Path toward Democracy? The Role of Economic Development
2012-01-31

While the "Arab Spring" is indeed a regional phenomenon, it has not had an equally strong impact on all countries of the region. As a consequence, the results of the upheavals in the Arab world are as diverse as the specific forms in which the cataclysmic events of 2011 touched upon individual countries. When asking whether prospects for sustainable economic development, and as a presumed consequence prospects for democratization, have improved or deteriorated, it is important to pay tribute to notable differences across the region. Democratization in the narrow sense of the term, i.e. the systemic transition to democratic rule, first of all, requires a minimum of functioning statehood, or else the risk of state decay, erosion, or collapse is imminent and democracy will hardly gain ground. In part due to the numerous and long-standing violent conflicts within the region, there are states and proto-states which have lacked stable statehood before the Arab Spring: Iraq, Lebanon, and Palestine are the classic examples. While Yemen, too, has figured among the world's most fragile states for many years, the situation there has worsened in the light of mass protests which will not be acquiesced by the grudging resignation of Ali Saleh from the office of the president he had occupied for over three decades. After months of protests which, at least in some parts of the country, resulted in a civil war-like situation, the economy is at a low even in Yemeni terms with no recovery in sight. A similar scenario, despite starting from a much more developed economic base, is likely in Syria where more and more soldiers defect and join the "Free Syrian Army" in order to fight government troops. Likewise, after the removal of the Gaddafi regime in Libya, state-building remains the key challenge along with a reconstruction of the country's oil and gas infrastructure on which it depends without alternative. And after Bahrain's crushing of democratic protests with the help of Saudi tanks and a subsequently failed "national dialogue" in summer 2011, the question of stability remains unanswered as of the time of writing. Thus, four new hotbeds of possible state failure are a result for parts of the Arab world, and in these cases neither can any prediction be made for longer-term improvements of economic performance11 Two of them (Libya and Bahrain), however, have the potential to reconstruct their states and ensure political as well as economic survival because they are abundantly endowed with mineral resources or political aid, respectively. nor should hopes for short- to medium-term democratization be raised high. On the other hand, the majority of countries in the sub-region of the Gulf peninsula (Kuwait, Saudi Arabia, Oman, the United Arab Emirates, and Qatar) have hardly felt the winds of change of the Arab Spring. Small scale protests were easily repressed and/or bought off by the rulers. While certainly popular dissatisfaction and silent renunciation mount among some segments of their populations (especially the youth), state coffers are still replenished enough -after several years of high world oil prices- for these regimes to survive the short- and medium-term future in their current traditional-authoritarian shape. This holds all the more since India's and China's thirst for energy is far from quenched, which for the foreseeable future offers valuable possibilities of export diversification for these countries' primary export commodities, i.e. oil and gas. Moreover, since globally, peak production of hydrocarbons was reached several years ago, and since the production of renewable energies does not keep pace with global demand, world energy prices will remain high over the next decade. In sum, thus, there is a high likelihood of continuity in these countries – both on the economic as well as on the political front: Rent-driven economic development will continue to safeguard the mentioned Gulf autocracies from unmanageable pressures from below, with democratization remaining off-limits. Pre-Arab Spring economic policies in Morocco, Jordan, Egypt, Tunisia, and Algeria had largely been shaped by structural adjustment programs initiated after the conclusion of standby-agreements with the IMF at the end of the 1980s and first half of the 1990s. They included fiscal austerity measures, trade and exchange rate liberalization as well as the privatization of state-owned enterprises. With regard to their structural adjustment experience in the 1990s, Morocco, Tunisia, Jordan, and Egypt were termed "success stories" by the IMF (Pfeifer 1999). Indeed, a capitalist transformation of their economies and successful macro-economic stabilization were achieved. However, the political logic of neo-patrimonial power maintenance prevailed throughout the reform process, resulting in "Patrimonial Capitalism" instead of a free-market economy based on equal competition and the rule of law (Schlumberger 2008). In Algeria, resistance against liberalization was higher, economic transformation of its rent-based economy shallower, and macro-economic improvements only materialized later. In all five countries, the economic reform process coincided with a political regime transformation: Former state elites benefited from the new possibilities for private businesses and rising businessmen were quickly co-opted by the ruling elites. These "crony capitalists" were allowed to make huge profits in return for political loyalty. Structural adjustment, however, yielded few positive development effects for the broad population. In particular, job creation was too slow to absorb the fast-growing number of young job-seekers. Hence, in order to prevent economic reforms from threatening regime stability, the rulers effectively narrowed down their base of legitimacy to a small elite fragment and the security apparatus. The delegitimizing effects of this inequitable economic and political transformation finally became visible during the Arab Spring. The spark for the Tunisian revolution was the self-immolation of a young man who suffered from his bad working conditions. High unemployment and rising prices were among the main motivations for protesters in Algeria. A survey done by the Amman Center for Strategic Studies in February 2011 found that 85% of those questioned identified various economic issues as the main problems in Jordan (CSS 2011). In a survey of Egyptian public opinion in April 2011, 64% of those respondents who had participated in or supported the uprising cited the low standard