The Modern Middle East (70 page)

The state’s approach to the mobile informal sector also tends to be one of unofficial tolerance. Many of the same difficulties (or lack thereof) that hinder the state’s relationship with the stationary informal sector also influence its conduct and posture toward the mobile informal sector. Nevertheless, the state’s treatment of the mobile informal sector tends to differ from that of stall owners in two important respects. In the “inclusionary” polities of the Middle East—those of Qaddafi’s Libya, postrevolutionary Iran, and Saddam Hussein’s Iraq—members of the lumpenproletariat have frequently formed an overwhelming majority of the state’s foot
soldiers.
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As chapter 8 demonstrates, all three of these states created paramilitary and quasi-political institutions whose primary purpose was to mobilize popular political support for state leaders and to carry forward the unending plethora of revolutionary projects—the Islamic Revolutionary Guard Corps in Iran, the Popular Army in Iraq before 2003 (also known as the Popular Militia), the Revolutionary Committees in Libya—that the state constantly embarked on. Membership in these and similar organizations has by no means been limited to recent rural immigrants. In fact, almost all influential positions within such organizations are filled with ideologically committed militia “commanders” who come from mostly urban, middle-class backgrounds. Nevertheless, becoming part of the burgeoning rank-and-file popular militia benefits not only the rural immigrants but the state as well. It enables the lumpenproletariat to become as much a part of the economic and political mainstreams as possible. These and similar state-affiliated institutions provide rural immigrants with shelter, a meager but sufficient income, and, most important, a new purpose in life and prestige among co-immigrants and in the village communities left behind. The benefits to the state are just as compelling: a ready pool of recruits who are easily mobilizable and who do not come with the preexisting ideological baggage often acquired in the cities.

In a second important respect the state treats the mobile informal sector somewhat differently. Although statistical evidence is not available, it often appears that the state is more eager to prosecute the lumpenproletariat who commit criminal acts than those with more economic resources and social or political connections.
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The state, both in the Middle East and elsewhere, often uses the punishment of the poor and other marginal elements of society to demonstrate its determination to combat crime, to impress society with its powers, and to intimidate its opponents.
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For example, according to Amnesty International, in Iran the state routinely uses “force against marginalized segments of society to assert its power,” frequently imposing harsher punishment on the poor than on the wealthier.
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Early on in the life of the revolution, recidivist thieves, an overwhelming majority of whom come from society’s fringe elements, also routinely had their fingers amputated as other criminals were forced to watch. In Algeria, villages and small towns, which are used as way stations to bigger cities by many rural immigrants, also bore the brunt of the country’s bloody civil war of the 1990s. In 1997, government militias—known as the Groupes d’autodéfense (self-defense groups) or Patriotes (patriots)—allegedly massacred two thousand villagers in the Blida and Medea regions near the capital, another three hundred in the village of Rais, and some two hundred in Bentalha.

The approach of the Mubarak regime in Egypt to the less wealthy, from among whom most of the state’s opponents came, is instructive. Egyptian security forces frequently used heavy-handed tactics in the poorer neighborhoods of Cairo, Alexandria, Asyut, and elsewhere to ferret out members and sympathizers of the opposition group Gamaʿa Islamiyya. These and similar operations were not surprising given that the security-conscious state was suspicious of its citizens and feared, often for good reason, the violence of the Gamaʿa. However, from the launch of the
infitah
in the mid-1970s onward, the Egyptian government’s economic policies consistently angered many of its opponents. For example, the 1996 repealing of the 1952 Land Reform Law, which had guaranteed farmers security on rented land, considerably heightened tensions between the state and those who were finally forced to abandon the countryside and to live on the fringes of urban areas. In many respects, the state’s campaign against the Gamaʿa and the Muslim Brotherhood acquired an economic, class character.

The same type of inequity in the state’s punishment of the less wealthy occurs in the oil monarchies, where most of those on the margins of the economy are expatriate workers from Yemen, Jordan, Egypt, and South and Southeast Asia. In the emirate of Ras al-Khaimeh (in the UAE), begging is punishable by flogging. A consistently large percentage of individuals executed in Saudi Arabia, which has one of the highest execution rates in the world, are foreign nationals working in the country at menial jobs and earning minimal wages.
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In Kuwait, nomadic bedouins have no citizenship rights and are frequently harassed and viewed with suspicion by government forces.

The third sector in Middle Eastern economies is semiformal, composed of an entrepreneurial class with substantial economic resources. Unlike the formal and informal sectors, whose economic activities are marked by extremes of procedural formality or complete informality, the semiformal sector operates out of formally established enterprises but conducts its business with little regard for formal procedures or regulations. Although the business establishments active in the semiformal sector are often officially registered and licensed, many of their transactions are conducted informally and unofficially, bound not by specific government regulations but by internal, complex dynamics that have evolved within and between the businesses. Usually operating out of small, rather nondescript shops and stores that give a misleading impression as to the high volume of capital they generate, these businesses generally fall into one of two categories. Many specialize in the sale of one specific type of item—fabrics, carpets, jewelry, leather, copper and brass, bridal and dowry goods, herbs and spices,
nuts and dried fruits, patisseries. There is often only one owner, although some stores are owned by a partnership of two or more entrepreneurs. Many of these businesses are found in the bazaar—in fact, these are often the
only
businesses found in the bazaar, with each wing of the bazaar or section within each wing housing similar businesses. Nevertheless, there are too many of these establishments to all fit into the narrow alleys and limited spaces available in the bazaar. They can therefore be found throughout the business districts of most larger towns and cities as well.

