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"Bully Economics" in the Middle East and North Africa
From: Cambridge University Press
| By:
Clement M. HenryRobert Springborg |
EDITOR'S INTRODUCTION |
 It is now impossible to escape the effects of globalization, even in countries not traditionally associated with economic or political success. However, the more open and liberal a state is, the more effective its economy tends to be in response. In this extract from their book Globalization and the Politics of Development in the Middle East, Clement M. Henry and Robert Springborg outline some of the factors which impinge upon the economic condition of Egypt, Tunisia and Palestine. |
 gypt, Tunisia, and the area controlled by the Palestinian Authority are not ruled from bunkers by elites beholden to clans, tribes, or other traditional social formations. In the case of Egypt and Tunisia, and the prospective Palestinian state, the ruling elites are at once both more narrowly and broadly based. Their rule rests almost exclusively on the institutional power of the military/security/party apparatus, but because these elites are not drawn from a clearly identified social formation, they are at least not unrepresentative of their relatively homogeneous political communities. Since the state provides the primary underpinning for these regimes, they have relatively little incentive to build and maintain ruling coalitions based in their respective political societies. The rulers of each of them seem content to restrict their extra-state coalition building to the placation of rural and traditional elites. Rent-seeking arrangements with crony capitalists are more for the purposes of serving state-based patronage networks than for broadening ruling coalitions. |
Differences and similarities
The differences between bunker and bully praetorian republics, other than that of the key issue of the lack of autonomy of the bunker states from social formations, are not great. The leaders of Egypt and Tunisia, having not been forced to forge societal as opposed to state-based coalitions to come to or maintain their power, lack the political legitimacy that flows, as Max Weber described, from tradition, charisma, or rational-legal procedures. Yasser Arafat used a combination of his coercive capacity based in the Palestine Liberation Organization (PLO), and support from Israel and the USA, as well as political alliances on the ground in the West Bank and Gaza to assert control over Palestine. By virtue of having built those alliances and because of his historical role as state-builder, Arafat personally enjoys considerable legitimacy, but legitimacy that will be hard to bestow on a successor. The Palestinian "state'' apparatus has come to supplant the PLO's broader political coalition as the basis for the Palestinian Authority's power. |
The rulers of Egypt, Tunisia, and Palestine, dependent primarily upon state-based patronage networks, are thus politically unable to radically downsize their states or dramatically privatize their economies. The Palestinian Authority (PA), for example, is rapidly expanding public employment while subordinating what little private economic activity there is to rent-seeking relationships to key members of Arafat's entourage. In the first four years of its existence, the PA created more than 65,000 government jobs, such that by 1997 the percentage of the labor force it employed (18.7 percent) was virtually level with that of construction (19 percent), making these two sectors the largest employers. In 1998 almost half of all new jobs were in the PA, taking central government employment to more than one-fifth of total employment and accounting for some 60 percent of the PA's budget (see S. Roy, "De-development Revisited: Palestinian Economy and Society Since Oslo," Journal of Palestine Studies 28: 3 (Spring 1999), pp. 64-82). But the PA still has some way to go before it reaches Egyptian levels, where total government employment accounts for about one-third of the labor force. Tunisia, heralded as a model for the region by the World Bank, retains a public sector that is among the most costly to the public purse in the MENA (Middle East and North Africa). |
With insecure political footings in the societies they rule, elites of these bully states are compelled to rely on economically irrational, overgrown governmental and public sectors. They cast about for ways to generate patronage from private economic activities, rather than engage in the political coalition-building that would obviate the need for their leviathans in the first place. But the drain on aggregate economic performance resulting from the gargantuan appetites of these leviathans, combined with the need to garner rents from private economic activity, and reluctance to grant any economic or political space to independent actors, inhibit economic growth. These factors also deter political elites from devising creative strategies that would help perpetuate their rule while encouraging economically beneficial responses to globalization as happened, for example, in Morocco. |
Elitism and primitivism
Rent-seeking arrangements that have been struck between the political elite and capitalists in Egypt discourage export-led growth, for the elite can rig local but not international markets. Crony capitalists are provided local oligopolies and monopolies that they exploit, leaving the more competitive and risky business of producing for export to those unable or unwilling to strike deals with the political leadership. Unlike the developmental states of Asia, Egyptian policy directs the most capitalized private enterprises to serve local, rather than global, markets, so the country's most dynamic private exporters are, by default, marginal, bit players serving niche markets, seeking to stay as far away from their governments as possible. The vast bulk of the private economy consists of micro-enterprises, large proportions of which are in the informal sector. They lack the capital, technology, productive capacity, and, in the case of informal operations, the legal status, even to consider exporting. |
