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Countdown to Build a Real Society — A Manual in Eight Steps

How can countries achieve economic reform and civic involvement?

March 30, 2005

How can countries achieve economic reform and civic involvement?

Here is a step-by-step countdown of what's required on the road to creating a real society:

Iraq has taken a useful step by having a Prime Minister to run the government (expected to be from the Shiite majority) and a largely ceremonial President (probably a Kurd or Sunni) as a symbol of unity.

Other reforming countries should consider the same model. Arab monarchs might like to note Egyptian King Farouk's prediction back in 1948 that one day there would only be five kings in the world — Britain, Hearts, Spades, Clubs and Diamonds.

If current kings can adapt — and fast — to constitutional monarchy, Farouk might turn out to be wrong. Not sure how to do it?

Just call King Juan Carlos of Spain. He is the only man in history to systematically dismantle an autocracy — and retire to ceremonial duties.

While state involvement in education should be kept to a minimum, competitive scholarships for foreign study — focused on the study of business, science and engineering — could help create the dynamic entrepreneurial culture that will eventually lift many out of poverty.

The Western idea that developing countries need a "strong man" is patronizing. Most developing countries, especially in the Arab world, have had their fill of them — and they don't provide long-term stability.

It is particularly important to make sure that devolved states or provinces have control over the police while a central authority controls the military.

Ensuring this division in the control of armed force was a key plank in the constitution that the Western allies introduced in Germany specifically to prevent the rise of another "strong man."

Nationalization does not put a country's wealth and power in the hands of the people — but those of the elite. Capitalism has the potential to spread power to millions of entrepreneurs, their families — and local communities.

Break up monopolies — and sell the component parts. States with oil wealth should distribute free shares to all citizens. The oil majors will undoubtedly move in, and likely do a better and cleaner job of extracting the oil.

Make them buy their way in — but not by offering a backroom deal with the government. Instead, they should buy shares directly from the people through millions of transactions that leave citizens with a nest egg.

Abolish tariffs and set a flat rate income tax.

There should be stiff penalties for taking and receiving bribes. The public sector accountants who enforce the regime will need pay raises and Western training.

Ensuring honest, transparent control of public funds should be one of the most prestigious jobs in public service.

Remember, the private sector can buy in Western accounting standards from anywhere. The public sector needs to make a concerted effort to import them.

Schools are the biggest single method for controlling the flow of information.

Nationalizing schools — especially in the era of E-communications and E-learning — ultimately is a bigger offence against freedom of speech than nationalizing newspapers and TV stations.

Allow private companies to run, and preferably own, schools. Take GEMS as one example. It is one of the biggest players in Western private education — and it is an Arab-owned company.

Also, remember that elementary schools matter more to civic participation than university. The children of the elite can always go abroad to get degrees. Universal literacy is much more important to realize a country's economic and social potential.

P.S. "Universal" includes girls. No exceptions, limitations — or statistical tricks.

The Peruvian economist Hernando de Soto has shown that most of the wealth in developing economies is unreported, undocumented, unrecognized — and therefore non-monetized.

Street traders, for example, have informally recognized property, in that other traders respect their "ownership" of a particular roadside area.

Equally, friends and neighbors may well respect a family's ownership of a self-built shack.

But because the ownership is informal, the vendors cannot sell, give, bequeath or mortgage their property. As a result, the cascade of wealth between generations is fractured.

Street traders also cannot borrow money from any financial institutions to expand their businesses — or even to keep trading through economic downturns.

Recognizing informally held property would immediately turn squatters into homeowners — and street traders into entrepreneurs.

It is no coincidence that Anglo-Saxon Common Law — which provides methods for recognizing traditionally held assets as property — has generally provided better tools to preserve both political and economic freedoms than does continental Civil Law.