I. Overview

There is an increasing perception that the successful popular democratic revolts in Tunisia and Egypt will likely sweep the Arab region. This is based on the contention that Arab countries—as in Egypt and Tunisia-- are governed by aging authoritarian rulers who have become increasingly repressive, have outlived their relevance, and are out of touch with the rapidly changing societies. It has been argued that rising unemployment, especially among the relatively better educated young people in a globalized world economy, a bleak outlook for the future, and a sense of humiliation at being mistreated by the autocratic authorities, precipitated the rebellion in the two countries. It is further contended that broadly similar conditions exist in other Arab countries and could spark popular revolts in the rest of the region.

A careful assessment of conditions in the Arab world does accord credence to the argument that deteriorating political economy conditions could trigger political upheavals. However, available evidence and conditions in these countries would auger caution. Even though it may be tempting to consider the democracy movements as driven by events in Tunisia and Egypt, country-specific factors may be more important and, therefore, need not fully replicate results of these two countries. Impact on the rest of the world and the “near neighborhood” is likely to be determined by the countries affected and the speed of transition. If the major oil exporters are affected, one could see a significant increase in oil prices and could slow down global economy.

II. What triggered popular revolt for democracy?

The popular view is that autocratic repression, when it reaches a tipping point—where the “cost” of repression exceeds “benefits” from the provision by the autocrat of “rationed” public goods and services— triggers rebellion terminating the social contract with the ruler or the ruling elite. It is argued that, irrespective of forces and reasons behind it, repression leads to a concentration of power to “harm or help” in the hands of an increasingly smaller segment of population, leading to a progressively skewed control over the use of national resources. In the absence of orderly mechanisms to redress this development, rebellion becomes necessary to restore balance.

Evidence from domestic insurgencies during the past fifty years or so can be drawn upon to explain the dynamics of democratic rebellion. While extended political repression is found to be central, home-grown democratic rebellions are positively correlated to income inequality and the absence of non-violent economic opportunities—economic deprivation— more than to the low level of income. Closely associated with it are population density, increasing share of the relatively young in the population, and unemployment which have been found to be important drivers of movements for political change on the assumption that political change would usher in the needed economic change. Similarly, institutional impediments –both the lack and misuse of institutions—to improving economic conditions have played an important role in spreading discontent. In this regard, poor governance—corruption—has been found to be crucial. Moreover, lack of functioning institutions, including political parties, non-governmental institutions, independent media, and an unbiased judicial system, to peacefully redress disputes and ensure basic human rights appear to have played an increasingly important role in fostering disaffection. Religious fractionalization, when combined with income inequality, also spawns disaffection against an indifferent ruler; however, ethno-linguistic differences are found to be somewhat less important. Interestingly, the impact of “demonstration effect” has been found to be indeterminate and seems to be effective only where other conditions are met.

It is, however, important to note that, although political repression and the absence of institutional structures to redress political and economic demands are important in fanning rebellion against autocratic rule, they are only a necessary but not a sufficient condition for self-sustaining resistance. Similarly, economic factors alone can only contribute to—not cause— instability that underlies terminal disaffection. It is only when both of these contributing factors combine that a home-grown democratic movement becomes inevitable and viable.

If past experience is any guide, caution would be in order against jumping to any precipitate conclusions with regard to the impact of events in Tunisia and Egypt on the rest of the Arab region. First, notwithstanding close cultural relations, Arab countries are quite diverse in terms of their economic characteristics and political economy challenges. Second, location, interactions with neighbors (e.g. GCC), and relative integration with the global economy (including access to social media and communications) would influence each country’s response to demands for democracy. Third, Arab countries differ considerably in terms of the level of human development; greater the human development index, the better the prospect of an organized movement for democratization. Fourth, given the differing levels of governmental repression, relative to “rewards” for accepting repression, it is unclear as to how many Arab countries have acquired the critical mass of disaffection for successfully confronting repressive regimes. Fifth, the impact of religious fractionalization and ethnic underpinnings on political activism vary widely across the Arab region. Finally, major oil-exporting countries, notwithstanding that they are absolute monarchies, face demands for democratization that are vastly different from those encountered in the non-oil Arab countries. Therefore, more attention may have to be accorded to country-specific factors.

