A Conversation with Justin Dargin

| Summer 2011

Dargin discusses Middle East changes and role of energy sector


What kind of observations did you come across during your recent trip to the Middle East and how has that affected the work you’re doing at the Belfer Center?

One of my observations [of the Arab Spring] was that no population in the world is immune, immune to wanting to have better things in their life, wanting to have a political voice.  For a long time people said the Arab world was an exceptional region, by exceptional they meant that they would posit many different reasons as to why the Arab world was exceptional- they would say due to the impact of Islam they were more accepting of a more medieval-esque type of system, or due to the Arab tribal structure a strong man was much more acceptable.  According to this argument the region was immune to the waves of democratization and also the need for political representation that you could say spread around the world after the French Revolution. But I found this to be obviously not the case. As we all know, in the Middle East, the people accepted to a certain extent the government not giving them as many rights as they wanted but in lieu of that the Arab social contract was formed so that they would get either subsidized food stuffs or other low priced products, or if you look at the Gulf context, the citizens extremely low priced energy and also subsidized health care, education, and so on.  The social contract had a different form depending on the country, yet it was the base of Arab society for several decades.  And for several decades, more or less, it kept the peace.

There was an Islamist challenge of course during the late 1980’s, 1990’s that confronted the legitimacy of many of these governments but that was a bit broader based.  Outside of the Algerian example, many of the governments did not have to face some broad based Islamist uprising.  So this kept the peace but then what I noticed was the social contract started to really break apart and it started to break apart in the mid-1980’s to late 1980’s and then up until you could say the early 1990’s that’s where you see this contract starting to fray.  And many of the people in these countries, the governments were not able, for many different reasons, to spread or distribute the wealth as it had pledged.  Or perhaps in the case of Egypt it was not as much job creation as the government had promised and we have to remember that Gamal Abdul Nasser promised each Egyptian graduate that he or she would have a job waiting for him or her, and mostly jobs of course were in the government so you had this type of bloated government but there really wasn’t that much challenge, the jobs did not foster ambition.

So we started to see stagnation start to occur, and then after stagnation this social contract starting to fray.  And then, from what I really started to see in the early 2000’s when the Arab social contract really started to fray, then that’s when the people were saying well you’re not really keeping your side of the bargain so why should we mute our demands and then you start to see much more agitation and so on. But the thing I found really interesting was that there tends to be this correlation between political unrest and not just in the Middle East but this could be anywhere, and the rise in the price of basic food stuffs.  So what I saw through my research was that when people are not able to afford just the basic, necessary items for survival then that’s when they really start to get out into the street.   And if the government cannot get a handle on that then this can quite quickly turn into a type of anti-government protest where initially it might just be anti-increase in food price, or bread price or what have you but then this can change quite quickly.  And this even happened in 1977 during the reign of Sadat, there was an increase in the price of bread due to the infatah policy, which basically means liberalization.  So the price was liberalized to a certain extent and the Egyptian economy was opened up.  And the price of bread increased precipitously, and many people, thousands, tens of thousands, went out into the street of Cairo and were protesting and they had to send in the army to quell this, about 200 people died, and scores were injured.  And then people started to hear anti-government slogans being chanted.  So we saw quite quickly the transition or the rise from price of a very essential commodity to becoming a type of critique of the government.

This is one that I think really needs to be understood quite well, for the Arab social contract to be a viable model, the government would have to keep its side of the [economic] bargain and then the people would mute their demands. But I see that’s not the case now.  Many people are demanding a [political voice] voice and I think that what is going to happen is that the state will move away a bit from its more paternalistic obligations and then perhaps grant the people much more of a say in governance. Now this will happen gradually in certain places and it might happen much more rapidly in other countries. It might be by violence, as in Libya or Syria, and in other countries it may not be typified by violent action, it may be more of a slower process. But we will start to see this type of trend happening all over the region.

Do you have any recommendations? Any next best steps for the region in general?

I would say that one thing that is occurring now is the growth of subsidies in order to meet the demands of the citizenry. Almost immediately when the Arab revolutions occurred, most of the governments increased subsidies thinking that this would meet most of the demands of the people and they would then  go back to their homes.  One of the things though, if you look at it economically, is that by increasing subsidies - while of course this would make the everyday lives of the people easier- but in the end analysis, it will merely put more stress on the governmental budgets.  And for the oil producing countries, in the time of increased oil price, perhaps they can deal with this and increase subsidies without having too much economic harm, but in the long run analysis, the governments may not be able to deal with the structural issues that the region’s facing.

