A Broken Social Contract, Not High Inequality, Led to the Arab Spring

Abstract

During the 2000s, expenditure inequality in Arab countries was low or moderate and, in many cases, declining. Different measures of wealth inequality were also lower than elsewhere. Yet, there were revolutions in four countries and protests in several others. We explain this so-called "inequality puzzle" by first noting that, despite favorable income inequality measures, subjective well-being measures in Arab countries were relatively low and falling sharply, especially for the middle class, and in the countries where the uprisings were most intense. The increasing unhappiness, reflected in perceptions of declining standards of living, was associated with dissatisfaction with the quality of public services, the shortage of formal-sector jobs, and corruption. These sources of dissatisfaction suggest that the old social contract, where government provided jobs, free education and health, and subsidized food and fuel, in return for the subdued voice of the population, was broken. The Arab Spring and its aftermath indicates the need for a new social contract, one where government promotes private-sector jobs and accountability in service delivery, and citizens are active participants in the economy and society.JEL Codes: D63, I30, H40

Unhappy Development: Dissatisfaction With Life on the Eve of the Arab Spring

“…This finding is in line with the view that the “autocratic bargain” has weakened the direct link between authoritarianism (for example, lack of freedom) and life satisfaction. Suppressed citizens compromised their voice and freedom in exchange for material benefits provided by the state (Devarajan and Ianchovichina, ). The results suggest that disappointment with the economic aspects of the failed social contract dominates the effect of grievances associated with limited freedoms.…”

“…As part of this social contract, Arab governments subsidized food and fuel, provided free education, health, and other public services, and provided jobs in the public sector. These benefits were offered in exchange for political support and limited voice (Devarajan and Ianchovichina, ). However, over the years and especially in the 1990s and the 2000s, the social contracts became fiscally unsustainable as these states did not have the fiscal resources to finance the food and fuel subsidies, provide government jobs to new graduates entering the labor market, and improve the quality of public services (Devarajan and Ianchovichina, ).…”

“…These benefits were offered in exchange for political support and limited voice (Devarajan and Ianchovichina, ). However, over the years and especially in the 1990s and the 2000s, the social contracts became fiscally unsustainable as these states did not have the fiscal resources to finance the food and fuel subsidies, provide government jobs to new graduates entering the labor market, and improve the quality of public services (Devarajan and Ianchovichina, ). Reforms implemented in the 1990s delivered economic growth (World Bank, ), but this growth was not inclusive as the private sector did not create jobs fast enough to absorb the large number of young people entering the labor force.…”

“…While public services were free, their quality was so poor that people ended up paying for services provided by the private sector. Teacher absenteeism was high (Brixi et al, ) and learning outcomes were disappointing (Devarajan and Ianchovichina, ).…”

“…Yet, even in the absence of a shift in expectations or social injustice, people may have become more frustrated with difficult‐to‐measure factors related to the quality of life in the Arab world, such as the deterioration in the quality of public services, the ability to get good jobs, and institutional and environmental quality. For instance, although access to free public health and education improved dramatically over the years, teacher and doctor absenteeism became a severe problem hurting learning outcomes and forcing people to pay out of pocket for better quality private‐sector services (Brixi et al, ; Devarajan and Ianchovichina, ). Worsening of other subjective indicators, such as the ability to voice concerns and demand accountability and perceptions of corruption and cronyism, may have also contributed to the deterioration in subjective well‐being.…”