Saturday, February 5, 2011

From the Land of Pharaohs

Against the backdrop of CNN’s broadcasts of the protests in Cairo and throughout Egypt, I took a great deal of time to reflect on the events that served as catalysts for the new wave of self-determination evidenced across the Middle East and North Africa. For years, I’ve been lecturing, writing, and conducting business inspired by a central tenant that all value exchanges must, at their core, represent a bounded correlation to production. In the last several decades, under the guise of “financial innovation” the largest monetary asset transfer has occurred in which a select few have egregiously abused monetary systems for their benefit without considering the consequences of their amoral acts. The modern dead and the defiled reliquary artifacts in the Egyptian museum are but the latest casualties of this callous indifference to the global commons and its stewardship.

Egypt is no stranger to food-inspired social unrest. And, in point of fact, one of modern history’s oldest economic models was born at a time such as this. I decided to revisit the oldest known account of Egyptian unrest to see what wisdom could be discerned to inform events of today both in the region and in the broader macro economy.

In the Biblical account of the famine in Egypt (Genesis 47: 13-26), the following story is reported.

47:13 But there was no food in all the land because the famine was very severe; the land of Egypt and the land of Canaan wasted away because of the famine. 47:14 Joseph collected all the money that could be found in the land of Egypt and in the land of Canaan as payment for the grain they were buying. Then Joseph brought the money into Pharaoh’s palace. 47:15 When the money from the lands of Egypt and Canaan was used up, all the Egyptians came to Joseph and said, “Give us food! Why should we die before your very eyes because our money has run out?”

47:16 Then Joseph said, “If your money is gone, bring your livestock, and I will give you food in exchange for your livestock.” 47:17 So they brought their livestock to Joseph, and Joseph gave them food in exchange for their horses, the livestock of their flocks and herds, and their donkeys. He got them through that year by giving them food in exchange for livestock.

47:18 When that year was over, they came to him the next year and said to him, “We cannot hide from our lord that the money is used up and the livestock and the animals belong to our lord. Nothing remains before our lord except our bodies and our land. 47:19 Why should we die before your very eyes, both we and our land? Buy us and our land in exchange for food, and we, with our land, will become Pharaoh’s slaves. Give us seed that we may live and not die. Then the land will not become desolate.”

47:20 So Joseph bought all the land of Egypt for Pharaoh. Each of the Egyptians sold his field, for the famine was severe. So the land became Pharaoh’s. 47:21 Joseph made all the people slaves from one end of Egypt’s border to the other end of it. 47:22 But he did not purchase the land of the priests because the priests had an allotment from Pharaoh and they ate from their allotment that Pharaoh gave them. That is why they did not sell their land.

47:23 Joseph said to the people, “Since I have bought you and your land today for Pharaoh, here is seed for you. Cultivate the land. 47:24 When you gather in the crop, give one-fifth of it to Pharaoh, and the rest will be yours for seed for the fields and for you to eat, including those in your households and your little children.” 47:25 They replied, “You have saved our lives! You are showing us favor, and we will be Pharaoh’s slaves.”

47:26 So Joseph made it a statute, which is in effect to this day throughout the land of Egypt: One-fifth belongs to Pharaoh.

One cannot help but see in this narrative the harbinger of conditions which are being played out – merely by a new set of actors. Remember, that the context for this story was the storehouses that Joseph stewarded for seven years prior to the launch of the famine. In Genesis 41: 46-49 you read that an “immeasurable” amount of grain was collected during the seven year period preceding the food shortage – and this from excess abundance – not from forced scarcity. What is unspoken but implicit in this story is that the infrastructure and technology for food storage and security became one of the most significant public works projects in history. In a time when we don’t have food security for most of our population in any part of the world, ancient Egypt had abundance that afforded caloric resilience for 14 years!

When a food commodity price shock hits – like the famine of old – the first response was to collect all of the money. Remember, at the time, this meant that there was a “rush to metals” not unlike our present day. One can readily see how the Pharaoh had gold sufficient to line tombs when you realize that, in the first year of famine, nationalization of gold assets was the first step to a new economy. This is the first record of a national reserve bank impulse in human literature.

In the second year, Joseph provided grain in exchange for livestock. To understand the modern implications for this, one must revisit the ancient and modern understanding in much of the world that livestock was the primary indicator of heritable assets and wealth. In short, by taking all of the livestock, Joseph enacted an inheritance tax and created a state-owned pension monopoly. Sound familiar? This move is in ancient times what Social Security and entitlements are today. Further, this move represented a recognition that the units of wealth and status needed to be subordinated to a broader social good. At this point, I wonder how many of our religious right politicians take the time to realize that their Bible actually used nationalized socialism as a primary means of enacting “God’s plan”?

And then, the coup de grâce, the nationalization of private property. While the assumption of land and productive labor sounds harsh in modern times, this move is indistinguishable from the effective analog we have in the U.S. where all forms of enterprise and means of production have been usurped by the Federal Government under the guise of the Commerce Act. Once all artifacts of value and means of production were controlled, you have one of the most overlooked, yet vitally important concepts that can be deduced from this story – a flat tax. But, note the important differentiation between Joseph’s tax and what’s in place today. Tax was 20% of productivity – NOT a percentage of assets, efforts or wealth. And, while those with more communist leaning sympathies may loathe the carve-out for the priests – antiquities’ bureaucrats – note that they are NOT expected to be productive and are subsidized from the government’s share.

Upon close examination, I find this productivity-based national economic and revenue policy something dramatically missing in present day Egypt and in the rest of the industrialized world. Today, we don’t have the wisdom that allocates abundance for mass resilience; we don’t have leaders who understand the courage required to lead in time of crisis; and, we don’t have a sense of civil society and social responsibility that inspires the transcendence of the citizen over the self. Do we have a food price crisis in Egypt? Do we have a political crisis across the Middle East and North Africa? Is there a risk of contagion for violent populist uprisings around the world?

Absolutely and not really. What happened in Tunisia and Egypt is a symptom of a more fundamental problem. When the much heralded and lauded construct of “leadership” fails to stay rooted in citizenship and common accountability, volatility grows as a latent potential in any system. The more wealth transfer extremes lead to conspicuous, asymmetric consumption by the few in power at the perceived expense of the many, the greater the volatility. “Qu'ils mangent de la brioche” (“Let them eat cake”) was not a good idea in monarchist France and it’s not a good idea in Goldman-inspired modern economies. When markets preserve economic asymmetries in the face of known social inequities, there are no surprises when revolution breaks out.

So the wisdom awaiting re-emergence is the recognition that at this very moment, there are abundant excesses around the world which would meet the needs and ameliorate the fervor of the disenfranchised in Egypt. If we really want considered democratic reform, we should focus on insuring that change comes from satiated reflection, not from hungry desperation. Despotic leaders are half the problem; callous hoarders of wealth are the other. Until we address both, we will look primitive in the light of a Pharaoh and his visionary deputy.

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Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave