Political Identity and Economic Interest
Hazem El-Beblawi
Political Identity and Economic Interest
Hazem El-Beblawi
Former Executive Secretary of the Economic and Social Commission for
Western Asia, (ESCWA)
Introduction
One definition of “identity” is the state of being the same or exactly alike. In this context, the identity of a society or a community exists when members perceive themselves and areperceived as belonging to the same group. It is a way to define a sense of belonging, what is “us” as compared to “them.” Identity in this sense is a synthetic concept resulting from an array of factors where ethnic, cultural, historic, geographic, linguistic, economic and political elements are involved. Though subject to evolution and change, identity is not a transient state with erratic or fast changes like fashion or fads; only gradually and imperceptibly may the identity of a society or community change. In Europe, for example, the transition from Christendom to the nation/state identity extended over generations before a French or a German identity took root. The same can be said about the umma and the new emerging political entities of the Muslim world.
As far as the Arab Middle Eastern countries are concerned, Arabist scholar Michael Hudson contends that the fundamental identity patterns of the Middle East were religious and ethnic in the 18th century, only to be transformed in the 20th century into modern nationalism with an ill-fitting mold of sovereign, secular, territorial states. He asserts that “an underlying cause of the turbulence in modern Arab politics is the incomplete, unsettled nature of Arab political identity.”1 This judgment was true some years ago, 155 and still is today. Alongside the trend toward this quasi-modern state, the last 50 years have witnessed the rise and decline of Arab nationalism on the one hand, and the awakening of the Islamic movement on the other.
The purpose of this paper is not to explore the ultimate basis of the political identity in the Arab Middle East, but rather to reflect on some of the major economic changes that have contributed in one way or another to the evolution of the Arab political identity. It is not my intention to come up with final conclusions as much as to raise questions for further discussion and consideration. It should be remembered, however, that unlike the identity of a society, economic factors often emerge suddenly and can change over shorter periods.
Perhaps the most important economic change that the region has witnessed since the Second World War was the increase in oil prices in the mid-1970s. Several years ago, I published a paper on the rentier state in the Arab world2 to demonstrate the impact of the oil phenomenon on the socioeconomic structure of Arab countries. Almost 25 years after the first oil shock, however, the economic landscape of the region is no longer the same. Oil, though still of paramount importance, is not the sole economic factor affecting Arab societies. Major economic changes, globally and regionally, have since taken place. Thus, two principal economic developments have had far-reaching effects on the region over the past two decades – the oil shocks from the mid-1970s to mid-1980s on the one hand, and the end of the cold war with its subsequent effects on the emergence of the global economy and the prospects of peace in the region on the other. The rise and fall of the oil era shook the Arab region profoundly, while the effects of globalization and the settlement of the Middle East conflict are yet to be seen.
The Oil Decade
The oil price increases of 1973–74 and again of 1979 marked a turning point in international economic relations. At the time, the move was labeled the “Oil Revolution” as if it were on a par with the “Industrial Revolution.” A decade later (1985), the oil prices reversed their trend and embarked on a long path of decline and stagnation. Two Gulf Wars – the Iran-Iraq War
(1980–1988) and the Iraqi invasion of Kuwait (1990) – brought an end to the high hopes of establishing a new Arab order for development. What promised to be a revolution in world affairs turned out to be no more than a passing episode – a parenthesis – in international finance.
Fleeting as they were, the oil decades dramatically shook the Arab region, bringing about new economic interests and changes in the balance of power, with large capital and labor movements. It is no exaggeration to state that, over the past 50 years or so, the oil shocks have affected the fabric of Arab societies more than any other factor, perhaps with the exception of the Arab-Israeli conflict.
Due to their large financial resources, the Arab oil-producing countries, with Saudi Arabia at the forefront, achieved prominence in the international financial arena and became leading players in Arab politics. Though still wanting in economic, military and population strength, these oil-producing countries acquired enormous financial power which soon manifested itself in Arab politics. The old political landscape of the Arab Middle East began
to undergo profound changes. The core countries of the region – Egypt, Syria and to some extent Iraq – had to adjust to the ascendancy of the oilproducing countries. This reshuffle of the core and the periphery in the Arab world was not without serious consequences to the political identity of the region.
