The Politics of Weak Control: State Capacity and Economic Semi-Formality in the Middle East

After years of mystification and theoretical overemphasis on the role and functions of the state, an increasing number of scholars have recently begun to "demystify" and "disaggregate" the state's powers and ability to affect change in society.¹ Observers of the Middle East have been no exception, with an overwhelming majority focusing on the impressive, often massive edifices of the state, its leaders, or its institutional arrangements.² Equally prevalent have been recent studies that zero in on the limitations of Middle Eastern states, especially those without substantial oil resources, and on developments compelling them to readjust and in some cases abandon their traditional modus operandi.³ Almost all of these works have focused on the institutional and economic exigencies of the Middle East's rentier states and their ensuing vulnerabilities to pressures from civil society.⁴

This article examines the limitations of the Middle Eastern state from a somewhat different angle, namely the nature of its relationship with a type of economic actor that may best be described as "semi-formal." These are primarily comprised of members of the petite bourgeoisie and owners of small and medium-sized enterprises (SMEs). The article begins with an examination of the phenomenon of economic semi-formality within the larger context of the political economy of non-oil rich Middle Eastern states. It argues that these states face diminished capacities in their efforts to regulate the economic activities of the petite bourgeoisie and some SMEs. At best, the state can only partially enforce its regulative agendas on the activities of these economic actors, resulting in the emergence of the economic phenomenon of "semi-formality": those economic activities that are only partially or episodically regulated by the state. Semi-formality, the article argues, is not simply the result of entrepreneurs' natural impulse to evade state regulations. It is, more fundamentally, a function of the state's own limited capacities to fulfill the regulative tasks it sets for itself. The state's uneven enforcement of regulative policies—uneven over time or in relation to different economic actors—allows nonstate economic actors, whether overwhelmingly in the formal sector or in the informal sector of the economy, to slip in and out of semi-formality.

Those whose economic activities can be classified as semi-formal tend to come from one of two overlapping, interrelated economic backgrounds: the petite bourgeoisie, and the SME sector. The petite bourgeoisie, the article argues, exists in a condition of near-permanent semi-formality, as neither the state nor the petite bourgeoisie itself makes concerted efforts to actively engage the other. At best, the interaction between the two tends to be episodic and, when it does occur, often superficial. The economic activities of most SMEs, on the other hand, are technically supposed to be regulated by the state. However, limitations in the state's capacities, which are mostly a product of its institutional and information deficiencies, often allow the SMEs to slip into and out of semi-formality.

Relative economic autonomy from the state does not necessarily translate into overt political activism. In fact, semi-formal economic actors are among the groups least likely to engage in open political activities directed against the state. This reluctance to partake in political endeavors is largely rooted in their precarious existence both in relation to the vagaries of the national macro-economy and the occasional harassments of state agencies and their officials. For the most part, petite bourgeois semi-formals, similar to industrialists and organized labor groups, are "contingent democrats," casting their lot with or against the ruling establishment when it suits their material interests.⁵ Put differently, the political dispositions of semi-formals are largely shaped by practical economic considerations.

Limited or impaired capacities are not unique to the states of the Middle East and can be found elsewhere in the developing world, and even in countries with advanced capitalist economies. Nevertheless, it is within the late developing countries where states' capacities generally confront their greatest challenges, rendering them "weak" in relation to comparatively "strong societies."⁶ This article's focus on limited state capacities and...