Cairo Spring

There is a chance that, by the time you read these words, Egyptian President Hosni Mubarak will have checked into the five-star King Abdullah Hostel for Displaced Dictators in Jeddah, Saudi Arabia.

More likely, it will take a little while – days or perhaps weeks, though I don’t think so – for Mubarak to board the helicopter that will carry him to a private jet, which, in turn, will whisk him to his comfortable desert exile. He will join former Tunisian strongman Zine El Abidine Ben Ali, who fled his nation on Jan. 14 amid protests very much like the ones that have ravaged Egypt’s major cities since last week.

The deposed presidents can sip sweet tea while they wait for enough colleagues to join them to get a nice poker game together. It may not be a long wait.

In Yemen, yet another president who has overstayed his welcome, Ali Abdullah Saleh, is facing growing demonstrations. The Western-oriented government of Lebanon, under Prime Minister Saad Hariri, has already fallen to be replaced by a new cabinet under Hezbollah-backed Prime Minister Najib Mikati. Police have broken up pro-democracy demonstrations in Algeria, while unrest has also been mounting in Jordan.

All of these fallen or struggling regimes are, in varying degrees, aligned with American goals in the Middle East. Those goals boil down to three objectives: 1) prevent all-out war between Israel and its neighbors long enough for a lasting peace to be negotiated, preferably in this century; 2) ensure the free flow of oil from the Persian Gulf region, which holds the world’s largest and most easily-tapped reserves, and 3) maintain freedom of navigation through the Suez Canal.

To the United States, Egypt is by far the most important of the governments under pressure, which is why it is one of our leading recipients of foreign aid. Egypt controls both sides of the Suez Canal. Its 31-year-old peace treaty with Israel makes full-scale military confrontation virtually impossible. This has frustrated Syrian aims to retake the Golan Heights and, in turn, induced Syrian support for Hezbollah and its low-grade guerrilla conflict with Israel. Egypt also cooperates, to a degree, with Israel’s embargo against the militant-governed Gaza Strip, which reduces the chance of that area igniting a wider war.

But the peace treaty with Israel has never been popular with the Egyptian people. It helped inspire the assassination of Mubarak’s predecessor, Anwar Sadat. Mubarak’s support of the treaty gave him the leverage to extract American aid even as he used rigged elections and a brutal police force to hold power for three decades.

It would be easy, but I think mistaken, to say the current wave of demonstrations is a rejection of pro-American policies, even though our support for autocrats has not endeared us to the local populations. Protesters took to the streets in Iran less than two years ago to protest rigged elections that returned a staunchly anti-American government to power. I think we can safely assume that the regimes in Libya, Syria and Sudan are all looking askance at the rise of pan-Arab “people power,” notwithstanding their history of tense relation with the United States. These countries have at least as much to fear from this democracy movement as do the nominally pro-American Persian Gulf monarchies of Kuwait, the United Arab Emirates and, most importantly, Saudi Arabia itself.

In fact, the only two countries in the region that probably are immune to the street-demonstration contagion are its first real democracy, Israel, and its latest, Iraq. While hardly a model of political stability or nonviolence, Iraq just recently resolved a contentious election the right way – with months of wrangling followed by a political compromise. That, in a nutshell, is what people on the streets of Cairo and Alexandria are demanding.

American stock markets tumbled Friday as it became clear that the Mubarak regime is likely to end. The downturn continued yesterday in the Middle East as the work week began, though the Cairo stock market, as well as Egyptian banks, were closed due to the turmoil.

Nobody knows what kind of government will emerge in Egypt, or what other resolution might come out of the crisis. I am pretty sure, however, that the uproar in the streets is not going to have more than a short-term effect on Wall Street. Despite its strategic importance, Egypt is a trivial player in the global economy. The military holds the balance of power there, and the Egyptian military makes its living by staying aligned with our basic goals in the region. I don’t see much likelihood of a regime coming to power in Cairo that will shut down the Suez or send tanks against Israel.

Our country has had, and lost, friends like Hosni Mubarak before. One was the Shah of Iran. Iran’s street rebellion was quickly co-opted by the theocracy, which in turn has been reduced to figurehead status by the militarized Revolutionary Guard, the mullahs’ erstwhile protector. The world is a much more dangerous place as a result – but, more than three decades after the Shah’s demise, global business is not suffering. Short of a shooting war near the oil fields or the shipping lanes, the markets will soon get back to normal.

It will be nice, however, if “normal” includes freely elected governments and reasonable freedom from corruption for the Arab populations beyond Iraq. That’s what they are calling for on the streets of Cairo. They deserve to get it.

About Larry M. Elkin 525 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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