Feature

Why We Can't Rule Out an Egyptian Reign of Terror

A historian's look at revolution and its discontents.

There are, of course, many different ways of categorizing historical revolutions. But for the purposes of understanding what is happening in Egypt -- and the challenges it may pose for the United States -- one simple, rough distinction may be especially useful. This is the distinction between revolutions that look more like 1688 and revolutions that look more like 1789. The first date refers to England's "Glorious Revolution," in which the Catholic, would-be absolute monarch James II was overthrown and replaced by the Protestant William and Mary and the English Parliament claimed powerful and enduring new forms of authority. The second is, of course, the date of the French Revolution, which began as an attempt to create a constitutional monarchy but ultimately led to the execution of King Louis XVI, the proclamation of the First French Republic, and the Reign of Terror.

A key feature of 1688-type revolutions is their relative brevity. They may be preceded by lengthy periods of discontent, agitation, protest, and even violence, but the revolutionary moment itself generally lasts for only a few months (as in 1688 itself), or even weeks or days. A regime reaches a point of crisis and falls. The consolidation of a new regime itself may well involve much more turmoil and bloodshed, and eventually entail considerable political and social change -- but these later events are not considered part of the revolution itself, and there is no sense of an ongoing revolutionary process. Men and women do not define themselves as active "revolutionaries" (in 1688, in fact, the English noun and adjective "revolutionary" did not yet exist -- it only came into frequent use after 1789).

Revolutions of the 1789 type are quite different. Their leaders and supporters see regime change as only the beginning of an arduous, ambitious process of political, social, and cultural transformation that may require years, even decades, to complete. For them, the revolution is not a discrete event, but an ongoing cause. They eagerly define themselves as "revolutionaries" and even speak of the "permanent revolution." Revolutions of this type generally have much stronger utopian tendencies than the others and more frequently lead to large-scale violence. They also tend to have ambitions that overflow national boundaries -- the local revolution becomes seen as just part of a process of worldwide emancipation. In some cases, revolutions of this type may be driven from the start by a self-consciously revolutionary party, committed to radical upheaval. In other cases (such as 1789 itself), it may seem to start off as a more limited event, only to change its character as particular groups grow frustrated with the results and the opposition they have encountered, and conclude that far broader, deeper forms of change are called for.

Historically, 1688-type revolutions have been much more common: France in 1830, Germany in 1918, China in 1911-12, and many of the revolutions of 1848 (of which most ended in failure). 1789-type revolutions, by contrast, have been relative historical rarities: above all, 1789 itself, Russia in 1917, China in 1949, Cuba in 1959. They are not, however, necessarily revolutions of the left. One could also include in this category the Nazi seizure of power in Germany (which Hitler termed a "National Revolution") and Iran in 1979. The American Revolution, it could be argued, represents something of a hybrid case -- closer to 1688, yet with important features of the other type, thanks to the long process of consolidation and contestation that followed independence.

In recent years, it seems as if the 1789 type of revolution has lost its appeal for most of the world. During the greatest series of political upheavals in recent times -- the collapse of communism -- most leaders of the victorious reform movements rejected the word "revolution" altogether. The Polish Solidarity leader Jacek Kuron went so far as to write in the summer of 1989, apropos of the French Revolution's bicentennial, that Poland did not want a revolution because revolutions spill too much blood. Germans refer to the events of 1989 as the "Turning," not the "Revolution." It was, above all, in Czechoslovakia that the word "revolution" came to describe what happened in 1989, but paired with the word "velvet" to underscore the differences from the great revolutions of the past.

Of course, revolutions have hardly disappeared since 1989. But the recent wave of them across the world -- the Rose Revolution in Georgia, the Orange Revolution in Ukraine, the recent events in Tunisia -- all look much more like 1688 than 1789. They have been short, sharp affairs, centered on the fall of a regime. In none of these countries have we seen the development of an extended "revolutionary" process or party. And though some of these revolutions have triggered others, domino-style, as in 1848, they have not themselves been expansionary and proselytizing. As far as I know, there are no Tunisian revolutionaries directing events in Cairo.

The principal exception to the current pattern -- the one great contemporary revolution of the second type to remain an ongoing proposition today -- is Iran. Although it has been more than 30 years since the fall of the Shah, Iran's Islamic Republic is still a revolutionary regime in a way matched by few other states in the world today. Despite its considerable unpopularity with its own people, it has remained committed since 1979 to the enactment of radical, even utopian change, and not just inside its own borders. Organizations such as the Revolutionary Guard retain considerable importance.

