Exactly 10 years on, how should we understand the root causes of the 2011 uprisings in the Middle East and North Africa? At the time, many commentators and policy-makers answered this question with reference to the simple mantra of ‘political and economic freedom’. While much of the world appeared to move away from authoritarian state structures through the 1990s and 2000s, the Middle East had remained largely mired in autocracy and monarchical rule – ‘the world’s most unfree region’ as the introduction to one prominent study of politics in the Arab world put it.^[2] The problem, according to these frameworks, lay in the stifling effect of authoritarianism over capitalist markets, which prevented the emergence of a vibrant private sector and held back the region’s economic potential. The popular rage expressed on the streets of the Middle East in 2011 could thus be understood as a desire for both ‘free’ political systems and ‘free’ economies.

In this vein, then-US President Obama noted in a major policy speech on the Middle East in May 2011 that the region needed ‘a model in which protectionism gives way to openness, the reins of commerce pass from the few to the many, and the economy generates jobs for the young. America’s support for democracy will therefore be based on ensuring financial stability, promoting reform, and integrating competitive markets with each other and the global economy.’ Likewise, the president of the World Bank at the time, Robert Zoellick, argued that the revolts in Tunisia occurred because of too much ‘red tape’, which prevented people from freely engaging in capitalist markets. Western policy-makers have repeated this basic argument incessantly since 2011 – autocratic states smother economic freedom, and ‘free markets’ are essential for any sustained transition away from authoritarianism. As part of this narrative, Western governments and international financial institutions (IFIs) are recast as benign and benevolent actors – ready to support the ‘transition’ to democracy and willing to provide the necessary technocratic expertise to construct open economic markets.

In what follows, it is argued that this standard framing of the Middle East’s political economy is false. It is certainly true that the region’s political structures were (and remain) highly authoritarian, but this kind of political system is directly reflective of how capitalist development occurred in the region over the last few decades. Central to this development trajectory were the far-reaching economic shifts that began in the 1980s under structural adjustment packages (SAPs) supported by the leading IFIs. Locked into these agreements, Arab governments moved through the 1990s and 2000s to reorient their economies in line with market-driven principles. The policies adopted in the region differed little from those found elsewhere around the globe – the prioritization of private sector growth, fiscal austerity, opening up to foreign capital inflows, privatization, and the deregulation of markets (including labour). There was no essential contradiction between these economic policies and political authoritarianism – indeed, the opening up of markets and the steady creep of neoliberal policies throughout the region depended precisely upon authoritarian rulers (as it still does). Crucially, this process was fully supported by Western governments, who applauded the coming to power of autocratic rulers in the region in the 1980s and continued to laud the direction of economic policy-making in the decades preceding 2011.

Postwar politics and the modern Middle East

Any analysis of the contemporary Middle East needs to begin with the region’s centrality to the world economy. Long a strategic crossroads of trade, the area took on special importance following the discovery of large supplies of hydrocarbons during the early twentieth century. Oil and gas were to become essential commodities underpinning modern industrial production and transport following World War 2 and, in this context, control and influence over the region shaped the balance of global rivalries in the postwar period. The United States, which emerged as the dominant power at this time, placed particular emphasis on building privileged relationships with countries across the region.

The 1950s and 1960s saw both a deepening of the region’s importance to the world economy and, at the same time, the coming to power of Arab nationalist movements in Egypt, Yemen, Algeria, Syria and Iraq. These new governments overthrew regimes allied to former colonial powers and attempted to pursue economic models based upon statist forms of development – emphasizing domestic control of industry, support to education and employment for university graduates, subsidies for basic consumer items such as food, and state control of land and other resources. Nonetheless, despite the frequent reference to ‘Arab socialism’ made by these new governments, their economic strategy was still very much capitalist in orientation.[3] These policies led to an improvement in living conditions for much of the region’s population, but they were also characterized by repressive forms of rule aimed at curtailing any independent political action.

Western governments – led by the United States – initially confronted these nationalist struggles through strengthening relations with three key regional allies: Saudi Arabia, Iran and Israel. In the Gulf, the Saudi monarch, King Saud, had long been reliant on US political and military support, and was all too willing to undercut Arab nationalism through the corrupting influence of oil revenues. Saudi funding of pro-Western movements in the region enabled these forces to deny any direct link to Western governments. The Saudi government was also encouraged to deploy Islam as a regional counterweight to nationalist and left-wing ideas, organizing ‘Islamic summits’ that asserted Saudi influence and challenged Egypt’s role as the leading Arab state. A vitriolic propaganda war opened up between the Saudi and Egyptian governments. This proxy conflict with Egypt took its most vivid form during the eight-year North Yemen civil war, where Saudi Arabia was the main supporter of the royalist, pro-British forces that had been overthrown in 1962, while Egypt backed the republican movements arrayed against the ousted monarchy.

In the case of Iran, the United States (and Britain’s M16) engineered a coup against the Iranian Prime Minister Mohammad Mosaddegh in 1953, bringing to power a pro-Western government that was loyal to the Iranian monarchy, headed by Mohammad Reza Shah Pahlavi. The US explicitly conceived of Iran as its principal base of control for the Gulf region, with a 1969 report by the RAND Corporation – a prominent think tank closely connected to Washington policy-makers – noting that Iran could ‘help achieve many of the goals we find desirable without the need to intervene in the region’.[4] This role was convincingly demonstrated in 1973 with the dispatch of the Iranian military to Oman to assist British troops in the repression of the Dhofar rebellion – a powerful struggle that was at the heart of left-wing movements in the Arabian Peninsula. The Iranian troops, supplied with US helicopters and other weaponry, succeeded in crushing the rebellion. US military support to Iran skyrocketed from 1973 onwards, amounting to more than $6 billion annually between 1973 and 1975. This close relationship continued up until 1979, when the Iranian revolution ousted the Pahlavi monarchy and removed Iran from the sphere of US influence in the region.

The other major pivot of US power in the broader region was the state of Israel. As a settler-colonial state, Israel had come into being in 1948 through the expulsion of around three-quarters of the original Palestinian population from their homes and lands. Inextricably tied to external support for its continued viability in a hostile environment, Israel could be counted on as a much more reliable ally than any Arab state. During the 1950s, Israel’s main external support had come from Britain and France. But the 1967 war saw the Israeli military destroy the Egyptian and Syrian air forces and occupy the West Bank, Gaza Strip, (Egyptian) Sinai Peninsula, and (Syrian) Golan Heights. Israel’s defeat of the Arab states encouraged the United States to cement itself as the country’s primary patron, supplying it annually with billions of dollars’ worth of military hardware and financial support.

Israel’s victory in 1967 signalled a decisive turning point in the evolution of Arab nationalism. While pro-Western regimes continued to be challenged from below by various radical movements, and new nationalist governments came to power in Southern Yemen (1967), Iraq (1968) and Libya (1969), Israel’s victory dealt a devastating blow to the notions of Arab unity and resistance that had been crystallized most sharply in Nasser’s Egypt. The military defeat was symbolically reinforced by Nasser’s death in 1970 and the coming to power of Anwar Sadat, who subsequently moved to reverse many of Nasser’s more radical policies. The priority given by the United States to its relationship with Israel was further highlighted in 1973, when another war broke out between Israel and a coalition of Arab states led by Egypt and Syria. Despite initial Egyptian and Syrian advances in the opening salvos of the war, US airlifts of the latest military equipment led to Israel’s eventual victory.

