Posted 2/19/2011

MONEY IS THE ROOT OF ALL UNREST

The reports on Mideast unrest are all wrong.

Contrary to what you see and hear, the riots have nothing to do with dictatorships. No Arab has ever trusted democracy since the Sykes-Picot Treaty at the end of World War I, when the British and French divided Arabia up into protectorates, with legislatures and all the trappings of democracy. But when legislatures voted laws which the British and French disapproved of, the two big colonists overruled them.

Since that time "democracy" has become known as "a trick of the West."

The Egyptians went after Mubarak when oil and food prices jumped up. Americans do not understand this because food and fuel costs take up only 20 percent of the typical American family budget. But in the Middle East, an overwhelming number of people are poor and spend 50 percent of their incomes on food and fuel.

The real reason so much unrest has hit the Middle East is that all the countries are pretty much like Egypt – a small middle class and a huge lower class. All are being hit by rapidly rising food and fuel costs. Some of the rioters are actually going hungry. To understand riots and revolutions, go without food for 24 hours and see how friendly you feel toward the government – whether dictatorship or democracy.

If you doubt my comments about dictatorship, I offer you Taiwan and South Korea as examples. For the first 20 years of their post-World War II existence, both countries were ruled by ruthless dictators – Chiang Kai Shek and Singmon Rhee. But there were no riots and no revolutions, and both countries transformed themselves into democracies peacefully.

How did this happen?

Both Taiwan and South Korea, with help from the USA, became export machines, ripping business away from Japan, especially steel and shipbuilding. As each worker saw his standard of living increase every year, he became very comfortable with dictatorship, up to the point that each country grew a large middle class. It was this educated, prosperous middle class that moved the countries into democracies. Taiwan and South Korea – no hunger, no revolutions.

If we examine all the revolutions in history, we find money to be the root of all unrest. (My mother always told me that "money was the root of all evil." Of course, no one in those days talked about sex at family dinners.)

The American Revolution took place when King George III encouraged Parliament to levy a battery of new taxes on the American colonies. "No taxation without representation," the colonists shouted and off to war they went.

The American Civil War was largely fought over money, even though the history writers of the North dressed it up as a slavery issue. The North looked at a slave and saw a person. The South looked at a slave and saw an economic asset – whose value could be compared to similar assets like mules and horses. If slaves were freed, the South saw its states becoming 40% to 60% poorer.

In addition, the North enjoyed huge protective tariffs at the expense of the South. By making British textiles prohibitively expensive, the South was forced to sell its cotton to the North instead of shipping it to England, where it would fetch a substantially higher price. Put these two problems together and Lincoln walked into an explosive situation.

The Soviet Union collapsed into unrest when Moscow reached the point at which it could no longer provide adequate food, clothing and shelter to its citizens while attempting to keep up with what Premier Khrushchev once called the "accursed metal eaters" – the military.

Beijing is very worried about the rise in commodity prices, which are already causing unrest and riots in its far-flung provinces. While the large middle classes in Beijing and Shanghai are not suffering, over 700 million Chinese live very close to their harsher version of the poverty line. Not only are food prices rapidly rising in China, but almost three million Chinese farmers are without drinking water. If revolutions are caused by hungry people, think how much more dangerous thirsty people can be.

The showy resorts, hotels and golf courses of Beijing are awash with water, which has been channeled away from the farmers in the Northeast – where there has been no water for agriculture for the past four years. No water means no crops, and the food shortages force up prices.

During China's 4,000-year history, the majority of its great Dynasties fell to rural revolutionists when palace corruption created hungry people. Mao Tse-Tung was a Communist Revolutionist. But he was also a rural revolutionist who amassed a huge army made up of hungry, angry peasants.

A former Speaker of the House of Representatives once said, "Americans vote with their bellies."

People with empty bellies also vote – with riots and revolution.

With the long-term outlook forecasting rising commodity prices, I am afraid there is more political instability to come.

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