In the first month of 2011 a storm of popular rage swept across the Arab world. Protests from Morocco to Yemen have brought millions out into the streets to demonstrate against the once-feared powers that be, toppling one long-time titan of autocracy in Tunisia and leaving another clinging to power in Egypt as January ends.
One must remember that Tunisia and Egypt were the North African darlings of international investors looking for high returns in developing markets. Both had been regarded as stable macroeconomic environments right up until their collapse, with proven track records of strong growth and stellar potential. Who could have foreseen these revolts?
Economists and the like have a nice term for an event of such radical departure from the expected: a ‘black swan’ – a freak of nature, unforeseeable, unavoidable and of devastating consequence.
But were the events of the last month really so unexpected? We have known for years that wealth has failed to trickle down in Egypt and Tunisia, that corruption is rampant, that education has failed to match the needs of the economy and that brutal police repression has stymied legitimate protest.
The soaring Tunisian stock exchange led business and political leaders to assume the social economy was also thriving, and that Egypt’s long years of political stability and growing middle class were signs that all was well on the banks of the Nile.
Perhaps it is human nature for greed to settle us softly into irresponsible complacency, where we take for granted the status quo will remain and we blind ourselves from the fires growing around us. Perhaps, then, many ‘black swans’ are not unforeseeable at all –– rather, we ignore obvious threats because wanton disregard seems to make sense when profits are easy. But then the crash comes, and again we claim we’ve been wronged by wicked fate.
In the cases of Tunisia and Egypt, we were simply focused on the wrong indicators. Gross domestic product growth and stock market performance do not tell the health of a nation; to assess the stability of any society you must assess the level of satisfaction of its people.
In the future, analysts will have to revise the indicators they use to assess a country’s risk and investment potential if they want to avoid looking like the archetypal jilted lover, always claiming they never saw it coming.
