From the Bank to the Square, You Can Blame the Arab Spring on the Economy

How the Economy Caused the Arab Spring 

Melissa Nelson

Through recent history the balance of economic power in the Middle East has favored authoritarianism over democracy, to disastrous ends. By 2010 many Middle Eastern governments, dominating their public sectors in shares of employment and credit, rife with corruption and crony capitalists, had stifled their subsidy-reliant populations to an unlivable breaking point -- a trend particularly exemplified by Egypt, Tunisia, and Libya. Any ascent of democracy has many facets, but economic liberalization at the end of the twentieth century followed by widespread political mismanagement made the economy the main cause of the 2011 Arab Spring uprisings.

"How do you expect me to make a living?"

            Mohamed Bouazizi, a twenty-six year old Tunisian street vendor, was an average citizen in his rural hometown, Sidi Bouzid. As a teenager he quit school to help support his family, and, though his job selling vegetables often resulted in harassment at the hands of local authorities, he stood strong in a region with  an estimated 30% of its population unemployed (Thorne). Now, Bouazizi’s role in precipitating the Arab Spring uprisings is legendary.

Photo : http://www.demotix.com

            In early December of 2010 a Sidi Bouzid officer,  well aware of the impoverished vendor’s lack of political connections and bribe monies, crossed Bouazizi’s line in the sand when she slapped him and trashed his cart (Thorne).  After being refused an audience with the officer's supervisors Bouazizi returned to the municipal office with a can of gasoline, shouted, “How do you expect me to make a living?” at its office windows, and set himself on fire in the middle of the road (Thorne).  The Arab world’s visceral reaction to Bouazizi’s plight has since changed the Middle East's entire political landscape. 

            Bouazizi’s frustration provides an accurate anecdote for the majority of the populations of Egypt, Tunisia, and Libya, preceding the Arab Spring.  However, while many political analyses focus on Bouazizi’s nonexistent human rights status, the economy he was born into planted its roots long before his generation was born. 

Good Guys Gone Bad: Social Contracts to Liberalization's Cronies

            The leaders who took power after a mid-century convention in Tunisia and coups d’état in Egypt and Libya formed socioeconomic policies which created, as Middle East historian Dr. Onn Winckler describes well, a ‘social contract’ between their regimes and their peoples, the natures of which essentially traded mass economic incentives for political non-participation (Winckler).  These ‘contract’ policies, as Winckler describes them, guaranteed citizens that their governments would create at least four main facets in their economic strategies: a large bureaucracy to provide everybody with social services, expanded security and military services, numerous public-sector workplaces to keep employment up, and subsidized food and energy products.

            It seemed to go well, at first -- citizens let their governments do as they pleased and in return were essentially taken care of. The regimes, tricked into a false sense of economic success by profits from oil cost spikes, increased labor migration, and global tourism, missed two crucial steps in their economic development: adopting structural reforms to transition their economies into more stable sectors, and spreading family-planning policies through their populations (Winckler). Thus, when various upheavals trashed the oil, migratory worker, and tourism industries, Libya, Tunisia, and Egypt, were left with stagnant job markets and massive population bulges. 

            In reaction to the global debt crises of the 1980s international financial institutions, such as the International Monetary Fund and the World Bank, provided Egypt, Tunisia, and Libya’s state-dominated governments with fiscal aid stipulated by broad neo-liberal economic sanctions (Heydarian). Theoretically these new policies would stimulate economic growth by allowing private sector markets, regulated by the governments rather than run by them, to provide the social services, workplaces, and food and energy products guaranteed by the original 'social contract' policies to Egypt, Tunisia, and Libya's citizens.
         

