Politcal Economy Of The Middle East

Published on May 14, 2009, 8:53 pm
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The political economy of Middle East is determined by a combination of economic development, state structure, and social actors, but more broadly by concomitant economic, social, political, religious and historical forces.

The economic capacity and political systems of the Middle East vary widely from authoritarian to democratic, from rich to poor as evinced by disparate per capita income. A general increase in the standard of living since mid-twentieth century was spurred by the urban middle classes employed in the service sector, in conjunction with improvements in electricity, irrigation systems, and road networks in rural areas. Despite this improvement, the Middle East has been characterized by underachievement. Dramatic changes are necessary in the Middle East if the economy is to keep pace with the various socioeconomic changes currently underway, such as the growth of middle classes, urban influx, and a young population. In addition to these necessary socioeconomic adaptations, the region is faced with serious issues which have yet to be tackled: youth unemployment, forthcoming water shortages, structural adjustment, pressure of democratization, and political Islam.

Transformation from an agricultural society into an industrial political economy has proven necessary given the scarce water resources needed to sustain agricultural self-sufficiency or agricultural export-dependency. However, difficulties in this transition are exacerbated by a rural exodus to the already populous cities causing a discrepancy between economic growth and structural transformation. The particular development strategy of each country establishing the foundation and focus of its economic system is varied: agro-exports, mineral exports, import-substituting industrialization, manufactured exports, or agricultural development-led industrialization. A country may combine aspects of various strategies or assume different strategies over time. Do governments have volition in determining their development strategy or is the choice dictated by external forces and institutions? Some argue that although the influence of international markets and major world powers constrain choices, governments are not stringently bound by them.

A clear impediment to economic development most specific to the Middle East is the diversion of human capital and material resources to myriad military conflicts endemic to the region. The strategic and religious significance of the Middle East has precipitated regional infighting and the intrusion of external forces causing centuries of conflict. Such continuous conflict impinges the course of development and prevents foreign investment in the MENA (Middle Eastern & North African) countries. The focus has been geared toward investing in large military apparatuses in lieu of building strong economies.

Rents are also an integral component of Middle East political economy. The concentration of two-thirds of the world’s petroleum reserves located in select countries of the Middle East renders the region vulnerable to oil price fluctuations. The price increase of products or services without a commensurate increase in production costs may extinguish incentives to ameliorate the system. Furthermore, rents have permitted governments to circumvent taxation of its population, thereby removing any accountability of the government to its citizenry. In addition to petroleum, other rents important to the Middle East include United States aid and strategic rents like the Suez Canal, creating economic reliance on the behavior of international actors. As rents decline, Middle Eastern economies experience the negative affects from such dependence. Depending upon the rate of production, oil deposits will diminish, precipitating the need to plan for an economy independent of oil exports.

The young population characterizing Middle Eastern countries today necessitates an economy able to sustain their numbers, requiring expansion of education, health, agriculture, industry, water resources, etc. An increase in the number of applicants has translated into a paucity of job opportunities. Unemployment of educated youth may contribute to the rise of militant Islam as an outlet of frustration. The response of Middle Eastern governments to this demographic shift is substandard, as these numbers have overwhelmed the capacity of the administrations and economies to adapt adequately. If economic sustainability is not commensurate with needs of the young generation, instability will supersede the potential economic output of this young population.

With the exception of Iran in 1979 and Iraq in 2003, the MENA countries have evaded significant changes in their regimes and political systems, preserving the status quo for decades. Illustrating the link between politics and economy, several authoritarian regimes and aging incumbents have stifled reform by thwarting potential threats to their rule, in effect opting for stability in lieu of long-term progress and growth. What are the prospects for economic reform in the Middle East in the near future? Without undergoing extensive and rapid structural change, the Middle East will be hard-pressed to support its own population and ill-equipped to perform as a player in international markets vis-à-vis other dynamic economies. The implication of aging rulers and the consequence of a young population, operating as concomitant forces, may inexorably trigger the overhaul urgently needed. Stagnant regimes with a young, restive population may precipitate sweeping reform in the Middle East, rendering change more imminent and inevitable than some scholars may suggest. Gradual change is another possibility, still favorable to the continuation of the status quo as a region adept at defecting democracy.

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