The Role of the State in Arab Economies - Coursework Example

The Role of the in Arab Economies Introduction The last three decades have seen several Arab regimes experience various external and internal difficulties, such as fiscal deficits, military interventions and legitimacy crises. These challenges have become the driving factor behind a composite process of transformation that has in turn had political, economic and religious implications. Today, it is the consensus of many analysts that this metamorphosis does not necessarily represent a democratic process but rather has legitimized a reshaping of the power structures that have preserved the patrimonial and authoritarian complexion of Arab regimes. Despite the consensus within academic circle with regards to the neo-authoritarian nature of the current political shift within the Arab world, its effects and dynamics have in essence remained unclear. With regards to the basic human essentials including shelter, public service and food, the state in most Arab nations, is the ultimate provider. The operation of such systems depends largely on the existence of economic regulations, subsidies as well as other uncompetitive measures. Whereas such centralized systems work to the benefit of the ruling elites and certain influential social groups, it fails to deliver on the interest of social welfare and justice for the ordinary citizens. This system of economic governance has been largely characteristic of Arab nations under the Middle East and North Africa (MENA) umbrella. As a result, these nations have been acknowledged as having a clear mismatch between the demographic and economic frameworks (Malik 2011, para. 6). State Driven Economics in the Middle East Assertions that the state of economics in the Arab world is still in the initial stages of ideological development remains a hotly contested issue with regards to the economic situation, the relevant growth and evolution strategies as well as the state’s role in economics. The ideological polarization as concerns the design of Middle East Economics has been largely seen through the debate surrounding development strategies. For long periods, the state retained the core functions of safeguarding national industries, capital accumulation and catering for the basic needs of its citizens. Through the implementation of land reforms, stringent policies dictating subsidies and controls and the nationalization of national as well as foreign capital, states in the Middle East sought development based on social equity. Influenced by the acclaim and influence of radical states such as Syria, Algeria, Iraq and Egypt, other Arab nations focused on emphasizing the importance of redistribution with development. The nature of state driven economics has distinct traits that may initially seem irrational and oppressive especially where strict economic criteria are applied. This type of economy, commonly referred to as an authoritarian economy, empowers the state as the main economic actor mainly so that the state can utilize its economic power as a tool by which regime stability can be established. In these economies, the state plays a prominent role even though authoritarian economies may not necessarily be a factor of the state’s role in itself. Unlike in most Arab states, economic policies that oversee the state’s participation in relatively advanced nations, especially those in the West, follow a sense of rationality. Whatever the case, the development of economic policies has evolved based on the economic policies of nations and the long-term perception and objectives concerning societal development. A great majority of Arab states have gone through sequential phases of economic changes and employed development approaches that seem contradictory, without necessarily having laid down strong foundations for economic policies or structures. The reason behind the delicate nature of economics within Arab territories in the Middle East corresponds to a set of unique economic practices whereby the state remains the overall economic player in the society regardless of the presiding economic ideology of the state; whether socialistic or capitalistic. The main economic role of the state centers less on production but more on redistribution and regulation. In most Arab nations, the redistribution policies aim to enhance regime security by maintaining the balance that exists between various social groups and societal classes. To ensure that security is maintained, redistribution policies are enforced under duress. Whereas Arab regimes profess the reasoning behind economic goals of sovereign development as well as enhanced welfare of its people, the economic practices adopted seem to contradict these goals. A chiefly unique feature of an authoritarian economy is the employment of multiple and often contradictory regulations by the state with regards to a singular issue. For instance, in the 1960s and 1970s, the Algerian government approved a policy that supported an enhanced industrialized economy so that the country could reduce its dependence on fossil fuels. However, the same administration allocated a hefty portion of the nation’s investment budget to the hydrocarbon sector. Furthermore, investment in the agricultural sector within the same period declined by more than 10%. The effect of the policy, however, was an increased dependence on fossil fuels in the propagation of the nation’s gross domestic product. It also meant