The emergence of the new oil states in the 1970s and their accession to the forefront of world trade and finance reshaped the notion of the state in the Arab Gulf. The windfall wealth of unprecedented magnitude that these oil states accumulated in a short time revived the notion of unearned income. Other non-oil countries in the region fell – with varying degrees – under the spell of the new oil phenomenon. The impact of the oil phenomenon on the role of the state and on economic behavior in general has been so profound as to justify special treatment for this period. For lack of better concepts, I have chosen the concept of the rentier state to characterize the preeminence of the oil economies in the Arab region during the oil decade.
I have tried to define the concept of a rentier state elsewhere.3 Social scientists – including economists – have always suspected a difference between “earned” income and effortless “accrued” rent. Hence the concept of the rentier state, where rent situations – particularly external rent – predominate. What is most important here is the fact that in such a situation, the state or the government, being the principal rentier in the economy, plays a crucial role as the prime mover of economic activity. Citizenship becomes a source of economic benefit. Different layers of beneficiaries of government rents are thus created, giving rise, in turn, to new layers of beneficiaries. The whole economy is arranged as a hierarchy of layers of rentiers with the state or the government at the top of the pyramid, acting as the ultimate support for all other rentiers in the economy. It is important to add here that the rentier nature of the new state is magnified by the tribal origins of these states. A long tribal tradition of buying loyalty and allegiance is not confirmed by an etat providence, distributing favors and benefits to its population. This amounts to a near negative tax, where citizens are levying taxes on the governments by the mere fact of their citizenship. With virtually no taxes and a wide range of provided public goods and services, citizens are far less demanding in terms of political participation. The history of democracy owes its beginnings, as is well known, to some fiscal association (no taxation without representation). Government budgets in most oil states were a onesided document, an expenditure program, a promise to spend money and distribute benefits to the population.
If the rentier state weakened the claims for political participation, it also consolidated claims for narrow state nationalism at the expense of the wider notion of Arab nationalism. A Kuwaiti, Qatari, Libyan or Saudi has become more conscious and, accordingly, more protective of his citizenship to Kuwait, Qatar, Libya or Saudi Arabia than his belonging to a vague Arab nation. Economic interests here have a clear and direct relation to political identity. It is no wonder then, as shall be seen later, that the peak of the oil era coincided with the waning of Arab nationalism.
In the meantime, generous financial assistance from oil-rich countries to poor non-oil countries nurtured moderate voices advocating economic cooperation rather than Arab unity. This meant that the radical voices calling for Arab unity were kept at bay. After all, moderation in Arab aspirations paid handsomely while radicalism cost dearly. And advocates of the former philosophy were called realists while supporters of the latter philosophy were labeled romantics.
On the other hand, while the Arab non-oil states were by no means rentier states in the sense of the Gulf States, they did, nonetheless, increasingly exhibit signs not dissimilar to those witnessed in the oil states, thus, the epithet of semirentier states. First and foremost, the Middle East as a whole gained increased strategic importance or political rent. As a result of oil wealth, the whole Arab area – oil-rich as well as oil-poor – has assumed strategic value on the world chessboard. Military and political aid to preserve or introduce superpowers’ – as well as mini-powers’ – influence in the area, became a major source of external rent to many states. In the 1960s, for example, Egypt received the highest Soviet aid to a foreign country, and by the late 1970s it had become, after Israel, the second highest American aid recipient.