III. How will different Arab countries be affected?

The Arab region is not a monolithic entity. Arab countries can be divided into four broad but not mutually exclusive groups; they are subject to different pressures in the wake of the Tunisia-Egypt events. First, the major oil and gas exporting countries including Saudi Arabia, the UAE, Kuwait, and Qatar, are thinly populated homogeneous welfare states, financially very well off, and heavily dependent on a so far apolitical and pliant expatriate labor force. Second are the other oil and gas exporting countries, including Algeria, Bahrain, Iraq, Libya, and Oman, which have had varying levels of success in shifting from dependence on oil and gas to non-oil activities and in sustaining increase in the standard of living for the younger generation. The third group contains primarily non-oil middle or lower middle income countries including North African countries, Syria, Lebanon, and Jordan, which have rising population pressures and unemployment; many of these countries have association agreements with the European Union (EU). The fourth group consists of the relatively poorer countries such as Sudan and Yemen. All these groups are ruled either by absolute monarchies or by authoritarian regimes.

In the near term, major oil exporting countries would be least affected by the Tunisia-Egypt events. While political preconditions for democratic protests exist, economic preconditions are lacking. There would likely be some increase in demands by better educated younger population for participation in government’s decision making, leading to some cosmetic reforms including increase in representative governance. In countries where elected parliaments exist, such demands may be met by the induction of members of the parliament in the cabinet. Given the pervasive role of the large security-intelligence apparatus in these countries, the potential for a violent suppression of protests should not be ruled out; popular support for such protests in the short run may also be lacking. These countries are the major OPEC oil producers and have sufficient spare capacity to meet demands that may arise from disruptions in other smaller oil producers.

Over the longer term, greater participatory governance would become necessary; the pace of reform will likely be slower if oil income increases at a faster pace than currently but would be accelerated if population pressures increased. The desire of the younger better educated citizens to emulate freedoms in modern democratic societies cannot be ruled out. As a Tunisian journalist put it during Ben Ali’s reign, “one gets tired of being a well-fed slave.” The continued dependence on expatriate labor may also call for easing of regulations and, thus, political control, further opening the door to representative governments. Nonetheless, given these countries’ financial position and, thus, ability to co-opt dissidents, political reform will be slow but sustained.

Of the other oil producers, Algeria and Bahrain are particularly vulnerable to popular dissention in the absence of democratic reforms. Although it continues to benefit from the positive effects of association agreement with the EU, Algeria has had an unfinished political conflict between an Islamist democratic movement and an authoritarian military-backed government which has limited popular support. Notwithstanding gas exports and the safety valve provided by relations with the EU, Algeria has been unable to generate a sustained increase in employment for a rapidly growing population while income inequality has increased. Institutions for dispute settlement and meeting the society’s demands for good governance are constrained. Under these circumstances, it would be advisable for the ruling elite to move toward a more representative democratic system in order to avoid resurgence of the popular movement which could have negative economic effects and, thus, increase instability.

Bahrain is an ideal case for political reform where both political and economic factors conducive for heightened demands for democracy have come together. Run largely by a shrinking Sunni minority under a well-entrenched monarchy, Bahrain has had a long history of conflict with the majority religious group, Shia, which has erroneously been viewed as sympathetic to Iran. Its oil revenue has shrunk and it is dependent on financial and security support from Saudi Arabia; the United States Fifth Naval Fleet is also stationed in Bahrain. Despite impressive progress toward a non-oil economy, closer economic integration with other GCC countries (particularly, Saudi Arabia), and the development of a large, well-trained, young workforce, income inequality has continued to increase in this religiously divided society. Its financial sector, which had spear-headed its diversification toward the non-oil sector, was badly hit by the global financial crisis of 2008-09. While Bahrain is struggling to maintain its competitiveness as a major global financial center, its progress could be unhinged if political conflict deepened.

The current insurgency, though prompted by events elsewhere in the region, is a continuation of the ongoing fight for the restoration of majority rights. The initial aggressive official response has proved to be counter-productive and is (once again) being followed by half-hearted attempts at reconciliation. Measures such as increased subsidies and higher welfare payments to placate the majority appear to be ineffective. An early orderly transition to majority rule would, therefore, be needed to avoid escalation of the ongoing conflict.