that the nation had to import a great bulk of its food needs while the government was also forced to subsidize food prices as a ploy to sustain internal stability (Winders 2011, p. 70). By 1982, government subsidies on food stood at 3.8 billion dinars resulting in the crisis surrounding the country’s budget deficit. Algeria has entrenched a capitalistic economic system that is characterized by huge oil and natural gas dependence (Addi 1995, p. 90-91). Vaguely disputing policies governing the handling of similar issues are also evident in sectoral economic practices. After Egypt’s policy move in 1974, in favor of economic liberalization, known as the Infitah policy, rather than import substitution, there has been a flurry of contradicting policies under many sectors of the economy. Under the Agricultural sector, old lands were still subject to Nasserist legislation of compulsory marketing boards and regulated rent whereas new lands remained uncontrolled. Under the infitah, agricultural prices were set depending on the laws of supply and demand. This led to the decline of production under the agricultural sector. Other sectors suffered similar challenges, where Nasserist laws regulated sections of the industry’s economy while the other portions were left to the free market conditions (Nagarajan 2013, p. 27). It is difficult to rationalize such policies within any economic context whether in socialistic or capitalistic markets. Analysts suggest that the Raison dêtre behind such policies are fueled by political interests rather than by the goals of economic growth. This brings us to the second feature of authoritarian economies; the precedence given to distribution over production. According to this observation, the states utilization of economic power is eclectic and reactive from an economic view point. If the defining traits of authoritarian economics are the depoliticization of society and exclusion, this form of economics then counts as arbitrary redistribution policies. The unpredictable nature of authoritarian economics is as a result of a number of factors. In line with other economic ideologies, distribution in this form of regulated economics is more fundamental than production. However, unlike other economic ideologies, the specifications governing distribution as well as the allocation of shares may not be in line with standardized criteria based on roles and contributions made in the production process. The distribution policies may also not conform to humanistic views of fairness and social justice but are rather inconsistent and contradictory (Moore 2012, p. 40-41). Players performing the same functions under such systems, or the bureaucracy, may not be rewarded in a similar or equal fashion. They are awarded differently based on their significance as regards the “security map” in the eyes of the authoritarian regime. As a result, authoritarian economics is often considered as an economic system that nurtures bribery and corruption and hence it is often considered to be economics of waste. The nationalization of key corporations in Iraq, Syria and Egypt in 1964, 1965 and 1961 resulted in the establishment of a vast public sector. In each of these cases, the directors chosen were appointed for reasons other than their managerial skills. They were appointed based on security reasons, as rewards for loyalty or their achievements while in the service of the state or as a means by which allegiances could be established between certain social groups. Most of the top positions in these sectors were issued to prominent military figures as a means of securing their loyalty or to reduce their military influence if they posed any form of threat to the existing regime. While key corporations were nationalized, a moderately influential private sector was tolerated consisting primarily of medium and small scale corporations. The construction sector was left to the private sector. The issuance of licenses and the supply of subsidized merchandize to the private sector became a get-rich-quick scheme to both directors and decision makers in the public sector. The economics of bribery and fraud established a unique dynamic in which wealth was distributed between certain social divisions (Guazzone 2009, p. 35). In 1970, the ratification of the open-door policy under the influence of oil wealth triggered the return of radical Arab regimes to a reintegration policy within the global economic system. An open-door precinct was established in the highly state regulated sector. In Egypt, the new sector was not subject to state regulation, especially with regards to salaries and remunerations. The attainment of jobs in such in the open door sector depends largely on influence and power of the applicant. Patron-client relationships as well as nepotism are rampant dynamics of employment and wealth distribution is majorly circulated within the circles of powerful and wealthy state individuals and their families. A common feature of the open-door system is that the state maintains control of it. In the event that the elite members of society fail to benefit from this system, the policies that initiated this system are often reversed or altered to realize this cause (Nagarajan 2013, p. 27). Authoritarian economics can as well be defined as an economic approach that leads up to the prioritization of the “security function” to state matters. This aspect is vividly evident in the inflated budget and resource allocations in favor