x Abu Dhabi, UAEWednesday 17 January 2018

A harsh economic season lies ahead for Arab Spring states

The euphoria of the Arab Spring has hit a plateau, and increasingly the world has to deal with it in harsh economic terms.

This week marked the passing of 150 days since disturbances in Tunisia set off unrest throughout the Arab world. Even if the results of this revolutionary wave are still unclear, a turning point has been reached in the way the outside world responds to the new era.

The clearest sign of the new stage comes from the economists. Enough time has passed for them to calculate the cost of these events, including production lost to strikes, missed tourism revenues, lack of foreign investment, higher wage settlements and subsidies to cushion the cost of oil and food.

Egypt is asking for help to the tune of $12 billion (Dh44 billion) a year, while Tunisia needs $4 billion a year. These sums, although eye-watering, are just to plug the gaps in the budget. Much greater sums will be needed to modernise their economies and provide jobs for young people.

Without wishing to spread too much gloom, it is worth recalling that it cost the West Germans no less than $1.9 trillion to modernise the former communist East Germany, with a population one-fifth the size of Egypt's.

The clarity of the financial crisis contrasts grimly with the so far incomplete results of the transitions. Everywhere there are more questions than answers. Michael Hudson, a professor of International Relations at Georgetown University who has been analysing policy for 30 years, wrote this week that even the most basic questions were still unclear: was the revolutionary wave an awakening, a cataclysm, a contagion or just a random series of events? Was the unrest all about jobs, or political legitimacy?

In short, we know the cost of the "Arab Spring", but not its value.

The complexity of these questions has confused the outside world. The international media created an alluring narrative from Tunisia and Egypt: the Arabs, previously caricatured as angry, violent and stuck in the Middle Ages, emerged as young and smart and wanting what everyone else in the world wants. It seemed like a rerun of Europe in 1989 - a short, sharp story of young people overthrowing tired dictatorships.

The violence in Libya, Syria and Yemen has killed that story. The courage of the Palestinian refugees who marched on the borders of Israel on Nakba day, which is just as inspiring, is not something a US television audience wants to see. Many foreigners wanted to believe that the Middle East had been reborn, with all its fault lines wiped away. Excitable commentary to that effect has been shown to be so much hype.

Meanwhile the US electoral calendar is advancing, and President Barack Obama's thoughts are on re-election. For him, events in the Middle East - barring the death of Osama bin Laden - are more likely to present a threat than an advantage. The planned declaration of a Palestinian state in September - which the Israelis are predicting will be followed by a third intifada - could be used by his enemies to claim he was asleep at the wheel of foreign policy and "lost" the Arab world.

In the long term, of course, we do not know what the effects will be. It is quite possible that the biggest loser from this turmoil in the Arab world may be Iran, which could lose its strategic alliance with Syria. But that, if it happens, would most likely be a long-term trend, not an overnight revolution.

Since the only thing we know for sure is the financial cost of the unrest, US policy is likely to focus on aid to Egypt and Tunisia. Egypt has lost almost one quarter of its foreign reserves since January. Poverty levels are rising, and there is no government in Cairo strong enough to claw back the ruinously expensive subsidies which keep the poor from destitution.

Money is needed, but is not enough on its own. Egypt can swallow foreign aid forever and still remain poor. Given the vast amounts of money that Egypt will require, there are bound to be strings attached to foreign aid, including the curbing of subsidies and opening up the economy.

These demands have to be balanced against popular yearning for a higher standard of living and fairer distribution of the national wealth. The populist solution is to soak the rich who earned easy profits due to close links with the regime. Suzanne Mubarak, the wife of the deposed president, has set a precedent by handing back $4 million to Egypt's Illicit Gains Authority.

But this is no long-term solution. Without political legitimacy, no economic reform is going to work. Each country, as it asks the outside world to help pay the cost of the transition, has to establish what societal value it has gained from the experience and how it will prevent the old ills returning.

This is easier in the Arab monarchies than in the republican states. With the exception of Bahrain, the legitimacy of the ruling families has not been widely challenged, even though the problems faced - as in Jordan - are no less dire than in Egypt. Unfortunately for Egypt, there is no Nelson Mandela to be released from jail, to tell people they have to wait years for the benefits of the revolution.

Both Egypt and Tunisia, and to a small extent Syria, have undergone some economic liberalisation over the past decade. But the result has been enrichment of the well-connected elite. This cannot be allowed to happen again.

As Marwan Muasher, the former foreign minister of Jordan, writes in a new analysis, economic liberalisation took place in Jordan "without the development of a system of checks and balances and resulted in the benefits of economic reform being usurped by an elite few". He concludes: "To the average citizen, neither bread nor freedom was attained."

Increasingly the outside world is going to engage with the "Arab Spring" in harsh economic terms. It may not be as exciting as toppling the dictator, or expropriating the rich. It may even end up inflaming the revolution as hopes for a comfortable life for all are pushed over the horizon. But the real meaning of the Arab Spring will only become clear when revolutionary fervour meets the reality of money.