Understanding the Political Economy of the Arab Uprisings

For the millions of citizens in the Arab World who came together in 2010-2011 to discover their common yearning for dignity and liberty, the real revolutions only began after the wave of protests. Understanding the Political Economy of the Arab Uprisings reassess the interests, potential and constraints of various socio-political players and their importance in the building of a constructive environment for democratic progress in the Middle East. Initiated by the Cairo-based Economic Research Forum and edited by Ishac Diwan, this invaluable volume features contributions by Middle East academics across the world. They examine the reasons behind the uprisings, how democratic transitions transpire, the role of Arab capitalism in the crises, and how the experiences of other countries such as Indonesia, Turkey and Iran, can forecast where these uprisings may lead the Middle East in the years to come. Contents: Preface; Introduction; The Genesis of the Uprisings: The Political Economy of Arab Presidents for Life and After (Roger Owen); Understanding Revolution in the Middle East: The Central Role of the Middle Class (Ishac Diwan); The Making of the Tunisian Revolution (Fadhel Kaboub); A Transition to Democracy?: On the Determinants of Democratic Transitions (Caroline Freund and Melise Jaud); Islamists in Power? Inclusion, Moderation, and the Arab Uprisings (Jillian Schwedler); Arab Capitalism in Crisis: Detecting Corruption and Evaluating Programs to Control It: Some Lessons for MENA (Jeffrey B Nugent); Enhancing Competition in a Post-Revolutionary Arab Context: Does the Turkish Experience Provide Any Lessons? (Izak Atiyas); Lessons from Elsewhere: Politico-Economic Developments in Turkey and The Transformation of Political Islam (1950-2010) (Hasan Ersel); Social Order, Rents, and Economic Development in Iran Since the Early 20th Century Hadi Esfahani; What Happened in the Early Years of Democracy: Indonesia's Experience (Akhmad Rizal Shidiq and Philips Jusario Vermonte). Readership: Graduate and research students, political scientists, economists, social scientists who specialize in the political economy of the Middle East and current affairs in the MENA Region Contents 10 Preface 6 About the Editor 12 About the Contributors 14 Acknowledgments 18 Introduction 20 UNDERSTANDING THE POLITICAL ECONOMY OF THE ARAB UPRISINGS 20 The Genesis of the Uprisings 34 Chapter 1. The Political Economy of Arab Presidents for Life — and After 36 1. Introduction 36 2. The Establishment of Authoritarian Presidencies for Life 37 3. Republican Presidents Become More Monarchical 38 4. Pressures Within the Dictatorial Regimes that Account for Their Overthrow 39 5. Major Political and Administrative Problems Involved in the Development of New Structures and a New Arab Order 40 6. Economic and Legal Problems: Tunisia, Egypt, and Libya 42 6.1. The trial and punishment of the leaders of the old regime 42 6.2. The restructuring of the old crony-capitalist economic order 43 6.3. Longer-term reform of basic institutions and their relationship with the state 44 7. Some Lessons Learnt so Far 45 8. A Final Question: What has been the Effect of the Spring on the Arab Monarchies and the Gulf States? 46 9. Conclusion 46 Acknowledgments 47 References 47 Chapter 2. Understanding Revolution in the Middle East: The Central Role of the Middle Class 48 1. Introduction 48 2. Theoretical Frameworks 50 2.1. The roll-back of the state 51 2.2. Repression and co-optation 52 2.3. Modernization theory 53 2.4. Distribution theory 54 2.5. What happened to in equality? 55 2.6. Political Islam 56 2.7. Divisions among the elites 57 2.8. The middle class 57 3. Attitudes Towards Democracy 59 3.1. Preference for democracy 60 3.2. Preferences for equality 61 3.3. The infuence of political Islam on democratization 63 3.4. Bottom line on the transition hypotheses 64 4. State-Business Relations and Networks of Privilege 65 4.1. The value and nature of favors 67 4.2. Implications for the economy and polity 70 5. Conclusions 71 Annex 72 References 73 Chapter 3. The Making of the Tunisian Revolution 76 1. Introduction 76 2. The Inevitable Leaderless Revolt 77 3. The Transformation of Elite Power Structure 83 4. The Breakdown of the Social Contract 85 5. Towards a New Liberal-Political Islam Coalition 90 6. Conclusion 93 Acknowledgments 94 References 94 A Transition to Democracy? 