My first recommendation, and I think most experts would agree with it, is that there needs to be job creation.  There needs to be a culture of innovation.  This culture of innovation will help create a self-sustaining dynamic whereby there would be job growth and people would feel as if they have a stake in the system.  When people feel as if they have a stake in that system then they’re not likely to protest that system.  So that’s a key issues that I think we need to understand.   When people feel as if they are part of the system, then they’re not going to protest that. If they feel like they have something to lose then they’re not going to work against it.. The important thing is incorporating people, making them feel as if they are part of the system and also giving them a livelihood by acting as a type of enabler to create jobs. This occurred with education, now many of the Gulf citizens are quite educated, and this is significant.  This was not the case before the 1970s, when the region had some of the highest rates of illiteracy and lack of education. But now the problem is you have all of these educated people and they aren’t able to find jobs and consequently, not able to get married until a very late age.

My key recommendation is making people feel as if they’re part of the system.  Now that doesn’t necessarily have to be a type of Scandinavian democracy model, no, I think that depending on the region or area of the world, it can meet those particular cultural dynamics that are on the ground or in play.  In China, for example, democracy’s going to look very different.  In Latin America, it’s going to look a bit different from the U.S. or Western Europe, or in Africa we have the same situation.  So I don’t think that we necessarily should be confused that there’s going to be a dual party system anytime soon, but  there is definitely going to be much more opening of the space for people to voice how they want their future system to be without necessarily having to approach the issue from street protest.  They would be able to use the system to posit their demands.

Why kind of research are you doing now and how are you going to incorporate these observations and this trip into the work you’re doing here?

What I’ve been working on now is the energy sector’s role in state formation in the Middle East.  That’s my overall research topic.  And the way I am looking at it is how the energy sector has been used as a base of economic development, industrialization, modernization in oil and gas producing countries.  And how many different governments in the region are using this sector in order to either modernize their economies at a very fast clip, as we see in Qatar or UAE, or whether they’re just using this as a type of redistributive instrument without necessarily having any type of sustainable growth. I am looking at how the different countries are utilizing their natural resources, whether it’s been done in a much more viable way to support future growth of a change in the economy or whether it’s more or less keeping the status quo. The way that this is connected to the current Arab Spring is simply because many of the governments in the region are going to reach a fork in the road. This fork in the road encompasses either a system that develops into a “democracy” in name in most of the countries, but it may be a type of Louisiana or Chicago type politics which is what we call “word style politics.” That means that you have a type of demagogue who goes to the people and promises them that if he is elected he will give them access to certain resources without giving thought to the wider national concern or the wider interests of the nation.  This type of politics is characterized by corruption, and often times playing on the ignorance or fears of the people.  This can actually increase the financial burdens which are on many of the Arab states right now in the sense that you can have a type of leader who is attempting to be elected and when he is running he pledges that he will  be the one who gives the people the most money or the most access to resources but then the budget might not be able to handle that.

So you would just have a replay of what just happened during the 1960’s during Nasser, who, yes, was very popular, but he set in motion a type of economic system which was unsustainable over the long run.  So I see that as being one of the paths that is in front of many countries in the region.  Another path is that when you have a mature citizenry, a more mature constituency, these people will tend to  thinkin the national interest so they realize that they shouldn’t be concerned with just their parochial desires but what should be done for the nation as a whole. Of course,  there may be some short term economic  and political pain, in the sense of removing the subsidies or reducing the size of the government or the bureaucracy, but they will realize that in the long run this will actually work to benefit of the nation  and will work to make the country a modern country that can compete in the international arena.

