State, Business and Citizen in the Distributional System

A subtle but potentially important political economy consequence of the Arab distributional regime is that it weakens the link between the business class and citizens: few citizens aspire to private employment and those who are privately employed often operate in the informal sector. At the same time, business remains state-dependent in many ways—through the provision of cheap energy but also due to high levels of administrative protection (World Bank, 2009). Together with a legacy of cronyism and corruption—themselves potentially facilitated by heavy state intervention, and over-staffed and unaccountable bureaucracies—this arguably explains the prevailing low trust placed in Arab businesses. According to the 2010-14 World Values Survey, 20 per cent of respondents in the ten non-GCC Arab countries polled have ‘no trust at all’ in big companies, compared with a figure of 10 per cent in the rest of the world. This likely helps to explain the lack of leadership that Arab business showed during, and has shown since, the regional uprisings.

At the same time, in eight out of ten non-GCC Arab countries—all bar Jordan and Morocco—public trust in government institutions, including the civil service, is lower than in other countries with comparable levels of development. This demonstrates that the region’s comparatively expansive but lopsided welfare regime fails to generate political buy-in. While the state hence plays a dominant role, it does so in an ineffective way, failing both to steer the economy towards higher productivity and job creation, and to create equitable social outcomes or inspire public trust.

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