of living and/or lack of jobs as their main reason (IRI 2011a). In response to the economic grievances of the protesters, governments made material concessions. While in Morocco, Jordan, and Algeria, the rulers managed to contain the protests and will likely survive by employing similar strategies of legitimation as before, Ben Ali and Hosni Mubarak were toppled and democratization becomes a possible trajectory. In all countries, however, there is a tendency to alleviate popular grievances through populist policies, which will also relieve pressure to democratize. The rulers of Morocco, Jordan, and Algeria employed material legitimation strategies as part of the recipe for surviving the Arab Spring. The Moroccan government almost doubled its food subsidies, raised the minimum wage, increased pensions and salaries, and created new public sector jobs. In Jordan, salaries for public employees and subsidies for energy and basic food products were raised. The Algerian government introduced measures to lower the prices of sugar and oil and promised employment and housing initiatives. Yet, these short-term, mainly debt-financed attempts to alleviate economic hardships cannot provide sustainable solutions. Algeria, thanks to its income from oil and natural gas, will perhaps be able to continue its strategies of material legitimation, and Jordan and Morocco are seeking a new source of financial aid through membership in the Gulf Cooperation Council. In the light of scarce resources and high debts, however, rulers will find it more and more difficult to walk the tightrope between the appeasement of the masses and the satisfaction of their business elite clients. Self-enrichment will have to be put on hold, and more attention given to the broadening of the base of legitimacy and the incorporation of larger segments of the population. If successful, however, this is fully part of the logic of "upgrading authoritarianism" (Heydemann 2007) – not democratization, but a more populist form of authoritarianism is a likely result. In Tunisia and Egypt, the rulers' strategies of "upgrading authoritarianism" have obviously failed to protect them from the Arab Spring. While the protesters succeeded in forcing Ben Ali and Mubarak to step down, they had also hoped for the political changes to positively affect their economic situation. In March 2011, 46% of respondents in a Gallup survey expected the economic situation to improve (compared to only 15% in fall 2010). In a survey among Tunisians conducted in the same month, the largest share of respondents (35%) stated that the top priority of the government should be to provide jobs (IRI 2011b). This shows that the protests were not only about democracy or political liberties, but also about a departure from the previous, exclusive development model. Unfortunately, the immediate economic consequences of the Arab Spring in Tunisia and Egypt have so far been dire, and the expectations of the population are far from being fulfilled. Foreign direct investment and tourism revenues have plummeted, and growth rates for 2011 are expected to reach about 0% in Tunisia and 2% in Egypt. Both the civilian government in Tunisia and the military government in Egypt have used deficit spending to alleviate the economic crisis caused by the Arab Spring. The Tunisian government announced a € 260 million financial aid package for rural areas, raised the minimum wage and the salaries for over 480,000 state employees and 150,000 workers in the public sector, and promised financial support for unemployed university graduates. In Egypt, the salaries of public employees were increased by 15 percent, 450,000 permanent contracts offered, and overall subsidies raised by almost 25% in the budget for the fiscal year 2011/2012. Also, the privatization program was stopped and the Ministry of Investment abolished. Post-Arab Spring economic policies in Tunisia and Egypt have therefore taken a populist turn. It is clear to the political elites that it will not be easily possible to ignore the interests of the broad population in the future. In Egypt, however, the current policies do not signal the beginning of a truly inclusive development project. They are largely financed through internal debt, which involves serious risks in the medium to long term. There is no political will to tackle underlying imbalances – for example, switch from regressive subsidies to a more effective social security system. Most parties, especially the newly founded ones, do not have a clear economic policy program with a long-term vision – not to mention that it is unclear what policy-making role the military is ready to grant to civil parties at all. Currently, state-society relations are still lopsided towards the state. Higher wages, for example, are granted if politically necessary, but at the same time strikes are violently put down and labor parties remain prohibited by the party law. This top-down populism makes democratization unlikely; civil society is not seen as a partner in development, but as a potential threat which needs to be appeased and controlled. The private sector, as well, is still dependent on the state. While many of the prominent big businessmen of the Mubarak era are behind bars, there is little potential for a new, independent bourgeoisie which could challenge the military rulers. Under these conditions, prospects for democratization in Egypt remain dim. The political developments in Tunisia, in contrast, promise more opportunities for civil society to take a leading role. The risk remains, however, that the fragile democratization process stalls due to the inability of the future Islamist government to provide lasting solutions for the problem of unemployment in particular. If it decides to adopt laws which would restrict the freedom of tourists, unemployment will even be exacerbated. Also, many members of the old ruling elite are still in important positions, which may jeopardize democratic reform. There are two scenarios for the future if economic developments do not show a "revolution dividend": another wave of protests might erupt, where people call for a strong leader to solve their immediate problems. Such an uprising would likely not call for democratic reform, but for even stronger populist policies. Alternatively, the general public could become disillusioned by the lacking positive impact of the Arab Spring on daily lives and retreat from the political arena altogether, leaving the field to political elites. Either scenario would inhibit democratization and promote authoritarian regression instead.