The costs of counter-revolution in the GCC

The reaction in the GCC monarchies to the uprisings coursing through the Arab world has leaned heavily toward the politics of patronage. Saudi Arabia, Oman, and even Bahrain have met political challenges in part with lavish financial inducements to key sectors of society. Such soft counter-revolutionary strategies seem astute in the short run, as they buy allegiance instead of breeding resentment, and allow regimes to avoid the international opprobrium which comes with undue violence. In the long run, however, they threaten to undermine not only the fiscal sustainability of GCC regimes, but also their strategies to integrate their national populations into a diversifying economy.

Saudi Arabia has a history of throwing money at its most severe domestic problems. The Kingdom has seen two severe political crises in the last four decades: the occupation of the Grand Mosque in 1979 by the Juhayman group, and the domestic backlash to the presence of 500,000 U.S. troops in the wake of Saddam Hussein's invasion of Kuwait in 1990. In both cases, the al-Saud reacted to political instability with increased subsidies, reductions in government fees and other patronage measures. But those past giveaways, although substantial, pale in comparison with the welfare decrees issued in February and March 2011.

With a total estimated volume of $130 billion, the new spending measures are larger than the total annual government budget was as recently as 2007. They include the creation of 60,000 new jobs in the Ministry of Interior -- an agency that is already said to employ almost as many nationals as the whole Saudi private sector -- the building of 500,000 houses, the setting of a minimum wage of 3,000 Saudi Riyals ($800) in the public sector, one-time bonus payments for incumbent civil servants, the creation of a general unemployment assistance scheme, budget increases for various public credit agencies as well as supplementary funds for a number of religious organizations. Some of the spending is immediate, while other components will be rolled out during the coming years.

Many Saudis see the extra cash for religious institutions, including the religious police, as a reward for their vocal public stance against potential anti-regime demonstrations. Amendments to the Saudi media law announced in late April made it a crime to publish any material that insults the kingdom's grand mufti, members of the Council of Senior Ulama and government officials. Dissidents feel that the regime is circling the wagons, and is underwriting its strategy with targeted patronage measures.

The plan to build new houses is arguably the most economically rational component of the spending packages: Although it could cause short-term inflation due to bottlenecks in the construction sector, the shortage of housing for middle and lower class Saudis is a pressing social issue. Home ownership is out of the financial reach of most young nationals, many of whom live with their parents into their late twenties. The inability to pay for their own abode, and the concomitant inability to start a family, has fueled much of the frustration of young protesters all across the Arab world.

In the face of high youth unemployment, the envisaged unemployment assistance scheme also appears a timely move, although the monthly benefit level of 2000 SR announced in March struck local observers as high: The private sector, which remains dominated by foreign employees, provides some 8 million jobs in total, but only about half a million of those pay more than 3000 SR per month. The average wage is closer to 1000 SR.

The provision of more public jobs is a more problematic trend: already now, an estimated 45 percent of the government's total outlays are for salaries, an exceptionally high share in global comparison. The kingdom has stepped up the creation of public jobs since 2008. But if the aim is to soak up all or most of the young Saudis who will enter the job market in the coming years, the government faces a losing battle: Some 400,000 men and women enter working age every year, a volume that even the most generous bureaucracy cannot absorb. Together with the new minimum wage of 3000 SR in the public sector, however, the renewed drive to create state jobs is likely to drive young Saudis out of the private labor market and into the waiting loop for a government position.

Saudi Arabia is calm for the time being: Its opposition is ideologically polarized and badly organized, King Abdullah is popular among important parts of the population, and the regime continues to command wide-ranging patronage networks. It can also afford to be more honest about what it is -- a conservative, kin-based monarchy without democratic pretensions -- than the hypocritical and corrupt republican dynasties that have fallen or are trembling now. In the long run, however, the patronage formula that the regime relies on could come under increasing stress. Already now, the oil price at which the Saudi budget breaks even lies above $80 per barrel. It was closer to $20 just a decade ago. The kingdom's current overseas reserves are large, but so are its budgetary needs.

Bahrain and Oman are the two GCC countries that have witnessed serious oppositional mobilization in recent months, and their fiscal reaction to the crisis closely resembles the Saudi one. In addition to a massive housing program, the Bahraini government has promised 20,000 new jobs in its own Ministry of Interior, a huge number relative to a national population of less than 600,000. In Oman, the government has announced increases in subsidies for commodities, higher welfare and pensions payments as well as the creation of 50,000 new jobs, of which 35,000 are to be provided by the public sector.

In the wake of demonstrations and strikes in Bahrain and Oman, their richer GCC neighbors have recently promised 20 billion dollars to support development in the two countries -- a good share of which will have to be coughed up by Saudi Arabia. In the mid-term, relatively resource-poor Oman and Bahrain run the danger of becoming a fiscal ward of their better endowed neighbors. Bahrain's sovereign ratings have already been downgraded in March, while Oman is on review for potential downgrades.