98 Chapter 4. On the Determinants of Democratic Transitions 100 1. Introduction 100 2. What Do Democratic Transitions Look Like? 102 2.1. Identifying democratic transitions: Successful, gradual, and failed 102 2.2. How frequent are democratic transitions? 105 3. How Do Transitions Happen? 106 3.1. Estimation framework 106 3.2. Empirical results 108 3.3. Robustness checks 114 4. What Makes Transitions Successful? 115 4.1. Estimation framework 115 4.2. Empirical results 116 5. Conclusion 121 Appendix 123 Acknowledgments 127 References 127 Chapter 5. Islamists in Power? Inclusion, Moderation, and the Arab Uprisings 130 1. Introduction 130 2. Inclusion and Moderation 131 2.1. The limits of inclusiveness 135 3. The Record of Islamist Participation 138 4. Changing Institutional Dynamics 140 5. Impact of the Arab Uprisings 142 6. New Challenges from the Margins 144 Acknowledgments 145 References 145 ARAB CAPITALISM IN CRISIS 148 Chapter 6. Detecting Corruption and Evaluating Programs to Control It: Some Lessons for MENA 150 1. Introduction 150 2. Model of Principal and Agent 160 3. Methods of Fighting Corruption and Relevant Evidence 162 3.1. Limit the size of the public sector and privatize 162 3.2. Increase competition and openness 163 3.2.1. Decentralize government 163 3.3. Simplify regulations, lessen discretion and ambiguity in program rules and increase transparency and information 164 3.4. Raise the salaries (both present and future) of the bureaucrats 165 3.5. Increase monitoring to detect corruption 167 3.6. Rotate, fire, and replace the endemically corrupt agents 169 3.7. Establish a high profile anti-corruption agency 170 3.8. Grant freedom of the press and media access 171 3.9. Make greater use of international standards and monitoring 173 4. Conclusions 176 References 179 Chapter 7. Enhancing Competition in a Post-Revolutionary Arab Context: Does the Turkish Experience Provide Any Lessons? 184 1. Introduction 184 2. A Competition Enhancing Reform Package 186 2.1. The content 186 2.2. The institutional setup 187 3. The Experience of Turkey 189 3.1. From discretionary capitalism to institutional reform 190 3.2. Assessment 197 4. Evaluation: Trade-Offs and Challenges of Enhancing Competition 198 4.1. A brief review of empirical evidence 198 4.2. The politics of enhancing competition 199 4.3. The role of privatization (vs. liberalization) 202 4.4. Separation of powers and the special role of a competition authority 202 4.5. Empowering consumer groups 204 4.6. Selection of regulators 204 5. Conclusion 205 Acknowledgments 206 References 206 Lessons from Elsewhere 210 Chapter 8. Political and Economic Developments in Turkey and The Transformation of Political Islam (1950-2010) 212 1. Introduction 212 2. The Single-Party Regime and Etatism (1923-1945) 214 3. Transition to Multi-Party Regime (1946-1950) 215 4. Infancy Phase of the Multi-Party Regime Failure on Both Fronts (1950-1960) 218 5. Multi-Party Regime on a Fragile Path 220 6. Towards an Open Market Economy 223 7. The Years of Macro-Governance Failure (1990s) 224 8. Conservative AKP and Its `Reformism' 226 8.1. Intellectual roots of the AKP and changes in socio-economic environment 227 8.2. Stability over everything else: The AKP era65 229 8.3. The 2008-2009 crisis and its aftermath 230 9. Conclusion 231 List of Abbreviations 233 Acknowledgments 233 Chapter 9. Social Order, Rents, and Economic Development in Iran Since the Early 20th Century 238 1. Introduction 238 2. The Framework 243 3. Social Order and Economic Conditions in Iran in Early 20th Century 247 4. Transformation of Social Order under Reza Shah 250 5. Economic and Political Change under Mohammad-Reza Shah 253 6. Formation of the Islamic Republic under Ayatollah Khomeini 258 7. Reconstruction, Reform, and Reaction 267 8. Conclusion 276 References 278 Chapter 10. What Happened in the Early Years of Democracy: Indonesia's Experience 282 1. Introduction 282 2. Prelude to Crisis 283 3. Two Important Reforms: Electoral Democracy and Decentralization 284 3.1. Electoral reform 285 3.2. Decentralization 287 4. What Has Been Achieved: Continuation and Moderation of Reforms 287 4.1. Political reform and the rise of political Islam 288 4.1.1. Electoral political reform 288 4.1.2. Islamic parties and the election 291 4.2. Decentralization and proliferation of district splits 293 4.2.1. Mixed result of decentralization 293 4.2.2. Proliferation of districts splits 295 5. Conclusion 299 List of Abbreviations 300 Acknowledgments 300 References 301 Index 304