The emergence of authoritarian neoliberalism

Given this regional political context, the global economic downturn of the early 1970s placed severe pressure on the statist development strategies of various Arab governments. The global recession hit the non-oil exports of many Arab countries, while the cost of food and energy imports increased. Moreover, large military expenditures associated with ongoing conflicts in the region (particularly the 1967 and 1973 wars with Israel) placed considerable strain on government budgets. Following the sharp rise in US interest rates that began in 1979 – the so-called Volcker Shock – an acute debt crisis swept through key Arab states, including Egypt, Morocco, Tunisia and Jordan.

As a result of this debt crisis, many Arab governments sought financial support from IFIs, in return for signing SAPs that committed them to a reorientation of economic priorities. Morocco was the first to sign a SAP in 1983, and similar reform programmes were soon adopted in Tunisia (1986), Jordan (1989), Egypt (1991), Algeria (1994) and Yemen (1995). These SAPs sought to strengthen the private sector and achieve closer integration with the world market. The private sector would be, as the World Bank later put it, the ‘engine of strong and sustained growth’ – a necessary requirement of the ‘new global economy’ in which ‘rewards . . . go to the most hospitable environments [for capital investment]’.

From the 1980s onwards, the economic policies of Arab states followed such prescriptions, much like countries elsewhere around the world. Trapped in a cycle of debt and compelled by the conditionalities of multilateral loan packages, Arab governments embraced the standard policy priorities of market-based development: privatization and the prioritization of private sector growth, deregulation of labour and financial markets, a lowering of corporate tax rates, relaxation of barriers to trade and foreign investment, and cutbacks to public spending, including subsidies on food and energy. These new policies were widely unpopular, and their introduction was met with strikes, demonstrations and violent clashes between citizens and security forces – one survey documented 25 outbreaks of major protests between 1977 and 1992 against structural adjustment in nine countries across the region (Algeria, Lebanon, Jordan, Egypt, Morocco, Iran, Sudan, Tunisia and Turkey).[5]

In the face of this widespread opposition to economic change, Arab states took on increasingly authoritarian characteristics through the 1980s and 1990s. Indeed, several of the regimes that were overthrown in 2011 first came to power in this period and led the turn towards neoliberal development models. The 1987 coup by Ben Ali in Tunisia, for example, was followed by the country’s decisive orientation towards IFI-led structural adjustment. Likewise, Egypt’s Hosni Mubarak, who became president in 1981 following the assassination of his predecessor Anwar Sadat, consolidated a system of repressive rule that included the suspension of the constitution, imposition of an Emergency Law, restrictions on the press, detention without charge, and the introduction of military courts to try political opponents. In 1991 Mubarak agreed to an SAP with the IMF and World Bank, and then turned his security forces against the resulting labour strikes and mass demonstrations that occurred throughout the 1990s. Similarly, governments in Jordan, Morocco and Algeria became much more authoritarian in this period. Western governments and IFIs were nonetheless supportive of these governments, viewing their repressive practices as a necessary means to undercut the widespread social discontent around the new neoliberal measures.

These economic measures reversed many of the previous policies embraced by Arab nationalist governments from the 1950s to the 1970s. One indication of this is the large-scale privatization of state-owned firms during this period. According to World Bank figures, total proceeds from privatization in Egypt, Morocco, Tunisia, Algeria, Jordan, Lebanon and Yemen reached a little over $8 billion between 1988 and 1999, with more than half of this figure coming from sales in Egypt alone ($4.172 billion).[6] Over the subsequent decade, the scale of privatization expanded considerably, with privatization receipts totalling more than $27 billion between 2000 and 2008. This latter period saw many more countries in the region engage in the selling of assets, as well as a shift away from the privatization of industrial and manufacturing industries and towards the privatization of the telecommunications and financial sectors. Despite the increasing number of countries involved in privatization, Egypt continued to register both the highest number of deals and the largest value of assets sold ($15.7 billion from 1988 to 2008).

A further core priority of structural adjustment in the region was the deregulation of labour markets through reducing (or abolishing) minimum wages and severance pay, and easing laws around hiring and firing.^[7] Arab governments were urged by the World Bank and other IFIs to implement ‘more flexible hiring and dismissal procedures’ as a means of reducing ‘the dominant role of government as employer’ – in this manner, the costs of labour across the board could be reduced. In particular, those firms that were earmarked for privatization would not have to compete with better labour conditions in the public sector and would thus become more attractive to potential investors. Throughout the 2000s, Egypt, Jordan, Morocco and Tunisia all passed significant laws deregulating the labour market.

Another important focus of IFI policy in the region during this period was liberalization of the agricultural sector. Here, policies aimed to develop new agribusiness models that would link production more closely to global markets. Alongside laws that commodified land and dismantled collective ownership rights, other measures lifted price caps on agricultural inputs (such as fertilizers, pesticides and water), and sought to integrate farmers into agribusiness commodity chains. The Egyptian case has been particularly well documented. In 1992, the Mubarak government passed Law 96, which allowed landlords to sell land without informing or negotiating with tenants and lifted longstanding caps on rural rents.[8] As a consequence of this law, rents increased by 300 to 400 per cent in some areas and over a third of all tenant families in Egyptian rural areas (around 1 million households) lost their rights to land. Law 96 was enthusiastically backed by the World Bank and IMF as part of a general policy to establish private property rights in agriculture. A USAID-sponsored study applauded the Egyptian government for passing the law, which it saw as doing away with

‘more than 40 years of an imbalanced relationship between landlords and tenants’.

The logic of these and other policies was further reinforced through international trade and financial agreements signed throughout the 1990s and 2000s. Of particular significance here are the Association Agreements signed with the European Union as part of the European Mediterranean Partnership (which later became the European Neighbourhood Policy). Between 1995 and 1997, Jordan, Morocco and Tunisia signed Association Agreements with the EU, while Egypt followed them in 2004. These agreements promised financial aid and greater access to the markets of the EU – the region’s most important trading partner – in return for deepening neoliberal reform. Alongside similar bilateral treaties with the US and accession to the World Trade Organization, these international agreements constituted an important driving force behind the reduction of trade barriers and the opening of new sectors – such as finance, telecommunications, transport, and energy – to foreign ownership.

These economic agreements were also directly tied to the intensification of Western military and political intervention in the region throughout the 1990s and 2000s. Most significantly, this included the decade-long imposition of sanctions on Iraq through the 1990s, culminating in a 2003 US/British-led invasion that overthrew the Iraqi ruler, Saddam Hussein, and that led to a devastating series of social and economic crises from which the country has yet to emerge. At the same time, the United States and European Union sought to normalize Israel’s place in the region – backing the misnamed Oslo Peace Process through the 1990s and advancing a range of regional initiatives aimed at deepening Israel’s ties with Jordan, Egypt and the Gulf states. In relation to both the Iraq War and Israeli–Arab negotiations, US strategic objectives carried an explicit economic dimension (frequently overlooked) that aimed to deepen the region’s integration with global trade and financial flows – war, politics and the region’s economic transformation need to be seen as intimately connected.

