Why economists missed the Arab Spring

In other words, it is not straightforward economic hardship, but rather frustration with the disparity between expectation and reality that awakens the masses.

THE sixth anniversary of the Arab Spring uprisings this year came and went largely unnoticed. Unlike in previous years, there was no torrent of commentary about the tumultuous events that shook the Arab world and seemed to promise a transformation of its politics.

Of course, novelty wears off over time.

But waning interest in the Arab uprisings reflects a deeper shift; hope for new, more representative political systems has given way to despair, as expectant revolutions have morphed into counter-revolution, civil war, failed States, and intensifying religious extremism.

And yet, as disagreeable as the outcomes may have been so far, we must continue to focus on the Arab Spring uprisings, in order to uncover their root causes.

Like any landmark event, they have posed new and difficult questions. And one of the most important is why economists failed to anticipate the unrest.

Forecasting political upheaval is no easy feat. Economists have a less-than-impressive record when it comes to predicting even economic crises.

But this particular forecasting failure may reflect a deeper problem with economic assumptions and frameworks. On the eve of their downfall, a few Arab autocrats were actually being lauded by the World Bank and International Monetary Fund for their supposed success in adopting the “right” economic policies.

The World Bank’s subsequent mea culpa is a clear indication that there may have been a problem with the policies they had prescribed for the Arab regimes.

This raises a raft of other questions. Were economists focused on the wrong indicators? Were they misled by false inferences? Or were they not paying enough attention to potential pitfalls? In short, was it a problem of data or analysis?

A failure to anticipate political revolutions reflects, at least partly, conceptual inadequacies.

Mainstream economics tends to focus on the equilibrium-seeking behaviour of homo economicus, guided by rational choice, when marginal benefits equal marginal costs.

That conceptual framework is demonstrably ill equipped to deal with social and political upheavals, which can hardly be described as marginal changes.

There are also empirical dimensions to this forecasting failure. Many of the data painted quite a favourable picture of the economic situation in the Middle East and North Africa ( MENA).

During the decade before the uprisings erupted, the region’s economies attained respectable real annual GDP growth rates of around 4-5 percent.

These gains were somewhat diluted by the population growth that accompanied them, with real per capita GDPgrowth rates hovering around 2-2,5 percent.

Nonetheless, this represented a significant improvement from the 1980s and 1990s, when the MENA economies lagged far behind other regions.

There were also appreciable improvements in human- development indicators in the MENA countries and, judged by conventional criteria, inequality was declining in some of them.

For example, the Gini co-efficient was declining in Egypt.

Moreover, despite the paucity of data, poverty ratios, already among the lowest in the developing world, were falling in some of the countries swept up by the Arab Spring — most notably in Tunisia.

MENA countries had benefited, directly or indirectly, from years of favourable international oil prices — especially from 2002 to 2008, when prices reached a historic peak of about $147 per barrel — and benefited from a recent upswing in the business cycle.

But it was not all good news, of course.

When the revolutions erupted, there were plenty of reasons for ordinary people, especially the young and the educated middle classes, to feel politically alienated.

Unemployment rates — particularly youth unemployment rates — were very high. And autocrats are not exactly known for placing a high priority on social justice.

Even so, the fact remains that the MENA countries were experiencing improvements in relative prosperity, not economic downturns or stagnation. This flies in the face of much conventional thinking, which links mass revolts to economic hardship and assumes that periods of relative prosperity are correlated with mass political quiescence. —