Moving on to the relationship between oil and non-oil states, this too was affected by certain rentier concepts. Inter-Arab financial assistance was related, to some extent, to its effect on the stability and tranquility of oil rent in oil states. Very often, Arab aid to fellow Arab states was motivated by a similar logic of distributing favors to buy allegiance or rather to avoid trouble. By distributing or promising aid, the oil states helped buy peace and stability. On the other hand, by conferring or withholding super-legitimacy, the advocates of pan-Arabism from the core states used their political clout to obtain such financial aid. Arab finance was thus more a counterpart than a complement to pan-Arabism. Pan-Arabism and Arab money were the stick and the carrot, used by these two opposing parties to bring about a very subtle equilibrium in sharing oil rent. It is no wonder, then, that Arab financial flows to Arab states coincided with the retreat of the pan-Arab system after the 1967 war, which “marked the Waterloo of pan-Arabism.”4
In addition to the financial assistance from oil-rich Arab countries, some non-oil Arab states enjoyed another external location rent as transit countries. For example, Suez Canal revenue and oil pipeline royalties became major revenue sources to some countries, e.g., Egypt and Syria.
With the advent of the oil era, workers’ remittances became one of the major foreign exchange sources in some non-oil states. Yemen is a good example of a country in which remittances represented more than 85 percent of GDP in the 1970s. Workers’ remittances probably have become the biggest single source of foreign exchange in Egypt as well. In Syria, Lebanon, Tunisia, Algeria and Morocco, workers’ remittances play a very important role in their balance of payment adjustments. It is not easy to equate workers’ remittances to external rent. From the worker’s point of view, he is earning his income at the cost of effort and work. From the recipient country’s point of view, remittances are, nevertheless, more akin to aid or nonrequited money transfers.
The semirentier nature of non-oil states is not without its effects on the role of the state and on citizens’ behavior. Government favors are now embodied in a welfare doctrine. During the 1970s and 1980s subsidies of all kinds perverted the economic system. A huge bureaucracy, a sort of new rentier class, was getting a substantial slice of the government’s accrued rent.
It is also interesting to see how each source of external rent has bred its own chain of second-order rentiers.
It seems clear from the above that the oil phenomenon has cut across the whole of the Arab world, oil-rich as well as oil-poor. The impact of oil has been so preeminent that it is not unrealistic to refer to this period as the oil decades, a time in which the oil disease contaminated the entire Arab world. Income was no longer a reward for serious and hard work, but rather often became related to special circumstances, chance, location, etc.
In a word, it is a rentier universe which has affected both the state and the citizen. Perhaps the biggest loser in this new game was the notion of Arab unity. Arab nationalism has receded to the background and a narrow state nationalism has carried the day. Economic cooperation among independent Arab states took precedence over the discourse of Arab unity.
From Rentier to Market Economies
By the late ’80s and early ’90s the socialist camp had collapsed and the market ideology had scored a near victory. The fall of the Berlin Wall symbolized the end of an era and some people were carried away to the point of announcing the end of history. Without going so far, it is clear that the end of the cold war unleashed the underlying economic forces for globalization. Only a few years after the disappearance of the Soviet Union and company, the world woke up to the emergence of the global economy. The fact of the matter is that there was no sudden change; globalization was at work latently but persistently all along.
Without over-simplifying, it can be said that we are now witnessing a globalization of the economy, while political boundaries are diminishing in importance. The industrial revolution and capitalism, through their universal outlook, have continued their drift toward globalization. Indeed, since the Second World War, the growth of international trade has been almost twice the growth rate of national economies. The world economy is becoming
more interdependent. Increasingly, the most dynamic industrial actors are the multinationals and transnationals, and, in the meantime, industrial strategies in the most advanced sectors are being defined on a global scale.
This trend has been further strengthened by the revolution in information and communications, which is transforming the world into a kind of global village. A no less dramatic financial revolution is making political boundaries even more obsolete. The integration of financial markets, as well as the movement of capital and foreign exchange fluctuations has resulted in phenomenal worldwide surges in investment and savings.
The international institutional framework has sanctioned this globalization trend. The World Bank and the International Monetary Fund act as tsars of the world economy. With the establishment of the World Trade Organization, the circle is complete.
Notwithstanding the above, we should not exaggerate the globalization
trend.