The revolutionary wave has largely spared the high-rent GCC monarchies with small national populations: Qatar, Kuwait and UAE. Pressures to throw around money have hence been less acute. The UAE government has nonetheless committed to spending $1.6 billion on infrastructure in the poorer and potentially restless northern emirates, raised military pensions by 70 percent and started subsidizing bread and rice.

The politics of patronage do not only put rising pressure on national budgets, but also undermine strategies to increase national participation in private labor markets -- a sine qua non of long-term economic sustainability. Easy and well-paid public sector jobs lift nationals' wage expectations and thereby price them out of the private market, weaken incentives to acquire education that is relevant in the private economy, and reinforces an entitlement mentality that can be politically explosive when the going gets tough. Expectations are easy to raise but difficult to curb, creating a ratchet effect that demands ever larger outlays during every political crisis. Almost all past attempts to reduce entitlements of GCC populations -- public jobs, subsidies, cheap utilities etc. -- have come to nought.

It is a lot nicer to be thrown money at than to be shot at and tortured, but neither strategy of containing political challenges appears sustainable. The demography of the GCC's national populations is similar to that of the rest of the region: the ranks of the young are swelling and their aspirations rising. Expectations of lucrative and low-effort public jobs are bound to be disappointed one day. By shifting precious resources toward a bloated bureaucracy, the regimes are kicking the employment problem down the road -- and making it worse, as incipient private job creation for nationals is undermined.

The chances that the GCC's long-term socio-economic challenges of demographic growth and youth unemployment will be solved now look a good deal worse than just a few months ago. For the high-rent countries, the issue will remain largely academic for decades to come. But depending on oil price developments, it could become an existential worry for Bahrain, Oman and Saudi Arabia before the end of the decade. The breakeven oil prices for GCC budgets have increased significantly in the past few months. Bahrain probably already needs a per barrel price above $100, while the Institute of International Finance predicts a Saudi breakeven price of $110  for 2015. These should be sobering numbers for those who believe that the GCC can always buy its way out of trouble.

Steffen Hertog is a lecturer at the London School of Economics and the author of "Princes, Brokers and Bureaucrats: Oil and the State in Saudi Arabia."

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The Middle East Channel

The Muslim Brotherhood as helicopter parent

Soon after I began teaching, a student came to my office hours because she had been ill and missed a portion of the class. That was not unusual -- but what did seem a bit out of the ordinary was that she brought her mother. I explained to the student that she could take an incomplete but that I advised this only as a last resort, since it would not be easy to make up the work after she had begun a new set of courses the next semester. Her mother piped in, "He's right honey. You know how I feel about incompletes." I had encountered my first "helicopter parent"-- those who hover closely over their grown sons and daughters, monitoring their choices, offering unsolicited advice, and intervening in their daily interactions. 

There is no image that better captures the behavior of Egypt's Muslim Brotherhood toward the political party it claims only to be launching, and that may be a problem for Egyptian democracy. The new Freedom and Justice Party will be free, says the parent Muslim Brotherhood, to make its own choices. But the Brotherhood as helicopter parent cannot resist suggesting to its offspring who the new party's leaders will be, what it stands for, how it will be organized, who should join it, and who its candidates will be.  The party is completely independent in decision making -- so long as it does precisely what it is told. And actually, it is not only the party that is being told what to do -- individual members of the Brotherhood movement have been told to join no other party and to obey movement discipline in the political realm. This kind of relationship between movement and party is already making the Brotherhood a difficult partner for other political actors; over the long term, it may make the Islamists awkward electoral actors.

A close relationship between party and movement was to be expected, but this relationship is more than close; it is micromanaged. In a recent meeting of the Muslim Brotherhood's Consultative Council (a policy making body with approximately 100 members that had not been able to gather in the Mubarak years for fear of arrest), as well as in a series of other decisions widely reported in the Egyptian press, the protective parent movement has taken the following steps:

