Six years after the Arab Spring movements, inequalities that largely triggered them still pose a problem in the Arab world. Samir Aita, a Franco-Syrian economist, takes a look at their causes, consequences and potential ways of addressing these.

What are the terms of the debate on inequalities in the Arab world?

Traditional approaches focus on poverty rates and on “discrimination in results”, expressed, for example, via the Gini index or access to education. This is the case with reports by the World Bank or Economic and Social Commission for Western Asia (ESCWA).

However useful these approaches may be, they suffer from a lack of data in the countries studied. Household income and expenditure surveys are few and far between and are not conducted regularly. They also often do not comply with international standards or are simply not published. It is extremely difficult to monitor the impacts of public policies and the current upheavals, despite the commitment of Arab countries in the UN programs for the Millennium Development Goals (MDGs) or Sustainable Development Goals (SDGs). This is easy to see when you monitor the SDG global comparison indicators.

These surveys are no less problematic, as they do not include the non-national share of the population. Yet Gulf countries, and others such as Lebanon and Jordan, today have an immigrant population which can be equal to or higher than the number of nationals. Consequently, what does the measurement of poverty or of the rate of access to universities in Qatar, as in the UAE, mean if migrants are not taken into account?

The Gini indexes suffer from the same scarcity of surveys and provide us with little information. Moreover, Arab countries are among the global average, except for the Gulf countries, which are much more unequal than countries with similar levels of GDP per capita. While most employment is informal, most of the high incomes which serve to pay for it are as well. This means that we are unable to measure inequalities in the Arab world.

 

 

Faced with the lack of data, traditional approaches are becoming increasingly complex, with the introduction of notions such as “discrimination in autonomy”, based on opinion surveys, focusing on the role of individual initiatives in reducing inequalities, with public authorities simply being a repressive barrier to this individual will. There is consequently a change of register, from inequalities to perceptions of inequalities.

In all these debates, there is very little talk about causes, which in particular stem from public policies and failure to respect economic and social rights. In discussing the observation, potential solutions – the other side of the mirror – are not put into perspective.

 

Can you give us an example?

Let us take the example of poverty. Apart from humanitarian aid, there is no effective and direct remedy to poverty, except for employment and social security. A poor person can only get out of one’s situation by accessing the labor market and obtaining a decent income. And if he is unable to work due to illness, society must take care of him out of solidarity. Consequently, the issue of poverty cannot be separated from that of employment and especially of informality, as by definition, a job which does not give access to social protection is informal. Two-thirds of the 3 million people gaining access to first-time employment in the Arab world every year only find informal jobs and inequalities are increasing!

By way of illustration, the study on informal employment in 13 Arab countries, which I presented on 3 October 2016 to the Delhi group of experts of the International Labour Office, shows that the bulk of informal employment is wage work – and not self-entrepreneurship. In Lebanon, for example, 37% of workers are migrants, mostly informal: 18% of Syrians, 6% of Palestinians and 13% of other nationalities, mainly made up of domestic workers from Ethiopia or Indonesia. In Bahrain, the share of migrants stands at 73% of workers. Most do not benefit from social protection, despite their legal status. 60% of them have been in the country for less than a year. Yet a year of residence is required before being entitled to these rights.

The issue of inequalities cannot be addressed without talking about rights equality and redistribution, and therefore about taxes. Yet most Arab countries are marked by substantial income disparities. They are typically between property owners or executives employed by international companies, and the large number of people relegated to minor tasks, paid “under the table”, with an increasing share of immigrants and refugees employed with a meagre wage. It is not only a question of income inequality, but also and especially of inequalities in ownership, and there has been a significant concentration of the latter.

 

Are there major differences in the structure of inequalities in the Arab world, between Morocco and Lebanon, for example?

As we have said, national data does not allow us to actually measure it. The French economist Thomas Piketty – author of The Economics of Inequality (Harvard University Press, 2015) – observed this when he looked at the case of Egypt. There is a low level of taxation and both high incomes and the very wealthy largely escape taxation. Annual household income surveys do, of course, give indications, but they are very inadequate. Piketty had noted that “there is no doubt that income inequality is extremely large at the level of the Middle East taken as whole”. The 1% of the highest incomes receive over 25% of the regional total, against 20% in the USA, 11% in Western Europe and 17% in South Africa. This is without mentioning inequalities in property ownership. Perceptions of inequalities concern both the national level and regional level.

It is nevertheless possible to observe, with the naked eye, intuitively, that the disparities are similar in the Arab world: a fraction of the population lives in conditions similar to those in Western Europe, while the majority resides in informal urban housing or in rural areas where the level of development is comparable to that of the most deprived regions in India.  In Morocco, the most disadvantaged are nationals. In Lebanon, they comprise a significant proportion of migrants and refugees.

 

Is the lack of formal employment due to the post-colonial structure of Arab economies?

The post-colonial structure is already in the distant past and had certain aspects that were better, whatever one might think about the industrialization policies via the public sector. In the 1950s, and up until the 1970s and 1980s, productive employment was created, in a context where we did not yet know that there would be a massive arrival of young people on the labor market.

Growth rates in the workforce were similar to population growth (around 3%, excluding Gulf countries). Today, there are growth rates in the urban workforce of 6% to 8% in certain countries, due to the baby boom in the 1990s and rural exodus.

