The Economics of the Arab Spring

• Published in: IDEAS Working Paper Series from RePEc
• Main Authors: Malik, Adeel, Awadallah, Bassem
• Format: Paper
• Language: English
• Published: St. Louis Federal Reserve Bank of St. Louis 01.01.2012
• Subjects: Arab Spring; Private sector

This article explores the economic underpinnings of the Arab spring. We locate the roots of the region's long-term economic failure in a statist model of development that is financed through external windfalls and rests on inefficient forms of intervention and redistribution. We argue that the rising cost of repression and redistribution is calling into question the long-term sustainability of this development model. A singular failure of the Arab world is that it has been unable to develop a private sector that is independent, competitive and integrated with global markets. We argue that developing such a private sector is both a political as well as a regional challenge. In so far as the private sector generates incomes that are independent of the rent streams controlled by the state and can pose a direct political challenge, it is viewed as a threat. And, the Arab world's economic fragmentation into isolated geographic units further undermines the prospects for private sector development. We explain this economic fragmentation as a manifestation of centralized and segmented administrative structures. Revisiting the politics and geo-politics of regional trade, we argue that overcoming regional economic barriers constitutes the single most important collective action problem that the region has faced since the fall of the Ottoman Empire.