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Time to Get Real on Israel and the Middle East

US should let Israel do what is needed, and help Egypt's economic growth

Steve Forbes
Published: Aug 22, 2014 06:54:43 AM IST
Updated: Aug 20, 2014 04:55:56 PM IST
Time to Get Real on Israel and the Middle East

There are two things the US should do about the widening war in Gaza.

First, stop the mindless calls for a cease-fire. Like Pavlovian dogs, Washington officials always push for a cessation of hostilities whenever violence flares between Israel and Palestinian forces. This is supposed to show “evenhandedness” and to set the stage for yet another “peace initiative”. Why can’t Washington face facts?

Hamas wanted this war. It had dissed all of its Mideast patrons. Isolated, it figured a big conflict would change the political calculus, refurbishing its credentials as a major force and pressuring other states to pony up more money. That’s why it summarily rejected Egyptian attempts to arrange a ceasefire—for which the Israelis were game, wanting to avoid, if possible, waging a bloody ground campaign in Gaza.

But Hamas needed war. For Washington to treat both parties as morally equivalent is repugnant. Hamas is using as human shields and murderous fodder for propaganda images.

The US should remember that since Israel totally and unconditionally withdrew from Gaza in 2005 the territory has used the billions of dollars it’s received in foreign assistance not to build its economy but to wage war. Its system of tunnels through which it attacks Israel (and until a year ago received weaponry and supplies from Egypt) is elaborate. Its arsenal of rockets—and their sophistication—has expanded exponentially.

The FAA decision to ban (for a day-and-a-half ) US commercial flights to Israel, where tourism is a big part of the economy, handed Hamas its first political victory. Under the circumstances, a now physically isolated Israel must totally destroy Hamas’ military capabilities: No more tunnels, no more caches of rockets. To do less would only make Jerusalem’s increasingly dangerous security situation worse. John Kerry should pack his bags and stay away from the region, and President Obama should cease indulging his anti-Israeli predilections and let Jerusalem do what has to be done.

The second thing Washington should do is of a longer-term nature: Focus constructively on what it can do to help Egypt achieve a rapidly growing economy à la those of South Korea, Taiwan, Singapore and, yes, Israel, whose high-tech achievements now surpass those of all the EU members.

The Egyptian economy is in shambles, on life support from Saudi Arabian subsidies and IMF loans. The steps needed to be taken are basic.

Currency board. An economy can’t function well without a stable currency. The Egyptian pound is prey to speculative attack. Cairo should fix it to the dollar via a currency board, whereby the pound would be backed 100 percent by the greenback. Currency boards done properly always work. Hong Kong has had one—with its dollar fixed to the US dollar—since 1983. Bulgaria, Lithuania and other countries also have currency boards, with their monies fixed to the euro. The IMF will object, because it’s addicted to the notion that funny money hastens economic growth, even though it actually does the opposite. The agency should firmly be told to take a hike.

Taxes. Adopt a low-rate fat tax the way Hong Kong and over 30 countries have done. This will encourage local entrepreneurship and job creation.

New businesses. Make starting a new, legal business a simple formality, a process that could be completed within minutes. Follow the example of New Zealand. This, along with a simple tax code, would encourage new businesses and reduce the informal economy.

Subsidies. Don’t phase them out until the economy improves markedly.

Labour laws. Remove restrictive labour laws; they hobble hiring and fuel the shadow economy.

The combination of a very benign tax regime and a stable currency would put Egypt on the road to im- pressive growth. Given its history and overwhelming size, this would have a profoundly positive impact on this treacherous and bloody region.

Steve Forbes is Editor-in-Chief, Forbes USA

(This story appears in the 05 September, 2014 issue of Forbes India. To visit our Archives, click here.)

