The Economic Imperatives of the Arab Spring

WASHINGTON, DC/ISTANBUL – Almost a year has passed since revolution in Tunisia and protests in Cairo’s Tahrir Square toppled ossified authoritarian regimes and ignited a much wider – and still raging – storm in the Arab world. No one can safely predict where these events will eventually take the Arab people and nations. But one thing is certain: there is no turning back. New social and political movements and structures are emerging, power is shifting, and there is hope that democratic processes will strengthen and spread across the Arab world in 2012.

Events in the Arab world in 2011 recall other far-reaching regional transitions, such as in Eastern Europe after the fall of the Berlin Wall in 1989. There are differences, of course, but the upheavals’ sweeping and contagious nature is strongly similar to that of the revolutions that brought communism to an end in Europe. So, too, is the debate about the relative contributions of political and economic factors to the eventual eruption of popular protest.

While the yearning for dignity, freedom of expression, and real democratic participation was the driving force underlying the Arab revolutions, economic discontent played a vital role, and economic factors will help to determine how the transition in the Arab world unfolds.  Here, three fundamental and longer-term challenges are worth bearing in mind.

First, growth will have to be much more inclusive, especially in terms of job creation. The youth employment-to-population ratio was about 27% in the Arab countries in 2008, compared to 53% in East Asia. Moreover, income inequality has widened, with the global phenomenon of increasing concentration of wealth at the top very pronounced in many Arab countries. Top incomes in these countries have resulted largely from political patronage, rather than from innovation and hard work. While Tunisia was an extreme case of a regime furthering the economic interests of a small clique of insiders, the pattern was widespread.