• 313 days Will The ECB Continue To Hike Rates?
  • 314 days Forbes: Aramco Remains Largest Company In The Middle East
  • 315 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 715 days Could Crypto Overtake Traditional Investment?
  • 720 days Americans Still Quitting Jobs At Record Pace
  • 722 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 725 days Is The Dollar Too Strong?
  • 725 days Big Tech Disappoints Investors on Earnings Calls
  • 726 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 728 days China Is Quietly Trying To Distance Itself From Russia
  • 728 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 732 days Crypto Investors Won Big In 2021
  • 732 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 733 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 735 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 736 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 739 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 740 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 740 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 742 days Are NFTs About To Take Over Gaming?
Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

  1. Home
  2. Markets
  3. Other

Searching for a New Political Order in the Middle East

Revolutions are often sloppy affairs. Just ask President Mohamed Mursi of Egypt. His late-November 2012 bid to assume greater powers - some say dictatorial in nature - set off a new wave of demonstrations in Cairo's Tahrir Square and attacks against the offices of the ruling party, the Muslim Brotherhood. Is Mursi a president seeking to restore order and make Egyptian democracy work or is he a new autocrat in the making? One thing that is certain is that, although Hosni Mubarak is gone, the political situation in the Arab world's most populous country remains fluid, the incomplete aftermath of the revolution that swept away an autocrat, but left old tendencies of centralizing power intact. In many regards, Egypt reflects the challenge facing much of the Middle East and North Africa, the search for a new political order that takes many of the countries and their young populations out of the age of autocrats into a new era of responsible government, transparency and better economic prospects.

The American, French, Russian and Chinese revolutions brought about stunning transformations in the political systems of their time. Old political groups and their institutions were swept aside and replaced by new actors who created new means of governance. In 2011, the Jasmine Revolution rolled through the Middle East and North Africa, bringing down the houses of autocrats and clearing the decks of their closest followers. However, the defining lines of the new political order are not fully formed. The civil war in Syria, the incident in Benghazi, and the turmoil in Egypt indicate that the potential for political upheaval remains high. In a sense, the dust has yet to settle on a new political order in the Middle East as Islamic and secular parties, ethnic and religious groups, labor unions and the military scramble for niches in the unfolding new political landscapes.

Before the Jasmine Revolution, regimes in the Middle East and North Africa were remarkably stable. An earlier wave of democratization in the 1990s inspired by the fall of the Soviet Union and dismantling of the Eastern bloc threatened to pull down the autocrats ruling countries such as Algeria, Egypt, Libya, Syria, Tunisia and Yemen. Yet these regimes remained firmly in power. Central to their survival, in different shapes and forms, was the military and/or security apparatus. Sometimes these two groups were aligned; other times they were very separate institutions, jealous of each other's authority. The alignment of political forces throughout much of the region was built around the power of a strong national leader, supported by the military and security forces, and economically backed by large industrialists and, for a long time, the more secularly-minded elements of the middle class.

Islamic groups, some with a degree of middle class support and popular among the lower layers of society, usually played on the margin of political power. Although they often had an appeal, which became evident in elections (such as they were), the Islamists easily fell into the realm of the "threat" as a broad group with radical wings that embraced the use of violence. In a Middle East filled with ethnic and religious minorities, the often strident voice of the Sunni majority left others, in particular Shiites and Christians, uncomfortable and by default often supporters of the autocratic regimes.

Regime Changes - Selected Middle Eastern Countries

In the 1990s and first decade of the 21st century, a number of forces conspired to change the socioeconomic and political landscape - enough to bring down the autocrats. These forces included a revolution in technology that facilitated easy communication around state censures and national borders via Twitter and Facebook. With social media advancing linkages between the younger generations across the Arab world, concerns over food prices, housing and bad job opportunities were easily communicated. Frustration with official corruption and its exposure via blogs did little to dampen the rise of anti-status quo forces. What had been a seemingly resilient set of autocratic regimes generally proved to be ossified control elites unable to effectively respond to widespread societal upheaval. A new, yet fully unformed political world, were born amid the tear gas, riots and (in the case of Libya) civil war. And not all of the movements for change were successful - Saudi Arabia helped Bahrain's monarchy crush its democratic movement and Syria's Bashar Al-Assad has refused to depart, fighting hard against being ousted by a wide coalition of opposition forces.

