Poverty, inequality and the structural threat to the Arab region

This memo is part of a larger collection, POMEPS Studies 34: Shifting Global Politics and the Middle East. All pieces from this collection are available here.

External powers looking at the Middle East tend to focus on issues of high politics. That focus may blind them to the local, regional, and global factors which drive the ongoing political and sectarian tensions and armed conflicts across parts of the Arab region. Lurking beneath diplomatic maneuvering is a dangerous pattern of new and deep structural threats that have converged in a cycle of poverty, inequality and vulnerability that seems likely to keep the region mired in stress and conflict for decades to come. These threats exacerbate existing antagonisms and armed clashes across the region, heighten social tensions, and ultimately lead to the fragmentation of both individual countries and the wider Arab region that had enjoyed some minimal commonalities and integrity in the past century.

These threats include, most notably, chronic and growing poverty, a very high rate of labor informality, increased vulnerability among middle income families, continued high population growth rates that outstrip economic growth, and expanding disparities and inequalities in almost every sector of life and society. As these combine with other political and material grievances that are common among majorities of citizens (lack of water, affordable food, and decent housing, poor political participation and accountability, among others) they erode citizen trust in government institutions and lead to greater alienation among families that suffer two major pains: they feel they are not treated equitably, and are powerless to do anything about their condition.

Arab governments and their external sponsors tend to prioritize the wrong threats. Most Arab governments continue to introduce superficial reforms in pivotal sectors such as education, employment, and anti-corruption, but their efforts mostly remain unsuccessful or limited in their impact. Simultaneously, the broader Arab trend in most countries since the end of the Cold War around 1990 sees steadily increasing pauperization, vulnerability, perceived injustice and helplessness, and disparities. The extent, causes, and consequences of this troubling trend are crystal clear, yet they do not seem to elicit any serious response from Arab governments. The Arab region and many individual countries are literally being ripped apart by the consequences of decades of incompetent, autocratic governance, combined with continuing foreign military interventions and the impacts of the century-old Arab-Israeli conflict.

The symptoms of the systemic crisis started to appear several decades ago. They could have been alleviated much more easily at the outset had governments been more effective in recognizing and tackling the issues that plagued their citizens, especially corruption, insufficient decent jobs, state cronyism, and declining educational standards. Rather than dealing with these early signs of serious mass internal dysfunction, regimes focused on military security and internal repression. The outcome was to exacerbate rather than solve the threats to social cohesion and national well-being, which in turn contributed to the brisk emigration of educated youth, the collapse of political parties, the rise of sectarian groups and militias, and steady expansion in adherents to both nonviolent and militant Islamist movements.

Poverty, inequality, and systemic economic crisis

The actual levels of poverty and vulnerability in the Arab region are higher than previously thought, with some two-thirds of citizens falling into the categories of poor or vulnerable. The realities of declining family wellbeing were disguised by prevailing poverty measures based on daily expenditures, which did not accurately capture two critical trends: high levels of poverty, and rising levels of vulnerability among families that used to be counted among the middle class or middle-income category, but have gradually fallen into the poor or vulnerable categories.

Significant research in recent years by economists at UNDP, the United Nations Economic and Social Commission for Western Asia (ESCWA), the World Bank, and other institutions has used the Multi-Dimensional Poverty (MDP) measure to gauge poverty and vulnerability more accurately than the previous reliance on money-metric measures such as $1.25 or $1.90 expenditures per day. The Multidimensional Poverty Index, published by UNDP and the Oxford Poverty and Human Development Initiative, offers excellent insights into this issue (http://hdr.undp.org/en/2018-MPI). The MDP approach more accurately measures real life conditions of families because it looks at a range of key indicators in health, education and living standards (including nutrition, child mortality, years of schooling, sanitation, electricity, drinking water, assets, and others).

The MDP figures indicate poverty rates as much as four times higher than previously assumed (partly because MDP captures the richest and poorest in society that money-metric expenditure measures did not). In ten Arab states surveyed by ESCWA, 116 million people were classified as poor (41 percent of the total population), and 25 percent were vulnerable to poverty. In Egypt, poverty increased from 19.5 percent in 2005 to 28 percent in 2015. If this level of 66 percent poor/vulnerable holds for the entire Arab world, it means that some 250 million people may be poor or vulnerable, out of a total Arab population of 400 million. The middle class in non-oil-producing states has shrunk from 45 percent to 33 percent of the population, according to ESCWA economists who have analyzed this issue. They see many middle income families sliding into vulnerability, and vulnerable families in turn falling into poverty.