Of course, not all states in the Middle East were integrated into the global economy and the Western orbit to the same degree. Throughout the 1980s and 1990s, countries such as Libya and Syria largely stood outside the US-dominated system, seeking instead to build relationships with other powers – notably the Soviet Union (up until the early 1990s), and later Russia and China. These two states were headed by tightly centralized, authoritarian regimes – that of Gaddafi in Libya and the Assad family in Syria – in which state power was based on highly patrimonial structures and, in the case of Syria, the deliberate cultivation of sectarian patterns of rule. Due to the way that state control underpinned the power of these regimes, and their relative isolation from Western markets, both Libya and Syria did not see the adoption of IFI-led structural adjustment throughout the 1980s in the same way as other Arab states. Nonetheless, in the wake of the decline of their traditional international backers in the 1990s and early 2000s, both Syria and Libya began to seek a rapprochement with the West. This move was not solely political: it also included an opening to world markets and initial steps towards economic liberalization. In the case of Libya, Gaddafi gave his strong support to the US attack on Afghanistan in 2001 and was later to participate in CIA rendition flights and torture programmes. In 2003, following the lifting of UN sanctions that had been placed on Libya in 1992, key regime figures began lobbying for economic liberalization, with Gaddafi’s son Saif el-Islam insisting that ‘everything should be privatized’ in a speech at the Libya Youth Forum in 2008.^[9] Only tentative steps in this direction were to be adopted, however, due to the highly centralized concentration of state power in the hands of the Gaddafi family. Despite this fact, the IMF was to note on 15 February 2011 – just two days prior to the beginning of an uprising that was to lead to the overthrow of the regime – that ‘An ambitious program to privatize banks and develop the nascent financial sector is under way. Banks have been partially privatized, interest rates decontrolled, and competition encouraged . . . ongoing efforts to restructure and modernize the Central Bank of Libya are under way with assistance from the Fund.’

For Syria, significant steps towards economic reform began following the accession to power of Bashar al-Assad in 2000, after the death of his father Hafez al-Assad. The younger Assad began to privatize and open up the Syrian economy to foreign direct investment, leading to private control of key industrial sectors such as metallurgy, chemicals and textiles. According to one analyst of the Syrian economy, the size of the private sector had risen to just over 60 per cent of GDP by 2007, up from 52.3 per cent in 2000.^[10] Much like other countries in the Middle East, privatization benefitted a small group of business groups that were closely linked to the Assad regime, and that were enriched through state contracts and joint projects with foreign investors. As these reforms accelerated during the period 2005–10, much of the rest of the Syrian population saw a severe worsening of their living standards.

The cases of Syria and Libya confirm that the core assumptions of market-led development had become widely accepted by state and ruling class elites throughout the region by the end of the first decade of the 2000s. Although Syria and Libya may have sometimes expressed opposition to US policy in the Middle East – an opposition that was, however, typically rhetorical rather than substantive – their ruling regimes sought entry into the world market on the basis of economic programmes that paralleled those found elsewhere in the region. Characterized by a similar intertwining of authoritarian rule and economic power, the embrace of these policies expressed an attempt to strengthen the position of those located at the centre of the political system.

Social inequality and the polarization of wealth

Throughout this period of economic transformation, large and persistent disparities opened up in the ownership and control of wealth, access to resources and markets, and the exercise of political power. Alongside consistently high unemployment, rising poverty, and substantial levels of rural dispossession, a tiny layer of the region’s population benefitted considerably from the new economic policies. Privatization and new market opportunities presented lucrative openings for well-connected business groups involved in areas such as trade, finance and real estate speculation. State elites and militaries also came to wield significant economic power, building a web of highly opaque relationships with private capital groups.^[11] These patterns of inequality were sustained through authoritarian rule and state repression. Indeed, it is impossible to separate the highly autocratic political structures of the region from the policies (and outcomes) of the market-led development models implemented from the 1980s onwards.

One important illustration of these patterns can be seen in jobs and employment statistics. Before the global economic downturn of 2008, the average official unemployment rate across Egypt, Jordan, Lebanon, Morocco, Syria and Tunisia was higher than in any other region in the world. Young people and women were most affected by unemployment – with around one-fifth of all Arab women and one-quarter of youth in the region unemployed. These figures hide large regional disparities: in the Mashreq sub-region (Egypt, Jordan, Iraq, Syria, Lebanon and the West Bank and Gaza Strip), over 45 per cent of all young females were unemployed in 2011, more than double the rate for young men. The Middle East also ranked at the bottom of the world for labour market participation rates, with less than half of the region’s population considered part of the labour force. Only about one-third of young people and 26 per cent of women were in work, or actively seeking employment. This profound marginalization of young people and women carried deep social implications in countries where elderly men monopolized political power.

The region’s labour markets were also marked by a widespread prevalence of informal and precarious work. In 2009, the United Nations Development Programme reported that the growth of informal work in Egypt, Morocco and Tunisia was among the fastest in the world (reaching between 40 and 50 per cent of all non-agricultural employment). In Egypt, three-quarters of new labour market entrants from 2000 to 2005 joined the informal sector, up from only one-fifth in the early 1970s.[12] Not only did these trends affect the character of employment, they also carried important implications for the way urban space was used, and the kinds of social and political movements that emerged in the Middle East – the residents of densely-packed informal settlements across cities such as Cairo, Casablanca, Algiers and Beirut were viewed by governments with deep mistrust and suspicion.

These highly unequal employment and labour market outcomes contributed to worsening overall poverty levels in the region. The proportion of the population without the means to acquire basic nutrition and essential non-food items (the ‘upper poverty line’) averaged close to 40 per cent across Jordan, Morocco, Syria, Tunisia, Mauritania, Lebanon, Egypt and Yemen in the decade prior to the uprisings.[13] Health and educational outcomes also reflected unequal access to state services and social support. Between 2000 and 2006, around one-fifth of all children in Egypt and Morocco exhibited stunted growth as a result of malnutrition. Across the Mashreq countries, undernourishment increased from 6.4 per cent in 1991 to 10.3 per cent in 2011. In 2010, on the eve of the uprisings, a striking 30 per cent of all adults in the region were illiterate (rising to 40 per cent for females aged 15 and above). Educational access was also marked by clear inequalities. In Egypt, for example, UNESCO noted that ‘one in five of the poorest [children] do not make it into primary school at all, while almost all rich children get through to upper secondary’.

It is essential to stress, however, that alongside this widespread deterioration of social conditions throughout the 1990s and 2000s, many of the region’s leading economies were experiencing very high growth rates and were being lauded as successful cases of economic reform, worthy of emulation by other countries in the Global South. Egypt, for example, was ranked by the World Bank as the ‘world’s top reformer’ in its 2008 Doing Business report, and continued to rate within the top 10 global reformers until the overthrow of Mubarak. Likewise, the World Bank’s 2010 Development Policy Review on Tunisia praised the country for its ‘steady structural reforms and good macroeconomic management’ that had earned Tunisia a place ‘among the leading performers in the group of emerging economies’ and led to ‘enviable achievements’ for the country’s poor. This kind of support to authoritarian governments continues to mark IFI policy in much of the Middle East today (such as the Sisi regime in Egypt) – a fact that it is crucial to remember in the light of attempts by these institutions to rewrite their historical record in the region.

The regional order and the global crisis of 2008

The economic policies imposed by IFIs on the Middle East throughout the 1990s and 2000s did not just reconfigure social structures at the national scale, they also precipitated new economic and political hierarchies at the regional level. A key feature of these emergent hierarchies was the growing weight of the six Gulf Arab states (Saudi Arabia, the United Arab Emirates (UAE), Qatar, Kuwait, Bahrain and Oman) in the regional political economy – and the linkage between capital accumulation in the Gulf and processes of class and state formation elsewhere in the area.

