Arab revolutions mask economic status quo

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By Mark LeVine

Business and trade were hard hit by the uprisings across much of the Arab world – and now the IMF and World Bank say they want to help economies get back on their feet. But privatisation and enforced ‘structural adjustment’ will keep many of the poorest on their knees [GALLO/GETTY

The World Bank and IMF have been restructuring the economies of the Middle East for decades, with largely negative results. Yet they are poised to play a major role in the post-revolutionary efforts to stabilise Egypt, Tunisia and other post-authoritarian states.

The post-1967 era of the Middle East can, in many ways, be defined by the turn towards market liberalisation across the region, although the attempts by Western lending institutions to pressure local governments to initiate structural reforms goes back to the Nasser period. From the start of the 1970s-era infitah, or opening, under Anwar Sadat, there have been over a dozen episodes of mass protest and even revolt against IMF and World Bank-imposed austerity measures. Not just in Egypt, which has had at least four such episodes, but in Algeria, Jordan, Lebanon and Turkey as well.

At times local governments made some effort to resist the imposition of what is today referred to as “Washington Consensus” policies, which advocate trade liberalisation, privatisation, opening economies to foreign goods and investment, stabilising budgets and exchange rates, and cutting government expenditures and presence in the economy. As one left-wing paper headlined a story in 1978: “Egypt puts the IMF on notice, heralding new era of economic development.”

But the new era was stillborn; Egypt would soon be far too tightly enmeshed within the US-led order to pursue an independent path towards development, continuing a history of frustrated economic development that stretches from the mid-19th century, when Muhammad Ali’s attempt at independent modernisation was met by a joint European-Ottoman front that ultimately forced Egypt – and the Ottoman state – into a European-dominated economic fold that, within three decades, led both states to bankruptcy (and soon thereafter, for Egypt, to more than half a century of British occupation).

Today, some Egyptian observers argue that one of the main reasons the army was willing to sacrifice Mubarak was because of its anger at the increasing power of his son Gamal and his colleagues, such as former – and recently convicted – IMF official Youssef Boutros-Ghali, who were accruing significant power through the financialisation of the economy and other policies that weaken the power of the army and the more traditional national capitalist elite.

In short, resentment against the kind of neoliberal policies championed by the IMF and World Bank runs deep in Egypt and other Arab countries. Today, even senior officials of the Bank and Fund blame the imposition of “Washington Consensus” models of restructuring developing economies for helping create the situation of economic hopelessness that sparked the Tunisian revolution.

While few people are making the link today, such policies also helped torpedo the Oslo peace process. They justified the economic integration through physical separation and isolation of Palestinians within the Occupied Territories that became a defining motif of the so-called peace process, reinforcing Israeli economic dominance over Palestinians in the same manner that its territorial footprint in the West Bank grew wider rather than trimming down, which is what most people assumed would happen on the way to a final status agreement.

Lessons learned?

Despite the less than encouraging history of involvement in the region, the World Bank, IMF and other mainstream institutions have all sought to insert themselves into the economic reform process that most observers believe must accompany political reform in order for the latter to succeed. At least, at the leadership level, officials are saying the right words. Bank head Robert Zoellick argues that “we must act now … In revolutionary moments, the status quo is not a winning hand”.

Zoellick has declared that the Bank understands that “we need a new social contract where governments listen to their people and include them in their development process”. Similarly, incoming IMF chief Christine Lagarde admitted that one of the lessons of the region’s uprisings is that “if priority is to be accorded to inclusive and sustainable growth, issues of justice, security and employment, particularly in the private sector, can no longer be addressed separately”.

Similarly, in a heated exchange with Egyptian pro-democracy activist Wael Ghonim, then IMF head Dominique Strauss Kahn admitted that the Bank had erred in helping to prop up the Mubarak regime and offering analyses which celebrated policies of the government which clearly were harming the interests of most Egyptians.

Both the IMF and the Bank now state loudly that the Arab Spring has taught them the appropriate “lessons” and that they now realise that “we have to listen to people” and help ensure that wealth is now “for everyone” and not just the privileged few.