The Palestinian economy is a still more primitive, almost microscopic version of the Egyptian one. Its 60,000 private firms are almost exclusively establishments employing fewer than three persons and capitalized at less than $10,000 (S. Roy, op. cit., p. 71). Since virtually nothing is manufactured or processed for export, the preconditions for which are absent, the patronage that can be extracted by the political elite from aspiring capitalists typically involves the selective use of permissions and regulations for importation. The emerging political economy of Palestine is, therefore, one that appears to be mimicking Egypt's. |
Tunisia has enjoyed proportionately greater export success than has Egypt, for its political economy is something of a mix between the comparatively primitive rent-seeking one of Egypt and Palestine, on the one hand, and the more sophisticated, liberal, but still rent-seeking one of Morocco, on the other. The Tunisian ruling elite has retained its overgrown state and public sector for patronage and control purposes. But the domestic market is too small to support any significant manufacturing industry, so the scope for it to generate substantial patronage through rent seeking is limited, although continuing high tariffs suggest that selective permissions for importation still produce a substantial share of patronage resources. Unlike Palestine, Tunisia no longer receives much public foreign assistance, so living off external rents has not been an option. The ruling elite has thus encouraged the development of export manufacturing, but, unlike its counterpart in Morocco, has not succeeded in integrating these activities into a tightly structured oligopoly linked directly to that elite. The Tunisian elite thus remains more wary than its Moroccan counterpart of both civil society and capitalist activity. Lacking the legitimacy and means to direct and to benefit from civil society and capitalist activism, as enjoyed by its Moroccan neighbor, the Tunisian elite hesitates to open any wider the doors to either political or economic competition. The regime thus selectively favors trusted, individual capitalists, rather than capitalism as a concept and practice. |
Regional factors
That the economic performance of these bully republics differs considerably, despite the structural similarities of their political economies, attests also to the importance of regional factors for the MENA's economies. The Palestinian economy is hostage to the Oslo peace process, and as that process slowed, so did it. Closure, which was first imposed in 1993 some six months prior to the signing of the Oslo Accords, was intensified during the Netanyahu years (1996-1999), essentially segmenting the occupied territories of the West Bank and Gaza into collections of small enclaves cut off from the outside world. The World Bank noted in 1997 that the economic situation was so bad "that the hopes for private-sector-led development had to be set aside by the international agencies involved in organizing aid to the Palestinian economy.'' More than 40 percent of the disbursements by these agencies intended for long-term investment were diverted to emergency budgetary support (S. Roy, op. cit., p. 72). Regional factors worked favorably for Tunisia, on the other hand. Far removed from the Arab-Israeli conflict and only 80 miles from Europe, it was tagged as a "Mediterranean tiger'' in the late 1980s as the World Bank and others were looking for success stories to parallel those of the East Asian "tigers.'' While it has in fact remained an economic pussycat by comparison, it has nevertheless substantially outperformed Egypt in globalizing its economy, thanks in large measure to the eager European embrace, propelled as much by fear of potential North African boat people as by any other considerations. Unable to take to their boats to reach European shores, and situated much closer to the Middle East's "Arc of Crisis,'' the Egyptians have been proportionately less favored by Europe than have the Tunisians. They have also felt compelled to devote a substantially greater proportion of their budgets to the military. |
The capitalist legacies of Tunisia, Egypt, and Palestine also account for some of the variance of their economic performance. The West Bank and Gaza have had far too discontinuous histories and too much conflict for capitalism even to be sustained at the minimal level it had achieved at the time of the "disaster'' when Israel was founded in 1948. Egypt's capitalists have not had to deal with occupation and an intifada, but the Egyptianized minorities among them, including Jews, Greeks, Italians, Syro-Lebanese, and others, were essentially forced into exile, while the native capitalists were subject to expropriations and other indignities by Nasser's Arab socialism. Still, Egypt's capitalist legacy is both more substantial and more continuous than Palestine's. The Tunisian capitalism that existed at the end of French rule, although substantially disaccommodated by Ahmad Ben Salah's planned economy in the mid-1960s, has remained much more closely linked to the former colonial metropole. Indeed, it is those linkages that account in part for the comparatively rapid rise of Tunisia's manufactured exports over the past decade, but which also pose the greatest threat to them. Having agreed to the EU's terms as laid out in Barcelona in 1995, Tunisia will in the coming decade be losing preferential access to European markets. It will have to open up its nascent manufacturing sector to European competition by lowering its tariffs, which at an average of almost 20 percent in 1997 were only eclipsed by Syria's in the Arab world. |
Conclusion
At the core of the explanation of the economic performance of these and other MENA states, however, is the nature of their political regimes. Egypt, Palestine, and Tunisia have different factor endowments and locations, but they share in common rule by elites whose primary base of support is within state structures, rather than in political organizations anchored in society at large. Compelled to service and maintain these structures, these elites are politically incapable of surviving free and fair elections or permitting truly free economic markets to operate. |
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