremists who may choose to place political activism over profits, this could become a chokepoint for oil distribution, causing oil price increases and damaging the world economy. And, if political unrest spreads to nearby Algeria, Angola, and Nigeria, oil could rise further still.  This is a double-edged sword for green companies.  If an oil crisis temporarily tanks the world economy, green stocks will certainly go down along with everything else, at least in the short term.  But, since an oil crisis alerts more and more people to the very fragile nature of our energy security, capital will increasingly find its way to safer energy alternatives that can be sourced renewably and domestically. So, green stocks may not fall as fast or as far during an oil shock, and they may be among the first to recover.

But in the more important longer term, emergence in the region of more fair and just regimes (e.g. increasing democratization) that help their people realize a better quality of life would be the best anti terrorism, pro growth development we could hope for. Osama bin Laden must be pissed off that the protests going on in the Middle East aren't so much anti-America-and-the-West as they are pro social justice, income equality, basic rights, and a desire to join the emerging affluent nations like China and India. But economic hardship and political repression can be more motivating than ideology. What they're protesting for is a better life.  And to the extent that this can be achieved, experience tells us that terrorism will decline (if folks believe in the future they're a lot less likely to want to become human bombs), business will improve (emerging affluent populations both buy and make a lot more stuff), and the region will begin to stabilize, which is always good for markets. To the extent that political change empowers populations, the West should welcome rather than fear it.

This, however, is where oil reenters the picture. Where there is a lot of oil money, democracy and, in most cases, human rights do not thrive (Thomas Friedman and economists have been writing about this for years).  The only regional countries that have anything resembling a democracy, Israel, Turkey, Lebanon, Cyprus and Egypt (which is sometimes on this list, even though it is autocratic and corrupt) are also among the least oil rich.  That internally driven regime change is starting outside the oil patch is no coincidence. (This may be one causal factor in the ability of the population to affect change in Tunisia and Algeria: they don't have too much oil in relative terms.  Rising grain prices, likely exacerbated by global warming, seem to have been the immediate catalyst.)  Friedman puts it thus:

"The higher the average global crude oil price rises, the more free speech, free press, free and fair elections, an independent judiciary, the rule of law, and independent political parties are eroded. And these negative trends are reinforced by the fact that the higher the price goes, the less petrolist leaders are sensitive to what the world thinks or says about them. Conversely, according to the First Law of Petropolitics, the lower the price of oil, the more petrolist countries are forced to move toward a political system and a society that is more transparent, more sensitive to opposition voices, and more focused on building the legal and educational structures that will maximize their people's ability, both men's and women's, to compete, start new companies, and attract investments from abroad. The lower the price of crude oil falls, the more petrolist leaders are sensitive to what outside forces think of them."

Put simply, oil-rich autocrats have the means to inflict their will upon their nation without regard to internal or external objection.  Absolute power.  So as long as the world is over dependant on oil, change in the Middle East will have to start, and is starting, outside the oil patch.  The west should be doing all it can to make sure these transitions result in peaceful democracies  that encourage the advancement of their people via education, infrastructure development and the other vectors of economic growth.  And since oil rich countries do not appear to be as vulnerable to political change (absent open war; if civil unrest does manage to spread to major oil producers such as Saudi Arabia, it's that much more important to be transitioning away from oil), we need to keep pursuing goals to replace oil in every sector and industry where it is economically feasible to do so.  These are our best shots at a stable, just Middle East with a growing economy that in turn will help the global economy to stabilize and prosper.

Egypt then shows us that in both short- and long-term cases it is evident that renewable, more globally distributed power sources must be a critical component of the solutions. Capital will continue to flow to the companies providing the best solutions, and the Next Economy will in aggregate continue to offer better investment returns than the legacy, business as usual economy.  Mubarak now says he'll step down when his term expires in September of this year. A free and fair election to choose his successor is the ideal, if idealistic, outcome. With our long term economic interests in mind, the West should actively encourage this result.

Garvin Jabusch is the cofounder of Green Alpha Advisors, LLC and manages The Sierra Club Green Alpha Portfolio -- a unique blend of Green Alpha Advisors' Next Economy universe and the Sierra Club's proprietary green-investment guidelines.

Comments

[LeighAnne]

I agree, in resolving the political turmoil, the solution/ leadership regime needs to emphasize on technology and innovation in the clean tech arena. Are there existing solar or wind companies that exist in North Africa already? What about the other countries mentioned that have democracy in the region, are they succeeding in the new economy?

[Garvin Jabusch]

Jordan’s King Abdullah II described economic reform as a “necessity to provide a better life for our people, but we won’t be able to attain that without real political reforms, which must increase popular participation in the decision making.” Abdullah’s statement also called for an “immediate revision” of the laws governing politics and public freedom. Hopefully this indicates real reform.

[jake raden]

I think the Mid East unrest is the most interesting, awesome thing to happen to the world in a long, long time. You mention terrorism, which is literally a direct result of petro-imperialism in the area on behalf of countries like the US. I sincerely hope new leadership comes in, kicks out the US puppets, start hording the oil and driving the prices up, so we can get this next economy soiree started for real in the West.

[louboutin schaussures]

Love those! I enjoy following your posts on facebook and rss!

[quick loans]

If you are applying online, you may want to call customer service to ensure you fill the application out correctly.

[Accounting Recruitment]

Egypt is now recovering from the remnants of the last administration.

[Michael Kors Outlet]

Nice home with great interior designs, I like it!! thanks for sharing the post..

[Michael Kors Outlet]

Nice home with great interior designs, I like it!! thanks for sharing the post..

[Arrildeni]

MemfealmGam coach.com
aperneIrreway coach outlet online
arralsFuegape coach outlet online
Wabuncece doudoune femme moncler
MemfealmGam Julius Pruitt Jersey
aperneIrreway www.coach.comcoach outlet store online