The Modern Middle East (69 page)

Similarly important is the direct dependence of rentier economies on factors over which they seldom have any control: international demand for their primary sources of rent income (such as oil); international developments that can drastically reduce their rent revenues (the Gulf War and the resulting expulsion of many Jordanian expatriate workers from Kuwait); and other market vagaries. The rentier economies of the Middle East tend to be particularly susceptible to fiscal uncertainty both because of the region’s frequent international crises and because of the short-term concerns and considerations on which their national budgets are based. Especially in the oil monarchies of the Persian Gulf, where elaborate,
cradle-to-grave welfare states have been devised, fluctuations in levels of rent income can potentially have significant political repercussions.
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Despite the multiple negative side effects of the “resource curse,” some rentier economies have managed to achieve high rates of economic growth while maximizing social welfare sustainably. The economies of Botswana and Costa Rica can be counted among the select few that have employed rentier practices rather successfully. The difference there has been the existence of democratic polities that have introduced a measure of transparency in public revenues, and, more importantly, relative state autonomy from vested societal interests, thus giving room to policy makers to pursue sound economic policy.
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Equally instrumental, of course, have been more stable rent streams (especially diamonds for Botswana) that have not had the volatility of oil prices over time. In all Middle Eastern rentier economies, however, the underlying dynamics of rentierism have been different. Essentially, the rentierism of Middle Eastern economies has been
unruly,
trapping the state in a vicious circle: the state must constantly strive to keep its societal clients quiescent while at the same time staying mindful of domestic or international developments that could cut its rent revenues.

Despite state efforts to the contrary, statism and rentier practices have not helped the state establish its desired levels of control over the different sectors of the economy. In broad terms, Middle Eastern economies can be divided into three main sectors: formal, informal, and semiformal. The characteristics and agendas of the semiformal sector are especially instrumental in contributing to the basic “weakness” of Middle Eastern states in relation to their societies, as manifested by their inability to control or regulate many of the economic interactions of the more affluent social actors. Even the most extensive programs of statist development, of which there have been plenty in the Middle East, have failed to quell or even to penetrate the vibrant capitalism of the semiformal and informal sectors of the economy. Countless other small business establishments are, at best, only seldom regulated by the state. However, the economically derived social autonomy that ensues as a result does not automatically undermine the authoritarianism of the state, as these sectors are more concerned with maintaining economic independence from the state than with pursuing political goals. Thus, despite crises of rentierism throughout the region and apparent moves toward economic liberalization, economic actors in the Middle East so far have not emerged as advocates or supporters of political
change. When economic actors have put their economic clout to political use—as Iranian bazaar merchants did during Iran’s 1978–79 revolution—they have failed to permanently curtail state power vis-à-vis society. Whether the private sector in the Arab world emerges as a source of political change as a result of the Arab Spring remains to be seen.

Much of the literature on the political economy of the Middle East focuses on the formal sector and its relations with the state.
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A few other studies, equally rich in depth and insight, concentrate on the informal economy.
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Although there have been some perceptive studies of the bazaar merchants and other economic “informal networks,” none examine systemically the semiformal economy and the pivotal relationship between its actors and the state.
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The core of the semiformal sector is made up of merchants who operate out of small, nondescript stalls, often found in the commercial districts of cities large and small, especially in the bazaar area and other inner-city marketplaces. In relation to each of these sectors, the state faces a basic problem of penetration. Given that the formal sector is—theoretically at least—the most organized and is bound by procedures and official regulations, the state has the most influence and control over its activities and its growth in size and productivity. In contrast, the informal and semiformal sectors remain largely outside the state’s purview, the former often because of the state’s deliberate neglect but the latter despite the state’s efforts to the contrary.

As in the rest of the developing world, the formal sector in the Middle East is made up of business establishments and enterprises that tend to be large, may be partly or wholly owned by the state or by private interests, and, despite occasional attempts at evading government regulations (e.g., labor laws and import-export fees), are by and large subject to the state’s official policies and laws. Within the formal sector, economic endeavors range from those occurring within the state bureaucracy—which, at least technically, is subject to close government scrutiny and influence—to those of private enterprises, whose owners are eager to skirt government regulations whenever possible. While extensive programs of economic liberalization have been launched in the Middle East—as seen in Iraq before the Gulf War and in Egypt, Jordan, Tunisia, Turkey, and the Persian Gulf states—the state continues to own numerous enterprises and closely regulates many others. In fact, even in Egypt and Turkey, which have undergone some of the most extensive economic liberalization programs within the developing world, state-owned enterprises continue to be seen as “indispensable to accomplishing the productive and distributional goals of national policy.”
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The state bureaucracy, in which the bulk of the urban middle class finds
employment, remains particularly massive and cumbersome despite occasional state promises of greater efficiency and streamlining.
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It is often through the bureaucracy and state-owned enterprises that Middle Eastern states perpetuate the ruling bargain. They use the economy as a tool through which they reinforce patron-client relations with domestic and at times extranational actors and, eventually, enhance their standing in society.
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No matter how direct or extensive the state’s influence within the formal sector may be, it can at best only indirectly affect the overall life and internal dynamics of the informal sector. The informal sector itself may be divided into two economic groups. One—the
mobile
informal sector—is forced to move from place to place and from job to job in a constant struggle to make ends meet. It is primarily composed of what is traditionally referred to as the lumpenproletariat: recent, unskilled immigrants from the countryside whose inability to secure regular employment forces them to resort to creative ways of earning a living. Male immigrants usually work as day laborers on construction sites, although a more frequent source of employment for both males and females is domestic service in the houses of the upper-middle classes and the wealthy. Countless others shine shoes on sidewalks or sell fruits, vegetables, bread, cassette tapes and compact discs, lottery tickets, or other items. Though not to the extent found in Latin America, children living in the streets are also becoming more and more prevalent in some of the Middle East’s larger metropolitan centers, such as Alexandria, Cairo, Istanbul, and Tehran. With little or nothing at stake in the village communities they left behind or the urban community in which they remain marginal and alienated, these members of the informal sector drift through life from one low-paying job to another, frequently at the mercy of wealthier shopkeepers, construction foremen, or others in the middle classes who can easily hire or fire them.