Such language – of inclusiveness and accountability to the broader population, of focusing on human development rather than merely aggregate economic indicators – is laudable, and reflects the commitment of the Bank specifically to support the millennium development goals. Yet it runs hard into almost insurmountable obstacles.

First, the entrenched institutional ideology and policies of the Fund and Bank. Thus, for example, increasing “productivity” and “efficiency” in the Egyptian or Tunisian economies would demand trimming supposedly bloated workforces, at a time when the institutions’ leaders have admitted that joblessness is among the most difficult problems faced by Egypt and its neighbours. Similar problems occur with opening economies too far towards foreign investment and export-oriented growth, when the strengthening of locally based production, consumption and credit would be more beneficial.

Second, the desire to change course runs into the problem that the larger structural imbalances in economies such as Egypt – rampant corruption and concentration of wealth tied to long-term authoritarian rule – are globally systemic in nature. They mirror (in fact amplify) problems that plague the most market-devoted advanced industrial countries, such as the United States. But at the same time they are exacerbated by the fact that US policy has long had little interest in encouraging the kind of autonomous development that the Bank and Fund now say they support.

In the case of Egypt (and the Middle East more broadly), the US supported Mubarak and other dictators because he backed US policies which were antithetical to the desires and interests of most Egyptians. Neither authoritarian governments nor their patrons have any interest in encouraging the development of a robust civil society and autonomous middle-class led economy, now named among the chief goals of the Bank and Fund. Rather, keeping civil societies relatively weak (or at least disempowered) and individual citizens dependent on the state are among the few tools governments have left to maintain some form of control, or at least power, over populations.

Despite this obvious reality, it remains almost impossible to find officials or researchers associated with the Bank or Fund acknowledging that disparities in economic and political power within developing countries and between their nations and more powerful countries impacts the way policies are experienced on the ground.

A more realistic portrayal of the view of Washington Consensus insiders to the Arab Spring comes from a recent report issued by the Carnegie Endowment for International Peace. Written by two former senior Bank officials, Uri Dadush and Marwan Muasher, it called on the Fund and Bank to step in to ensure that political changes sweeping the region didn’t encourage governments to abandon Washington Consensus policies.

Bluntly, the authors warn that “there is a significant possibility that the government that ultimately emerges out of this crisis will renounce previous economic reforms as misguided and argue that they contributed to the region’s plight … It is in the large economies’ own interest to insure that economic reforms continue apace with political reforms.” Worse, they fear, local governments might “lose faith in liberal economic reform” and “essentially ‘buy’ peace with domestic handouts and new spending packages”.

Roots of de-development

The roots of the neoliberal policies against which not merely “ordinary” Arabs, but even the leaders of the Bank and Fund would seem to be pushing run extremely deep, to the emergence of a global capitalist system in the 16th century that was inextricably tied to the rapid development of European empires and all the violence and exploitation they wrought – through centuries of imperial power, colonial rule, and enforced exploitation and slavery.

Equally important was the rise of nation-state ideologies and institutions that helped manage the increasingly globalised economic order. When colonised peoples finally achieved independence and sought to create autonomous institutions and networks, they were met with concerted efforts to frustrate their drive towards independent development, setting up a showdown between Arab “socialism” and Western capitalism that lasted for the better part of the 1950s and 1960s.

Despite the conflict with the United States and other Western powers, this period was in fact marked by unprecedented levels of both economic growth and relative economic equality within ostensibly socialist-inspired societies such as Egypt, Syria or Iraq. But by the 1970s, and especially in the 1980s, leaders of these countries began to integrate themselves into the Western political-economic fold, and such growth and egalitarian distribution of wealth changed for the worse.

