An Economic Answer to Political Instability in the Arab World
February 11, 2014
Host: Brookings Institution
Kemal Dervis, Director, Global Economy and Development, Brookings Institution
Hafez Ghanem, Nonresident Senior Fellow, Brookings Institution
Daniela Gressani, Deputy Director, Middle East and Central Asia International Monetary Fund
Akihiko Koenuma, Director-General, Middle East Department, Japan International Cooperation Agency.
With a war dragging on in Syria, increasing violence in Iraq and Lebanon, and political instability in Egypt, it can be difficult at times to see the good that the Arab Spring has brought to the Middle East. Since the revolutions began 3 years ago, leaders in the U.S. and around the world have stressed the importance of establishing democracy in the region, urging governments to respect personal liberties and promote inclusivity and equality. However, when a government was democratically elected in Egypt, it barely lasted a year before popular demand removed the president from power and again threw the country slid back into a state of turmoil and revolution. The region though has not given up on democracy. In Egypt, over 80% of the public still believes democracy to be the best form of government and the country is preparing for a new round of democratic elections to be carried out later this year. In Tunisia, the birthplace of the Arab Spring, the parliament recently passed its own progressive constitution, paving the way for elections in the coming months.
The establishment of democratic and open societies is undoubtedly important in the eyes of western leaders. But, according to new data from the Arab Barometer, when talking to people in Egypt, Tunisia, and other countries in the region, one learns that their greatest concern is not on personal liberties but economic opportunities. Although the values of a democratic society are undoubtedly recognized and desired by the people, new liberties mean little when people can barely afford to feed and house themselves. Without addressing the inequalities experienced in rural areas and between genders and ethnicities, it will be impossible for any government to maintain peace and stability in the region.
In his presentation, Dr. Ghanem cited data in a recently published Brooking’s report to identify areas new governments should focus on addressing in order to maximize individual’s earnings, create jobs, and generate economic growth. Looking at data from across the region, Dr. Ghanem pointed to the unequal amount of spending that goes towards urban development as a source of inequality and joblessness, especially give that many countries have large rural populations – in Egypt 57% of the populations lives in rural settings, 70% of Yemen’s population is rural, as is 32% of Tunisia’s. In these countries, and particularly in Egypt and Tunisia, rural work revolves largely around small, family enterprises, usually a small to medium sized agricultural or retail operation. It is these smaller, local, businesses that governments must focus on strengthening, providing them with the necessary resources so they can thrive and hire.
The birthplace of the Arab Spring, Sidi Bouzid in Tunisia, is one clear example that Dr. Ghanem used to illustrate how economic mismanagement hurt local businesses and encouraged political unrest. In this small town, 41% of the labor force is tied to agriculture, with a majority of farmers operating small-medium size plots of land (0-20 hectares). However, under the city’s policies small and medium sized farms receive only 10% of the city’s irrigation, with the rest being given over to larger corporations. Such unequal distribution of resources leaves local farmers at a complete disadvantage, unable to compete with large-scale producers, and thus unable to hire or pay competitive wages. The lack of local success then proceeds to have an impact on the larger community, driving down local consumption and the number of businesses willing to hire.
However, economic inequality isn’t entirely about providing a certain number of jobs, it is also important to make sure that the entire labor force has access to jobs regardless of gender, race, or religion. In Egypt, the unemployment rate amongst women is three times higher than that of men and in Tunisia, 32% of working age women are unemployed. These large numbers are in part due to large role the informal economy is playing in these countries, where jobs for women are typically unsafe and pay very little. Regardless, opportunities need to be created so equal employment can become a reality. Both domestic and international institutions can do more to work with people on the ground, to help them procure loans and funding for entrepreneurial ventures and generate spending and growth.
Polling shows that the desire for democracy, equality, and prosperity is strong across the Middle East region. It is up to world leaders and institutions to provide the aid and advice though to ensure that each country’s potential is being tapped though. Ms. Gressani is confident in the work the IMF is doing to address the concerns of small enterprises, aiming to curb state sponsored subsidies that only benefit large, urban businesses. By tapping in to what has been a largely ignored workforce, the IMF, international leaders, and local governments will enjoy greater stability and prosperity, while also providing citizens with better, local employment opportunities. What is needed is for leaders to put in more effort and make connections with institutions and individuals on the ground who are passionate about change, and identify where resources are most desperately needed. By taking in to account businesses of all sizes, emerging governments will be able to enact policies that address their entire country, promoting unity, agreement, and future success.