- Constraints & Opportunities in the Arab World
Today, Arab regimes of all hues are undergoing a major crisis of legitimacy. In order to understand this crisis, one must first grasp the priorities of the typical regime in the Arab world. The foremost priority is to preserve the regime’s own resource base—and above all the public sector—as a major supplier of jobs and income for regime personnel and their clients. The second need is to keep key elites happy. This is particularly relevant in countries (such as Syria) where these elites are drawn from unpropertied ethnoreligious minorities that depend on the regime for socioeconomic advancement. Finally, those in power are anxious to preserve the broad popular base of the regime, composed above all of groups that depend heavily upon the public sector (industrial workers, government employees, and even peasants). These groups expect the regime to repay their political support with social-welfare benefits, reasonably priced basic commodities, and economic opportunities for the young. If inflation, unemployment, or shrinking state resources persistently prevent the regime from delivering, its legitimacy may suffer, especially given the waning of older legitimating ideologies such as Pan-Arabism and Arab socialism.
In light of the foregoing, the grave internal political consequences of declining oil prices should be apparent. In the late 1980s and early 1990s, oil-rich Arab countries had to cope with declining GNP and even more steeply declining state revenues, even while they were incurring huge unexpected expenses. They had to write off loans made to Saddam Hussein during his war with Iran, and then had to finance the Gulf War in order to defeat the Iraqi military machine that they had helped to finance. Poorer states such as Syria, Egypt, Jordan, Yemen, and Tunisia found themselves also feeling the pinch, both directly (in the form of [End Page 103] reduced aid from the Gulf states) and indirectly (in the form of reduced wage remittances from their nationals working in the Gulf). While the decline in foreign aid and remittances was gradual during the mid-to-late 1980s, it took a nose dive in the wake of the Gulf War, particularly for countries whose nationals were expelled from the Gulf states because their homeland sided with Iraq or because they were viewed as security threats.
Meanwhile, the fall of communism and the collapse of the Soviet Union meant that both Soviet aid and East European markets for Arab exports were drying up. Outside of Tunisia and Egypt, birthrates remained high. Recent high-school and college graduates and young migrants from the countryside continued to flood the cities, but faced growing joblessness and underemployment as the state lost its capacity to supply jobs.
With the “rentier resources” drawn from oil, gas, and foreign aid becoming scarcer, Arab governments found themselves unable to fill the gap by turning to the public sector. Indeed, the latter’s economic failure had been evident for some time: the bureaucratization and politicization of state-run businesses brought about rampant inefficiencies in production and management. Capital formation, infrastructure development, and the search for export markets had been deferred in favor of job creation and the manufacture of cheap consumer goods.
As long as the regimes had enjoyed rentier revenues, they could satisfy their clients despite the flagrant deficiencies of the public sector. As long as the public sector had continued to expand, debates over resource allocation and economic policy could be forestalled and no economic interest groups (other than the political elites) could amass significant influence. Salaried taxpayers and property owners—the people who, in other types of regimes, provide the state with most of its revenues—could be ignored. There was little or no accountability.
The revenue crisis that began in the mid-1980s changed all this drastically. The bribing of various clienteles (with jobs, subsidies, or cheap health and welfare services) had to be scaled back. Budget cuts became the order of the day; the public sector stagnated, much less able to finance investments. The political elites, especially in the Gulf states, might have been able to keep up past policies by cutting the share that they themselves took from resource rents. They could also...