Lessons of the past may spur blooming Arab Spring success

The aftermath of the Arab Spring has reached a critical point. While much of the focus is on the emerging political processes in Tunisia, Egypt and now Libya, urgent economic challenges demand attention.

Tunisian women sit at a cafe's terrace in Tunis. REUTERS/Anis Mili
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The aftermath of the Arab Spring has reached a critical point.

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While much of the focus is on the emerging political processes in Tunisia, Egypt and now Libya, urgent economic challenges demand attention. If these are not met, there is a risk the Spring countries may have to "try again" in their efforts to rebuild their nations.

To avoid this, we must learn from previous episodes of regime change around the world. These may have occurred in different circumstances, but they still have much to offer in terms of insights into the anatomy of change.

There have been more than 100 episodes of regime change in the past half century, of which 87 have led to democratic change. In the five years after a regime change, growth tends to be higher, but in the immediate aftermath, a country tends to go through a period of great vulnerability.

Many democratic transitions need to "try again" as initial change can be derailed by factors such as financial crises and ethnic tensions.

The second and third years after change tend to be the most vulnerable period, and a second wave of unrest, reform or institutional remaking is often necessary for successful transition.

The anatomy of many previous transitions also suggests that containing unemployment, attracting sustained direct investment from abroad and accepting overseas aid are important factors in post-change growth.

Successful transitions are also marked by a sharp fall in inflation and military spending.

Other evidence shows successful democratic transitions such as that in Chile have distinguished themselves by effective management of threats posed by financial crises and sound implementation and communication of new institutions and policies.

Other countries, such as Georgia, have done well to use information technology to tackle corruption, while countries such as Turkey used improvements in institutional quality as a driver of growth.

Against the backdrop of the euro-zone debt crisis, the Arab Spring nations and their neighbours are likely to think twice about accepting economic policy advice from the West.

They may prefer to follow Frank Sinatra's doctrine of doing it My Way, and may feel there is more to be learnt from what countries such as Ireland have done wrong rather than right.

Western consensus policy recommendations to ensure the rule of law, strong institutions and transparency are relevant but so, too, is the need for new, inventive approaches. These could take several forms.

One is to further harness the power of social-media technology to build virtual labour networks, curb corruption in procurement and hiring practices, and aid moves toward truth and reconciliation.

Although it might be too early to establish pan-regional policymaking bodies, it might be the right time to set up a pan-regional economic crisis council body that brings together the countries of the region.

The aim of the body would be to anticipate and offset the effects of economic and financial market crises on the region and the Spring countries specifically. Other institutional innovations could centre around measures to facilitate the further growth of Islamic finance and the establishment of a Mediterranean investment bank.

Furthermore, the economies of the Spring countries could be strengthened and jobs generated by moving dynamic sectors such as tourism up the value chain. Branding and improving infrastructure and facilities will be critical factors in this effort. The southern Mediterranean region's agri-business sector also holds great promise.

Less than a year ago, few would have predicted the Arab Spring.

Now the question is: will it work? Steadying economic activity, offsetting shocks and using technology inventively will provide the stability for translating hard-won political gains into growth and prosperity.

Twenty years ago, countries such as Poland faced an uncertain economic future when they broke free of communism, but they have thrived since then.

Similarly, attractive demographics, a strong trading spirit and the scope for infrastructure development in the Spring countries give them vast potential for growth.

* Michael O'Sullivan is a member of the Credit Suisse Research Institute

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