Has Neoliberalism helped or hindered development within the middle east?

JatinSham

What is Neoliberalism?

Investopedia defines Neoliberalism as “An approach to economics and social studies

in which control of economic factors is shifted from the public sector to the private sector. Drawing upon principles of neoclassical economics, neoliberalism suggests that governments reduce deficit spending, limit subsidies, reform tax law to broaden the tax base, remove fixed exchange rates, open up markets to trade by limiting protectionism, privatize state-run businesses, allow private property and back deregulation.”

What does that mean?Open and free marketsPrivatisation of industryNo exchange rates (thus making

trade easier)Less tax on businessThe idea of democracyCivil rights

History of NeoliberalismBiggest champions of Neoliberalism

was Margaret Thatcher (privatisation of U.K. railways, oil, gas, etc) and Ronald Reagan (the privatisation “revolution”)

Thatcher argued it created more wealth prospects and was crucial for capitalism

Lead to austerity, which many argue on whether or not it is a good thing

Later implemented internationally

Egypt before Neoliberalism Under Colonel NasserNasser's tenure as Egypt's leader started a

new period of modernisation, and socialist reform in Egypt with a boost in Nationalism.

The era was seen as a time where ordinary citizens enjoyed unprecedented access to housing, education, jobs, health services, and nourishment as well as other forms of social welfare.

Under Nasser, Egypt experienced a golden age of culture, particularly in theatre, film, poetry, television, radio, literature, fine arts, comedy, and music.

Economy under NasserThe national economy grew significantly

through agrarian reform, major modernization projects such as the Helwan steel works and the Aswan Dam, and nationalisation schemes for example that of the Suez canal.

Egypt's economy grew at an average rate of 9% per annum for almost a decade.

The share of manufacturing to Egypt's GDP rose from around 14% in the late 1940s to 35% by the early 1970s.

The public sector in Egypt resulted in around 75% of Egypt's gross domestic product (GDP) being transferred from the hands of the country's rich either to the state or to millions of small owners.

Neoliberal Egypt The economy's main exports are crude oil and

petroleum products, cotton, textiles, metal products, and chemicals. Agriculture today accounts for 17 percent of GDP, industry for another 32 percent, while the services sector provides 51 percent.

Egypt's economy improved dramatically in the 1990s as a result of several arrangements with the International Monetary Fund (IMF) and the move by several, mainly Arab, countries to relieve a large proportion of its debts.

Egypt has managed to maintain positive growth rates. Inflation has been kept down, the country's budget deficit decreased, and its foreign reserves increased, while gross domestic product (GDP) has averaged annual growth of 4-5 percent

Neoliberal Egypt continued Despite the slow pace of privatization and new business

law enactment mandated by the IMF reform program, the country has succeeded in attracting foreign investment by moving towards a market-based economy.

U.S. aid to Egypt has come in the form of development assistance for infrastructure programs, job creation, education, democracy and governance, and in incentives for enlarging the private sector.

Egypt received US$815 million annually from the United States.

These aids brought along many rules and regulations with them to turn Egypt from a socialist country into a working model of Neoliberalism.

Failure of Neoliberalism in EgyptThe neoliberal policies of Sadat and Mubarak

made the country's economy more vulnerable to possible economic crisis

It could have been argued that  While these policies were making a group of elites richer, the majority got poorer.

The role of the army in the Egyptian economy stayed the same as a dominant economic figure with many factories and corporations.

 In 2006, tens of thousands of workers attended 220 strikes throughout the country, which was the biggest chain of strikes Egypt had ever seen in decades.

Failure of Neoliberalism in Egypt During the wave of privatization of a total of 314 state

companies, 209 were privatized and this led to the displacement of many public sector workers. From 1994 to 2001 the number of public sector workers was halved. This army of informal workers has played an important role in the uprisings.

All these neoliberal reforms paved the way for the revolution and the victory of the Muslim Brotherhood. However, every political scientist knows that democracy needs stability to survive and stability needs money. In a country where the income gap between the rich and the poor is too high and the middle class is too weak it is nearly impossible to maintain democracy

 As happened in Egypt, there is always a danger of reversal to authoritarianism in economically instable countries

Failure of Neoliberalism in Egypt Implementing neo-liberal policies as a

government project does not bring democracy to a country.

 It has to be in a natural (bottom up) way and it may take many years to form a well-established industrialized economy, government institutions and the middle class.

In Egypt the rage of the people against the bad government policies and worsening economic conditions paved the way for a revolution to democratize the country but it was not possible to keep it alive without necessary conditions.

Iraq before the warIraq’s GDP stood at $33 billion in

2000Iraq sold both oil and agriculture

as form of profit revenue, however majority of Iraq’s profit comes from it’s oil revenue

Graph created by CIA

How was Neoliberalism implemented in Iraq? Through...

Shock and awe

Shock Therapy“One of the risks in shock-based operations

has to do with the likelihood of "unintended consequences," or in precipitating reactions that have not been anticipated. For example, extensive attacks against a nation's infrastructure, electrical grid, or economic system can create such extreme hardship that the resulting backlash bolsters rather than weakens our opponent's national will to fight.”

—Lieutenant Colonel John N. T. Shanahan, "Shock-Based Operations," Air & Space Power, October 15, 2001

What does this mean? Similarities have been drawn with shock therapy

and bombing a country as both can identifiably be a form of erasure and mental shock which leaves state or victim in a form of paralysis that they do not recognise what is happening. Victims in camps in U.S. Were heavily shocked to create “new identities” which could later be used on torture victims, this form of deleting minds was adapted in Iraq through shock and awe.

Bombing of Baghdad was used as a form of shock because whilst the population were busy trying to avoid the bombs/live through war zone, heavy privatisation begun to take place

What does this mean? (continued) During the 2003 bombings more than 380

Tomahawk cruise missiles were launched against Iraq.

Furthermore, during the bombings, electricity and phone lines were cut, could only hear bombs during the night – biggest shock

“No one here [Iraqi’s] cares about privatisation, what they care about is surviving” Michael Birmingham, Irish peace activist

Colonol Shanahan proven right as population did not fight back against the heavy privatisation of the country

After the war Half a million workers of the state (be it doctors ,

engineers, teachers) were fired and removed due to Bremer’s attempts of “de-Baathication” of Iraq, and cleaning out Iraq of its former regime, which heavily hindered development

Thousands of Iraq’s doctors left due to the war During the war unemployment raised heavily to 67% in

Iraq, once companies were privatised multinationals would slash work force to build a higher profit

Contracts opened with Iraq privatised companies for up to 40 years

$20 billion of Iraq’s revenue has turned out missing, with no accountable trace of where it had gone to

No secured police force or army to stabilise order One of many examples of promises not kept, the

supposed building 146 health clinics hadn’t been created, only 6 were

Conclusion Once war had ended agriculture couldn’t be used

as a form of profit due to the heavy damage on Iraqi crops due to U.S. Bombing, disastrous effect on infrastructure and the massive rise of unemployment in Iraq has shown that neoliberalism has heavily hindered development in Iraq

Furthermore the Neo-liberal policies implemented in Egypt was not synonymous with democracy or human rights given the fact that the revolts had begun. Privatisation had also lead to heavy unemployment which also damaged development.

In conclusion, neoliberalism has been nothing but harmful to development in the Middle east.