National interests are still dominant, hence the tension between an increasingly global economic trend and a political reality that remains national, if not nationalistic. However, the impact of the globalization of the economy is felt more heavily in developing countries that have fewer options than large advanced economies.
Economic Reform and Political Reform
The transformation of state economies into market economies poses serious problems, in particular regarding the relation between economic reforms and political reforms. Does the transition to a market economy require political reform? Is democracy a prerequisite of or a complement to the market economy?
History is ambiguous in this regard, to say the least. Although in most Western countries democracy and capitalism went hand in hand, other examples prove the contrary. For example, Germany and Japan in the 19th century and the Southeast Asian countries in the 20th century enjoyed prosperous economies without any relaxation of the grip of politically
authoritarian states. Today’s China provides yet another example of such a paradox.
Without dwelling on this thorny issue, one thing seems indisputable in my view. A market economy can only function where the concept of the Rule of Law prevails. With the Rule of Law, people do not obey other people.
Everyone – governed and governor – is subject to the Rule of Law, free from arbitrariness and whims. The law defines the scope and limits of activity and guarantees respect for commitments. The Rule of Law constitutes, therefore, the minimal condition necessary for a market economy.
Democracy is unquestionably based on the concept of the Rule of Law, but its brightest promise lies in the areas of political liberties, participation, changeover of authority and respect for human rights. In a democratic regime, responsibility, accountability and transparency are more or less guaranteed. Thus, although democracy is not absolutely necessary for a market economy, it certainly is its most reliable ally.
Regional Economic Cooperation
Hopes for Arab unity having receded, at least for the foreseeable future, alternative projects for regional economic cooperation have surfaced to the fore as the new common strategy. Notwithstanding declarations of intent, the reality of Arab regional economic cooperation remains very modest.
It is true that labor and, to a lesser extent, capital movements witnessed a significant surge during the oil decades. Intraregional trade remains, nonetheless, disappointingly low – around 6-8 percent of total Arab foreign trade.
In the realm of projects for regional economic cooperation, we can distinguish between different orientations. The oldest and more popular is the search for Arab economic cooperation, particularly the establishment of an Arab Common Market. The Economic and Social Council for the League of Arab Economic Unity was intended to push the idea further.
In the 1980s, a different approach to economic cooperation was practiced emphasizing subregional affi nities. Thus, the Gulf Cooperation Council was established in 1982, to be followed by the Maghreban and Arab Cooperation Councils for the rest of the Maghreb and Mashrek countries. More recently, the League of Arab States has announced a plan for an Arab Free Trade Area to start as of January 1998 and be completed by 2017.
Alongside Arab schemes for economic cooperation, other competing or complementary Middles Eastern projects have surfaced from time to time, especially at the time when the peace process, initiated by the Madrid Conference, seemed to be on track. An agreement – in principle – to establish a Middle East Development Bank was even initiated. But the whole project came to a halt with the present impasse of the peace process.
A recent scheme for a Euro-Mediterranean partnership was signed and/or is under discussion with some Arab States.
Conclusion
Globally as well as regionally, the Arab Middle Eastern states face major economic challenges. The globalization of the economy and the modernization of Arab economies is already underway with most Arab countries implementing economic reforms. Emerging new economic interests will call for political changes and more democratization. Prospects for peace, or the absence of it, will definitely affect the pattern of regional economic cooperation and its orientation. Relations with other adjacent regions, particularly Europe and perhaps the new emerging Far East, will not leave the Arab region unchanged. This is a region in the making and the unsettled nature of a single Arab political identity is unlikely to come to an
end soon.
Notes
1 Michael Hudson, Arab Policies: The Search for Legitimacy (New Haven, 1997), p. 56.
2 Hazem el-Beblawi and Giacoma Luciani, eds., The Rentier State (London, 1997).
3 Ibid.
4 Fouad Ajami, “The End of Pan-Arabism,” Foreign Affairs 57/2 (1978–79).
From:
Confirguring Identity in the Modern
Arab East
Edited by
Samir M. Seikaly
AUB Press