Money and democracy were hot topics when Arab business and political leaders met for a long weekend of networking at the World Economic Conference, here in Sharm El-Sheikh, Egypt. There were big debates at the formal sessions, and small talk over endless cups of coffee, about the sudden surplus of the first of these commodities in the Arab world, and the stubborn deficit of the second.

With the price of oil hovering around $70 a barrel, the governments of oil exporting countries are swimming in surpluses. The consensus of Arab decision makers at the Economic Conference was that the current oil shock may be permanent, and that the price of oil will remain high for years, if not forever. That was both the good news and the bad news. Good for Arab governments. Potentially bad for democratic reforms.

Conference Delegates

The autocratic and undemocratic governments of the oil exporting countries see the bonanza as good news. With all that money sloshing around the Middle East, they can afford to throw a lot of it at their problems. Their knee-jerk reaction to the timebomb of fast-growing young populations in their dysfunctional economies, though, is to create cushy government jobs for the locals, and leave the menial work to imported foreign workers. And if they spread enough of the oil money around in grants, loans and subsidized services, they think they can keep the lion's share and forget about elections. That's what they have been doing for years.

Western advisors and liberal Arab businessmen, though, are warning that throwing money at problems doesn't solve them, it merely postpones them. It is bad news for democratic reforms, they say, because it allows the mega-rich rulers of Saudi Arabia and the Gulf sheikhdoms to stifle demands for accountability.

Paradoxically, the Arab countries that don't have oil to export, and so aren't benefiting from this flood of cash, are doing the most to reform their economies. Egypt, with just enough oil to meet its own needs, but not enough to enjoy the exporting boom, is a good example.

The government of Prime Minister Ahmed Mahmoud Nazif, a first-rate technocrat, has slashed business and personal taxes and is attracting a flood of foreign investment, much of it in the labor-intensive tourism and hotel business. Sharm El-Sheikh, once a barren desert outpost, is now the Riviera of the Red Sea.

But even Egypt is resisting the pressure from Washington to reform its politics along with its economy. President Hosni Mubarak won re-election last year in a theoretically multi-candidate election, but made sure the opposition never stood a chance. Political opponents are routinely jailed, and street demonstrations are brutally broken up by police. The safety and tranquillity of Mubarak's guests while they discussed the benefits of democracy at Sharm El-Sheikh were ensured by a mass roundup of thousands of menial laborers. No one seemed to notice the irony.

Egyptian Presidential Guard

One of the key questions raised at the conference was whether Islam and democracy are compatible. A delegate from the world's biggest democracy, India, pointed out that 60 percent of the world lives under a democratic form of government, and that if you exclude the Middle East, 60 percent of Moslem countries are also democratic. It is the Arab countries that have a problem, because their traditional patriarchal societies lack a culture of democracy. As one Egyptian pundit commented, “No one in Arab society is willing to die for democracy. But we have people who are ready to die because they don't like tourism.” Or women without headscarves and all the other taboos imposed by strict Islamists.

The usual excuse offered by Arab officials is that they are all too preoccupied with the Palestinian-Israeli problem – what they call “the Mother of All Problems” – to reform their own governments. More enlightened Arabs are beginning to see that as the Mother of All Excuses. As one of them put it, “the Arab-Israeli dispute has little to do with Arab problems, and we had better recognize that and move on.”

A final excuse that many Arabs fall back on is that the United States is insincere in pressing for democracy in the Middle East. The bottom line, they say, is always the war on terrorism and the Bush Administration mentality of “either you are with us or against us.” The fact the United States is now embracing Libya's dictator Muammar Qaddafi is seen as just one more example of American double standards, if not outright hypocrisy.

America's Arab critics have got a point. Despite a few recent reforms, Libya could hardly be called a beacon of freedom. But it does have the largest oil reserves in Africa.