Enabling economic transformation in Mideast and North Africa
David Lipton, IMF First Deputy Managing Director addressing a meeting said I am delighted to be here at the London School of Economics, with its vibrant tradition of marrying up the study of economics and other social sciences, including politics, law, and sociology. LSE was set up to improve society and to “understand the causes of things,” something we at the IMF strive to do every day in our work with our 188 member countries.
Today, I would like to talk to you about a topic close to my heart and to our work right now at the IMF: the future of the Middle East and North Africa (which I will refer to as MENA). Your institution has a long history of study and engagement with the region, and I look forward to sharing my thoughts with you on the prospects for stability and prosperity in that part of the world.
We warned of the risks to recovery from the fiscal cliff in the United States and the eurozone crisis and we called for action on both counts. So, you would be right to assume that we spend a lot of our waking hours working on the prob- lems of the advanced economies. I will speak about what the IMF is doing. And I will also argue that the international community as a whole must resist the understandable preoccupation with its own difficulties, at this important moment when we all need to provide concrete support for the aspirations of the people of the Middle East and North Africa for a brighter future.
The Arab Awakening started as a revolution, with a single selfimmolation by a street vendor in a rural town in Tunisia in December 2010. The next month, the call in Egypt for “bread, freedom, and social justice” echoed across much of the Arab world and excited observers everywhere. The mandate for change was not just political?it extended deep into the economic sphere. The people were calling for a say in how their countries would be governed and for greater opportunities for prosperity and human fulfillment. Now, almost two years later, MENA’s future is unclear. In their recent article entitled “This is Not a Revolution,” two prominent Middle Eastern scholars, Hussein Agha and Robert Malley, begin with the assertion that in the Middle East “history does not move forward. It slips sideways.” They say aloud what many recent observers have been thinking, that newly elected governments lack a clear direction in terms of political and economic reform and that religious factionalism is reinforcing inaction. They warn darkly that the fight for political power will block progress on political and economic reform. One could add that some have doubts about the pace and direction of reforms in countries where leadership has not changed.
To me a useful way to think about the present situation is that the revolution in the region could take any one of three alternative paths, as far as the economic consequences are concerned, paths which one could call deterioration, restoration, and transformation.We could see stabilization achieved through a reassertion of vested business interests offering a respite from eroding economic conditions but condemning the region to a return to economic stagnation or at best tepid growth; or we could see a new economy emerge, as newly elected and inexperienced governments gradually find a way to end lingering economic disruptions and begin reforms to open the way to greater economic opportunity for their people.
While the first two paths would be undesirable, they could come to pass. Needless to say, the third path, transformation, would be best. How should we assess these prospects? What if anything can we do to affect the outcome? Let me try to address those key questions.
Stronger emphasis on trade. The overarching strategy to deliver economic growth on a scale and timetable that would create enough jobs and prosperity for the rapidly growing populations in these countries is economic integration.