Real GDP (%)

Where is the Middle East heading? The future is going to be defined by political experimentation - as in Egypt, Libya and Tunisia - with democratic institutions and practices, shaped by a broad range of public sentiment, hedged by local military establishments that are traditionally secular in orientation. Some of those public sentiments are secular and supportive of greater political liberalization, others are formed by more narrow religious perceptions of society, in particular the role of Islam in daily life and how that should interact with the idea of good governance. Add to this the existence of strong individuals, seeking to carve out their own political space. This interplay of forces is inherently charged with tensions that can lead to conflict and uncertainty.

As Egypt is demonstrating, the revolution may have occurred, but the process of political change is hardly over. This should concern policymakers in the region and globally as well as investors. Political upheaval and ongoing uncertainty are negative for economic growth, a point of concern in countries where economic activity has cooled and high unemployment is a problem. Unemployment in Egypt stands at close to 13%; in Tunisia it is 17% and in Jordan it is around 13%. Youth unemployment in these countries is even higher.

One group that does not care about economic growth is al-Qaeda. The widespread political upheaval is providing new opportunities for this group. Although the old al-Qaeda of 2001 has been decimated, a new al-Qaeda has emerged and is taking advantage of the Middle East upheaval to gain ground in such places as Jordan, Iraq (again), North Africa, Yemen and Syria. The last is of considerable significance as Syria sits in the heart of the Middle East, sharing borders with Iraq, Jordan, Turkey, Lebanon and Israel. Moreover, the new generation of al-Qaeda fighters is gaining experience. The longer the region has political upheaval, the better the chances of al-Qaeda and its affiliates to gain followers and possibly power.

The impact of political turmoil - not limited to the Jasmine Revolution - as evidenced by recent Gaza-Israel tensions and Iran's nuclear program - also dampens economic prospects for the region. The International Monetary Fund (IMF) reported in October 2012: "Uncertainty and unrest have led to a pull-back from the region, evidenced most dramatically in steep declines in tourism and FDI (foreign direct investment)."

The Fund is a little too optimistic on the political front. In the same report, it observed: "looking forward, uncertainty is expected to decrease as political transitions stabilize, while external demand picks up, and growth in oil importers is projected to recover 3.25% in 2013." We hope that the IMF assessment is right, but we have our doubts. Revolutions are not simple changes of governments, but are systemic in nature, recasting institutions and behavior - developments that take time. It is very important to understand that, prior to the revolutions, decision making was in the hands of a small number of individuals. Following the Jasmine Revolution, the number of decision-makers has multiplied and public opinion matters more now than before.

And what matters to the people? Drawing upon data from a November 2011 Gallup survey in Egypt, it was found that economic issues dominated, with inflation being the primary concern for a plurality of those polled, while unemployment and a lack of food and drinking water were important to many. This dovetails with the problematic economic landscape in which unemployment is high, education systems are inadequate and of poor quality and infrastructure is problematic outside of the wealthier Gulf States. Adding to this, demographic pressures are significant, with two-thirds of the region's population being under 30 years of age. The Middle East has long had one of the highest population growth rates, causing the Brookings Institution's Suzanne Maloney to quip: "The only real growth industry in the Middle East has been population."

The Middle East also confronts another potential geo-economic shift - the shale revolution in North America. According to the International Energy Agency (IEA), U.S. shale gas reserves will make that country the largest gas producer by 2015, the largest oil producer two years later and a net oil exporter around 2030. While the impact of new technologies on natural gas extraction should not be overstated (and the IEA is making forecasts), the considerable enhanced ability of the U.S. through fracking to reduce its hydrocarbon imports has long-term implications for the Middle East. As John Mitchell with Valérie Marcel and Beth Mitchell observed in a Chatham House study (October 2012) on the future of oil and gas: "... there is a question of who will carry responsibility for the physical security of Middle East oil exports now that these mostly go to Asian markets rather than the U.S. or Europe." These shifts are occurring at a time when the Middle East is undergoing profound political changes and searching for a new equilibrium.

For those looking for stability in the Middle East, there is likely to be a long wait. Both domestic and external factors are weighing heavily on the region, but the most significant of these is the pressing need for functioning political systems, more responsive to citizens. Without that, the Middle East remains unsettled, an ongoing zone of instability, facing a deep identity crisis over its ability to steer its own destiny. We fully concur with Daniel Byman in his excellent essay on regime change in the Middle East in Political Science Quarterly (Spring 2012): "New governments will strive to prove themselves to their own people, exploring the limits of political space and determining, often through trial and error, which areas are the most salient." That will take time and mistakes will be made. A new Middle East is forming, but there is a long distance to travel before stability returns, something that the global investor should consider, especially as he or she considers commodity and energy prices.


Back to homepage

Leave a comment

Leave a comment