Welfare and rebellion: The economic factor in the Arab uprisings

Too little attention has been paid to how Egypt’s socialist past and welfare-state present shaped the current rebellion. But neither the daring of the young people who defied a brutal dictatorship nor their passion and rage can be understood without knowing this history.

Many Arab and African states, including Egypt, are backward because socialism and statism created dysfunctional governments that were eventually overthrown by military dictatorships. Welfare especially worsened the desperate predicament of Muslim societies, where political, social, and personal repression is upheld by piety while women and the sexually repressed young, who cannot marry until well past 30, suffer terrible mistreatment and disabilities.

Welfare’s reduction in child-mortality rates helped create a demographic bubble, with millions of unemployed and probably unemployable youth roaming the streets, ready to explode in riots. This bubble has been draining what little resources these nations possessed; their investments in raising their youth have not seen appropriate returns, especially when they die young. The growing numbers and rage of the chronically unemployed have made it difficult for these countries to advance materially—even when their economies improved and fertility was dramatically reduced, as occurred in the last decade in Egypt.

About 40 percent of Egyptians are dirt-poor fellahin, farmers (in the West, only 3.5 percent of people work in agriculture). Tradition encouraged the siring of many children, to secure free labor and old-age support; consequently, about 50 percent of the population is under 25 (compared with 32 percent in Germany, 37 percent in France). Unemployment in Muslim countries is officially close to 10 percent but is probably much higher among the young.

Egypt’s population has doubled since the beginning of Mubarak’s reign. Welfare provided the means for the very poor to keep body and soul together and to have many children. But Egypt’s highly bureaucratized and corrupt crony system inhibited economic growth and denied the young employment and advancement beyond subsistence. Rising prices made marriage unaffordable until well into a man’s thirties. Sexual frustration and hopeless unemployment combined to create the rage that the Tunisian conflagration ignited.

What happened in Egypt between the end of the Second World War and the present rebellion illuminates what has happened economically throughout the Arab world (and much of Africa, too). In order to keep their religiously, culturally, and politically repressed citizens pacified, Arab dictators copied the West’s post-World War II welfare policies. Upon taking power, they nationalized industries and created socialist welfare states with autocratic governments.

When young Egyptian officers deposed King Farouk in 1952, they structured their “republic” on third-world models of military dictatorship. The Egyptian economy was totally subjected to politics, breeding inefficiency, waste, and corruption.

Dependence on Arab oil and on vast amounts of foreign aid (which was funneled through corrupt elites that squandered or stole much of it), together with Cold War politics, maintained these repressive dictatorships, however horrendous they were (e.g., Idi Amin). When the civilians ruling them messed up too badly, or lost in war against Israel, they were overthrown by the army, which then made bigger messes.

Repression, heavy taxation, and choking bureaucracy gradually did away with the small Arab middle class, the bearer of modernism and economic progress. Civil society disappeared. An ever restive “street,” composed of chronically unemployed “students” and many millions of idle or underemployed university graduates, was prey to incessant incitement by radicals, by the media, and recently—with the help of aid from U.S. labor—by the unions, which still hold to socialist ideas. “The street” became a wild card, a spoiler, an erratic but feared force in politics. Intellectuals (academics, the media, writers, lawyers, etc.) and their organizations also became captive of their most radical members, usually communists, socialists, or Islamists. There was not in the Arab world a countervailing classical-liberal tradition to resist this process of radicalization.

Nepotism and corruption made the wealth gap between the elites and the rest of the population grow into a gaping chasm. Dysfunctional governments could not deliver even the most elementary services. They destroyed the little blessings inherited from colonial rule: functioning health and educational systems, the rule of law, etc. Growing discontent was suppressed by ever-expanding security services (with instruction from East German “experts”) that acted with increased brutality and lawlessness.

Distributive politics, facilitated by huge oil income or by foreign aid, fragmented and radicalized politics. As government became the largest employer and purchaser of goods and services, the struggle for “benefits” and handouts became violent and corrupt. Cronyism became rampant. Laggard economic growth cut employment prospects and unemployment reached unbearable proportions . The need for welfare became desperate and forced governments to resort to deficit spending, causing high inflation. As distress and unrest grew, and as the welfare system increasingly corrupted both politics and the economy, power became a sole arbiter.

While this decline happened relentlessly in Arab and African states, in other parts of the underdeveloped world—such as India and China—prosperity advanced. The telling comparison with these prospering countries, let alone with a relatively successful Israel, inflamed the envy and rage of the Arabs.

As Indonesia teaches, there is no innate reason why a formerly repressive Muslim regime cannot nurture a democracy of sorts. To take root, however, the oppression bred by the failing states of welfare kleptocracies must cease, a tall order indeed. Also, Islamic strictures that reduced women to childbearing beasts of burden must be abolished.

Without such profound changes Arab frustration and rage will keep instability alive and provoke occasional rebellions. The army takeover in Egypt may bring about a lull in open hostilities, but army rule will probably result in worse crises in the future. Many of the top Egyptian officers were Moscow-trained, and they are either crypto-communists or socialists, devoted statists militantly opposed to a market economy. They have been great obstacles to some of the hesitant reforms that Mubarak tried to launch, insisting on maintaining state—namely army—control of the economy. They received much popular support because the Mubarak reforms, partially successful, created in Egypt a corrupt crony capitalism that helped spark the rebellion.

The second echelon of command in the Egyptian army, the colonels and majors—the likes of the officers who rebelled against King Farouk—are another story. A significant proportion, those not US-trained, are probably devout Islamists. There is a danger that they will join the Muslim Brotherhood in a takeover bid when the army botches up the economy, as it most certainly will as it pursues power and corrupting economic domination.

The story in Arab lands is just beginning to unfold. Those who ignore the economic elements involved in the evolution of the rebellion—as they ignore the role of the threat of economic bankruptcy in stimulating growing Iranian aggression—will be unable to correctly assess whether present events in Egypt are a prelude to greater democracy or to greater repression that will come about when Islamic radicals, with their supporters in the armed forces, may prove to more adept at exploiting popular rage, and take over the regime.