Taken as a whole, the Gulf Arab states are marked by features that set them apart from the rest of the region. All these states are monarchies whose rich and relatively cheap hydrocarbon resources (both oil and natural gas) made the Gulf a critical focus of Western strategy in the Middle East throughout the twentieth century. At the same time, the social structures of the Gulf monarchies differ considerably from those found elsewhere in the Middle East. Most significant is the Gulf’s reliance on a large number of temporary migrant workers, mostly drawn from South Asia and to a lesser degree neighbouring Arab countries, who now make up more than one-half of the Gulf’s total population of 56 million. When considered as a percentage of the labour force, non-nationals make up from 59 to 86 per cent of the employed population in Saudi Arabia, Oman, Bahrain and Kuwait, increasing to around 92 to 95 per cent in Qatar and the UAE. Denied labour, political and civil rights, these migrant workers have been fundamental to patterns of urban growth and capital accumulation in the Gulf; they have also underpinned the ‘vertical segmentation’ of Gulf societies, with citizens incorporated into the surveillance and control of migrant populations through the kafala system.^[14]

Over the past several decades, growing international demand for the Gulf’s hydrocarbons – underpinned by a near continuous increase in the price of oil from 2000 to mid-2014 – has massively increased wealth levels in the Gulf.^[15] This has helped nurture the development of large capitalist conglomerates in the Gulf, closely linked to ruling monarchies and the state, whose activities span sectors such as construction and real estate development, industrial processes (particularly steel, aluminium and concrete), retail (including import trade and the ownership of shopping centres and malls) and finance.

While much of the surplus capital held in the Gulf has been invested in North America and Europe, large amounts also flowed into neighbouring Arab countries throughout the 2000s.^[16] Critically, this regional expansion of Gulf capital was predicated upon the SAPs discussed above, and the subsequent liberalization and opening up to foreign direct investment flows throughout many Arab countries in the 1990s and 2000s. As a result, Gulf capital was a prime beneficiary of the neoliberal turn throughout the wider region – becoming intimately involved in the ownership and control of capital across the Middle East as a whole.

These regional hierarchies are crucial to understanding the impact of the 2008–09 global economic crisis on the Middle East. As noted, in the years preceding this crisis the region was already facing very high levels of social and economic inequality. In addition to issues of youth unemployment, social exclusion and poverty, rising costs of food and energy placed considerable pressure on the livelihoods of many families.[17] Growing import bills meant that Arab governments faced enormous difficulties in maintaining already reduced subsidy levels; simultaneously, the cost of living for poorer families also rose. This precipitated a large jump in the number of the region’s poor – one estimate from the African Development Bank calculated that a total of 1.11 million additional people had fallen below the poverty line in Egypt, Jordan, Palestine, Syria and Yemen immediately prior to the 2008 global crisis itself.

As the 2008–09 crisis unfolded, these pre-existing patterns of economic development influenced how different parts of the region experienced the global turmoil. Non-oil exporting states were hard hit by the drop in global demand for goods such as agricultural products, textiles and garments, and other manufactured items. Simultaneously, overseas remittance levels fell as the crisis enveloped agriculture, construction and low-skilled manufacturing sectors in Europe, where many Arab migrants (both documented and undocumented) were located. Finally, financial liberalization throughout the neoliberal period had exposed many countries to potential fluctuations in foreign capital inflows, notably of tourist spending and foreign direct investment.

In the Gulf, however, the crisis was experienced differently. Gulf countries were initially shaken by a short-lived drop in oil prices from July to December 2008 (and the associated fall in global demand), as well as a pull-back in foreign capital inflows that led to a collapse of the Gulf’s real estate bubbles (particularly in Dubai). But, in response, the Gulf utilized accumulated financial surpluses to support the large private and state conglomerates threatened by the crisis, launching massive programmes of spending on real estate and infrastructure projects (concentrated in Saudi Arabia and the UAE). Moreover, the Gulf monarchies were able to make use of their structural dependence on temporary migrant workers to shift the burden of the crisis onto neighbouring countries – the hiring of new workers slowed and existing workers could simply be sent home as projects were cancelled. By 2010, oil prices had begun to move upwards once more, further consolidating the Gulf’s path out of the global crisis.

Taken together, these different regional trajectories of the global crisis meant that the Gulf states were able to emerge in a regionally strengthened position in the years following 2008, whilst neighbouring Arab countries faced growing fiscal and social burdens. It was in this context that mass protests first emerged in Tunisia in December 2010, spreading rapidly throughout the entire region. The first phase of these protests in 2011 saw the overthrow of the Ben Ali regime in Tunisia and the Mubarak regime in Egypt. Governments in Syria, Bahrain, Jordan, Algeria, Oman, Morocco, Yemen and Libya were also faced with uprisings and protests expressing opposition to autocratic patterns of rule and the deteriorating socioeconomic conditions experienced by much of the population. In this sense, the uprisings targeted both the economic policies that had been so heavily promoted by Western financial institutions over the preceding decades, as well as the political structures with which they were twinned. Not all participants in the uprisings thought about the protests in this manner, of course, but the ubiquitous slogan of aish, hurriyah, ‘adalah ijtima’iyah (bread, freedom, social justice) make this fusion of the economic and political spheres quite evident.

Conclusion

Despite the aspirations of those who took part in the extraordinary struggles of 2011, the extreme polarization of wealth and power in the region has not been fundamentally altered. A recent study has shown that the Middle East is now the most unequal region in the world, with the richest 10 per cent of income earners capturing 64 per cent of total income – compared to 37 per cent in Western Europe, 47 per cent in the United States and 55 per cent in Brazil.[18] The figures are even starker for the ultra-rich population of the region: the income share of the top 1 per cent stands at about 30 per cent in the Middle East, compared to 12 per cent in Western Europe, 20 per cent in the US, 28 per cent in Brazil, 18 per cent in South Africa, 14 per cent in China and 21 per cent in India.[19] These unprecedented levels of inequality are present both at the regional level – between the wealthy countries of the Gulf and the rest of the Middle East – as well as within individual countries.

These high levels of inequality are directly attributable to the market-based development models of recent decades, which have remained essentially unchanged following the uprisings and which continue to be promoted by major IFIs. Such continuities were clearly demonstrated by the IFI-led Deauville Partnership, an initiative launched at the May 2011 G8 summit in France that promised up to $40 billion in loans and other assistance towards Arab countries ‘in transition’. The core premise of the Partnership was a redoubled effort towards market opening in five target countries – Egypt, Tunisia, Jordan, Morocco and Libya – with goals such as ‘remov[ing] existing structural impediments’, encouraging a ‘vigorous private sector’ as ‘the main engine for job creation’, and pursuing ‘regional and global economic integration [as the] key to economic development’. In this manner, and strikingly reminiscent of how the political and economic crises of the 1970s and 1980s had opened the path to structural adjustment in the region, the post-2011 crises were viewed as an opportunity to extend the policy trajectories of past regimes. As the European Investment Bank noted not long after the overthrow of Ben Ali and Mubarak, ‘moments of political change can also represent an opportunity to reinforce or improve already existing institutional frameworks’.

Backed by initiatives such as the Deauville Partnership, IFIs have moved since 2011 to expand their position in the region with the offer of new loan agreements and other forms of assistance. Long-established institutions such as the World Bank and IMF have led the way in this process, while working alongside other institutions that have only begun operating in the region during the last decade (such as the European Bank for Reconstruction and Development). The evolving discussions around post-conflict reconstruction in countries such as Syria, Yemen, Libya and Iraq are also marked by the same kind of market-driven logic, and – as history amply illustrates – the aftermath of war, conflict and crisis (including the current global pandemic) is frequently viewed as an opportunity to rework power arrangements and accelerate economic change.