of security institutions such as the regular police force, para-military forces as well as the army. Economic policy is mostly subject to the existing command in these security apparels and hence extra care is given to the economic needs of security agencies. Egypt entered into a peace treaty with Israel so that it could be able to focus more on economic development still allocates a significant portion of its budget allocation to its army alone. Even so, more resources and allocations could still be channeled away from development projects to cater for the financial needs of local and external security agencies. At the time of the Yemen war, the then presiding Egyptian government chose to reduce funding set aside for investment rather than regulate private and public consumption. To ensure social tranquility prevailed, the Arab regimes in Syria, Morocco, Tunisia and Egypt faced the probability of facing off certain development projects to finance a short-term rise in the consumption intensity through wage increases or subsidized products. The fundamental factor in the allocation of resources remains the need for reassigning social frameworks as per the security needs existing in the nation. In essence, the authoritarian economies in the Middle Eastern Arab World is an impulsive practice by the respective regimes whose take of its role is not necessarily the development of an ‘economic and social’ system with steady and productive institutions and mechanisms but rather focuses on undertaking daily societal affairs within the context of a short-term ideologies of security and stability regardless of the long-term implications this may have on the economy and the nation. The Effect of Privatization on State Involvement The Arab world has undergone significant transformation as a result of globalization and the privatization that goes with it. Dismantling the institutions developed under state-driven growth and development would jeopardize the professed popularity of many of the existing states. The volatile nature of countries in the Middle East and North Africa has over the past decade been rocked by democratic uprisings that are the culmination of years of oppression and a significant rise in the cost of living. Concurrently, the high rates of unemployment and increasing poverty over the past three decades have created a huge socio-economic gap between the ruling elites and the common citizens. However, one of the things that the conventional authoritarian regimes have successfully overseen is the enlightenment of its citizens through education. Most of the MENA states have a budding youthful population whose awareness of their rights and the social injustices that exist in these authoritarian economies has triggered a wave of revolutions that is further fueled by globalization as well as other external factors (Dessouki & Korany 2010, p. 48). Globalization is a relatively new concept in the context of social relations that consists accelerated interaction between people and cultures. In the same sense, key notion behind globalization is manifested in the universal simultaneity of the realizations it results in with regards to cultural, ideological, religious and economical aspects of society. Whereas the implications of globalization remain debatable, there is undoubtedly a marked growth of global interchanges that has seen MENA countries being oriented toward a relatively neo-liberal world perspective. This policy approach is characterized by an economic structure that is based on liberalization, deregulation and more importantly privatization. The simultaneous pursuit of these three elements of the neo-liberal policy has generated a global swing of static market economies in favor of decentralized systems, a move seen as a push to phase out the states dominance as an overarching player in the economies of the respective states (Dessouki & Korany 2010, p. 52). Research conducted in most Arab territories, however, reveals that political and economic reforms brought about by the adoption of neo-liberal policies do not necessarily lead to a relinquishing of the state’s hold over key economic functions leading to the emergence of sovereign actors. In states such as Egypt and Morocco for instance, privatization procedures have represented an opportunity for the nation’s elites to change patronage and relation strategies towards the private sector without sabotaging the authority of the state as the major development agent. They have also provided the state with alternative revenue generation opportunities as well as other mechanisms for wealth accumulation and distribution. The growing private sector within the Arab world relies on the existing state connections for its growth and survival and is easily coopted by the state (McMurray & Somers 2013, p. 3). Firsthand observations concerning the ability of Arab nations to retain state power against global trends has generated a lot of debate within academic and political circles. The existence of a rational global trend that champions a reduction of state power in economic matters for which Arab regimes are allegedly “resistant” to has not yet been proved. A critical inspection of the matter reveals that the state remains the legitimately and internationally recognized framework for mediation channels as well as political action. In fact, the notion of a global wave of state “withdrawal” as well as the equally opposite assertion of Arab regime’s rigidity to