March 5, 2003

A View from the Arab World

Chief: It's the Economy, Stupid (well, partly, at least)

By Rami G. Khouri

Two classic American truisms that explain much of the behavior of voters and mass public opinion in the USA – “all politics are local” and “it’s the economy, stupid” -- are also good tools for understanding the volatile, often violent, behavior of many Arabs in recent decades. Economics may not always fully drive politics, but it sure plays a large role. New data on the Arab economic condition offers ugly reminders of this.

The data is from an annual publication that I find to be among the few practical benefits to emanate from the Arab League, called the Unified Arab Economic Report (published annually by the Arab League, the Arab Monetary Fund, the Arab Fund for Economic and Social Development, and the Organization of Arab Petroleum Exporting Countries). The latest report for 2001 reveals significant trends that are largely worrying for Arab economies and people.

I am not an economist, but I know enough about the interplay between an individual’s material well-being, perception of his or her political place in society, and sense of hope for the future to know that much Arab discontent in recent years can be explained by the statistical data in this report. The economic data provides a powerful window into the underlying stresses that drive political turbulence, and even violence, hopelessness,
and terror in some cases. While it is true that poverty itself is not necessarily a sufficient reason to cause an individual to become a bomber, the phenomenon of hundreds of millions of people stuck in a cycle of economic stagnation and political dullardry provides the richly fertile environment in which small groups of militants are born, and from which they receive continuing mass emotional and political sustenance.

So the data in this report is important to grasp and to interpret in a wider political sense. The 2001 figures are interesting only to a limited extent, because the modern Arab economy since the early 1970s has been extremely volatile; this is due to a heavy reliance on notoriously erratic oil prices and income, and broadly incompetent political-macro-economic management. More important is the Arab economy's trend over time, which is frightening.

The statistics for all Arab countries where data could be collected (Iraq, Palestine, and Somalia are excluded in many cases, because of their battered condition) indicates that real living standards in the Arab World in the
past two decades or so have remained essentially stagnant, or declined in real terms in most cases. The real gross domestic product (GDP) per person (current prices) in the Arab world as a whole was $2469 in 2001, a drop from $2578 in 2000, and from $2612 in 1980.

If these current prices figures are adjusted for inflation and foreign exchange value declines since 1980, we’d find that the average income of the average Arab citizen has dropped substantially in real terms – in contrast
with significant quality of life increases in places like Western Europe, North America, the Far East, and Israel.

Even these figures are deceptive, however, because they aggregate the small populations of oil-producing Arab states with the poorer Arab states with large populations. Here's what we find for six relatively low income, large population Arab states (Algeria, Egypt, Morocco, Sudan, Syria, Yemen): the average per capita GDP for the 194 million citizens of these countries was $1039 in 2001, compared to $916 in 1995. If we add in Palestine, Iraq, and Somalia -- all economic ctastrophes recently -- the average Arab income figure would drop even further. If we adjust these current prices figures for inflation and foreign exchange value declines, they’d drop even more.

The political meaning of this is striking: about three-fourths of all Arab people are poor, and have been getting steadily poorer in the last two decades. Other pan-Arab economic trends are equally problematic, including
continued high relative public spending on security and defense (25 percent of current spending in 2001); public sector dominance of the economy (Arab public expenditures were 33.1 percent of total GDP); consistently high
foreign and domestic debt burdens; and domestic income and corporate taxes accounting for just 28 per cent of total Arab government income.

If you wonder why the American army is shooting missiles at Yemeni jeeps in the desert, chasing Egyptian, Moroccan, and Somali suspected terrorists all over Asia, Europe, and parts of northern New Jersey and upstate New York, and is poised to attack Iraq while the majority of Arabs (and Turks, and Iranians) oppose it, part of the answer is, “it’s the economy stupid”. As Arab populations continue to grow at a very high average annual rate of around 2.5 percent, the majority of Arabs remain poor, with few prospects of improvements soon, and virtually no Arab citizenry can freely elect its leadership and hold it accountable in a credible manner.

The net result is massive and cumulative inner tensions that drive most Arabs to despair, some to revolt, and a handful to terror. That’s why people around here are so volatile, angry, and often militant. American military
attacks, domestic Arab repression, and heightened Israeli brutality will not dampen these sentiments, but rather hasten and exacerbate them.

All politics is local. It’s the economy, stupid. Hail to the chief -- if the chief is listening, or cares to grasp any of this.