Looking at the impact of the global economic crisis on the Arab world, the new issue of the Arab Reform Bulletin published by Carnegie brings up a number of important issues that will resonate far beyond the region.
Particularly interesting is the piece on reform prospects in Egypt. From public dissatisfaction with dire economic conditions and a widening gap between the have and have nots to an expanding public sector in light of tight fiscal conditions, Egypt certainly faces some tough reform choices in the coming months and years.
Not only in Egypt, but elsewhere in the world, governments are facing a difficult choice. As economies continue to contract or stagnate, the ranks of dissatisfied with socio-economic conditions swell. In countries with little diversification and weak safety nets, people who lose jobs face few opportunities besides taking it to the streets in protest, turning to survival entrepreneurship, or even embracing criminal means of generating income. For many governments, the only practical option seems to be opening up the public sector coffers and providing employment or subsidies — something they ultimately can’t afford, especially in the times of crisis.
Just thinking about creating private sector jobs in the times of crisis can get depressing (see South Africa and the challenges of permanent unemployment), but it is possible. For instance, in many emerging markets, just reducing the levels of corruption and extortion to lower the pressure on business, might do the trick. However, instead, in countries like Russia, we’ve seen the opposite – corruption pressures intensifying, putting companies out of business entirely and destroying jobs in the process.