PRIVATE ENTERPRISE and SOCIALISM in the MIDDLE EAST
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Job Name:2041618 Date:14-11-06 PDF Page:2041618pbc.p1.pdf Color: Cyan Magenta Yellow Black THE AMERICAN ENTERPRISE INSTITUTE FOR PUBLIC POLICY RESEARCH, established in 1943, is a nonpartisan research and educational organization which studies national policy problems. Institute publications take two major forms: 1. LEGISLATIVE AND SPECIAL ANALYSES-factual analyses of current legislative proposals and other public policy issues before the Congress prepared with the help of recognized experts in the academic world and in the fields of law and government. A typical analysis features: (1) pertineut background, (2) a digest of significant elements, and (3) a discussion, pro and con, of the issues. The reports reflect no policy position in favor of or against specific proposals. 2. LONG-RANGE STUDIES-basic studies of major national problems of significance for public policy. The Institute, with the counsel of its Advisory Board, utilizes the services of competent scholars, but the opinions expressed are those of the authors and represent no policy position on the part of the Institute. ADVISORY BOARD Paul W. McCracken, Chairman* Edmund Ezra Day University Professor of Business Administration University of Michigan Karl Brandt Loy W. Henderson Professor of Economic Policy (Emeritus) Professor of Foreign Relations Stanford University American University George Lenczowski R. H. Coase Professor of Political Science Professor of Economics University of California, Berkeley University of Chicago Felix Morley Milton Friedman Editor and Author Paul S. Russell Distinguished Stanley Parry Service Professor of Economics Professor of Politics University of Chicago University of Dallas Gottfried Haberler E. Blythe Stason Galen L. Stone Professor Dean Emeritus, Law School of International Trade University of Michigan Harvard University George E. Taylor Professor of Far Eastern History C. Lowell Harriss and Politics Professor of Economics Far Eastern & Russian Institute Columbia University University of Washington OFFICERS Chairman Carl N. Jacobs Vice Chairmen Henry T. Bodman H. C. Lumb Herman J. Schmidt President Treasurer William J. Baroody William G. McClintock Thomas F. Johnson Joseph G. Butts Director of Research Director of Legislative Analysis *On leave for government service PRIVATE ENTERPRISE AND SOCIALISM in the MIDDLE EAST Howard S. Ellis AMERICAN ENTERPRISE INSTITUTE FOR PuBLIC POLICY RESEARCH 1200 17th Street, N.W. Washington, D.C. 20036 October 1970 Distributed to the Trade by National Book Network, 15200 NBN Way, Blue Ridge Summit, PA 17214. To order call toll free 1-800-462-6420 or 1-717-794-3800. For all other inquiries please contact the AEI Press, 1150 Seventeenth Street, N.W., Washington, D.C. 20036 or call 1-800-862-5801. AMERICAN ENTERPRISE INSTITUTE for Public Policy Research Middle East Research Project Professor George Lenczowski University of California, Berkeley Director 91 st Congress ANALYSIS NO. 17 Second Session This Special Analysis is presented by the American Enterprise Institute as the fourth in its series within the framework of the Middle East Research Project. Howard S. Ellis, Flood Professor of Economics (Emeri tus) at the University of California, Berkeley, is an ex pert in the economic problems of developing countries. © 1970 American Enterprise Institute for Public Policy Research, 1200 17th Street, N.W., Washington, D. C. 20036. All rights reserved under International and Pan-American Copyright Conventions. Library of Congress Catalog No. 75-133604 Price: $3.00 The author bespeaks his sincere thanks and his obligations to Professor George Lenczowski for the inspiration and insights which accrue from his profound knowledge of the Middle East; to Professor Bent Hansen for materials and a critical reading of the chapter on Egypt; and to Professor Memduh Vasa for valuable suggestions concerning the economy of Turkey. Page INTRODUCTION 1 Political Change in the Middle East .......................... 1 Peculiarities of Economic Development in the Middle East . 3 The United States and the USSR in the Middle East ............. 5 I. EGYPT: "ARAB SOCIALISM" 7 The Character of "Arab Socialism" 7 The Evolution of Arab Socialism . 8 Egypt Before the Socialist Revolution 8 Historical Phases of Development under the Revolutionary Gov- ernment 10 The Free Enterprise Stage, 1952-56 .................... .. 10 The Controlled Capitalist Economy, 1956-60 11 The First Five Year Plan, 1960-65 12 Economic Survey by Sectors 13 Agriculture 13 Industry 17 Issues and Policies 17 Present Condition of Industry 18 The Value of Egyptian Industrialization 19 The Service Sector 20 Welfare 21 International Trade and Finance 22 What Has Caused the Deficits? 