  • After repeatedly insisting that the party would be able to select its own leader, the Brotherhood has been unable to resist giving its offspring an unusually generous gift: three members of its top body, the Guidance Bureau, will move over to the party to run it.All three (Muhammad Mursi, Saad al-Katatni, and Issam al-Iryan) are skilled and experienced in all sorts of ways -- in speaking to the press, organizing and running movement affairs, and serving as parliamentarians.While their personalities are very different, all come across as very capable figures. But all three also stand out as very loyal to the Brotherhood movement.
  • The movement (and not the party) is also said to have put the finishing touches on the party platform. And that platform is not likely to be a terse or vague document; earlier leaked drafts suggested a very detailed set of policy proposals.
  • The movement has not only written the party's platform, it has also approved its bylaws.In the process, it has left its very strong imprint.Those bylaws, for instance, make clear that the party is dedicated to peaceful and gradual reform along Islamic lines. Reform of what? The party aims to "reform the individual, the family, the society, the government, and then institutions of the state." Reforming political institutions is standard stuff. But it takes a very special kind of political party to tell voters that it wants to reform them and their families as well.Actually, that is the traditional mission of the parent Brotherhood movement -- it makes much more sense for a movement like the Brotherhood to focus on helping its members improve themselves than it does for a party to run on reforming the individual and the family as a program
  • The movement (and not the party) has decided that it will contest up to one-half of the seats in parliament. (Earlier, movement leaders had consistently suggested they would seek at most one-third of the seats, though they were often careful to add that no final decision had been made.) The raised electoral horizons for the party were not well explained -- the most plausible argument was that competing for the extra seats would be the best way to ensure that the party would wind up with the target it seems to want: something like one-quarter to one-third of parliamentary seats; the crossed signals surrounding the decision may have also been an outcome of transferring authority from the small and more cohesive Guidance Bureau to the larger, more diverse, and less wieldy Consultative Council.
  • The movement is not only determining the number of candidates for upcoming parliamentary elections; it also seems to be picking the names.According to at least one account, the movement is actually preparing separate candidate lists, some for a party list system(full of skilled parliamentarians), and some for a district-based system (full of those likely to serve their local constituencies well).The final list of candidates will therefore not be determined until the new electoral law makes clear the blend of list and district voting.
  • The movement has also made clear how much it expects its members to be bound by its guidance in the political realm. Brotherhood members are not required to join the party, but they are told not to join any other.The movement decided that its members will not contest the presidency; if former Guidance Bureau members Abd al-Minaam Abu al-Futuh actually files for candidacy, that will likely be grounds to evict the estranged leader from the organization. There are numerous accounts that the Brotherhood is going beyond telling its members what not to do; local branches are also reportedly suggesting which of their members should go into the political work of the party.

When pressed about their close management of the party, movement officials react defensively: this is only to get the party off the ground, they claim. Once it is founded, it is free to evolve as its members see fit. But with its structure, leaders, members, and program so closely shaped by the movement, it is not likely it will evolve very much at all.

The movement is currently exploring its options in realms far from the political sphere. It has suggested intentions of forming youth clubs, broadcast media, and even soccer teams (leading to some Egyptians joking that Brotherhood players will follow the path of the political party by seeking only to tie every game). If the Brotherhood does develop in so many different directions while keeping close control over the various aspects of the movement, it will post difficulties for Egyptian democratic institutions. Historically, it is precisely the Brotherhood's broad focus and diverse interests that has made it a difficult coalition partner. When a secular political leader sits down with someone from the Brotherhood, he or she finds that the potential partner is cautious, anxious to protect a broad range of activities, and wary about committing to specific agendas or compromise over programmatic issues. 

Recently the Brotherhood's general guide explained that while the movement stands for democracy and freedom, it did so within an Islamic reference and that "democracy cannot make permitted what is forbidden, or forbid what is permitted" in religious terms, "even if the entire nation agrees to it." Such a general formula actually has an ironically populist resonance in what remains a fairly conservative and religious society. The problem will come when the movement's leaders watch closely to ensure that the party interpret that general formula in accordance with its own strict instructions. Other political actors will likely find that a Brotherhood party tied closely to such a movement to be a difficult partner in the rough-and-tumble game of democratic politics. And indeed, the revolutionary coalition that brought down Husni Mubarak is already showing serious signs of fraying over precisely such issues. The Brotherhood absented itself from some recent meetings and demonstrations held by other political forces with an oppositional flavor. But it did not hesitate to send its representatives to an official sanctioned gathering.

The close relationship with the movement will probably serve the party well in the electoral realm -- in the short term. It will have a nationwide army of dedicated workers to organize its campaign. But in the long term, the movement and party have very different organizational impulses. A party interested in winning elections wants to attract large numbers of voters. A movement interested in an ideological mission is more concerned with the level of commitment of its core supporters. In recent days, a former Brotherhood parliamentarian was videotaped telling Brotherhood members that they should only marry within the movement. It is that sort of insular attitude -- one that served the movement well under harsh authoritarian conditions -- that makes the transition to mass democratic politics such a challenge. But with the close watch the movement is keeping over the party, the tension between seeking large numbers of votes and fulfilling the movement's mission is not likely to be felt over the short term.

To compare the Freedom and Justice Party to my student contemplating an incomplete is not an exact analogy. When it comes to democratic transformation, the party's helicopter parent is giving its offspring the precise opposite advice to that provided by my student's mother: it is very much recommending an incomplete.

Nathan J. Brown is a professor of political science and international affairs at George Washington University and nonresident senior associate at the Carnegie Endowment for International Peace.

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