I see these as being two of the main scenarios that are in front of the region now.  I’m working to tease out where I think most of the countries in the region will go.  At least preliminarily for my research, what I’ve seen is that if the country has a very large and differentiated population such as Egypt or Algeria I think the vulnerability for these interest based politics to arise is much greater because there’s less a sense of national cohesion and more overall impoverishment..  So I think that these countries perhaps will have a bit more difficulty in the transition.  But then you have other countries such as Qatar or the UAE, or even Saudi Arabia that are much more homogenous.  And these countries have much more of an ability to make this transition smoothly and create a type of modern economy and education system.  Even though there are still a lot of obstacles that the countries are facing but at the same time they have a greater ability to transition because of their smaller populations, not really a centralized system but a type of polity that people can rally around to a certain extent; so when they have this they are able to implement measures which the people will understand that may cause some short term pain but for the long run this is actually going to benefit the country.  We can see this put on display in the UAE and Qatar, countries that have made enormous strides just within a period of two to three decades. I mean, they have compressed an entire industrial revolution within twenty years, more or less, which is absolutely amazing.  It took about two hundred years for Britain and if we look at the U.S. it took about a hundred or so years,  but these countries had an entire industrial revolution in ten to twenty years. So social, political changes are lagging a bit behind but these changes will happen because when you modernize, without a doubt, there are going to be changes across the board, whether they are social changes, cultural changes or political changes. Economic modernization is not merely an economic change, it impacts everything. It impacts familial relationships, tribal relationships, old established hierarchies will crumble and then you have new hierarchies that start to arise and the country simply cannot escape this, if you look at it historically.  So I see this as being two of the main factors concerning the geopolitical upheaval in the region.

Is there anything you want to specifically want to talk about, collaborate on, or add?

I came across something very interesting about a month ago.  I started to look at the energy independence policies of the Western countries and the emerging markets, as China and to a lesser extent India, and I saw that there was a type of correlation between the energy independence policies and the international increase in the price of basic food stuffs and also social instability. I am not necessarily saying that there’s causation but definitely a type of strong correlation.

And the way that I saw this was when you look at some of the energy independence policies, the rise of the price of oil since about 2001, since about 2005 the price increase began to start to hurt a lot of people in the developed economies, particularly in the U.S., due to our dependence on automobiles I think we can all remember 2005/2006 when the price of gasoline started to creep up, we began to hear a lot of complaints, people alleged that there is a type of collusion between the international oil companies, due to the popular anger, Congress began to hold inquiries to ferret out  the reason for this, they called high level oil executives in for questioning find out why this happened.  This was an atmosphere where people were quite upset in the industrialized countries.  At this time, we the Bush administration announced the creation of a biofuel program, former president Bush announced that the U.S. has to increase its production of biofuels. The EU announced certain renewable energy targets, as well.  In the EU, these renewable energy targets are less centered on energy independence and more related to climate change. The developed countries wanted to gradually move away from hydrocarbon usage in the transportation sector.  But yet there was still this major push coming from industrialized countries to increase the production of biofuels- ethanol, and so on. And then, when you look at the rise in the price of basic foodstuffs- now remember, around 2007/2008 this was when many organizations that deal with food crises and global hunger warned that we were entering a very critical phase because the price of basic food stuffs are increasing out of the reach of a great number on this planet that make two to five or dollars a day and can simply not afford it.

We began to see these food riots breaking out all over the world and people protesting that they are simply not able to meet their daily needs.  And then I saw that this was related to the use of food for fuel production.  So if we look from the years 2000 to 2010, in 2000 about 1% of grain was being used for fuel production and then by the year 2010 this was 6%. And then if you look from 2007 until now there has been a double digit increase in the price of basic food stuffs and a lot of this has been driven by the demand coming from developed countries and emerging markets such as China looking to increase their biofuel production and competition among them in the international market.  Adding to this already significant problem, there are also droughts, wild fires, - I believe it was 2009 with a significant drought in Russia and Russia wasn’t able to supply its population with as much wheat as it wanted. All these food supply problems came to a head in 2008/2009 and then we started to see this rise in international price in various food stuffs and when the Arab Spring really started to percolate- such as Tunisia at the beginning in January, if we look at the period from January until March the international price of grain has increased about twenty to twenty-five percent.  This had a definite impact in the Arab world, in these countries where the people simply don’t have enough money; they don’t have enough to feed their families, themselves and so on.

So if we look at the protests in the Arab world, initially they dealt with corruption and economic concerns, they then transitioned into anti-government.  But initially it was economic grievances that spurred revolts, with the common refrain that the government was not able to undertake its economic duty. So that’s one thing that I’m attempting to wrap my mind around at the moment, the correlation behind certain policies that the U.S. takes, perhaps even to support the farm lobby in our breadbasket states, and the potential impact it has on social unrest in the Arab World? Does it have a substantial impact? Maybe not.  Does this have a slight impact? Perhaps.  This is what I’m attempting to grapple with at the moment.

For more information on this publication: Belfer Communications Office
For Academic Citation:A Conversation with Justin Dargin.” News, , Summer 2011.