22 Policies to Combat the Deficit 23 An Evaluation of Arab Socialism ................... .. 24 International Comparisons 24 Unfavorable Aspects 25 Disuse and Misuse of the Price System .................. .. 25 Bureaucracy 25 Preoccupation with Manufacturing 25 iii Page The Demographic Problem 25 Wars 26 Favorable Aspects 26 II. IRAQ: IS OIL ENOUGH? 27 Brief Political Retrospect .. 0 ••••• 0 0 •••• 0••••••••••••••••• •• 27 Economic Development Prior to the Plans, 1920-50 ........... .. 28 Rapid Development, 1950-58 .... 0 ••••• 00 ••••••• 0 • • • • • • • • •• 29 General Characteristics .. 0 •••••••••••••••••••• 0 • • • • • • • • •• 29 Agriculture .......................................... .. 32 Industry . 0•••••••••••••••••••••••••••••••••••••••••• •• 34 Infrastructure and Social Overhead 36 The Oil Industry 36 A Retrospect, 1950-58 36 Political Chaos in Iraq, 1958-69 ~ .... .. 39 The Kassem Regime, 1958-63 39 Continued Political Turmoil after 1963 40 Iraq's Economic Position 43 III. MODERN TURKEY: AN EXPERIMENT IN STATE CAPITALISM 45 What Does Turkish State Capitalism Mean? . 45 Periods of Recent Economic History . 48 The Interwar Years . 49 The War Years, 1939-45 . 50 Postwar Years, 1946-50 . 50 Inflationary Expansion, 1950-60 . 51 The Decade of the Sixties . 53 Development of the Economic Sectors . 54 Agriculture . 54 Industry . 56 Welfare . 57 Foreign Trade . 58 General Appraisal of Turkish Development . 61 Some International Comparisons . 61 What the Republic Symbolizes 0 ••••••••••••••••• 62 Weakness and Strength for Development . 62 IV. LEBANON: PRIVATE ENTERPRISE 65 Distinctive Character 65 Historical Notes 0•••••••••••••••••••••••••••••• •• 66 Foreign Trade and Finance '. 69 iv Page Agriculture 70 Industry :................. 71 Evaluation and Conclusions 72 V. IRAN: PRIVATE ENTERPRISE ASSISTED BY THE STATE.... 75 Historical Note 75 The Economic Plans ....................... .. 77 First Seven Year Plan, 1948-55 ............. .. 77 Second Seven Year Plan, 1955-62 ................... .. 78 Third Development Plan, 1962-68 ~ .................. .. 80 A Stocktaking to Date 81 Fourth Development Plan, 1968-72 ,. .................. .. 82 The Petroleum and Other Mineral Industries ................. .. 83 Importance of Petroleum 83 The Conduct of the Oil Industry in Iran .................. .. 85 Other Minerals and Metals 86 Agriculture 87 Importance and Products 87 Methods of Cultivation and Productivity .................. .. 88 Irrigation 89 Land Tenure and Land Reform ...................... .. 89 Planning and Agricultural Development ................... .. 91 Manufacturing Industry, Excluding Oil 91 Chief Characteristics 91 Historical Retrospect 92 The Sources of Finance for Industry ..................... .. 93 Domestic Sources 93 Foreign Sources 93 Other Economic Aspects 94 Electrical Power 94 Transport and Communications 95 Money, Banking, and Prices ............................ .. 95 Public Finances 95 Foreign Trade and Balance of Payments .................. .. 96 Welfare 100 Retrospect and Prospect ................................. .. 102 Distinctive Features of the Economic Development of Iran .... .. 102 Factors Underlying Iran's Rapid Development .............. .. 103 What of the Future? .................................. .. 104 v Page VI. SOME INSIGHTS CONCERNING ECONOMIC DEVELOPMENT IN THE MIDDLE EAST 00.0.0.00000.000.0000000000000.000 107 Economic Resources 000•0000000•00000000000•00000000000000 107 Natural Resources: Land 000•0000000000 •• 0 • 0 0 •• 0 0 • 0 0 0 0 0 0 0 107 Natural Resources: Oil 00000.00000000000000.0000.00000000 108 Foreign Capital 0 0 0 • 0 •• 0•0000000000000000•000000 •• 0 0 0 0 • 0 0 0 109 Labor Force 0 0 0 0 0 0 0 •• 0•0•0•0000000000000•00 ••• 0 0 0 0 0 0 ••• 0 110 Economic Systems 0 0 0 • 0 0 • 0 0 ••• 0 0 0 • 0 .0 0 • 0 0 0 0 •••••• 0 0 • 0 0 • 0 • 0 110 Economic Institutions 0 0 0 0 0 0 ••• 0 •• 000000000•0•0000000 •• 0 0 • 0 112 The Distribution of Wealth and Income 000000000000000000•00 112 Economic Planning 0" 0000•000•0•0•000000000000000000000 113 Education, Religion, Individual Behavior 0 0 0 0 0 0 0 0 0 •• 000000•000000 114 The Demographic Problem 00•000000000000•00000000000•0•0•0 115 Political Stability 0 •• 000000000000•000•000•0000000000000000 115 American Policy 000000000000000•000000•00000000•000•0•0 o. 115 APPENDIX 0 •••••• 0000•0•0•00•0000•000•0 ••••• 0 • 0 0 0 0 0 0 •• 0 0 0 0 0 0 0 119 SOURCES 000•0000000 •• 0•000000000000 ••• 0 0 •• 00000•0•000000•000 121 AEI PUBLICATIONS. 0 0 0 .0.00 •• 000 •••• 00.0.000 •• 000.0.0. 0 0 0.00 125 vi INTRODUCTION The Middle East today is caught up in rapid and almost convulsive changes. To understand the nature of these changes, one needs to proceed in an order which re verses the Marxian materialistic interpretation of history. According to that doctrine, the "mode of production" determines