Egypt, interestingly enough, experienced a revolution close to the 1789 type in its relatively recent history. The so-called Revolution of 1952 that overthrew the country's monarchy and brought Gamal Abdel Nasser to power ultimately involved a great deal more than regime change. Nasser had broad ambitions both for remaking Egyptian society and for taking his revolutionary movement beyond Egypt's own borders (most strikingly, in the creation of the short-lived United Arab Republic). Ironically, Hosni Mubarak spent much of his military career in the service of Nasser's revolutionary regime. But well before Mubarak came to power, following the assassination of Anwar Sadat in 1981, Egypt's revolutionary energies had largely dissipated.

The fundamental question being discussed by commentators at present is what shape a new Egyptian revolution might take, if Mubarak's regime falls and the military does not intervene. Will it come to a quick end with the establishment of a new government -- hopefully a democratic one -- or will a much more radical, long-lasting revolutionary process develop? In other words, will things look more like 1688 or 1789? Anxieties focus not on a resurgent Nasserism, of course, but rather on the Muslim Brotherhood and the possibility that Egypt may experience its own Islamic revolution, with unpredictable consequences, not only for the country itself but for the region and the world.

Against these anxieties, many commentators have been pointing to the lack of ingredients, at present, for such a turn of events. Cairo in 2011, they insist, is not Tehran in 1979. They argue that the crowds protesting Mubarak have called above all for democracy and expressed little enthusiasm for an Islamic Republic. They characterize the Muslim Brotherhood, despite its long and radical history, as a relatively ineffective organization that has recently moved in more moderate directions and that lacks a charismatic leader like Ayatollah Khomeini. In short, they are effectively arguing, the signs point to 1688, not to 1789.

This analysis may well be accurate. But the history of revolutions suggests that even if it is, the long-term outlook in Egypt is still a highly unstable one. This is not only because the furious events of the last two weeks are hard to predict, but because revolutions of the 1789 type do not always start out as such. Hardly anyone at the start of the French Revolution could have predicted the demise of the French monarchy and the Reign of Terror. There were no Jacobins present at the fall of the Bastille in 1789, only future Jacobins. France's turn to radicalism took place after the Bastille had been taken, within the revolutionary process itself -- between 1789 and 1793. Similarly, Russia's February Revolution of 1917 initially looked to most observers like 1688: a short, sharp crisis that led to the fall of a monarch, and the quick foundation of a constitutional regime. While Bolsheviks were already present, few observers foresaw the October Revolution that would bring Lenin to power.

Egypt probably does not face the prospect of an Islamic Revolution in the next few months. But if Mubarak falls and is replaced by a weak, unstable series of governments that cannot restore order or deliver serious social and economic reforms -- and thus quickly lose credibility and legitimacy among the population -- then a different, far more radical revolutionary movement may yet develop. And despite the current lack of a charismatic leader for such a movement, one could quickly emerge out of the torrent of events. In July 1789, Maximilien Robespierre and Georges Danton were unknown lawyers; Jean-Paul Marat an unknown doctor, known to most of his acquaintances as something of a crackpot. Within four years, they had emerged as leaders of the most radical revolution yet seen in history.

So the crucial point to keep in mind, as events in Egypt unfold, is that even in the best-case scenario -- Mubarak falls without further violence and is replaced by a seemingly stable, democratic, secular government -- the Egyptian Revolution of 2011 may still just be getting started. Its crucial moments may lie months, or even years, in the future. It is after Mubarak's fall that American support for Egypt's democratic forces will be most important. And the last thing anyone should do, if Egypt appears to complete a revolution this year that looks like 1688, is to breathe a sigh of relief. At the end of 2011, Mohamed ElBaradei may well be president of a democratic Egypt. But then, at the end of 1789, Louis XVI was still King of France.

Feature

I Was a Rare Earths Day Trader

How a naval confrontation in the South China Sea created a global investment bubble -- and cost me half my life savings.

"What's the definition of a mine? A hole in the ground with a liar on top."

The most famous aphorism about the mining business is usually credited -- possibly apocryphally -- to Mark Twain, who before assuming the mantle of America's great literary wit was just another mining speculator gone bust. But generations of fleeced investors since Twain's day would nod angrily in agreement -- losing a fortune on too-good-to-be-true mining deals is a tradition as old as mining itself.

So it goes with rare-earth elements, a group of materials used in the manufacture of various high-tech applications and the object of the latest subterranean fad. Since a border dispute between China and Japan pushed rare earths into the headlines last fall, prices for some of the elements have shot up to an incredible 1,000 percent of what they were just three years ago -- and as in Twain's day, there is no shortage of smooth-talking suits who will tell investors this is only the beginning. I should know: For a few months, I was one of the suckers.

