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The political economy of conflicts

F or decades, the dominant framework concerning the reform of developing countries’ economies has been a circumscribed set of measures intended to promote good governance, fiscal austerity, reduction of public budget deficit, increased privatization, and overall the advent of market economies to achieve sustainable development and help developing countries undergo economic crises. The liberalization of trade, the privatization of the economy, including strategic sectors and those providing basic services to citizens, as well as financial deregulation, have been perceived as the best cure for the many ills afflicting the economies of the region and spurring economic growth and development

The internationally-sanctioned reforms implemented by several MENA governments were expected to result in economic prosperity, the democratization of states and societies, the pacification of the region, the eradication of social problems such as endemic poverty and exclusion, as well as the modernization of the economies and their integration into the world economy. Today, according to both experts globally and the constituencies of the countries of the MENA region, it seems that we are far from the mark. Both before the 2011 Arab uprisings and after, for the peoples of the region it has become urgent to revisit these socio-economic policies and broaden the horizon of the thinking about policy options to enable Arab states to face the economic and societal challenges and eventually uplift their societies from the trap of inequality, exclusion, structural disempowerment, poverty and conflict. This notably involves the necessity of considering new perspectives and the multiplication of spaces dedicated to a healthier debate on socio-economic policies for an inclusive sustainable development for all.

A sound analysis of the economic policy regimes in place in the MENA region- since 2000 at least- shows how issues of growth and employment have undermined citizens’ trust in state institutions and adversely affected political stability and social cohesion.

A sound analysis of the economic policy regimes in place in the MENA region- since 2000 at least- shows how issues of growth and employment have undermined citizens’ trust in state institutions and adversely affected political stability and social cohesion. The post-2011 situation in several MENA countries has deteriorated further. These socio-economic regimes are based on the combination of a policy mix that is founded on the principle of socio-economic austerity, the imperative of monetary credibility and budgetary discipline and on a structural policy whose objective is the intensification of competition and flexibility in the credit, product and labor markets. By assessing the overall performance of most economies of the MENA region, one can unveil an inconvenient triangle between, on the one hand, macroeconomic governance and structural reforms, and on the other, the growth dynamics supposed to be triggered by these two levers. Growth in gross domestic product remains sluggish, dependent on agricultural value added, tourism or export of natural resources. It has yet to be translated in tangible human development achievements. Most of these economies have suffered from chronic volatility and incapacity to create the necessary employment opportunities to absorb the large number of unemployed and most of all the growing youth bulge.

 

 

 

The correlative activity deficit is accompanied by a negative impact in terms of unemployment and social welfare which restricts access to resources and rights to education and health and is coupled with increasing socio-economic inequalities which have eventually led to conflict in several countries of the MENA region starting from 2011. The case of Tunisia is a case in point both in terms of economic policy and performance, and in terms of social cost and democratic deficit. By emphasizing real rights and the role of institutions, Amartya Sen’s capacity approach offers an appropriate framework for studying the links between the economic policy regime and social cohesion in comparison with the Tunisian case. It is likely to shed light on these links in three ways. First, the persistence of rationing of access to employment, the massive nature of unemployment among young people, the extension of vulnerability, the rise in inequality are analyzed as so many obstacles to the expansion of the achievements of people and the exercise of substantial freedoms. Then, social conflict appears as a reaction to the inequality of capacities which brings into play demands for access to credit rights as protection against vulnerability. Finally, the socio-political deficit is testing the efficiency of economic institutions and the capacity of the state structure to respect its commitments and to control the processes affecting social cohesion.

Reducing the threats to society calls for a reorientation of socio-economic governance, putting the fight against chronic structural unemployment and systemic inequalities at the forefront of public policy.

Reducing the threats to society calls for a reorientation of socio-economic governance, putting the fight against chronic structural unemployment and systemic inequalities at the forefront of public policy. The limits of monetary and budgetary policies like those of the changes in market structures now frequent in IMF and World Bank studies. The negative impact of public spending restrictions and the perverse effects of neo-liberal reforms on the steady increase in inequalities are increasingly pointed out to explain the perverse effects on potential growth and negative social effects. The policy mix must be revisited with a view to boosting employment and supporting economic activity towards a more equitable and inclusive human development. To this end, the adoption of flexible rules is likely to ensure greater responsiveness to cyclical developments and their social fallout. The room for maneuver of the State should be widened by a fiscal policy intended to extend the budgetary space which the IMF defines as the margin available to the State to allocate resources to expenditure without compromising its financial position and macroeconomic stability. Resources can be freed up by reducing the tolerance for tax evasion and strengthening the incentive constraints to respect the law. At the same time, improving the progressivity of taxation and narrowing niches and subjecting them to performance conditionalities. Under these conditions, public spending can serve as the primary lever both to support economic productivity and growth, both through investment in infrastructure and innovation activities as well as in education and health services.

The option in favor of redistribution is essential, not only to reduce inequalities, but also to create the conditions to support long-term growth and eventually development. In this sense, the fight against unemployment calls for actions in favor of those excluded from employment and downgraded wage workers. The private sector, whatever its dynamism cannot fully meet the demand for employment, the State can ensure the function of employer as a last resort. A significant proportion of graduates are overqualified for occupied jobs, investments in training as much as redeployment’s in public activities can contribute to the fight against this form of inequality. The performance of governance setup that has been in place for over two decades translates into an increasingly costly negative social effects generating conflict. Other policies are possible to design and implement provided that policymakers free themselves from the foundational ideas and vision, on which this governance rests, which remain significant despite the poor record of the implementation of their implications.

The nexus between socio-economic policies and conflict requires a renewal of thinking in the field of the political economy of development and related issues globally, and particularly at the MENA regional level. The diagnosis of past experiences and lessons learnt globally from a multitude of recurrent crises should offer new perspectives in this regard.

The nexus between socio-economic policies and conflict requires a renewal of thinking in the field of the political economy of development

Author

ICDI Admin