Photo: spatialorientation.com

            But this time the authoritarian nature of regime leaders in Egypt, Tunisia, and Libya doomed their economic plans to failure. Rather than allowing economic liberalization to play out in a free and fair market, the regimes manipulated the new policies to benefit their friends, families, and allies. Economist Robert Springborg explains the trend quite well: any government that controls its power unilaterally relies on preferential, cliquey exchanges of economic benefits to do so, the process of doing which perpetuates said unilateral progression of leadership.  In other words, the regimes traded money for respect, and the companies relied on the money they got by respecting. This trend led to economies dominated by ‘crony capitalists’ in Egypt, Tunisia, and Libya, or economies led by corrupt and politically entrenched private corporations who took funds from the government, offered poor welfare services and no social development, and put their personal profit above-all (Heydarian). It can be argued that the two most important aspects of governance in regards to economic security are macroeconomic stability and the protection of personal rights (Springborg). These authoritarian regimes had by now abandoned both duties in favor of political leeway over their cronies.

Cronies Look Good on Paper

          This corrupt economic system filled cronies’ pockets while working class populations faced increasing unemployment and flat wages. Regimes based their subsidy distributions, government employment, and credit allocation on political goals rather than economic stability, giving nearly three-quarters of food and energy subsidies to large industry leaders (Springborg). With most private sector employers then relying on government subsidies and credit to turn a profit, even non-government employees indirectly relied on the regimes for their incomes (Springborg). The economic situations of citizens in Egypt, Tunisia, and Libya were thus still under slightly-veiled authoritarian government control, while the governments no longer claimed sole control of their citizens’ economic wellbeing. Systems like this keep wealth and power concentrated in a very small group of the population – those few in favor.

Tunisian President Ali & IMF President Straus-Kahn
Photo: innercitypress.com

Disillusioned by cronies' apparent economic growth, international financial institutions gave Egypt, Tunisia, and Libya's regimes big pats on the back. Libya was rated to have the highest GDP and credit rating per capita in Africa (Winckler), and Tunisia was presented as model of the IMF programs’ successes (Prince). But the achievements that the IMF praised Tunisian President Ali for came without the infrastructure development his cronies needed to provide to guarantee Tunisia's economic survival; for example, in 2000 the Tunisian mining industry promised 26,000 jobs for workers to join the private sector, but, by 2009, they had eliminated 14,000 of those jobs without recycling any profit back into the industry (Prince). Tunisian investment went into overbuilding urban areas without any industrialization to drive the growth, a trend emulated in Egypt and Libya. 

First Comes Winter... 

Traditionally, democratic citizenry is correlated with a strong middle class. The traditional Egyptian route to middle-class-dom had always been via government employment, however, in the early 2000s Egypt’s public sector employment plateaued as an effect of the country's economic liberalization, while the country’s labor market increased by about a million (Springborg). While theoretically liberalization's private sector should've been there to pick up the slack, its cronies were mismanaged by autocrats. 
From the 1980s to the early 2000s the average size of a microfirm, the type of which employed two-thirds of the entire private sector workforce in Egypt at the time, cut in half (Springborg). And from 2000 to 2009 the share of middle-income employment in Egypt’s private sector as a whole declined 5% in workers and 9% in wages, while a disproportionate number of low-wage, low-skill jobs were created (Springborg).  With urbanization failed, two-thirds of new entrants to the labor market began staying in rural communities to join the informal sector – that is, to take hometown jobs without contracts, health insurance, or pension plans (Assaad). Working in the informal sector increases a laborer's likelihood of remaining financially dependent on and trapped within traditional, patriarchal political systems (Springborg). Though they had been promised progression, the new generation of Arabs were given no option but to stay in the past. 

When further global financial crises arose cronies’ wallets were hit hard and western countries slowed their foreign aid to the Middle East, leaving citizens un-served by their bosses and governments broke from tax incentives (Heydarian).  Some countries tried to gain control of their macro-economies by devaluing their currencies, such as Egypt devalued its pound in 2002 (Springborg). But by that point urbanization had already begun its inevitable decline outlined above, and the government failed to properly manage its inflation with budget deficits reaching 9% of Egypt’s GDP and subsidies taking more of the national budget than capital investments (Springborg). In this fashion the economic stability of Egypt, Tunisia, and Libya began to crumble.