Other businesses in the semiformal sector offer a variety of services, including but not limited to lending money, selling cars or real estate, operating as general contractors, and importing industrial or automobile spare parts. Because such businesses tend to be more capital intensive and to require some technical or bureaucratic know-how, many of these enterprises are partnerships of two or more investors and businesspeople. Often an individual has investments or other types of involvement in several such businesses. Unlike shops and stores that sell goods and products, service businesses tend not to be concentrated inside the bazaar. Instead, many line the streets and the neighboring areas around the bazaar and are also found in other hubs of economic activity throughout the city.

Despite their often unassuming storefronts, semiformal entrepreneurs tend to be affluent and have substantial capital at their disposal. In this they differ from the middle classes, which throughout the Middle East, except in the oil monarchies, have difficulties in making ends meet. The regional recession that started in 1986 and lasted into the 1990s, compounded by the slowdown of the 2000s, did not help matters: many have had to take second or even third jobs to be able to afford their rents or mortgages or the modern appliances that have become essential to middle-class living (washing machines, refrigerators, TVs and VCRs, and, more recently, computers, satellite television, and cell phones). More and more families find it necessary to have two incomes, and more wives have had to join the ranks of the formally employed.
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Members of the semiformal sector also differ from the professional technocrats and other wealthy members of the upper classes—physicians, industrialists, high-ranking bureaucrats—in that they seldom engage in conspicuous consumption. Despite their wealth, their purchasing habits and lifestyle more closely resemble those of the middle classes. Most important, they do not owe their station in life to the state and are not directly or even indirectly dependent on the government for their continued economic well-being.

Like those in most developing states, Middle Eastern governments often see the private sector as weak, likely to engage in speculation and profiteering,
and prone to selling out the national good through alliances with foreign capital.
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The state tries to regulate what goes on in the semiformal sector as much as possible and to collect its share of tax revenues generated by the sector’s economic activities. But it is inherently weak when it comes to pursuing its goals and agendas. Its contacts with the semiformal sector are irregular and sporadic. Its ability to collect taxes and other fees from members of the sector is highly limited and inconsistent, depending on factors such as the cleverness of entrepreneurs in evading state institutions and its personnel, the effectiveness of the state’s own agents, the whims of policy makers, and the zealotry or apathy of bureaucrats charged with implementation.
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Thus the state’s penetration of the semiformal sector and its ability to extract resources from it are uneven and often minimal. In short, in the Middle East one finds what one scholar calls “limited states” both in general and in specific relationships to the semiformal sector.
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The state’s inability to firmly establish its authority over the semiformal sectors is due to complex interactions and processes. Both in its stated policies and in actual practice, the state wants to bring the semiformal sector under its control, at least financially if not bureaucratically. It thus creates bureaucratic institutions and agencies for this purpose (e.g., the Ministry of Economy, the Chamber of Commerce). But midlevel merchants and entrepreneurs often simply ignore state agencies and their functionaries. Their successful snubbing of the state is partly due to the state’s own inherent limitations: the state needs to preserve its available resources for the pursuit of larger economic goals, as it does not have, despite pretensions to the contrary, the omnipresence that its policies would require. Equally important are the dispositions and the capabilities of the merchants themselves. Members of the semiformal sector often perceive the state to be an obstacle to their desired economic goals, and this perception tends to be more accurate than not. Like the middle classes, they tend neither to trust the state’s intentions nor to agree with its overall ideological, political, or economic agendas, and their relation to the bureaucracy is especially adversarial.
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They have at best a utilitarian approach toward state institutions and officials: best avoided at all costs unless they somehow further one’s own benefit, which happens only rarely. Consequently, although the state has often created highly elaborate procedures aimed at regulating the operations of businesses, the semiformal sector seldom binds itself by state regulations in such crucial matters as hiring or firing employees, lending or borrowing money, setting the price of goods and services, observing child labor laws, and remaining open or closed on certain days. Frequently, business proprietors in the semiformal sector consider government regulations in these
and similar matters intrusive and ill informed, tedious, and cumbersome, designed to maximize the benefits accrued to the state and thus ultimately harmful to business. In an attempt to derive revenues from society in forms other than what may appear as taxes or levies, many Middle Eastern states collect “fees” from businesses. To the merchants and businessmen who bear the brunt of these fees, they often appear as arbitrary and unfair, wasted at best on misguided state projects or at worst on corrupt officials. Even banks and other official lending agencies are viewed with suspicion: they enable the state to keep track of one’s assets, to tax hard-earned savings, and, in times of crisis or instability, to seize one’s assets. Unofficial moneylenders, especially those with a history of doing fair business, are often held in much higher esteem than formal banks and other institutions affiliated with the state. Thus evading the state and its multiple layers of institutions and officials is central to the economic vitality of the semiformal sector.

Sometimes a mutually beneficial relationship develops between the state and the semiformal sector that reinforces both the political and the economic status quo. This type of relationship appears to have developed in the mid-to late 1970s in Egypt, when many entrepreneurs benefited from, and in turn vigorously supported, President Sadat’s
infitah
policies.
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Throughout the oil monarchies, also, there is a wealthy and influential class of merchants, often situated just below the ruling family, with whom the rulers maintain extensive familial, clientelistic, political, and economic ties.
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And, in Iran, in the early years of the Islamic Republic at least, there appeared to be substantial support for the new regime and its policies in the bazaar and in other segments of the semiformal economy.
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In these and in other countries of the Middle East, the pursuit of clientelist politics and rentier economics by the state has kept the semiformal sector content and politically quiescent for relatively lengthy periods. Clearly, favorable conditions for growth, prosperity, and high levels of consumer spending, as fostered and encouraged by the state, go a long way toward alleviating the potential irritations of the semiformal sector with the state and, over time, may even turn entrepreneurs into one of the state’s main sources of financial support.