As in the past, escalation of hostile official response to demands for democracy would, among other effects, hurt market confidence, generate capital outflows, and cause a further migration of the minority stakeholders. It would reduce Bahrain’s competitiveness as a financial center, slow down growth, and further reduce employment opportunities. The recent increase in government expenditures to increase transfers to the public will likely worsen the budgetary position with adverse economic effects. These developments would enhance resentment against the rulers with possible adverse effects on the entire GCC region. Bahrain’s credit rating has already slipped, which augers ill for the economy. It would, therefore, be in the interest of Bahrain’s richer neighbors and other friends to support rather than subvert democratic reforms, through political reconciliation and financial assistance, thus, embracing the majority group.

Oman continues to benefit from a relatively open socio-political environment with steady progress toward a post-oil-dependent economy, and, thus, amenable to an orderly change. Libya has encountered some regional dissention from the existing autocratic order, which partly reflects long-standing tribal and regional tensions. Notwithstanding a relatively apolitical social structure and a more equitable income distribution, the current conflict--which is partly triggered by long-standing regional and tribal tensions--could worsen if not addressed quickly. Early steps for greater representation in government decision-making would ease transition to a more democratic system. In particular, establishment of clearly-defined rule for the selection/election of the next ruler combined with the announcement of transition to a more democratic dispensation may ease the escalating tensions. Given the absence of institutions for peacefully settling political disputes, recourse to armed confrontation is highly likely; it could hurt prospects for democracy.

The non-oil middle income countries present the most pressing challenge. They share most of the attributes which shaped the revolt against authoritarianism in their cohorts—Egypt and Tunisia. In addition to unrepresentative governments, overpopulations, rising unemployment, and income inequality, they share poor governance and ineffective institutions. External support has propped some of these ruling structures. They are characterized by dormant parliaments, obedient opposition parties, and corrupt politicians and business leaders. In particular, their economies, being integrated with the global economy, are highly vulnerable to both external and internal shocks.

All non-oil countries are presently encountering demonstrations of varying intensity for democratization. It is likely that these countries will look at Jordan as a test case to formulate their response to the democratization wave. Jordan is a complex country with three broad nationalities—Palestinian Diaspora, Bedouin tribes, and the urban Jordanians coexisting in an economy strained by limited natural resources at the crossroads of an entrenched regional conflict. It is run by a monarchy that lurches from liberal to conservative dispensations and demands. It has a large well-educated young population that demands equality of opportunities. The government is not a representative of the people, but of the monarch, with a powerful security apparatus which benefits from the status quo. The non-state institutions, including opposition political parties, are increasingly leaning toward nationalist-Islamist interests which often conflict with the ruling elite’s and the monarch’s interests. The economy, though better run than in many members of this group, remains vulnerable to global slowdown, regional conflicts, and the goodwill of the richer neighbors in the Persian Gulf. The recent concessions by the monarch—increases in subsidies and a cosmetic change of government—are unlikely to pacify the democratic forces but will worsen the economic position, thus adding to challenges in the period ahead. In the event, Jordan appears to fulfill both political and economic conditions for a domestically-inspired democratization movement. Its success will lie in how effective the government is in cooperating with the non-state institutions to ensure change with stability.

The authorities in the poorer countries are likely to be even less prepared to resist demands for reforms. Violent official response would dramatically worsen economic conditions, add to the unpopularity of the government, and further reduce its ability to address new challenges. The case of Yemen is highly instructive. With the fast depleting oil and gas resources and a rapidly rising population, the younger generation’s standard of living is likely to be no better, if not worse, than the older generation. The country, wracked by a separatist movement in the south, is facing tribal conflicts and a burgeoning Al-Qaeda-inspired insurgency. Unemployment is rising while the safety valve provided in the past by job opportunities in Saudi Arabia is shrinking, adding to economic malaise. The authorities have no room to ask for additional sacrifices by the population without according it the right to choose as to how country’s resources are used. However, a durable shift to a more democratic dispensation will call for sharply higher financial assistance in the short run and a closer cooperation of regional players (e.g. GCC) so as to get the new institutions functioning and governance improved.