A decade on, the experience of the 2011 uprisings demonstrates that it is not sufficient to focus solely on political demands (such as new elections or governmental corruption) without simultaneously tackling the social and economic power of capital (nationally, regionally and globally). There can be no fundamental break with authoritarian state structures under an economic system that continues to promote unfettered growth and so-called ‘free markets’ at the expense of social justice and equality. One of the major weaknesses of the 2011 revolts was a failure to recognize this strategic lesson. But more recent cycles of political protest – notably the 2018–21 uprisings across Lebanon, Sudan, Algeria, Morocco and Iraq – appear to have learnt from the 2011 experience, explicitly linking the challenge to autocratic political elites with the need to reverse the extreme disparities in the control and distribution of wealth. In this sense – while the aspirations of 2011 remain wholly unfulfilled – the lessons, experiences and hopes of that moment will form an indelible part of struggles to come.

Adam Hanieh is a Professor of Political Economy and Global Development at the Institute of Arab and Islamic Studies, University of Exeter.  His current research focuses on global political economy, development in the Middle East, oil and capitalism. He is the author of three books, most recently Money, Markets, and Monarchies:The Gulf Cooperation Council and Political Economy of the Contemporary Middle East (Cambridge University Press, 2018), which was awarded the 2019 International Political Economy Group (IPEG) Book Prize of the British International Studies Association.

Copy-edited by Ashely Inglis

A partnership with Rosa Luxembourg – North Africa & TNI

[1] This article draws on Hanieh, A. (2013) Lineages of Revolt: Issues of contemporary capitalism in the Middle East. Chicago: Haymarket Books.

[2] Schlumberger, O. (2007) Debating Arab Authoritarianism: Dynamics and durability in nondemocratic regimes. Palo Alto, CA: Stanford University Press. p. 5.

[3] Hanieh, A. (2021) ‘Class, nation, and socialism’, International Politics Reviews 9: 50–6-0. Available at: https://link.springer.com/article/10.1057/s41312-021-00104-2 [Accessed 26 July 2021].

[4] Cited in Stork, J. (1975) ‘US Strategy in the Gulf’, MERIP Reports 36: 19.

[5] Walton, J.K. and Seddon, D. (1994) Free Markets and Food Riots: The politics of global adjustment. Wiley-Blackwell. p. 171.

[6] See Hanieh, A. (2013) Lineages of Revolt, pp. 76–80, for further discussion of the figures in this paragraph.

[7] Ibid.

[8] See Bush, R. (ed.) (2002) Counter-Revolution in Egypt’s Countryside: Land and farmers in the era of economic reform. London: Zed Books.

[9] Prashad, V. Arab Spring, Libyan Winter. Oakland, Baltimore, Edinburgh: AK Press Publishing and Distribution. p. 111.

[10] Haddad, B. (2011) ‘The Political Economy of Syria: Realities and challenges’, Middle East Policy 18(2): 53.

[11] For Egypt’s military–economic links see Marshall, S. and Stacher, J. (2012) ‘Egypt’s generals and transnational capital’, Middle East Report 262(Spring); and Abul-Magd, Z. (2011) ‘The army and the economy in Egypt’, Jadaliyya, 23 December 2011.

[12] Wahba, J. (2010) ‘Labour markets performance and migration flows in Egypt’, in Labour Markets Performance and Migration Flows in Arab Mediterranean Countries: Determinants and Effects, European Commission Occasional Paper 60, Vol. 3. Brussels: European Commission. p. 34.

[13] Achcar, G. (2013). The People Want. London: Saqi Books. p. 31.

[14] Khalaf, A. (2014) ‘The Politics of Migration’, in A. Khalaf et al. (eds.) Transit States: Labour, migration and citizenship in the Gulf. London: Pluto Press. pp. 39–56.

[15] Hanieh, A. (2018) Money, Markets, and Monarchies: The Gulf Cooperation Council and the political economy of the contemporary Middle East. Cambridge: Cambridge University Press. p. 31.

[16] A commonly cited figure throughout the 2000s was that around 50 to 55 per cent of all Gulf Cooperation Council investments went to US markets, 20 per cent went to Europe, 10 to 15 per cent went to Asia and 10 to 15 per cent went to the Middle East and North Africa.

[17] From July 2007 to July 2009, the food consumer price index rose 53 per cent in Tunisia, 47 per cent in Egypt, 42 per cent in Syria, 22 per cent in Morocco, and 20 per cent in Jordan.

[18] Alvaredo, F., Assouad, L. and Picketty, T. (2018) ‘Measuring inequality in the Middle East 1990–2016: The world’s most unequal region?’, The Review of Income and Wealth (online). Available at: https://onlinelibrary.wiley.com/doi/full/10.1111/roiw.12385 [Accessed 26 July 2021]

[19] Ibid.

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The 258 civil society organizations (CSOs) that sent an open letter to the World Trade Organization (WTO) and its members could not be more concerned. On April 17, 2020, when they asked the WTO to stop all trade and investment treaty negotiations during the COVID-19 outbreak and refocus on access to medical supplies and saving lives, the virus death toll surged past the 150,000 mark.

Trade and health: a prisoner’s dilemma

On the same day, the WTO organized a virtual meeting, in which its director general stressed the importance of “maintaining open markets for trade in laying the groundwork for a strong recovery.” The virtual meeting also discussed if the WTO members “would be open to formal decision-making through virtual meetings or written procedures until traditional in-person gatherings can resume.”

The letter’s endorsers that represent social movements in 150 countries, such as the United States, Brazil, India, Australia, many European countries and Tunisia, said they were shocked by “the business as usual” attitude of the WTO. For them, not only does the institution’s agenda ignore technological deficiencies of some developing countries, but it also diverts the efforts and resources from the most important purpose of combating the virus.

Many of these CSOs, such as the Third World Network, Oxfam, Greenpeace, Arab NGO Network for Development and the Tunisian Observatory of Economy, have been advocating for a fair distribution of world resources and fighting against the adverse impact of free trade on social welfare, especially in the Global South.

The Covid-19 pandemic just seems to revive these concerns. Indeed, access to affordable medicine often stumbles on the binding rules of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). Adopted in 1994, the latter expanded the scope of intellectual property rights, especially in terms of patent protection and conferred more powers to patent holders.

Despite its binding effect, TRIPs offers flexibilities such as compulsory licensing for public health purposes. Barr al Aman has recently stressed the importance of this flexibility and urged the Tunisian government to use compulsory licenses if the prices of health products are excessively expensive and / or if the quantities made available to Tunisia are not sufficient to cover the urgent national need.

Soigner le COVID-19, l’urgence d’une licence obligatoire

However, for many countries the use of the flexibilities is not that easy. According to a study conducted by the WHO and the South Center in 2005, “a number of provisions in recently concluded FTAs between developed countries (essentially the US) and developing countries, pose a real risk of undermining an effective use of TRIPs flexibilities in developing countries for public health purposes.”

Therefore, besides the discrepancy in the priorities scale of both its issuers and its receivers, the open letter brings back governments, drug companies and the public opinion back to an essential question: will intellectual property hinder the access to the potential COVID-19 medicines and other vital medical supplies?

“From the point of view of intellectual property, of course, a tension exists – and it is a tension that exists around access,” Francis Curry, the director general of the World Intellectual Property Organization (WIPO) said back in 2015, at a symposium on innovation and access to medicine held jointly with the WTO and the World Health Organization (WHO) in Geneva.

Curry then added: “on the one hand, what intellectual property does economically is making access a salable commodity, and that is the basis of markets in technology and creative works. But on the other hand, access as a salable commodity… raises questions about the cost and possibility of access.”

A deep-rooted paradox

The roots of this paradox are deep and old. Since the enactment of the first modern patent law in Venice in 1447, there has been a heated debate over the moral and philosophical foundation of patents and other forms of intellectual property such as copyright, trademarks and trade secrets.

As explained by the Stanford Encyclopedia of Philosophy “patent protection is the strongest form of intellectual property protection, in that a twenty-year exclusive monopoly is granted to the owner over any expression or implementation of the protected work.”

