World - Middle East: Bread and Dignity

Middle East: Bread and Dignity
Jane Kinninmont

In trying to understand the complex causes of this year's wave of unrest across the Arab world, people sometimes ask whether the real drivers were economic, rather than political. After all, food prices have been rising sharply: in January this year, when protests kicked off in Egypt, the World Bank's composite food price index was 29 percent higher than it was in January 2010.

Unemployment is among protestors' key grievances, as job creation has struggled to keep up with the region's famously fast population growth, and as there has been a chronic mismatch between the education that is provided and the skills that the job market needs. Moreover, despite the dramatic oil boom of 2003-08, and further increases in public spending in an attempt to offset the impact of the global recession in 2009-10, economic inequality seems to have been on the rise in many Arab countries, as persistently high inflation eroded the low wages of the poor and so-called 'unskilled'. Now, we now see unrest across much of southern Europe as a result of fiscal austerity measures. So is the Arab Spring really about democracy and rights, or jobs, bread and housing?

Actually, this frequently asked question is misconceived. It rests on a false dichotomy between 'politics' and 'economics', which are convenient labels for different academic disciplines, and should not be mistaken for genuinely different or separate spheres of reality. This is perhaps particularly true in a region where the state still plays a major role in almost every economy.

The economies of the Arab world are fundamentally shaped by the region's political, social and institutional structures and economic problems such as unemployment, inflation and inequality are inextricably bound up with the political context.

For instance, inflation has remained stubbornly high in Egypt for years, even in 2009, bucking the global trend. Local economists say this is partly because of extensive monopolies in domestic consumer markets, and, in the case of food prices, the political obstacles to agricultural reform. Economic inequality has been compounded by weak institutions and by corruption; for instance, a February article in the Wall Street Journal on 'Egypt's Economic Apartheid', the renowned Brazilian economist Hernando de Soto argued that more Egyptians work in the 'grey' (informal) and black economies than in the legal, private or public sectors put together, because of weak and failing institutions, and laws that are 'burdensome, discriminatory and just plain bad'.

Indeed, one of the triggers for the wave of protests that swept Tunisia in December and January was the suicide of Mohammed Bouazizi, a young man working informally as a vegetable seller, after his unlicenced vegetable cart was confiscated by police. The fact that so many people across the country clearly identified with Mr Bouazizi reflected not only the common experience of unemployment, but their dissatisfaction with a corrupt system that was seen to enforce laws against a poor vegetable seller but not against the increasingly flagrant theft of land and resources by the elite.

Across the region, unemployment is high even in countries with plentiful jobs, like those in the Gulf, which are increasingly dependent on foreign workers because of the weaknesses of education systems and a two-tier labour-market model (whereby the private sector is built on low-wage guest workers, while the public sector has historically provided for nationals). Even in the Gulf states, where economic problems are far less severe than in Egypt or Yemen, incentives to work and study are limited by systems that are seen as rewarding personal connections, family relationships and political loyalty more than hard work. In the Gulf, the greatest unrest has been seen in the least well-off states, Bahrain and Oman, which are facing the biggest challenges in sustaining their economic distribution models.

Overall, however, there is no simple correlation between average incomes, or even income inequality, and the degree of unrest. Across the region as a whole, unrest has been particularly pronounced in the countries with the longest-serving rulers (or in Bahrain's case, the longest-serving prime minister; Syria is the main exception to this rule) and with the most brutal security forces (as David Butter of the Economist Intelligence Unit recently pointed out).

In Egypt, some of the networks that helped organise the January 25 protests had originally formed to organise demonstrations against police brutality and corruption, following the death of Khaled Said, a young man who was dragged from an internet café by the police and beaten to death in the street, in June 2010 in Alexandria. Friends and relatives of Mr Said claimed he had been trying to upload evidence of police corruption. When people demonstrated against the brutal behaviour of the police, the police responded by beating them up. A Facebook group, 'We are all Khaled Said' was established to commemorate him. One of the moderators of that page - Wael Ghonim, an Egyptian marketing executive working for Google in Dubai, and a budding social entrepreneur - became an unexpected face of the Arab revolt after being arrested in Cairo in January on suspicion of helping to organise protests. The strength of the Egyptian uprising lay partly in the support it drew from different classes, from middle-class professionals to rural trade union leaders.

Their demands for both political and economic rights echo in the widely chanted protest slogan, 'Bread and dignity'. Another recurring word in protest slogans across the region has been 'justice', encompassing concerns about corruption and wealth distribution as well as human rights and the rule of law. In many developing countries, activists define human rights broadly to include basic socio-economic rights, such as those laid out in the United Nation's International Covenant on Economic, Social and Cultural Rights, which was ratified by many developing countries but not by the United States. Access to education and healthcare has also been a key political issue. One of the placards, included in a recent book of Egyptian protestor photographs, Messages From Tahrir read 'Why is Hosni Mubarak 80 years old? Because he doesn't use the national healthcare system.'

The lack of a level playing field, or of an independent judiciary fairly implementing the rule of law, or of meritocracy, are political and economic issues at the same time - affecting political freedoms, employment opportunities and the chances of success for entrepreneurs as well as political freedoms and representation. All this suggests that simply increasing public spending - the Saudi model for responding to the Arab spring - will not be adequate to offset demands for reform in the longer term. Even in the wealthy United Arab Emirates, where the average gross domestic product (GDP) per capita is 49,600 dollars (in purchasing power parity terms, as of 2010), an economist, Nasser bin Ghaith, wrote an article earlier this year saying as much. He is now on trial, with four other writers, for insulting the rulers and inciting acts that endanger public security. The case has indicated that even the possession of the world's second-largest sovereign wealth funds has not made the Emirati government sufficiently confident to tolerate criticism.

While economic reforms alone will not be adequate, they will be essential if the transitions in North Africa are to succeed. Egypt needs to create 700,000 jobs per year just to keep unemployment stable. Reducing unemployment will require growth rates of around seven percent. Expectations have been raised by the revolutions; for instance, there are hopes in Egypt that the country will soon benefit from the return of billions of dollars of stolen assets, although even if the most optimistic estimates are true - and the popular but unsourced figure of 60 billion dollars seems suspiciously high - this would only represent 705 dollars for every Egyptian. However, in the short term, inward investment and tourism are suffering and unemployment is likely to rise. Foreign investors are worried by the uncertainty, and are being forced to re-evaluate their strategies, including their basic assumptions about stability and risk, just as policymakers are.

Yet many of these investors see a strong potential upside to the political changes in Egypt and Tunisia - if they lead to less corruption and more transparency, stronger institutions and greater confidence in the rule of law. To that extent, there are some surprising areas of common interest between protestors and investors - though there will be major divergences on other issues, such as labour rights. The west should be careful to avoid complacency about its potential to act as a model, as has been highlighted by the decision of Egypt's interim government to reject conditional loans from the International Monetary Fund and the World Bank. Supposedly liberal economic policies in Egypt and Tunisia have failed to create the level playing field envisioned by theorists of free markets - a problem that is hardly exclusive to the Arab world. The idea that economic and political reforms can be carried out on separate tracks is essentially an illusion, although it may be a compelling one for economists at international financial institutions and banks, which prefer to imagine themselves as apolitical technical commentators. Rather, economic reforms and political reforms will need to be carried out together to build fairer and more inclusive Arab economies.

(Jane Kinninmont is a Senior Research Fellow with the Middle East and North Africa Programme at Chatham House.)

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