this wave are founded on normative and substantialist perceptions of the state as being synthetically detached from the social class that holds authority within it and from the greater society (McMurray & Somers 2013, p. 3). An accelerant of rapidly worsening socioeconomic state has seen the steady reduction in government expenditure with regards to social welfare of the public resulting in the decline in the quality and frequency of certain social services. Privatization measure has seen the reluctance of state machinery in providing the due services they are sworn to offer to citizens citing that some of these functions have been delegated to the private sector. The privatization of sensitive sectors such as the media has fueled the revolution in some parts of the Arab world due to the semblance of new-found media freedom that did not previously exist in the authoritarian regimes. Since the turn of the century, a radical shift in Arab media has led to the emergence of independent private satellite stations such as Aljazeera and the Middle East Broadcasting Centre (MBC) that have in some instances question conventional government approaches to the way in which the regimes have handled various issues. Some scholars assert that despite the relatively easy distribution of capital as well as images in mainstream Arab media, attaining credible information concerning the operations of certain governmental department still presents a challenge. Furthermore, the threat that radical Islamist groups such as the Islamic State of Iraq and Syria (ISIS) and Al Qaeda pose to journalists has been further heightened where states have no definitive ownership of the media (Elouardaoui 2013) It is assumed by most economic and political analysts that the abundance of natural gas in the MENA territories plays a significant role in the desire by most regimes to maintain economic power. The wealth and influence that comes with ownership and control of oil fields in these territories has been the cause of many conflicts and is the main reason why most regimes opt to fight for the retention of power. Neoliberalism and privatization threaten the capacity of these states to maintain economic control and it is attributed as the reason behind which these regimes offer resistance to these ideologies. By the year 2009, British Petroleum (BP) revealed that about 36% of the world’s oil supply originated from NEMA territories. Furthermore, suggestions that these nations maintain control of approximately two thirds of the global untapped oil reserves further increases the worth of these oil fields. Conspiracy theorists suggest that the perpetual War in Iraq as advertised by the United States was really a plot by the US to gain control of Iraq’s oil reserves. In this sense, the drive for privatization has seen the fall of regimes such as that of Sadam Hussein and Libya’s Muammar Gaddafi. It has also been suggested that privatization fuels the civil strife that is seen in the region since those regimes fighting in favor of nationalization of the oil reserves are branded as oppressive and authoritarian (Ismi 2014, para. 5). References Addi, L 1995, ‘Algerias new oil strategy’, in HC Moore & Gillipsie (eds), Oil in the new world order, University Press of Florida, Florida, USA, pp.89-102, Elouardaoui, O 2013, ‘The crisis of contemporary Arab television: has the move towards transnationalism and privatization in Arab television affected democratization and social development in the Arab world?’ Global Societies Journal, 1(1). gis_globalsocieties_19685. Retrieved from: https://escholarship.org/uc/item/13s698mx# Guazzone, L 2009, The Arab State and Neo-liberal Globalization the Restructuring of State Power in the Middle East. Garnet Publishing (UK) Ltd, New York. Ismi, A 2014, ‘Iraq nation destroyed, oil riches confiscated. Surviving Iraqi population impoverished’, retrieved 29 December 2014, http://www.globalresearch.ca/iraq-nation-destroyed-oil-riches-confiscated-surviving-iraqi-population-impoverished/5375905 Dessouki, HA & Korany, B 2010, ‘Globalization and Arab foreign policies: Constraints or marginalization?’ in Dessouki, HA & Korany, B (eds), The foreign policies of Arab states: the challenge of globalization. American University in Cairo Press. New York, pp. 45-66 Malik, A 2011, ‘The economics of the Arab Spring’, Aljazeera, 13 October , retrieved 29 December 2014, http://www.aljazeera.com/indepth/opinion/2011/10/20111010142425419849.html McMurray, D & Somers, A 2013, The Arab revolts dispatches on militant democracy in the Middle East, Indiana Univ Press, Bloomington Moore, PW 2012, ‘Understanding political economies of the 2011 uprisings’, in The Project on Middle East Political Science (ed), Arab uprisings: New opportunities for political science, The Project on Middle East Political Science, Washington, DC, viewed 29 December 2014, http://www.ssrc.org/publications/docs/POMEPS_Conf12_Book_Web.pdf Nagarajan, KV 2013, ‘Egypt’s political economy and the downfall of the Mubarak regime’, International Journal of Humanities and Social Science, Vol. 3, No. 10, pp. 22-39, retrieved 29 December 2014, http://www.ijhssnet.com/journals/Vol_3_No_10_Special_Issue_May_2013/3.pdf Winders, B 2011, ‘The food crisis and the deregulation of agriculture’, The Brown Journal Of World Affairs, Volume xviii, Issue 1, pp. 69-71, retrieved 29 December 2014, http://brown.edu/initiatives/journal-world-affairs/system/files/private/articles/18.1_Winders.pdf Read More