The idea of monopoly over ideas was endorsed by philosophers like John Locke (1632 – 1704) and G.W.F. Hegel (1770 – 1831).

The English theorist claims that individuals are entitled to control the fruits of their labor (including their intellectual labor).

The German thinker has rather a personality-based justification as he argues “that individuals have moral claims to their own talents, feelings, character traits, and experiences.”

Another philosophical justification for intellectual property is to be sought in utilitarianism. The utilitarian point of view was explained in the Virginia law review, by Jeanne C. Fromer Associate Professor at Fordham Law School. “Copyright and patent laws are premised on providing creators with just enough incentive to create artistic, scientific, and technological works of value to society at large by preventing certain would-be copiers‘ free-riding behavior,” she wrote.

Do these arguments hold up when the patented intangible work is the formula of a saving-life drug?

Dr. Yusuf Hamied’s answer would be no. When Harvard Business School (HBS) interviewed the founder of the Indian pharmaceutical company Cipla in 2013, he said:

There should be no monopoly… [we are] willing to pay the originator [of drugs] a suitable compensation and India should not be deprived of newer drugs and be at the mercy of the innovators.”

If the HBS featured Dr. Hamied for its Creating Emerging Markets Project, it is because of the man’s exceptional battle against the human immunodeficiency viruses (HIV) that causes acquired immunodeficiency syndrome (AIDS).

Back in 2001, Cipla mixed three molecules– Nevirapine, Didanosine and Zidovudine and came up with a new anti-HIV drug. Dr. Hamied then gave his antiretroviral therapy (ART) to humanitarian organizations and poor Asian and African governments for $350 a year.

That price was thirty times lower than market prices. Suddenly, big multinational pharmaceutical groups were left with their useless patents and with financial shortfalls of billions of dollars. Full of wrath at seeing their monopolies collapse, western multinationals had to lower their AIDS treatment prices by 80%.

While western business groups and media accused Dr. Hamied of piracy, the United Nations organizations described him as India’s Robin Hood of drugs.

When Dr. Hamied gave that interview, the world was still dazed by the 2009 swine flu pandemic and its estimated death toll of 284,000 victims. So, he intuitively evoked the example of the Oseltamivir; the antiviral drug used to prevent and treat swine flu, other subtypes of influenza A and influenza B.

The patent on the Oseltamivir in the US was then held by the Swiss multinational Roche. An epidemic before the patent’s expiry date (2016) would have meant, according to Dr. Hamied, that the destiny of the world would have been in the hands of one company.

In a concluding remark that encapsulated his business philosophy, the Indian scientist said:  “I am a firm believer that if you are in the health care business like supplies, it is not a business per se; it is a business plus you are saving lives. So it has to have a humanitarian angle to it.”

Santé: la bataille autour de la transparence sur le prix des médicaments

This dispute happens as international trade has become the stage of a violent confrontation between the US and China: a “trade war” which is paralyzing the WTO, particularly as this multilateral institution is attempting to reform itself.

We interviewed Ms Aileen Kwa, a researcher, trade negotiations expert and advocate, heading the Trade for Development Program at the South Center* to learn more about the complexities of the crisis.

What reform is the US putting on the table?

There are four main reforms that were requested by the US and the developed countries. The first reform is relating to the WTO’s rule of consensus regarding decision making. According to this rule, no negotiation can take place unless there is a consensus on its negotiation agenda between all the members a process they want to reform.
The second element of the reform states that several developing countries should not avail trade flexibilities (S&D treatment).
A third element they have been insisting on is what they call transparency and notification measures: the necessity that members make all notifications formally. The proposal indicates that members who default on notifications should be punished.
And the last is about bringing new issues to the discussion, e-commerce for example.

And how did developing countries respond to these suggestions?

Regarding transparency and notification, developing countries were clear that they do not agree on additional notifications. It is impossible for developing countries to abide by the notifications’ requirements. Responding formally to everything, attending meetings and engaging with officials in the capitals of our countries is a resource-intensive process, whereas many of us, including Tunisia’s delegation, are under-represented. Tunisia has only one delegate, trying to cover all the WTO committees and negotiations. It’s an impossible situation.

With regards to other reform suggestions, developing countries had their position on how the reform of the WTO should be; they presented a proposal of which Tunisia was co-sponsor.

The aim of this proposal was to say that the idea of a WTO reform is not a new question. The developing countries had been asking for it since the first round of negotiations called “the Uruguay round” (1986-1994). Therefore, there was already a set of reforms, and a suggested reform agenda from the perspective of developing countries, that was not taken into consideration and which aims at addressing many of the imbalances coming out of the Uruguay round.

The proposal stresses that there are a lot of WTO principles that developing countries want to preserve including consensus decision making. It also reminds us of the issues that developing countries want to discuss such as S&D treatment, aspects of agriculture’s development, implementation issues, and balancing some of the imbalances from the GATT agreement.

But how did all this “battle of reforms” start?

After the Buenos Aires Ministerial Conference in 2017, some developed countries (the EU, Japan, and the US) got frustrated at the fact that developing countries, especially India, South Africa and the Africa Group were not in favour of launching negotiation in some new trade area that they suggested, especially e-commerce. In their opinion, developing countries used the consensus decision-making of the WTO to stop the negotiations on new areas within the WTO.

As a result, during the Ministerial Conference they set up, what is called a plurilateral initiative in the areas of e-commerce, investment facilitation among others. During those meeting, members of developing, developed and least developed countries of the WTO who have accepted to negotiate these topics, will gather and discuss ways forward.

They also started to meet in trilateral form – US, EU and Japan- at the Ministerial level in order to discuss these same issues as well as a reform of the WTO. A big part of the reform they agree on is how to bypass the consensus format of decision making in the WTO in order to continue these plurilateral discussions and negotiate issues of their interest without going through the consensus process. They would later bring the outcome to the multilateral format.

Developing countries view this as a problem, because it would be contrary to the rules of the WTO and will not accept the outcome. It was however not possible to stop these meetings. The breaking point has not come yet: the situation will most likely get more complicated when they finish their negotiation and decide to bring it to the multilateral level.

What did developing countries think of the USA July memorandum on the elimination of what they called “Unfair trade benefits”?

The memorandum was very threatening, yet funny. The US submitted the proposal to reform access of developing countries to the trade flexibilities under the Special & Differential treatment twice this year, in January and in May.

Developing countries refused the US proposal and they made it clear why they think the proposal is unfair and why they still deserve S&D treatment.

But despite their opposition, the USA submitted this same proposal again in July, and of course, did not get support for it. A few days after this, the memorandum was released.

The Special and Differential (S&D) Treatment

These are special rights and flexibilities granted to developing countries under the WTO due to their development status. These flexibilities offer the privilege of maintaining some tariffs to protect the local economy or enjoy longer transition periods to implement WTO rules. These provisions allow more policy space for developing countries to strengthen their economic fabric.

For instance, developing countries were given until January 2000 to adjust their legislations and implement the TRIPs provision. Least Developed Countries were given more time, until 2006 to adapt their legal frameworks and enforce protection of Intellectual property rights.

Why do Developing countries refuse this reform?

The US proposal argued that the poverty rates dropped in Developing countries, and that shall make them equal to developed countries in applying the WTO trade measures. That means they will no longer enjoy flexible implementation calendars, neither should their exported products benefit from preferential treatments, among other flexibilities.