The decline in public investment has not been replaced by at least equivalent growth in private investment – in Egypt, for example, as Gilbert Achcar has clearly shown in his book Morbid Symptoms: Relapse in the Arab Uprising (Stanford University Press, 2017). In a schematic view, there is work, but no capital invested. Furthermore, the Arabic term for “capital”, raas mal, which is literally translated by “head of money”, is joked about among Arab economists. We talk about mal without raas, “money without a head”, to discuss the problems of our economies.

 

Do inequalities particularly affect women?

Women are indeed doubly penalized, in access to employment and in property ownership, in the Arab world.

In the 1990s, they still had work in agricultural economies or access to urban work, especially when they had a secondary or tertiary education. The rural exodus changed things: as soon as there was a mass influx of rural women in cities, they found themselves in a precarious situation of informal housing where the majority of men already had informal jobs, activities which they did not want to move into – as they were regarded as being part of a masculine and precarious world. This is one of the major reasons for the decline in their participation in economic activity.

In most Arab countries, women mainly work in the public sector, where there are real contracts and social protection, particularly in the health and education sectors.

The dominant discourse of donors, first and foremost the World Bank and International Monetary Fund (IMF), by which public employment needs to be reduced, is disastrous for them. What is the alternative, bearing in mind that the participation of Arab women in the labor market is the lowest in the world?

Rather than addressing the objective reasons for this situation, religious or cultural reasons are most often mentioned, as if Muslim women did not want to work. The fact is that they work, but mainly in the formal sector or as members of family businesses. The cultural issue for women is more about owning and transferring property, because of the inequality in inheritance. But it is not specific to Islam.

 

 

What have been the most exemplary policies to date in the fight against inequalities in the Arab world?

There was a period following the Independence where Arab countries applied excellent policies to fight against inequalities: free education for all, health for all, electricity for all, territorial development, etc. There was a significant reduction in general inequalities and inequalities between regions.

But there has been a change of epoch and model since the “oil boom” in the 1970s. There has been a fall in public investment. Subsidies and the debt service consume a large part of State budgets, which themselves are declining as a percentage of GDP. Consequently, education, health, etc. are privatized. And inequalities have grown again and significantly.

We have since entered into a vicious circle and a flawed debate. The IMF is calling for subsidies to be reduced and VAT to be introduced, and governments object. Subsidies are, of course, not sustainable and benefit those who do not need them, but VAT clearly does not work towards reducing inequalities.

The basic problem is that tax revenues are insufficient, excluding the rents from natural resources. The State can only address inequalities via taxes and social contributions, by redistributing wealth between the regions in the country and the social categories of the population. Yet most Arab countries are characterized by a low level of taxation – 10 to 15% of GDP         at best, excluding natural resources, against 45 to 55% in OECD countries.

Nothing can be done in Arab countries without collecting taxes and broadening the tax base. Up until now, for many of them there has been a great temptation to draw on natural resources. Oil and rents cannot, however, act as a stopgap for taxes. This is especially the case because a generation does not, in principle, have the right to use the bulk of revenues from natural resources for its own benefit, without thinking of future generations. In the case of Iraq, for example, the total of non-oil tax revenues is less than 3% of GDP – one of the lowest levels in the region and in the world. Is it a good policy to tap into black gold and sell it cheaply? The IMF considers these countries as “fragile”, because there is still too little taxation.

But the issue of taxes needs to be addressed holistically, in terms of “total social contributions”, including direct and indirect taxes and social contributions. The real issues firstly involve taxing fortunes, cumulated assets, such as capital gains from property, and, secondly, extending social contributions and coverage.

The horizontal universal establishment of social security in its different forms constitutes an exemplary distribution policy to reduce inequalities. Only Tunisia has partly applied it. The taxation of capital gains on rents is another, provided the revenues are used to invest in territorial and infrastructure development.

 

Is there a clear political awareness in the Arab world of the issues related to inequalities?

Yes, there is, populations in all these countries are extremely aware of this, hence the social movements in recent years, which have even occurred in economies that benefit from oil wealth.

But the question arises of knowing whether this “political” awareness can really be qualified. There is first the perception of national inequalities, between regions and vis-à-vis the wealthy and those who govern, and especially the lack of prospects for young people. There is then the perception of inequalities between countries, especially vis-à-vis Gulf countries. But these perceptions have led to a return of religious conservatism and the strengthening of community networks. Then, when the “Arab Spring” broke out, they were mainly expressed in terms of civil liberties and the will to overthrow “regimes”. In addition, when there have been social movements to demand better working conditions and salaries, they have faced hostility describing them as corporatist.

 

 

There has consequently been no “political” framework to these uprisings. They have also rapidly reflected the divisions between conservatives and modernists, between the different social categories and the labor market, and between communities. Tunisia, which has a strong union, was the only country able to “politically” channel its uprising so that it specifically took the form of a democratic transition of the State. It has even been able to manage a mass influx of refugees which is rarely mentioned.

 

In addition, the awareness of inequalities blocks on the issue of migrants and refugees. A citizen in the Gulf often does not consider that migrant workers are equal to him in human rights. This is the same for Lebanese people towards Palestinian or Syrian refugees and domestic workers. Yet migrations have become one of the main realities in all countries in the region.

 

The opinions expressed on this blog are those of the authors and do not necessarily reflect the official position of their institutions or of AFD.

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