The Calculus of Anarchy in the Middle East

In several parts of the Middle East, governments are too weak or dysfunctional to perform even the most basic tasks. To many observers, this entails an ultimate breakup, if not the road to anarchy.

Let us consider the size of a country. During the past 40 years, a small country like Chile has had the fastest growing economy of Latin America. This would not have been possible without the access of Chilean companies to markets in other countries, both in South America and elsewhere. Chile now exports around 40% of its GDP, higher than Brazil and the United States. And to many in Czechoslovakia, the economic future seemed dim when the country voluntarily split in 1993 into the Czech Republic and the Republic of Slovakia. Similarly, emotions were strong after a destructive war forced Yugoslavia to split into 6 separate countries. Yet these separate smaller nations are generally doing at least as well economically as did Czechoslovakia and Yugoslavia.

There is, however, an under-appreciated advantage of being a large country: the diversification of risk. Suppose a tiny country has one big export industry, and its export earnings finance most of its citizens’ consumption. If that one big industry falls on hard times, the adverse economic impact on the country could be very great. So there are scale advantages to being a large country: the risk diversification; a measure of additional security outweighing the efficiencies of being small, which ultimately means that the benefits of breakup are large only where a country is composed of groups that simply cannot get along with each other.

There are commentators who deduce that a breakup means automatically anarchism. At the very least, there is a tendency for individuals to develop private solutions to the obstacles that stand in the way of their ability to realize the mutual benefits of cooperation, even where government is absent. Numerous examples of centralized coercive governance can be cited where “parallel” predominately cooperative systems of norms and institutions actually dominating many interactions. Hernando de Soto’s analysis of the “informal” sector in Peru is particularly revealing in this regard, as he explains that the “squatter communities” are very well organized, and members respect each others’ property claims and cooperate to enforce rules of behavior (The Other Path: The Invisible Revolution in the Third World, 1989).

So, in some cases, anarchy may generate better outcomes than government: empirical evidence sheds light on how individuals under anarchy develop private institutional solutions to address the problems that statelessness presents (we can check the 19th-century American West, medieval Iceland, and Anglo-Saxon England). However, predictions about anarchy’s performance remain speculative. All we have are isolated historical examples.

One policy warning is that countries with well-functioning governments face very different constraints on what kind of situations they may have than countries facing anarchy. Thus, anarchy is a constrained optimum.

The above examples are not intended to suggest that these particular institutional settings are generalizable or somehow suggest how other societies without government would evolve. On the contrary, there is no blueprint for how anarchy would or does work.

Thus, when talking about the Middle East, we must be careful to avoid committing what the economist Harold Demsetz called the “nirvana fallacy,” which involves ignoring real-world constraints that limit the menu of options (and thus outcomes) available. The same kind of reasoning applies to thinking about anarchy versus government in countries teetering on state collapse. For instance, should we conclude from Somalia’s stateless era during the 1990s that it was a nice place to live?

No sane person believes that anarchy generates order. And here comes the other policy warning: regardless of its merits, anarchy has no prospect as an actual policy option. To use the mathematical economist’s jargon, statelessness may not be a stable equilibrium. Somalia’s pre- and post-government performance may highlight an important point about the desirability of anarchy: that it is simply not true that any government is always superior to no government. At the same time, a better government that emerges to fill that void may be much more desirable than a stateless Somalia.