I explored this trend and the experience of globalisation more broadly in the Middle East in my 2005 book Why They Don’t Hate Us: Lifting the Veil on the Axis of Evil. What was striking about the data I collected was both how often growth was the result of following policies at odds with the Washington Consensus model, and how following this model produced greater inequality and poverty in countries where there was economic growth. For this and other reasons, it’s not surprising that the region was largely left completely out of mainstream analyses of economic globalisation in the 1990s and first half of the 2000s, as if the world did not include the Middle East.

Instead, analyses by the IMF and World Bank “extensively praised this stabilisation success in Tunisia, Egypt and Morocco”, ignoring the social costs of policies such as reducing the size of the public sector through privatisation, removing controls over investment, eliminating subsidies and most tariffs on imports and liberalising trade regimes. Nor was there significant analysis of the “conditions” attached to loans granted by the Fund or Bank, which demanded that recipient governments engage in significant “structural adjustments” of their fiscal and monetary policies that could go against the interests of the majority of a population, especially during periods of economic downturn – when people are already living at the margins.

Such policies of “conditionality” made loans into tools of policy by Western governments. Such policies could afford sides being based on very inaccurate modelling of how real life economies function or have no appreciation for political circumstances or economic realities of poor people, because their main function was to help pry open developing economies to foreign control. In the process, across the region, structural adjustment encouraged the destruction of existing industries and even deindustrialisation more broadly.

At best, more critical scholars have observed, IMF and World Bank loans have often been used as if they were remittances, being distributed to the population in “inefficient” ways to maintain social peace while strategic public sector investment was significantly reduced (particularly in Egypt). At the same time, the negative impact of the structural adjustment policies attached to them have forced Western donors, such as Sweden, to redirect aid away from encouraging local development and towards ameliorating the worst negative effects of the adjustments forced upon local economies.

Recutting the pie

In a recent article for al Jazeera, Oxford University Egypt expert Walter Armbrust makes two key points that need to be borne in mind as the World Bank, IMF and other international financial institutions seek to reorder the economies of the region for a supposedly post-revolutionary political economic landscape. First, he points out that the corruption that everyone now laments was, in fact, “a conflation of politics and business under the guise of privatisation” that was “less a violation of the system than business as usual”.

Not only that, such practises were not just endemic to Egypt. They are “as American as apple pie” – part of the larger global system I mentioned above. As Armbrust points out, in sheer scale, audacity, and – incredibly – legality, the conflation of business and government in the US makes the same process in Egypt look like amateur hour by comparison.

Ultimately, what this analysis reminds us is that even if IMF or Bank officials might have gone a bit soft, the US under President Obama, as under his predecessors, has as little interest or ability to change a system it has profited from enormously over the past half century. Ultimately, neither the generals of Egypt’s Supreme Military Council, nor the barons of Wall Street (and their allies among the generals in the Pentagon) will willingly allow anything more than “cosmetic changes” to the political economy of either country.

And so when Egypt’s finance minister, Samir Mohamed Radwan, exclaims to a Chamber of Commerce audience that, “it’s very simple, I need cash” to keep the economy functioning – while Egypt struggles with billions in debt and lost revenues from the uprising, it is still quite difficult to imagine the “I” he mentions representing the “we”, of all of Egypt, Mr Radwan officially represents. With tens of billions of dollars in loans, aid and investment slotted to enter Egypt in the next few years, a system which has been nourished by industrial scale corruption for decades will find it hard to suddenly function efficiently and for the good of the average Egyptian rather than the economic elite which still controls the country – even if that elite has had to sacrifice a few of its own to maintain power.

The struggle for these billions, far more than inter- or intra-religious conflict, changes in Egypt’s foreign policy orientation, or the power of the youth movement that toppled a dictator, will likely decide the future of the country for the next generation.

Mark LeVine is a professor of history at UC Irvine and senior visiting researcher at the Centre for Middle Eastern Studies at Lund University in Sweden. He has authored several books including Overthrowing Geography: Jaffa, Tel Aviv and the Struggle for Palestine (University of California Press, 2005) and An Impossible Peace: Israel/Palestine Since 1989 (Zed Books, 2009).

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial policy.

Source:
Al Jazeera
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