The geopolitical and socioeconomic map of the Arab region is currently facing the most serious existential threat since the creation of independent Arab nation States in the mid-twentieth century. Disillusionment with the prospect of a serious peace process in Palestine; the seizure of vast areas of land in the Arab Mashreq by the Islamic State; high youth unemployment; governance fragmentation; and global marginalization all paint a bleak picture of a region that, only three years ago, looked set to provide a commendable example of non-violent democratic transition. Underlying political economy factors driving the rise and fall of the Arab middle class might best explain why a region, abundant in human and natural resources and unsurpassed in its heritage, cultural endowments and diversity, is seemingly unable to confront ethno-religious threats. The fate of the Arab middle class, inferred from rigorous socioeconomic analyses, sheds lights on this question. The empowerment of the Arab middle class could carve a way out of the current development and governance debacle.
Contrary to popular belief, the middle class in the Arab region has not been eliminated. Prior to the Arab uprisings, it remained constant as a percentage of the population, increasing in size in some countries. Since then, however, the middle class has been shrinking, especially in countries that have witnessed popular revolts, notably the Syrian Arab Republic and Yemen. A strong positive correlation exists between social unrest and the size of the middle class in the Arab region. Increases in middle class size, owing to decades of successful public policy implementation, have been reversed by social upheaval.
Evidently, young people with high school and higher education qualifications are the driving force behind the growth of the affluent and middle classes in the region. Education remains the most influential policy option in explaining the resilience of the Arab middle class until 2010, and it remains the strongest policy tool for its enhancement. Understanding poverty in the region is paramount to understanding the middle class and therefore to answering this fundamental question: what policies and measures prevent the current middle class from falling into poverty; can push the poor into the middle class; and guarantee unrestricted social mobility?
The fading social contract highlighted by a lack of structural transformation and decent jobs; falling wages as a share of gross domestic product (GDP); inefficient public finances; unfair subsidies; and the breakdown of public health and education, combined with non-transparent repressive political systems, are all powerful examples of a rapidly changing political economy that has directly affected the welfare of the middle class in most countries. The contrast between the increased capacities of Arab youth, as evidenced by improvements in health and education, and their inability to translate these human development gains into higher incomes and political participation explains the middle class’s shift in allegiance and its explosion onto the streets three years ago. Since then, the erosion of the Arab middle class can only be explained by the political failure to empower them, thus benefiting violent non-State actors who fill the vacuum.
A set of policy recommendations for the development of a short and medium-term policy framework to protect the middle class from falling into poverty and enhance the poorer classes’ ability to join the middle class, must be offered to underscore the importance of a socially conscious developmental State. The middle class is not demanding more hand-outs; it is requesting equitable development and decent employment opportunities. This requires a shift from a rentier State based on authoritarian bargaining, to a developmental State where productivity enhancements drive economic growth and inclusive social and economic policies underpin economic and social justice. These initiatives will not be effective if governance reforms are not undertaken seriously to meet the growing demands and aspirations of an increasingly capable Arab middle class.
These policy recommendation should not be viewed in isolation. It is an integral component of an immense effort by ESCWA to develop an intellectual foundation for a new Arab development paradigm built on sound macroeconomic policies, good governance and sustainable social policies within a regional integration and cooperation framework. This is also reflected in the recently launched Arab Integration report and the soon to be launched Arab Development Outlook: Vision 2025 Report, the Arab Economic Integration Report, the Arab Poverty Report and the Arab Governance Report. Nonetheless, as these reports bring together hundreds of Arab intellectuals and policymakers to develop a new and daring vision for the region, the forces of disintegration, extremism and occupation are forging ahead with their enterprise. Only an empowered middle class, the backbone of progress, democracy and prosperity, can challenge these destructive forces and broaden the horizons of Arab aspirations.
The Arab Middle Class Report: a force for change? will be launched in late October 2014. More details will be available from the ESCWA website and this blog.
Abdallah Al-Dardari
Report task leader
Chief Economist and Director of the Economic Development and Globalization Division
ESCWA