Before we get to that, a brief geology lesson: "Rare earths" is the catchall phrase for 17 elements mostly near the bottom end of the periodic table that are essential for cutting-edge optical and magnetic applications in hybrid cars, wind turbines, iPads, mobile phones, and smart missiles, among other things. What rare earths aren't, however, is rare -- in years past, they were mined everywhere from Florida to Indonesia -- or terribly valuable. In 2009, global sales of all raw rare earths combined came to less than $2 billion -- half the market for palladium alone, and 1 percent of the market for gold. These aren't exactly precious gems: Most rare earths are priced by the ton, not the ounce.

China started cornering the rare-earths market in the 1990s not because it was the only one with the stuff in the ground, but because everyone else gave up. Mining rare earths requires some of the most invasive and ecologically destructive open-pit extraction practices in the world, and China's lack of environmental regulations and its cheap labor meant that it could easily undercut even the biggest suppliers. The one active mine in the United States, operated by the company Molycorp in Mountain Pass, California, halted production in 1998 after a radioactive-waste spill and was shuttered four years later.

For fly-by-night speculators, rare earths couldn't be packaged more attractively. No amount of polite explanations like the above will strike the word "rare" from their name, and the stuff has a knack for attaching itself to headline-worthy buzzwords: "China," "green technology," "iPhone." The rare earths' names -- dysprosium, neodymium, yttrium -- may be a mouthful, but everyone knows how to spell "opportunity." Many companies currently dealing in rare earths have seen their stock valuations jump more than 500 percent on speculation alone, even as global demand for what they're selling has remained more or less flat.

I first heard about rare earths last February, while researching the link between mining -- including rare earth mining -- and guerrilla conflict in rural India. Almost as an afterthought, I noticed China's monopoly and the potential for a big price jump should China decide for any reason to twist the screws. Acting on the hunch, I dumped my meager life savings -- about $9,000 -- into the rare-earths sector, and waited for the payoff.

Investing in speculative mining companies is a bit like buying lottery tickets -- for every firm that pays off, there are dozens whose promises of vast riches disappear into the fog of stock dilution, mismanagement, environmental catastrophe, and fraud, as well as the ever-looming possibility that companies digging for pay dirt will find only the regular kind. The business is full of cautionary tales like that of Bre-X Minerals, a small Canadian gold-mining company that opened up shop in an Alberta basement in 1994. Bre-X started putting out spectacular press releases about phantom gold findings on its Philippines property; the stock soared, and soon the company was worth almost $5 billion before a single ounce of metal was mined. By 1997, however, its claims couldn't be substantiated, and one of the company's geologists died under mysterious (and ambiguous) circumstances. Individual investors and pension funds eventually lost everything, and the cases are still clogging Canadian courts.

Then there are the geopolitics: Events perpetually threaten to upend whole mining subsectors, with countries flooding markets or nationalizing firms more or less on a whim. For rare earths, with their Chinese near monopoly and high-tech military applications, the odds of the whole market being turned on its head were particularly good -- and that was exactly what happened on Sept. 7, when a Chinese fishing boat collided with two Japanese naval vessels along a disputed border in the South China Sea.

Within days, China halted its rare-earth exports to Japan, whose high-tech manufacturing sector is heavily dependent on them. The Chinese government insisted its actions had nothing to do with punishing Japan, but the countries on the receiving end of China's rare-earths exports, and technology exports that use them, didn't buy it.

Believing that China intentionally used its monopoly position to create an international incident, U.S. Secretary of State Hillary Clinton announced that securing rare earths would be a focal point of China/Japan G-20 discussions in November, and the issue vaulted up the diplomatic agenda. On Sept. 29, the U.S. House of Representatives introduced and fast-tracked the Rare Earths and Critical Materials Revitalization Act, which was as much a sheepish admission of U.S. ignorance on the subject as a coherent plan for future security. On Oct. 16, the United States complained to the World Trade Organization over China's embargo; four days later, China banned exports to Europe and the United States, too.

Now things were really cooking. Every breathless headline gave a steroidal boost to the penny mining stocks in my account, and within a few weeks a 10 percent gain in a day was ho-hum. By that point, I was hooked. The promise of getting in on the ground level is a powerful investing drug: There's nothing quite like the thrill of sitting at a computer and seeing your account go up by $100 almost every time you hit refresh. Cashing in on one of the "once in a generation" opportunities you always hear about made me feel like I gamed the system.