The second group within the informal sector is
stationary.
It is made up of rural immigrants who are slightly better off and whose resources or savings have enabled them to purchase small stalls or shops from which they sell goods and at times even certain services. Small shopkeepers and grocers—especially those in the inner cities, the slums, and small towns and villages—are the most common examples of such stationary entrepreneurs. In some of the larger fringe communities, however, such as Cairo’s City of the Dead or Istanbul’s Kasimpasha, one may also come across individuals with stalls or other settled spaces in which they practice dentistry and medicine (in addition to performing circumcisions), lend money, service the neighborhood’s cars, serve tea and coffee, sell alcohol or other beverages,
and perform a variety of other functions. Most of these family-run businesses remain small and, despite the hiring of neighborhood children for negligible wages, seldom enable their proprietors to build up substantial savings.

Because of mounting problems of underemployment and insufficient job opportunities in much of the Middle East in recent decades, especially outside the oil monarchies, the lines between members of the stationary informal sector and the urban lower-middle class have become increasingly blurred. It is extremely difficult, for example, to pinpoint the socioeconomic background of the owner and employees of a small mechanic shop, an herbalist, or a fruit seller. Making the distinctions even more muddled are the close personal, kinship, and neighborhood ties that pervade Middle Eastern societies: for example, friends, especially youngsters, from different economic backgrounds working together or for each other.
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In ordinary circumstances, both the mobile and the stationary members of the informal sector have minimal and sporadic contacts with the state and its agents. This holds true even for those who own small shops or stalls. For a minority of stall owners, their only contact with any state agency comes at the start of their operation, when they formally register themselves with the government. Many, however, continue to operate without officially registering. Subsequent contacts with the state or with its agents—building code inspectors or those from the Health Ministry, for example—are practically nonexistent. In fact, members of both of the categories in the informal sector tend to view the state, including those affiliated with it, in an adversarial light.
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“Those in the government have done little to assist us,” goes the conventional wisdom, “and not evading them can end up costing in fees, taxes, or bribes.” The stationary informal sector, with its entrepreneurial, self-starter mentality, is especially keen on evading the intrusive reach of the state. For a low-budget, small-scale business that relies on its immediate physical and economic environments to survive, government regulations can be both prohibitively costly and unimaginably tedious to bear. The rural immigrant starting such a business, already wary of state institutions, has neither the time nor the resources to go through official licensing procedures or to abide by the endless array of rules and regulations the state imposes.

None of the states of the Middle East make concerted efforts to penetrate or drastically influence the stationary informal sector. The manpower and the institutional capabilities needed to extend the reach of the state that deep into urban society often simply do not exist.
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From an economic and bureaucratic standpoint, state leaders and policy makers do not rank the
regulation of small, largely informal businesses high on their list of priorities. Far more fundamental and pressing difficulties within the national economy—the price of oil on the world market, the rate of inflation, currency reserves and foreign loans, IMF-mandated austerity measures, the official and unofficial exchange rates, unemployment—demand more immediate attention from the state.
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Few state leaders, in fact, are oblivious to the safety-valve function of the informal economy: informal traders and enterprises, especially so long as they refrain from dealing in contraband and smuggled goods, can serve as useful means through which an otherwise desperate segment of the population earns a living.
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That continued economic marginalization is thus perpetuated and that a potentially lucrative tax base for the state remains outside its reach seem a small price to pay for keeping a potentially dangerous—easily mobilizable—fringe social class economically active.

Even if Middle Eastern states decide to bring the stationary informal sector under their regulatory supervision, as some have done on rare and brief occasions, they are likely to face numerous practical problems in implementing their policies. How would the state ensure that all of the businesses in operation were officially licensed or registered? One of the state’s most feasible options is to hire inspectors—or to assign existing civil servants—to go through different neighborhoods and determine which business establishments are legally registered and which ones are not. To my knowledge, so far none of the states of the Middle East have adopted such a tactic, nor have they assigned such a task to their conscript soldiers.
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Even if such a tactic were adopted, given the pervasiveness of social and personal bonds in Middle Eastern societies, it is unclear how many of the state’s hired agents would actually initiate measures that might well result in the closure of a business that was someone else’s main source of livelihood. Reducing the strength of interpersonal bonds by assigning employees to inspect businesses in cities other than their own also seems impossibly difficult for the state to coordinate and afford.