Revolutions Do Not Rain Gold

By Adel Al Toraifi

Since January, five Arab capital cities have been idle in terms of politics, administration, and security. Yet most important of all is the complete downfall of the economies in these cities, to the extent that several Arab uprisings are now threatened with failure, this time in the economic domain. Amidst the wave of celebrations across Arab capital cities, some of which transformed into civil chaos and open anarchy, some people seem to have overlooked basic considerations that may be more significant than revolting against tyranny; namely economic security.

Whether or not you agreed with some of the policies of the ruling elite in the countries that have witnessed revolutions, you cannot ignore the fact that the economies of those countries witnessed development and a remarkable rise in the volume of foreign investment over the past five years. This was the case in Tunisia, Egypt, and even Libya and Syria, countries which were successful in enacting a set of economic reforms and trade legislation, hence boosting their chances of competing in regional markets. This does not mean that these regimes were not corrupt, or that they were successful in achieving an economic renaissance, yet they improved the conditions of the economy in general, even if this did not trickle down to the ordinary citizens. The question to be raised here is: Did such authoritarian and rentier regimes fall victims to their market reforms and process of trade liberalization?

In an interview with a European economic expert, who asked to remain anonymous and has been involved in consultancy work for the restructuring of several Arab economies over the past decade, he indicated that the circumstances that led to the so-called "Arab Spring" can be partially attributed to the imbalance between the regimes and citizens. Such an imbalance occurred after the age-old "rentier" equation was disturbed. The equation being that the regime governs the majority of citizens in return for ensuring their basic requirements via a complete package of subsidies on food, housing, fuel, education and medication, in addition to agricultural reform projects, the nationalization of service facilities, and above all, offering extensive job opportunities in already inflated government bodies in all sectors, and pensions for those who retire. The equation ensured political stability for over five decades, yet when the youth generation within the authority decided to inherit power from the old guard, they opted to show their inclination towards modernity and reform by liberalizing trade, privatizing state facilities, introducing foreign investment, and even encouraging civil society and human rights institutions – as was the case with Libya. Here the disorder occurred: The government failed to reconcile between outdated local systems, legislations and economies - in the age of the free and modern economy - and a modern elite influenced by the Western model. This ultimately led to an explosion, and when the state's security apparatus attempted to return to its old repressive practices, the entire regime fell down.

In short, the period of reform in some regimes over the past two decades has contributed - relatively speaking - to their downfall, not because reform leads to failure, but because these regimes were selective in their application, and failed to reconcile the practices of the old corporations with the modern class, thus creating a state of instability. Following the regimes' downfall, some demagogic characters have come to the fore in an effort to outbid the revolutionary masses' stances, unloading a torrent of promises and pledges regarding the economy, most of which are intended to blind and mislead the people.

For instance, there is now a widespread theory that one reason for the corruption of former regimes was their reliance on the assistance and policies of international corporations – such as the World Bank and the International Monetary Fund – and that the post-revolution economy should be independent and self-reliant, and must avoid loans from Western countries. Some even go beyond this calling for the nationalization of some foreign investments and properties, in the claim that they were agreed during an era of corruption, when the nation's wealth was stolen. In sum, those characters are calling for an economic model that can only be described as centralized socialism, hostile to anything foreign.

In Egypt, for instance, a number of officials in the interim government made promises, repeated slogans, and issued contradictory statements about the condition of the present-day Egyptian economy. For instance, Egyptian Minister of Finance Samir Radwan said that the Egyptian government will not resort to loans from the World Bank or the IMF, saying that Egypt is capable of reducing the deficit in its upcoming budget and can fund itself without having to resort to foreign aid, and this is in response to the demands made by the revolutionary youth. As for Fayza Abul Naga, Egyptian Minister of Planning and International Cooperation, she emphasized that Egypt will not be dictated by the IMF or the World Bank and that "Egypt listens only to whatever is beneficial to its interests first and foremost, and the aid offered by friendly countries will not be subject to terms that could jeopardize Egypt's sovereignty."

Needless to say, any novice student of economics would be amazed to hear such statements. A quick look at the Egyptian economic record since the beginning of this year would reveal a genuine disaster threatening the country's economic future. Egypt lost nearly 10 billion US dollars - nearly a third - of its foreign reserves, whilst the overall growth rate declined by 10 percent, and local industrial production decreased by over 12 percent, not to mention the cease of tourism and foreign investment. The number of unemployed youths has doubled, and the stock market has lost much of its value. Most economic forecasts are extremely negative, even in the best case scenarios.

What does it mean when officials in Egypt issue statements and figures which they know, more than others, are inaccurate? The Egyptian government has been promised aid and loans totaling at least 20 billion US dollars, so how can anyone say that Egypt will not borrow money from abroad? Protests and demonstrations have disrupted public life in Egypt, Bahrain, Syria, Yemen and Libya, and it became impossible for such countries to restore their old production and industrial potential, let alone boost production to cover up the deficit. Do those who took to the streets of their capital cities for months, in their thousands, now produce anything?

The problem with those who advocate the "Arab Spring" is that they argue that what is happening is essential in order to improve conditions, even if chaos prevails for many years. Yet, the bitter reality is that the great turmoil suffered by some of the region's economies may continue for decades, without these societies being able to restore their old economic conditions. Some imagine that through protests, clashes with government authorities, even more government intervention in the economy, the imposition of protective legislation, the provision of subsidies on basic commodities, and a salary increase without a real rise in production or sources of income, this will all solve the country's problems in the long run. Unfortunately, the actual figures do not stand up to these exaggerated wishes.

This behavior may remind us of the story of the man who abandoned his employment and lived in isolation in a mosque, supplicating assistance from God without doing any work. This is to say that the revolutionaries in the Arab streets demand their governments meet all their needs without considering the limited sources of income and the modest productivity of their countries.

Late US economic expert Milton Friedman once said "A major source of objection to a free economy is precisely that group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself."

If advocates of the "Arab Spring" really believe in freedom, they should accept the free market, rather than pushing their countries back to the old socialist regimes, and they should be begin real production, instead of continuing with protests and remaining prisoners of the revolutionary phobia. Revolutions do not rain gold.

-This commentary was published in Asharq al-Awsat on 29/06/2011
- Adel Al Toraifi is the current Editor-in-Chief of Al Majalla magazine, he is s specialist on Saudi foreign policy