In search of a miracle cure
The COVID pandemic and the war in Ukraine have had very different impacts on the Arab world. While oil-importing states are facing unprecedented food and energy price hikes, unemployment, debt and inflation, Gulf states have amassed huge profits from the sudden rise in oil prices.
In the crisis-ridden Middle East, it is becoming abundantly clear that the existing political and economic systems have reached their limits. There needs to be a fundamental revision of the authoritarian and rentier capitalist systems currently in place if social order is to be maintained and stability and prosperity preserved.
This succession of crises and challenges has engendered a variety of reactions from Arab states. The latter fall into three categories, determined less by their geographical proximity than by the political strategy pursued: flourishing states, states in crisis, and failed states. The question is not whether these countries are capable of maintaining the old Arab order – they can't. It is more a question of what new Arab order they aspire to.
Witnessing a progressive collapse in the price of oil from 2014 onwards, several Gulf states have realised that the rentier economy is no longer capable of reducing unemployment and creating real jobs. Moreover, oil revenues have proved unable to keep pace with public sector inflation.
Several Gulf states, led by Saudi Arabia, the United Arab Emirates (UAE) and Qatar, have therefore begun diversifying their economies in earnest, with the aim of freeing themselves from a one-sided dependence on oil. Far-reaching economic and fiscal reforms have been implemented, numerous subsidies reduced and investment laws updated.
Pioneering reforms
Saudi Arabia has seen major social reforms recently. Women are now allowed to drive, for example, while many social restrictions on citizens have also been lifted. The UAE took this path decades ago. These states are now also adopting a new approach to financial support for other countries.
Rather than supporting the state budgets of oil-importing countries as before, aid is now conditional either upon economic reforms or the acquisition of shares in state-owned enterprises. Some states are no longer receiving support at all, owing to political differences.
Even though the oil price has risen in recent months, the Gulf states have not returned to their previous policy of financial support. Much of the additional oil revenue is instead being invested in domestic projects. This change has been very positively received, especially by the younger generation.
As a result, the ruling regimes have succeeded in maintaining their grip on power without having to implement political reforms that would have given their citizens a greater role in the decision-making process and brought the issue of human rights more to the fore.
It is doubtful, however, whether this strategy can remain successful long-term if political decision-making power remains concentrated in the hands of one person or a small group and nothing is done to combat clientelism and corruption.
Reforms blocked in Jordan, Egypt and Tunisia
The second group, the states in crisis, consists mainly of countries with little oil and many workers. These include Jordan, Egypt and Tunisia, for example. Traditionally, these countries have been heavily dependent on the support of the oil states and the remittances of their citizens who work there. Known as semi-rentier states, these countries have also experienced high public sector inflation and an entrenched culture of cronyism at the expense of efficiency and productivity.
At the beginning of the last decade, massive protests erupted in these countries when international financial assistance and migrant workers' remittances became insufficient to cover the costs of the expanding public sector and create real jobs.
With much of the revenue used to cover current expenditure, education, health and transport were neglected, even though these are the very sectors that form the basis for high growth rates.
Not least because of the changes in aid payments by the oil states, these countries are now in severe economic straits, since they can no longer rely on foreign funds to maintain sustainable economic and political systems. These countries are currently experiencing dangerous increases in unemployment, debt, and food and energy prices.
These countries are aware they are at an impasse in the way they do business and possibly also with their political systems.
Nevertheless, there are strong forces of inertia opposed to transitioning to an order based on efficiency, participation, the rule of law and equality. They reject even the notion of a gradual transition, convinced that this would change the social contract on which their power is based.
The political and security elites in these countries fear for their privileges and influence. They oppose the proposals of reformers who are pushing for a transformation towards an efficiency-based economic model, for higher productivity and thus for more economic growth and real employment opportunities. Yet, at the same time, such reforms would significantly strengthen the social base of those loyal to the regime.
This theoretical discussion looks set to continue, while the economic situation in these countries continues to deteriorate. Change will only come when the political and security elites realise that the old mechanisms, which relied on the violence of the security forces and external financial resources to maintain social peace, have had their day once and for all.
Failed states: from Lebanon to Sudan
Finally, let's take a look at the third group: the failed states – such as Lebanon, Syria, Libya, Yemen and Sudan. Rather than regarding ethnic and religious pluralism as a source of strength, these countries unfortunately focus on its divisive potential.
Lebanon's ruling elite, mindful of securing their political power and control over financial resources and regardless of the economic decline that has brought the country to the brink of national bankruptcy, rejects any reform, no matter how modest.
In Syria, a brutal regime is using violence to maintain power and privilege. In Libya, Yemen and Sudan, wars continue to rage. It is true that external actors also play a role in these conflicts. Yet they are not the main reason these countries are seen as failed by the international community.
This can rather be found in the domestic failures and intransigence of the political elites and their refusal to reach any political agreements that might help their countries to a better future.
All three groups of states share the refusal to adopt a comprehensive approach to reform, encompassing political, economic and social reforms in equal measure. The prosperous Gulf countries are currently playing for time through economic and social reforms, without involving their citizens in the decision-making process. The states in crisis are implementing partial reforms that address a few challenges yet are insufficient to lead them out of the impasse.
The failed states, however, which reject any kind of reforms and are waiting for a miraculous rescue from outside, will not find a solution as long as they are not prepared to help themselves.
Full equality for women
The status quo in the Arab countries suggests that fragmented individual measures are no longer sufficient to address the growing challenges in the region. Serious reform must address all political, economic and social challenges simultaneously, based on a phased and meaningful plan.
Such a plan must also include thorough reform of the education systems that are currently producing generations unable to cope with the ongoing mutability of life or develop creativity and innovation, which form the foundation for progress and prosperity.
A smooth transition to systems based on efficiency rather than nepotism must be accompanied by social safety nets that safeguard even the poorest elements of society. Otherwise, social order is in jeopardy.
And if sustainable prosperity is the goal for our societies, then it is also time for the Arab world to catch up with the rest of the world and commit to full equality for women, granting them their political and legislative rights.
Moreover, there is a need for a national dialogue between all sections of society, notably with the security agencies, which are usually in control of political and economic decisions and with whom – despite all the difficulties – a dialogue must be held to convince them that their instruments are no longer capable of securing social order and enabling prosperity.
With the exception of the Gulf states, most Arab states are currently in an extremely difficult situation. Overcoming the current challenges is not impossible, but it requires new, holistic policy approaches rather than fragmented individual reforms that are no longer sufficient and never were.
© Carnegie Endowment for International Peace/Qantara.de 2023
Marwan Muasher is vice-president for studies at the Carnegie Endowment for International Peace in Washington and Beirut, where he leads research activities on the Middle East. Muasher served as Jordan's foreign minister (2002-2004) and deputy prime minister (2004-2005). In his career, he has worked in the fields of diplomacy, development, civil society and communications.