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23 February 2011, Gateway House

It’s The Economy, Stupid

Unlike the 1979 Iranian revolution, the unrest that is sweeping the Arab today are as much a response to repression as it is to decades of economic hardship, poverty and unemployment.

ASSOCIATE, THE PARTHENON GROUP

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“It was like being on the Hajj in Mecca”, exclaimed Emad Gad (a friend) gathered in Tahrir Square, Cairo, as the protests against Hosni Mubarak reached a deafening crescendo in the first week of February. It might have indeed been a sacred pilgrimage. Except in this instance, the destination promised not religious salvation but the right to self-determination and a path to economic reform.

Activists around the world (and on Facebook) are ecstatic about how a people-driven, non-violent protest has almost single-handedly brought about a political change in Tunisia and now Egypt. With similar protests in Yemen, Jordan, Bahrain, Libya, Algeria, parallels are being drawn with the Islamic revolution in Iran in 1979 and the fall of the Soviet Union in 1990-91.

But is history really repeating itself? Is the right to self-determination the main objective of such protests?

While the Iranian revolution was a popular protest, it was driven by religion rather than a political or economic objective. The fall of Soviet Union came after perestroika, or reforms that provided greater participation in government for the common man. It precipitated the fall, as it brought to light the grim, true economic conditions of the Soviet nation. Though similar protests in Eastern Europe (early 2000s) and Thailand (2008) were driven by political events, it is difficult to overlook the prevalent economic conditions at that time.

In 2011, the denial of the right to sell fruit on the street to a vendor in Tunisia triggered a rebellion against a system that stifles all paths of upward economic mobility for the common man. The protests did target the political regime but it was economic deprivation, the result of inadequate political freedom, which led to the outburst against the political regime. In today’s globalized world, when a population of 100 million young Arabs compares the economic opportunities available to them vis-à-vis their counterparts elsewhere, when they can clearly see how far ahead others have vaulted, a sense of dissatisfaction and a desire for change is natural. This natural feeling has manifested itself in the outpouring of emotions on the street. Essentially, it’s not a better political system they seek; rather their key goal is equal economic opportunity. Leaders across the region have begun to recognize it.

The tension was palpable in the main city square in Muscat, the capital of Oman, as a large crowd gathered after the Friday prayers on 18th February 2011 to demand better economic conditions. Coming just one day after the protests in Bahrain, a country Omanis identify with culturally and politically, the regime was clearly nervous as evidenced by unprecedented security measures. It turned out to be quite a peaceful rally and not surprisingly, the banners were dominated by demands for better pay and economic security.

Ali Rashid al Shahi, Business Development Manager with a private firm in Muscat, sees interesting days ahead for the region, especially his home country. “There is a lot of respect for HM Sultan Qaboos and we are not asking for a change in the regime, just an opportunity to compete with the rest of the region on an equal economic footing. He has recognized the gravity of the situation and taken remedial steps to pre-empt any mass scale uprising”  The government has already increased the minimum wage for Omani citizens twice in the past two years besides declaring interest holidays for loans but whether  these steps are enough to placate an angry population remains to be seen.

In a marked sign of opening up to the Western world, Syrian President Bashar al-Assad, gave a rare interview to the Wall Street of Journal. Mr. Assad emphasized that Syria is “stable” because his government has initiated a series of economic reforms, which he sees as a pre-cursor to broader political reform. It will be interesting to note in which direction the latest events will spur him – accelerated economic reform? Right to self-determination? Or will he fall back to the days of the closed regime of his father?

This begs the question – Can a regime survive merely by affording its people a rising standard of living, while continuing to deprive them of their political rights? While everyone knows the fate of Soviet Union as it looked to introduce political reforms, China decided to take the path of economic liberalization while keeping the political structure closed. Besides murmurs of protests from democracy activists, we haven’t seen a popular protest in China in the 21st century. The protests by workers in Guangzhou were pacified by an increase in their salary. In the Middle East and North African region (MENA) itself, Qatar and UAE are yet to see protest from their oil-rich citizens. Perhaps having the region’s highest per capita income has something to do with that.

Egypt has witnessed a fresh round of strikes and protests after the dismissal of Mubarak demanding better pay. Was Mubarak really the problem? Why haven’t the problems gone away with him?

It’s indeed the economy, stupid. In a highly capitalist world, social and political freedom is seen as a corollary to economic freedom.  Different political systems across the world have failed if they have not been able to deliver on the economic front.

Economists, however, view this differently. Amartya Sen, Nobel Prize winner, has been advocating that growth should not only increase per capita GDP but it should also pursue a multidimensional objective to target overall sustainability. In the absence of political equality, China is expected to follow a growth trajectory similar to Japan, reaching a plateau but leaving in its trail, a wide chasm between the rich and the poor. Economic growth without true democracy will only serve to delay the inevitable.

The Mid East crisis has pertinent lessons for India too. In the 11th five year plan, we made “inclusive growth” the stated aim of our economic policies. But without implementing it correctly, we will only foment trouble in our own backyard. The Naxal problem is not a result of lack of access to democracy; it’s due to widespread corruption and the lack of economic freedom. We need to recognize this before this problem engulfs the entire nation.


Unlike the 1979 Iranian revolution, the unrest that is sweeping the Arab today are as much a response to repression as it is to decades of economic hardship, poverty and unemployment.

Simran Singh is an associate with The Parthenon Group, a global management consulting firm.

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