IV. Is there light at the end of the tunnel?

The whirlwind of mounting demands for democratic reforms in the Arab world have the potential to go astray if not handled carefully. Even if the autocratic rulers were to cede power, few countries have institutions—both official and non-official—to facilitate an orderly and speedy transition to democracy. The escalation of conflict between the authoritarian regimes and democratic forces will likely increase market uncertainty, encourage capital flight, reduce investment, and worsen economic outlook. This, in turn, could increase unemployment pressures. Attempts by the new governments to controldeterioration through restrictions and subsidies could further weaken the economic situation and strengthen non-democratic forces, reducing support for reforms at a time when they will be ill-prepared to take the needed bold economic reform measures. This would likely happen in the backdrop of unrealistic expectations of masses from a democratic government.

The transition to democracy will be bumpy, depending upon countries’ circumstances and how much institutions—and elites—are prepared to bear the new responsibilities. In countries that have a semblance of democracy—a parliament even if powerless, political parties even if dysfunctional, non-governmental social services organizations, trade unions, etc.—it may be easier to replace an authoritarian regime without excessive disruption, especially, if these institutions are amenable to quick reform. Transition would be more complicated in countries ruled by absolute rulers where no alternative credible institutions exist. In the former case, early steps to clean up the institutions and reallocate decision-making power along with credible change in political representation could meet the immediate demand for democratization. Such action would provide the much-needed space and time to durably entrench democracy. In the later case, transition may take much longer since new institutions will have to be created from scratch. In either case, institutions—rather than individuals—will matter; otherwise new ‘’strongmen” will re-emerge, subverting the reform process. In either case, neutrality of security forces and non-interference of foreign powers will be central. Perhaps learning from the diverse experience of the former Soviet Union countries and South Africa would be in order.

V. What should the world do?

Presently, it is difficult to do any meaningful crystal ball gazing. Prolonged instability, especially if it also affects major oil producers, could raise oil prices through lower output or market uncertainty. Post-revolution political uncertainty in the absence of effective institutions could potentially lower growth and encourage migration to the near-neighborhood. The “demonstration effect” on other developing countries may not be significant, but it is unclear as to how governments elsewhere will react to preempt instability. These developments could have nontrivial consequences for the global economy and stability.

It is unrealistic to expect, as shown by events in Tunisia and Egypt, that masses would postpone their demands for democracy in deference for an orderly transition. While the primary responsibility for orderly transition will have to lie on the affected countries, support from outside without compromising the democratic cause would be crucial. Since regional institutions, such as the Arab League, are neither designed nor equipped for such an exercise, it will be crucial that alternative entities be created to support national agencies to facilitate the reform process.

One unintended consequence of violent democratic rebellions would be a likely and significant negative regional economic disruption, which, if not addressed expeditiously, could derail the democratization process and fan conflicts. A mechanism will have to be created to address such consequences. Bilateral assistance will be fraught with risk. The multilateral institutions—World Bank, IMF-- which can be called upon to assist, will require considerable flexibility in their mode of operation. Consideration could be given to the creation of trust funds for many of the countries undertaking democratic reforms. However, effective operation of such funds would call for keeping interests of contributors/donors from influencing funds’ operations. These are uncharted waters.

What role could the US play? Its primary interest is ensuring an orderly flow of oil and gas to the global economy and regional security. In the long term context, ascendency of democracy in the Middle East region should be beneficial to the US interests. However, in the short run, loss of known leaders/allies would require adjustment in the policy stance. In some countries, democratization would facilitate US interest, while in others the outcome may be unhelpful in the short run. US participation—both financial and institutional-- should be aimed at facilitating the transition without taking sides among the various interest groups. A similar role could be played by other entities such as the EU, especially, in countries that have association agreements.

The US would do well to become even-handed in terms of support for human rights even when it is inconsistent with narrow short-term interests in selected countries. Similarly, a more equitable treatment of all countries in the region and a serious attempt at solving the Palestinian/Israel conflict will help. It is also advisable that Islamic movements are not singled out for blame. Such movements in the Arab world are evolving and should be expected to play a constructive role in furthering the democratization process.

Assertions and opinions in this Policy Insight are solely those of the above-mentioned author(s) and do not necessarily reflect the views of the Middle East Institute, which expressly does not take positions on Middle East policy.