This argument may be true if we use the $2 poverty threshold used by the World Bank. However, if we use $5 or $7 per day as the poverty threshold -which is a more accurate measure according to experts-, the number of poor people increases tremendously, and we can see that people in poverty are still overwhelmingly concentrated in developing countries, including in the most efficient/blooming economies like China. This is why Developing countries find the US proposal unfair and are opposed to it.

Do you think this reform can get through despite developing countries opposition?

It is quite hard to answer. I think the US was very ambitious with its reform. As a powerful country, the US can ask for a lot of things, exert political pressure and get away with almost everything. But how much can they continue pressuring a group of developing countries? I very much doubt that countries like India or China will give up on their position.
Developing countries also have their reform agenda. They argue that the Uruguay round, which is the first trade negotiations round, concluded in 1994, ended up with several imbalances in fields like Agriculture, and Intellectual property, and that it gave developed countries many flexibilities which are not available to developing countries, like reverse S&D treatment.

In their Trade Policy Review, the US mentions the WTO reforms are one of the pillars of its policy. What could possibly happen in case there is no agreement?

If the US under the Trump Administration continues to put pressure in the next ministerial conference which will be held in Astana, Kazakhstan in 2020, I think this will cause everything else to collapse.

This goes beyond the WTO. Once you turn your back on the WTO, you also do so on other multilateral forums. What about the United Nations Framework Convention on Climate Change (UNFCCC) negotiations? This is not only about the WTO, but about a big systemic shift.

The US still refuses to take part in renewing the WTO Appellate body, the WTO organ in charge of settling trade disputes, which is threatening to become dysfunctional by December 10th. Is this another mean of pressuring the passing of the reforms they want?

I used to think that the US used this method as a bargaining trick but now I am more inclined to think that the US just does not want to revive the Appellate Body, even if the reforms go through. They simply do not want an appellate body which in some cases has ruled against the US.

Why do developing countries refuse to launch negotiations about issues like e-commerce?

The stakes in negotiating e-commerce are huge. What the US wants is “free data flows” which consist in opening up our digital markets. When the data flows freely, so will the online goods and services. This bypasses any of the tariffs that we have in place right now, as well as the GATT limitations. Today, the products and services concerned might be limited but tomorrow it can be anything under the sun.

This is the heart of the problem. A lot of developing countries are not yet aware of what the game is about. The narrative that is presented to them is that e-commerce is very good for the economy, that it is a reality going forward, that they and the WTO should keep up to with the 21st century, and that all countries need to have trade rules for their digital economy. They are promised programs of assistance in building their digital capacity.

If there is no agreement, do you think we will witness a bigger wave of bilateral treaties in which these measures are discussed?

I think, regardless of what will happen in the WTO, bilateral agreements will continue anyway. They are struggling a lot in any case. Since the Uruguay round, bilateralism was used as a threat by developed countries against developing countries. They would say “if you don’t agree on this in the WTO, we will go through FTAs.” And in fact, they concluded the Uruguay round and launched the NAFTA the same year. I think that they will continue trying to get what they can get in any forum.

How did the Doha round die? Is there any chance of revival?

The negotiations of the Doha round have been suspended to a large degree because some countries would prefer it not to exist. But the Doha round was never formally closed. In every single ministerial conference since its launch, the Ministers would reaffirm the Doha round, before they continue to negotiate. The US is saying that the Doha round died in Nairobi. But there is no formal decision or statement which states this. So technically and legally, the Doha round continues.

Do developing countries still want to negotiate?

Yes, they still want to negotiate the development issues on the Doha round. It is the opposition of several developed countries which prevented further negotiations. But in the end, they cannot dispute the fact that there are still pending, unsolved Doha issues. And it is in our right to call on these mandates for further negotiations.

* South Center is a research-oriented developing countries organization based in Geneva, working on assisting developing countries in presenting development-centered policies in international policy forums.

This interview was conducted in Summer 2019.

Mohamed Haddad supervised, An Hoang-Xuan & Khansa Ben Tarjem reviewed this paper.

Is indebtedness really irredeemable? And can monetary sovereignty as defined by Modern Monetary Theory (MMT) settle African states problems with their creditors? These questions, among many others, have been debated in a 4-day conference held in Tunis, under the theme “The quest for economic and monetary sovereignty in 21st century Africa”.

From November 6th to 9th, economists gathered by The Rosa Luxembourg Foundation, the Global Institute for Sustainable Prosperity (GISP) and the Politics of Money/DfG Network have examined the history of Africa’s debt and analyzed its political, economic and social implications for the continent’s 54 states.

Africa’s debt: a burden of the past

When examining sovereign debt through the lens of history, many speakers first identified the moment of independence (1950’s – 1960’s) as a turning point. African countries then moved from wealth-generating colonies to theoretically independent countries. But the yoke of political and military colonization had been replaced by the burden of an increasingly growing public debt.

The freshly independent states inherited a heavy colonial debt. This debt transfer has been described as “illegitimate” and “illegal” by several civil society movements in Africa and around the world.

Since its creation in Belgium in 1980, the Committee for the Cancellation of the Third World Debt (CADTM) has been denouncing the “collusion” between ex-colonizers and IFIs.  “The World Bank is directly involved in some colonial debts. In the years 1950’s and 1960’s, it granted loans to the colonial powers for projects allowing them to maximize their colonies exploitations”, Robin Delobel, member of CADTM-Belgium wrote earlier this year.

Also read (FR) : Franc CFA: Saga d’une monnaie (néo) coloniale 

In his article entitled “When will reparations for colonial debt be made?” the activist pointed out that “debts contracted with the World Bank by the Belgian, English and French authorities for their colonies were then transferred to the countries that gained their independence without their consent”.

There came the advent of neocolonialism.

Then came the 1970’s, a decade of massive developments plans. African governments undertook large-scale projects and borrowed heavily to finance the construction of dams, ports, hospitals, railroads and schools. It was promoted by IFIs that external finance would grant prosperity. However, by the mid 1980’s, most governments found themselves overwhelmed by debt and debt service that had to be paid in foreign currency.

Besides, not all the loans were used to build infrastructure and generate growth. Many post-colonial governments were ruled by the military and armed conflicts were recurrent in several regions of the continent. A study published by the Stockholm Peace Institute in 1971 and quoted by the monthly magazine Africa, showed that during the period between 1950 and 1969, Egypt’s major weapon imports reached 1500 million US dollars. That was more than half the total arm imports of all other African countries during the same period. Corrupt regimes and dictators have also contracted debt for their own benefit.

It was promoted by IFIs that external finance would grant prosperity. However, by the mid 1980’s, most governments found themselves overwhelmed by debt and debt service that had to be paid in foreign currency.

Faced with this risk of insolvency, and in an unprecedented neoliberal intransigence, IFIs, such as the International Monetary Fund (IMF), began to impose Structural Adjustment Plans (SAP) on their debtors. In order to benefit from IMF’s loans and finance, their teetering budgets and balance of payments, indebted governments were forced to liberalize their markets and privatize several state-owned companies. But these so-called reforms, which first meant to enforce payment, were paradoxically (enough) constraining any possible future debt settlement.

The trap of indebtedness

Tunisia is one of the countries that have been stuck in this trap. Since the 1970’s, the government has become literally obsessed with foreign direct investments. It adopted laws (in 1972, 1993 and 2016) that granted generous tax and financial incentives to foreign, yet low added-value, investments.

Tunis has thus deprived itself of a huge amount of tax revenue. “We identify these tax incentives as tax expenditures, because it is a shortfall for the state,” said Amine Bouzaiane, the Tax Justice Officer at the Tunisian NGO, Al Bawsala.

Tax incentives proved to be ineffective and costly, even by the IMF, as foreign investors would have invested even without these incentives.