The drivers of this increase in poverty and vulnerability have persisted or worsened since the 2010-11 Arab uprisings. They are likely to drive further families into poverty and vulnerability for years to come, given the current regional realities (wars, erratic tourism receipts and real estate and direct foreign investment levels, low real wage levels, stagnant economic growth and labor remittances, inadequate new job creation, and unreliable foreign aid levels, to mention only the most significant). This trend seems to be directly associated with the steady recent decline in the quality of state-managed basic social services, mainly outside the Gulf region, including health care, education, water, electricity, transport, and social safety nets. The number of Arabs requiring humanitarian assistance to stay alive and minimally healthy, according to ESCWA calculations, is 60 million people in seven crisis states. They include many of the 30 million people who have been displaced in the Arab region in recent years.

Once families fall into poverty, they are likely to remain there for generations to come. The steady, large-scale growth in new jobs in industrial, tourism, agriculture, and service sectors that absorbed new labor market entrants in the half-century after the 1950s has disappeared. IMF and other projections say the Arab region must create 60-100 million jobs by 2030, and 27 million jobs in the next five years, to reduce unemployment significantly. This is clearly a task that is well beyond the capabilities of the current Arab state system and its private sectors. This suggests that informal labor will remain dominant for years to come in most Arab lands (averaging 55-60 percent according to some recent estimates); this means we should expect continued and growing poverty and vulnerability, due to the erratic and low pay and the lack of protections that informal workers suffer. Informal-labor-linked poverty is also a consequence of poor education outcomes, with some universal test scores indicating that as many as half the students in primary and secondary school across the Arab region are not learning, and many will drop out before completing primary or secondary education.

This exacerbates the worst of these trends, because low household education levels and poor early childhood development indicators, including stunting that is becoming more common, are now recognized as among the clearest signs that once families become poor today, they will be relegated to long-term poverty and marginalization. Long-term, cross-generational poverty now seems inevitable for families that suffer short-term setbacks in their income, because most Arab states are unable to generate the new decent jobs or provide the social services required to pull poor and vulnerable families out of their miserable condition.

Recent studies indicate that the Middle East is the most unequal region in the world, with the top 10 percent of its people accounting for 61 percent of wealth (compared to 47 percent in the USA and 36 percent in Western Europe). Inequalities are documented in virtually every sector of life and society, including rural/urban, gender, income, ethnicity, and others, suggesting that this has become a deeply engrained structural problem rather than a fleeting phenomenon due to short-term economic stresses.

Poverty, vulnerability, and inequality have converged into a single dynamic that is deeply anchored in existing economic realities and state policy deficiencies that show no signs of changing appreciably, and consequently they will be difficult to reverse in the short term. Some Arab countries (including Egypt) have even reversed decades-old recent trends and registered a rise in fertility rates in the past five years, which will increase the demographic pressures on economic and social systems that have been unable to keep pace with population growth even when fertility rates were declining in recent decades. An estimated nine million Arabs are born every year (nearly two million in Egypt alone), all of whom will need education, health services, housing, water, and jobs that the Arab states already are unable to provide to the existing population.

Beyond the pain that this situation brings to poor and vulnerable families is the additional dangers that societies suffer, such as fragmentation, political instability, social, class, and sectarian tensions, citizen alienation from the state, and sometimes political violence, criminality, or illegal migration. External powers have done little to address these massive social and economic problems, and in most cases have supported regime policies which make them worse.

The Jordan example

Jordan offers a timely example of how social, economic, and political stresses on families lead to wider tensions in society, ultimately generating serious splits between citizens and their state. From the late 1990s to 2018, for example, Jordanians significantly increased their perceptions of injustice and inequality in their lives, especially their treatment by the state and its institutions. Data from polls by the respected local consultancy NAMA, directed by Dr. Fares Braizat, shows those who say that justice does not exist in their lives increased from 8 to 24 percent in that period, and the perception of inequality increased from 10 to 30 percent.

These sentiments are especially high in rural areas and among those who migrated from rural to urban centers in recent decades; most of these citizens depend on state employment or other state-related income, have not benefited from private sector investments or jobs, and increasingly in recent decades have found themselves unable to meet their basic family needs. Polls by NAMA and the Center for Strategic Studies at the University of Jordan reveal some disturbing trends in family-level economic and political distress, including the critical perceptions of injustice that seem to be a crucial driver of anti-government protests.

Jordanians who see no justice in their lives increased from 40 to 46 percent in just the four months between June and September 2018, two-thirds of citizens feel the country is moving in the wrong direction, 72 percent of households said they could not meet their basic expenses (compared to 42 percent in mid-2011), and two-thirds of households reported their economic situation is worse than it was a year ago. The inability to meet basic household needs, or barely to do so but without being able to save any money, is also mirrored in regional polls by the Arab Barometer and the Doha-based Arab Center for Research and Policy Studies, both of whose pan-Arab surveys indicate around 70-75 percent of families cannot afford to pay for their most basic needs.