But cleaning up by day-trading stocks is just about the hollowest victory imaginable. By the end of each day, the easy-money euphoria would give way to the leg and arm cramps from remaining motionless save for my mouse-clicking hand, and hunger pangs from being too riveted to the screen to eat anything all day. By the time I gimped back home to my nonplussed girlfriend, I'd already be feeling like I was epically wasting societal space. Then I'd wake up the next morning, put on a pot of coffee, and start all over again.

Among the stocks I'd bought was Molycorp, the only U.S. company in possession of a genuine rare earth mine. After churning out raw rare earths for decades, Molycorp had closed up shop in 2002 after China's market flooding and tightened environmental regulations made mining unprofitable. Once China started scaling back, however, Molycorp saw the opportunity to start up its Mountain Pass mine again. The company launched an IPO in July to secure the funding needed for new operations, with which it promises it will be able to provide up to 65 percent of all rare-earth needs outside China by 2012. Less than six months later, Molycorp's shares were up 500 percent, and its value on the stock market is worth far more than global annual sales for all rare-earth companies: about $4 billion. CEO Mark Smith said himself in October that "there may be a bubble" in the rare-earth industry (though he backtracked quickly after realizing that his shareholders might not find that candor useful). No matter -- the company has doubled in value since.

Meanwhile, 15 major mining companies and over 100 minor players are ramping up production and exploration in places as varied as Australia, Canada, Estonia, Greenland, India, Kazakhstan, Mongolia, Russia, South Africa, and Vietnam. Their schemes range from the plausible to the preposterous.

Among the beneficiaries of the continuing panic is a Vancouver-based company called Rare Element Resources. Originally a curious hybrid of a gold-mining company and an investment firm called Spartacus Capital, the firm was renamed just before the rare-earth sector started to take off. In a phenomenal bit of luck, the newly minted enterprise was able to snag the stock-ticker symbol REE -- also the shorthand for "rare earth elements" -- and many people have since invested in the company thinking that they were buying the hottest minerals on the market.

In fact, Rare Element Resources' total holdings consist of a few small plots of land, the most promising of which had been abandoned by at least three previous miners (including Molycorp). Unlike the Bre-X scam, the company's Wyoming land does indeed have rare earths, but they are in small concentrations and are mostly the less-desirable sub-group of the elements. The company's chief financial executive and spokesman, Mark Brown, and secretary, Winnie Wong, are regulars on Canada's penny stock scene -- they've run at least 18 different businesses with names like Deal Capital, Cordova Industries, Apoquindo Minerals, Pivotal Corporation, Globemin Resources, and Everclear Capital.

The company's 402-square-feet headquarters in downtown Vancouver is also listed as headquarters of at least seven other ventures. The firm has no revenue, no production, and even if their rosiest press-release hopes and dreams come true, their first actual sale of rare earths won't happen until 2015, long after the other 20 rare-earth companies further along in the production process have locked up all the major buyers.

A charismatic man with an encyclopedic familiarity with the mining business, Brown told me that rare earths were the new oil -- a business whose market is more than 1,200 times the size of rare earths' -- but he also conceded that his new line of work was "a very, very high-risk business."

"Only one in a thousand companies will actually find an economic mineral deposit," he said, "and you don't know which one is actually going to find something." Plenty of people seem willing to bet that his firm will prevail over the long odds: Rare Element Resources is currently worth nearly $500 million.

Cooler heads have weighed in on rare earths, but since the frenzy began they've largely been ignored. Six months before the China-Japan incident, the U.S. Geological Survey issued a report showing that the world has a 1,000-year global supply of proven rare-earth reserves, 63 of them outside China. The U.S. Defense Department released its own assessment in November saying that the national security implications of China's rare-earth lockdown -- a key factor in the initial burst of panic -- had been overblown. Demand for rare earths, meanwhile, is almost totally inelastic, and the market is already adjusting to concerns over a Chinese monopoly. The big buyers in Japan started importing from India and Vietnam three years ago, and Molycorp alone may be delivering more than six times what the United States needs by 2012.

So, who are the winners in this saga? Not me -- as the rare-earth market went from ignored to overvalued in a blink of an eye, I went from smug satisfaction at being ahead of the curve to kicking myself for selling out way too early. I lost half my stash betting that people would have come to their senses by now, and left the day-trading game in pursuit of more rewarding ventures, like frantically scanning fantasy football waiver wires. The other small-time investors holding on for the roller-coaster ride likely won't fare much better -- they'll be cleaned out by betting on the "one in a thousand" companies once the quarterly sales figures start coming in. That leaves only the mining executives: If they're smart, they'll get out before the whole game goes south -- and prove the old adage right all over again.

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