[Tarek Heggy, a native Arab Egyptian, is one of Egypt’s most prominent intellectuals and most successful business managers. He is the author of innumerable articles and several books, and is a frequent guest lecturer at Oxford and Cambridge Universities in England.]


I have written many books and articles over the last ten years about the defects in the Arab mind-set, all of which are cultural defects stemming from three main sources.

The first is the repressive climate that prevails throughout Arab societies, the second a backward educational system that lags far behind modern educational systems and the third a mass-media apparatus operated by those responsible for the climate of political repression to serve their interests.

The following are the most obvious defects from which the contemporary Arab mind-set suffers:

If you bought a home 10 years ago for $100,000 and just sold it for $300,000, have you engaged in price gouging? Most people would say "no," provided there were willing buyers and sellers of both sides of the transaction merely responding to the market at the time.

As a result of hurricanes Katrina and Rita, some politicians have demanded prosecution of "price gougers." In many states, like Florida, "price gouging" is illegal. The Florida statutes say, "It is illegal to charge unconscionable prices for goods or services following a declared state of emergency."

Hmmm, I know what the law means when says burglary or murder are illegal, but an "unconscionable price"?

Assume you were a regular blood donor but had an accident in which you lost a considerable amount of blood. Do you think you should increase or decrease the size and frequency of your blood donations until you recover?

Though most politicians are smart enough to answer, "decrease the blood donations," many seem not smart enough to understand that, when you take an economic hit, you don't want to unnecessarily add burdens to the economy.

I refer to the call from some politicians to increase taxes or not extend President Bush's tax cuts to "pay" for Katrina.

Why is this cold, rainy land with its stark volcanic landscape, without much in the way of natural resources, one of the wealthiest places on Earth?

Small states, in the past, were most often poorer on a per capital income basis than large states, but in the last half-century many have become much richer then their large neighbors. Among the wealthiest places on the planet, we now find Luxembourg, Hong Kong, Denmark and Ireland, none with many natural resources.

In a just-concluded meeting of the Mont Pelerin Society in Iceland, some leaders of small states that have developed very successful economies met with some of the worlds' leading free-market economists and policy institute professionals, partly to discuss what lessons the rest of the world can learn from these small states.

Here is what they concluded.

Europe is in crisis. It is depopulating because of birthrates well below replacement. Weighted down by oppressive taxes and onerous regulations, the economies of the major European nations are barely growing. Pessimism reigns.

Yet there are the little flickers of light in the form of bright and energetic young people pushing constructive change, and increasing public recognition from some European leaders that the present course is unsustainable.

In times of crisis, some nations find a Ronald Reagan, a Winston Churchill, or a Margaret Thatcher. If one looks closely at the increasing political divisions in France, Germany and Italy, it is now possible to imagine a future Continental version of Mrs. Thatcher or President Reagan.

As demonstrated by the French and Dutch "no" votes, Europeans are increasingly frustrated living under a bureaucratic (as contrasted with a democratic) state where national sovereignty (and democratic control) continues ebbing.

What should be done? Europe needs for a couple of leaders not directly tainted by the recent "constitutional" fiasco to call for a new convention to write a real constitution, which would protect the democratic and most of the sovereign rights and personal liberties of the European peoples. To succeed, the new constitution would need to allow for social and economic differences among the European states, unlike the just defeated "constitution."

Delegates to the new constitutional convention would be well advised to look at the U.S. Constitution and the Federalist Papers for guidance. Most of the basic arguments about the proper role and structure of governmental units and the protection of individual liberties and national identities and rights can be found in these documents.

The U.S. has evolved into a much more centralized state than our Founding Fathers envisioned, but their original vision is much closer to the type of Federal Republic with sovereign states that Europe needs today.

It is common for politicians in trouble to seek scapegoats for their own incompetence and wrong-headedness, but when this begins getting widespread popular support, both the people's liberties and pocketbooks are in danger.

Given its history, one would think Germany's people would be particularly resistant to demagogy. Unfortunately, that is not the case. Recently, Franz Muntefering, head of Germany's left-wing Social Democratic Party (the SPD), which also is the lead party in the governing coalition, accused business leaders of being "anti-social" and like "swarms of locusts." Rather than denounce him for attacking businesspeople and "international capital," other SPD leaders joined in the denunciations.

The chairman of Lufthansa airline and a director of the "Invest in Germany" organization, Jurgen Weber, replied to the SPD leaders: "If it turns out that this criticism of capitalism has a fundamental nature, then we don't need an Invest in Germany organization any more."