Such families or individuals usually cannot access state resources through their members of parliament or other state institutions, ultimately finding themselves unable to improve their lives or ensure a decent future for their children. They tend to express the highest levels of perceived corruption in the country, along with frustrations over what they see as an unfair system that discriminates against them, according to Breizat. They often respond “by self-alienating themselves from the state system,” he says, and find succor and representation in other arenas, such as tribal, religious, or militant ideological groups. “The combination of decreasing sense of equal opportunity matched with a rise in economic frustration, public disappointment, and negative expectations is indicating a similar public mood to that of April-May 2018 [when public protests toppled the previous government led by Hani Mulki],” he noted in an October 2018 article. “This significant attitudinal public support for protest action ought to be concerning to authorities.”

In fact, these combinations of family-level economic distress and widespread perceptions of inequality and corruption should be concerning to authorities across the Arab region, given the frightening reality of just how deep and severe these forces are, and how little is being done to redress them. One pertinent sign of this again comes from Jordan, where weekly demonstrations in front of the prime minister’s office in Amman resumed in late 2018, six months after the initial protests that triggered the change in government. This was because many and probably most middle class and poor Jordanians did not feel that the new tax law appreciably improved their life conditions.

Conclusion

Protests in the past year in Jordan and across the entire Arab region (Sudan, Algeria, Iraq, Tunisia, Lebanon, and other lands) indicate fact that citizens are stressed by a debilitating combination of political and socio-economic factors in their lives. Many suffer from precarious socio-economic conditions as well as their lack of political power to address compelling issues like corruption, political accountability of the elite, and being treated with disdain by their state (the most dramatic example of the latter was the desire of the Algerian ruling elite to nominate President Abdelaziz Bouteflika for a fifth consecutive term, despite his near comatose physical and mental state, which makes a mockery of the presidential election being an opportunity for citizens to voice their political views).

These powerful internal forces of discontent and public protest by large numbers of citizens across almost the entire Arab region have already started to impact on their states’ foreign policies and international relations, in several ways. In many situations where millions of citizens suffer sustained poverty and marginalization that leads to alienation from their state and society, large numbers of them (especially unemployed young men) join the reservoirs of vulnerable people who are easily recruited into militias, terror groups, and other organizations that impact both domestic calm and foreign relations. In some cases discontented citizens mobilize to vent their anger at their countries’ policies towards Israel (as happened in Jordan in 2018, when the king succumbed to public pressure and rescinded a clause in the 2004 peace agreement with Israel that allowed Israel to maintain control of a few patches of Jordanian land in the Jordan Valley). Turbulent conditions triggered by large numbers of dissatisfied citizens also prompt many of the best educated among them to emigrate, thus depriving the country of precisely the youthful talent and energy it needs to overcome its lingering socio-economic stagnation and political stresses.

Finally, when governments increase and harden security controls on their citizens in order to ensure “stability”, as many Arab countries have done since 2011, the result is usually the opposite – popular discontent rises, the ruling elite expands its powers and clientelist networks, economies lumber along without significant new growth or investments, the state relies more and more on external security and financial support to survive, and the cycle of pent-up discontent that exploded in the 2010-11 uprisings starts to build again. This should prompt scholars of international relations – along with the ruling elites of the Arab states in question – to examine more closely the worsening internal conditions of these countries, especially the mindsets of hundreds of millions of citizens whose attitudes and actions ultimately will determine the fate of their societies and the direction of the entire region.

References:

Khalid Abu-Ismail, Poverty and Vulnerability in Arab States,” ESCWA, Beirut, (June 2018)

Khalid Abu-Ismail and Bilal Al-Kiswani, “Multidimensional poverty in the poorest parts of MENA: Agenda for action,” ESCWA, Beirut, (February 2018)

MENA Economic Monitor, Inequality, Uprisings, and Conflict in the Arab World, World Bank, Middle East and North Africa Region, Washington,D.C. (October 2015)

Rami G. Khouri, “Many Early Warning Signs Signaled Current Arab Disarray,” Cairo Review of International Affairs, Cairo, (August 3, 2016)

Nandini Krishnan, Gabriel Lara Ibarra, Ambar Narayan, Sailesh Tiwari, Tara Vishwanath, “Uneven Odds, Unequal Outcomes: Inequality of opportunity in the Middle East and North Africa,” World Bank Group, Washington,D.C. (2016)

ESCWA and Economic Research Forum, “Rethinking Inequality in Arab States”, Cairo and Beirut (July 2018)

UNDP, “Beyond Income: A broader picture of poverty,” New York (2018)