Conditioning the Arab Transition

CAMBRIDGE – Nowadays, International Monetary Fund missions come and go in the Middle East without reaching agreement. Meanwhile, Tunisia, Egypt, Libya, and Yemen are becoming increasingly polarized along political, social, and sectarian lines, gravely threatening their democratic future. With the looming prospect of failed states in Iraq and Syria, the international community cannot afford to stay on the sidelines any longer.

The world urgently needs to create a political mechanism to help these countries escape the quagmire into which they are sinking. Without adequate support, their popular uprisings for freedom, justice, and dignity will end in chaos, insecurity, and economic meltdown.

Unlike the European Community’s support for Eastern Europe after the fall of the Berlin Wall, the tragedy for the Arab world is the absence of a useful blueprint for institutional reform and the resources to implement it. The Deauville Partnership launched at the 2011 G-8 Summit was a half-baked initiative long overtaken by events. The region’s financial needs are well beyond what the Deauville agreement can deliver. More important, the support must be not only financial, but also political. Economic reforms, on the other hand, can wait.

As in any post-revolutionary situation, the ongoing transitions are highly complex processes. A power vacuum sucks in all political forces and creates incentives to achieve ascendancy at all costs. As a result, the minimal consensus needed to establish rules for regulating these countries’ political transitions has failed to emerge.

In Egypt, the Muslim Brotherhood has adopted non-inclusive policies – reflected, for example, in the manner in which the new constitution was finalized. The opposition remains fragmented and ineffective. The “street” is boiling and increasingly radicalized, with violence against women, minorities, and politicians on the rise. Meanwhile, the economy is on the verge of collapse.

Tunisia, too, is facing profound polarization. Ennahda, the ruling Islamist party, may once have been committed to moderation, but it has gradually succumbed to the will of its radical wing and is narrowing the space for political opposition. And, as in Egypt, the protracted transition risks faltering under the weight of rising political violence and socioeconomic decline.

The situation is equally worrisome in Yemen and Libya. While short-term pain is not unusual following the end of despotic regimes, long and protracted transitions can be terribly costly, requiring decades for societies to recover. Political impasse is not only depressing economies by discouraging trade and investment; it is also preventing the formation of governments that could implement much-needed economic and institutional reforms – and thus threatening to take these countries into a long downward spiral.

Now is not the time to start on the path of economic reform. While necessary, economic reforms are highly contentious, creating winners and losers – and thus generate social and political pressures that are impossible to manage in the absence of viable mechanisms for channeling and reconciling diverse interests and demands.

It is past time for the international community – including the international financial institutions, the EU, the United States, Gulf Cooperation Council countries, and the BRICS (Brazil, Russia, India, China, and South Africa) – to raise the resources needed to give these countries sufficient fiscal space to meet their people’s immediate needs. If €250 billion ($325 billion) can be found to rescue Greece, it is certainly not too much to ask of the international community to find €100 billion to ensure successful democratic transitions in countries that are starting with low external-debt levels.

But, while support should be generous, discipline is needed as well. In particular, populist policies that promote the parties currently in office should not be allowed, and the international community needs to speak the truth so that electoral campaigns paint a reasonable picture of reality.

The most important task will be to create a new type of political conditionality. Political players need to be nudged to agree on the rules that organize how they compete for power. Without taking sides, the international community needs to encourage moderation and help policymakers, civil society, and politicians reach consensus.

The financial rescue package should be linked to a time-bound process of political transition involving broadly endorsed rules – a constitution, electoral law, election finance law, and an electoral calendar. To avoid giving undue advantage to existing political parties, the creation of a political finance fund should be part of the new deal.

A financial package conditioned on political agreements may seem ambitious. But there are many precedents, including the post-conflict packages agreed for Sudan, Liberia, and Sierra Leone.

If the transition is assisted now, the crucial economic reforms that will occupy elected governments for years to come stand a much greater chance of succeeding. The reform agenda will, no doubt, be defined by the need to make markets more competitive, democratize credit, introduce a more progressive tax policy, improve the quality and scope of public services, and tackle large-scale and petty corruption.

It is in the interest of the international community, especially the West, to support the universal values that it holds dear – the same values that are now being embraced by millions of Europe’s neighbors. For decades, the West gave its support to Arab autocrats, often for reasons of Realpolitik. Now, at long last, the West has an opportunity – by providing concrete and generous support for political transition – to bring its values and its interests into alignment.