Understanding Revolution in the Middle East: The Central Role of the Middle Class

Abstract

The paper argues that the changing interests of the middle class can explain the authoritarianism of the past and the more recent shift to democracy in some, but not all the countries of the Middle East. The framework proposed includes the evolving class structure and related class preference for economic and social policies. It compares the possible coalitions between classes that can form either an autocratic bargain or a democratic coalition, and it explores the conditions under which a shift from one sort of equilibrium to the other can occur. It then reviews the evidence in two areas. First, it looks directly at changes in opinion in Egypt, Iran, and Morocco and asks whether these are consistent with the predictions of the theory. Second, it examines the corporate sector in Egypt around the time of the revolution, in order to understand the performance of "crony capitalism" and to evaluate whether it may have affected the incentives of the middle class to defect. JEL Classifications: P16, P26

Accounting for failures to reform in the Arab world

“…Over time, however, declining levels, and effectiveness, of public spending may have contributed to growing discontent, loss of legitimacy and a questioning of the underlying bargain by parts of the population . Indeed, Diwan () has argued that the old social compact was dead by the mid‐1990s. Certainly, some of the main human development indicators may have flattered to deceive (Salehi‐Isfahani, ).…”

“…Most commonly, rents were generated by regulatory interventions and barriers and, in some instances, on the basis of explicit rent sharing with the autocrat or his party. The key levers here were control over the large public sector and its use to confer employment, income and other patronage, alongside a careful husbanding of cherry‐picked and lucrative commercial and financial activities into the arms of regime stalwarts or family relations (see, inter alia, Diwan, ; Eibl and Malik, ; Diwan and Haidar, ). In some contexts, there was also a strong centralization of power including of the repressive apparatus, whether the army, police or judicial system.…”

“…What seems to be common, however, is that the share has demonstrated rough stability over several decades. In a more nuanced argument, Diwan () argues that the most important change since the 1990s was not in terms of size, but rather the composition, of the middle class. Those changes came as a result of the partial economic liberalization that was being introduced.…”

“…A consequence of cronyism has also been attitudinal. Diwan () highlights the fact that cronyism spawned a perception of corruption and inequity and an attitude among the population that liberalization (however incomplete) was simply a means for concentrated private enrichment and even regime renewal. It is not quite clear whether this translated into hostility to business per se or to specific businessmen (cronies).…”

“… Acemoglu et al . () and Diwan () document the significant impact of perceived loss of connections on equity values in the Egyptian context. …”