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  • Arshad Islam

    No i am embarrassed. i am quite a regular reader of this magazine. Either Steve Forbes truly believes what he is saying here, which will mean that probably a guy walking in the street is probably more capable of providing an objective, balanced and humane view. or Steve Forbes is only part of the propaganda war Israel has unleashed, which publication does not care to provide news and lacks humanity and manipulates its readers. Just to put it in perspective, Steve Forbes wants to Israel to do what it wants, which is basically kill every palestinian to achieve their so called twisted racist zionist dream. and the US is not even handed, had it not been for the generous us military aid, joint development programs, diplomatic and economic support, such a state would never had come into existence let alone have the ability to kill, maim and occupy a population. his arguement to support Sisi deserves no comment. Even a high school student can see supporting depots does not help anyone. Apologies for the condescending tone here, but Mr. Forbes you are condescending us (the readers) by trying to sell half baked argument and facts.

    on Aug 30, 2014
  • Vas

    is Forbes trying to say that Gaza is not under Occupation because Israel withdrew settlers from Gaza?..Israel controls all borders(Egypt does what they are told by US,Israel), sea and air..naval blockade on Gaza by Israel has been going for 7 years..Forbes never mentioned that..Egypt regime came to power in military coup, unseating elected president..Forbes doesn\'t mention that..other than that, good article..

    on Aug 24, 2014
  • Sudhama

    This article makes me think of something journalist, Anthony Lerman, wrote recently. He said, \"The only Zionism of any consequence today is xenophobic and exclusionary, a Jewish ethno-nationalism inspired by religious messianism. It is carrying out an open-ended project of national self-realization to be achieved through colonization and purification of the tribe. \"This mind-set blocks any chance Israel might have to become a full-fledged liberal-democratic state, and offers the Palestinians no path to national self-determination, no justice for their expulsion in 1948, nor for the occupation and the denial of their rights. I came to see the notion that liberal Zionism might reverse, or even just restrain, this nationalist juggernaut as fanciful.\" You aren\'t racist, anti-Semitic or a self-hating Jew if you disagree with what Israel is doing right now. Just a person of conscience, with morals and a good heart.

    on Aug 23, 2014
  • Steven L

    Egypt needs healthy help! But the Obama administration resent Al-Sisi!

    on Aug 23, 2014
  • Steven L

    Both the US & EU have significant antisemitic constituencies they want to satisfy. Today the West as ever before never had or has to fear Israel or/and the Jews. The contrary is not true as far as Muslims are concerned. Undermining the only democracy in the ME is nothing but pure antisemitism. The EU is stocked for it oil & gas supply between Putin and the ME & N-Africa!

    on Aug 23, 2014
    • Arshad

      I think you should get the meaning of democracy checked. Israel follows two set of laws one for its Jewish inhabitants and one for its palestinian inhabitant. Of course on paper there is not a lot of difference but by consistently excluding them from bureaucracy, and economic and social institution Israel now is an apartheid state. Again, Israel may be a democracy for its own people (do not understand this concept). But it is an occupying power. it is foolhardy to suggest that israel can continue with the occupation and denying the palestinians the right to return if it is democracy. Also please do not give the \"anti-Semitism\" agreement, this has outlived its purpose and on the contrary indicates the lack of logical argument on the part of the speaker.

      on Aug 30, 2014
      • Steven L

        When did U go last to Israel. There are many definition for \"democracy\"! The word \"does not exist\" in Islam! U are either ignorant, uninformed, misinformed, biased, naive etc... . All the Muslim states practice absolute apartheid towards the Jews and soon towards the Christians. Pick-up a dictionnary and start to learn on your own.

        on Sep 2, 2014
  • Jgarbuz

    Mr.Forbes has written a concise but prescient analysis And I hope someone takes heed. Hamas is a purely a nihilistic terrorist group that must be extirpated not appeased, and the Egyptian economy needs some stability and support. Let\'s stop being \"even-handed\" and call things for what they are. Israel is a friend. Hamas is an enemy. Egypt needs stability.

    on Aug 23, 2014
  • Holy Shirt

    Does a Muslim Brotherhood empowered in the United States need Egypt?

    on Aug 23, 2014
  • Sheryl Dworkin

    Finally, a main stream media outlet that is speaking truth. Thank you, thank you, thank you.

    on Aug 22, 2014