... Then Comes Spring

Revolutions are most likely to happen in countries which have experienced a period of economic change without any accompanying political reform (Heydarian). When people don’t have a democratic way to voice their concerns while panicking over economic conditions they revolt, and by the end of this millennium’s first decade the citizens of Egypt, Tunisia, and Libya were economically suppressed and panicked.

80% of Egypt’s population qualified for subsidized commodities, with food and fuel subsidies taking up 31% of government expenditures (Springborg). When commodity prices – food prices in particular – began skyrocketing in Tunisia, Egypt, and Libya, their neoliberalized regimes lacked the budgets and the infrastructures to control their food emergencies (Heydarian).  By 2008, 74% of Egyptians rated the work of their government as poor, 69% rated their family’s financial situation as poor, and 58% frequently feared for their personal safety (International Peace Institute). People felt failed by their governments, had no way of supporting themselves, and were scared for their lives. But when elections were held in April of that year only 3% of Egyptian voters showed up to vote – the other 97% were too busy rioting and protesting over rising food prices, stagnating wages, and wealth inequality -- and, as a result, the 70% of the old regime was re-elected with no contention (World News). There was no end in sight. By the time Mohamed Bouazizi lit himself on fire in Tunisia, middle and low income Arabs had had enough.

Photo: npr.org

The Arab Spring uprisings in Egypt, Tunisia, and Libya were a magnificent example of people from all walks of life standing up for their rights as citizens. Economic concerns were one of the main unifying complaints of Arab Spring protesters. Labor unions commonly provided the essential links between social-media-saavy organizers and less-connected citizens (Heydarian). However, the revolting human rights violations of regime autocrats took the spotlight away from their fiscal policies. According to a study published by the International Peace Institute of New York, in 2011, when the Arab Spring commenced, 62% of Egyptians believed the economy to be Egypt’s biggest national problem. While philosophy and networking played important roles in the Arab Spring uprisings, the economy was the single largest cause of the revolts.

Works cited

 Assad, Ragui. "Labor Supply, Employment, and Unemployment in the Egyptian Economy, 1988–2006." (n.d.): n. pag. Rpt. in The Egyptian Labor Market Revisited. Cairo: American University in Cairo, 2009. 1-52. Economic Research Forum Online. Web. 10 Apr. 2014.

 Heydarian, Richard Javad. "The Economics of the Arab Spring." Foreign Policy In Focus (2011): n. pag. Web. 10 Apr. 2014.

International Peace Institute. Public Opinion in Egypt. Rep. International Peace Institute of New York with Charney Research, 19 Sept. 2011. Web. 9 Apr. 2014.

Prince, Rob. "The Political Economy of the Maghreb Spring and Its Aftermath." Foreign Policy in Focus (2012): n. pag. Web. 10 Apr. 2014.

Springborg, Robert. "The Precarious Economics of Arab Springs." Survival: Global Politics and Strategy 53.6 (2011): 85-104. Taylor & Francis Online. Taylor & Francis, 2 Dec. 2011. Web. 20 Feb. 2014.

 Thorne, John. "Bouazizi Has Become a Tunisian Protest 'symbol'" The National. Abu Dhabi Media, 13 Jan. 2011. Web. 10 Apr. 2014.

 Winckler, Onn. "The "Arab Spring": Socioeconomic Aspects." Middle East Policy 20.4 (2013): 68-87. Middle Eastern and Central Asian Studies. Web. 10 Apr. 2014.

The World Bank. 2008 World Development Indicators. Publication. International Bank for Reconstruction and Development, 2008. Web. 10 Apr. 2014.

World News Digest. "Egypt: Local Elections See Low Turnout; Other Development." Facts on File (2008): n. pag. World News Digest. Web. 10 Apr. 2014.

 World News Digest. "NATO Strike in Libyan Capital Kills Qaddafi Son, Grandchildren." Facts On File (2011): n. pag. World News Digest. Web. 8 Apr. 2014.