“Experience shows that there is often ample room for more effective and efficient use of investment tax incentives in low-income countries. Tax incentives generally rank low in investment climate surveys in low-income countries, and there are many examples in which they are reported to be redundant—that is, investment would have been undertaken even without them”, the Washington-based institution stated in a report published in October 2015.

Another self-inflicted constraint is the money lost due to free trade agreements (FTAs) and the “so called Tunisia’s open trade policy”. “Before the first SAP in the 1980’s, tariffs duties represented 25% of Tunisia’s tax revenues, in the 2020 draft finance bill the rate is about 5%”, Bouzaiane told law students at a lecture held earlier this month in Tunis.

Read More (FR) : ALECA/Tunisie: Quel impact des prêts UE sur les négociations? (Interview)

These unfavorable terms under binding FTA’s and investment treaties have been criticized worldwide by activists and economists like Prabhat Patnaik, Professor Emeritus at the Center for economic studies and planning at Jawaharlal Nehru University, New Delhi.“If governments have a popular mandate, they should withdraw from these treaties”, he told Barr Al Aman.

Over the last decade, Tunisian authorities have been overwhelmed by new dilemmas. The government responded to the outrage over unemployment by massively hiring in the public sector, which led to an inflated wage bill. Besides, corporate tax revenues have been shrinking as companies have been less productive. The country’s phosphates revenues have also declined due to protests over employment, transparency and fair development in the mining region.

In 2010, the state budget deficit was about TND 650 million (1% of GDP). In 2018, it amounted to TND 5.2 billion (10% of GDP). To fill the gap, the State has to borrow, and loans have to be contracted in dollars and euros.

On the other hand, the budget allocated in hard currency to the repayment of the foreign debt, of the principal and interest for the first half of 2019 represented almost one-quarter of all government expenditure.

In short, if a cartoon could summarize Tunisia’s debt ordeal, it would depict the country as a helpless Sisyphus who borrows continually to pay an ever-growing debt.

MMT’s prescriptions

So how can MMT help countries like Tunisia break free from this prison? “Through monetary sovereignty”, replied Fadhel Kaboub, associate professor of economics at Denison University, Ohio, and President of the Global Institute for Sustainable Prosperity (GISP).

A monetarily sovereign government, as he told Barr Al Aman, is a government that issues its own currency, collects taxes in that same currency, only issues bonds denominated in its local currency and operates under a flexible exchange rate regime.

Except from countries using the CFA Franc, which do not have monetary sovereignty at all as they have to deposit a share of their reserves at the French Treasury, the majority of African countries meet the first and second conditions of monetary sovereignty. The problem lies with the two last requirements.

Watch (AR) : What is MMT? / السياسة النقدية: ثورة في المنوال الاقتصادي؟

Tunisia, for instance, mainly borrows in foreign currencies that help the central bank build up its reserves and get access to more favorable interest rates and lengthier maturities.

As Tunisia’s local currency, the dinar, is very weak, paying down external debt and financing imports become more expensive, and thus lead to more deficit.

Beyond issuing bonds in local currencies and operating under flexible exchange rates, Kaboub added that energy and food sovereignty are the other two essential components of MTT.

Indeed, investing in renewable energies would not only drastically reduce the very expensive oil imports, but also mitigate climate change impacts. Agriculture, when directed at self-sufficiency rather than export, would minimize the exorbitant food imports, he said.

According to Mehdi Ben Guirat, professor of economics at Laurentian University, Ontario, “such measures would limit developing economies’ exposure to exogenous shocks, which will lead to less external debt and less conditional loans”.

Ben Guirat agreed with Kaboub on the need for developing countries to solve the “survivalist issues” of food dependency and energy deficit. He also stressed the importance of “champions programs”. In these programs, as he put it, the government identifies and finances priority sectors that have spillover effect and would therefore pull up the whole economy.

“There needs to be an ideological shift in terms of how the government operates”, he said.

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Mohamed Haddad, Hoang-Xuan An & Nada Trigui contributed to this paper.

“Can we sell more olive oil in Europe? Can we mention that it is a product coming from Tunisia? Would it be possible to postpone the next negotiation meeting? What guarantees do we have that our business owners and investors will be allowed on the European territory?” 

These few questions may seem simplistic, and obviously caricatural… but they eventually sum up, in a nutshell, the Tunisian negotiators discourse. 

Swapping dates, oranges and olive oil for Euros, but what is the counterpart? Where will the thousand tons of wheat consumed by Tunisian households in the form of subsidized baguettes and flour come from? What should the agricultural sector serve for? feed the local population or increase the foreign currency reserves? Should the right to healthcare take precedence over the intellectual property rights and the profits they generate for pharmaceutical companies?
These fundamental questions do not seem to be part of the Tunisian negotiators’ preoccupations. Is this an exaggerated statement? Perhaps. 

At the risk of recalling the obvious, the European Union is Tunisia’s first trade partner. But the EU is by no means a charity organization. It is an economic and political entity, one of the most powerful in the world, which position is being threatened by the USA and China. 

It is both predictable and legitimate that the EU defends its economic interests and its sphere of political influence in the region. And it should be the same for Tunisia. Interests of these actors can converge… but they can diverge as well.

It is not a question of discussing the modalities and extent of deeper free trade with the EU, but of assessing the balance of power and the impact of each article, each paragraph of this agreement on the lives of citizens, but also of the Tunisian State. As Ignacio Garcio Bercero, chief negotiator of the EU, states, Tunisia represents only 0.5% of the European market, while the European market represents more than 70% of Tunisian exports.

Why taking as much interest in Tunisia, then? Why didn’t the negotiation take place at a the Maghreb scale in order to reduce the lack of proportion between the negotiating parties? Indeed, Tunisia is in a relationship of economic and political dependence on the EU. Would Tunisia be able to re-balance or even… better negotiate its dependence? 

The EU and Tunisia are bound by an association agreement since 1995. What conclusion can we draw from it? The evaluation on Tunisia’s part is dragging. The terms of reference used to choose a consulting cabinet were published in January 2017. Selected at the end of 2018, it is barely starting its work just as this article is being written. Our requests to access information about the final interim reports remain unanswered. 

In this series of article about DCFTA, we will first address the ongoing negotiations, happening in the dark. They are the fruit of an investigation led by Fadil Aliriza after a conference by the Tunisian Forum on Economic and Social Rights (FTDES) held in October 2018.

Thereafter, we will concentrate on the topics of food security and sovereignty. The third article will focus on the fragile balance between the right to life and health and the right to intellectual property, a balance which might be challenged by the DCFTA. 

Our demands since October 2018 to meet the Tunisian chief negotiator, Hichem Ben Ahmed, currently Minister of Transport remained fruitless. His European counterpart, Ignacio Garcio Bercero, chose to answer our questions by email. 

Finally, the critical perspective is raised to us by Maha Ben Gadha, head of the economic programs at the Rosa Luxemburg Foundation – North Africa. Beyond these articles, our media, Barr al Aman, will produce meetings and Facebook lives to assess these embryonic public policies.  

Let us imagine a private, parallel and transnational justice to defend the interests of investors considered “not enough protected” by Tunisian laws. Let us imagine medicines whose production and marketing were prohibited because of extensions in protection periods, additional to those originally planned by the patent. 

Let us imagine calibrated, certified, imported and European-norm-compliant potatoes in our supermarkets. Let us imagine an adaptation of our job market to European expectations…

The Deep Comprehensive Free Trade Agreement (DCFTA) proposed to Tunisia by the EU certainly has an advantage: it questions us about who we are, and what we want to be.

Translated by An Hoang-Xuan