Politics and society in the Middle East

Lineages of Revolt Issues of Contemporary Capitalism

in the Middle East

Adam Hanieh

(T) Haymarket Books Chicago, Illinois

1

CHAPTER 1

Theories and Perspectives

M ore than twoyears since the downfall of Timisia's president Zine El Abidine Ben Ali, the cries of al-shaabyurid isqat ol-nizom—"the people want the downfall of the regime"—continue to reverberate through the streets of every Arab capital. The regionhas never before witnessed such an all-encompassing,

deeply felt, popular revolt. From the Atlantic to the Gulf, millions of people have con­ fronted authoritarian, corrupt, and feckless rulers, whose contempt for their popu­ lations has been matched only by the fear of losing a grip on power. Tliese regimes met the explosion of popular rage with cdiaracteristic brutality, killing, maiming, and torturing tens of thousands in a desperate attempt to restore the passivity and obse­ quiousness that autocrats expected of generations past. Concurrently, Western states scrambled to rearrange their domination of the region and identify new mechanisms of stable rule in one of the most strategically significant areas of the world, responding to the uprisings with their standard amalgam of militaiy intervention, promises of financial aid, and constant political intrigue. Despite this growing specter of cotm- terrevolution, die initial hope manifested by the uprisings persists, witnessed most prominently in the ongoing mobilizations in Egypt and Tunisia. It is, moreover, a conjimcture that has inspired millions across the globe. From demonstrations in Gabon, Nigeria, and Djibouti to the Spanish indignados, the Occupy movement, and the dramatic confrontations in Greece, the repertoire of protest tactics and slogans bom in the Arab uprisings continues to be generalized, molded, and transformed to fit circumstances and strug^es elsewhere. From the vantage point of late 2013 it re-

1

2 Adam Hanieh

mains unclear where these revolts will end up-it is certain, however, that the region will never be the same.

Beyond the profound and largely uncharted political implications of these revolts, one of their most enduring ramifications will undoubtedly be the renewed interest they have awakened in the Middle East’s political economy. Questions of political econ­ omy were clearly paramount in the minds of the demonstrators themselves, as the widespread slogan aisK huniytjh, 'odoloh ytima'iyvh ("bread, freedom, social justice”) testifies. The popularity of this cty points to the numerous social crises that faced much of the region in the decade preceding the uprisings, a period marked by extremely high levels of unemployment, poverty, rising food prices, and the growing precariousness of daily existence. These intense social problems worsened in the wake of the 2008 globaleconomiccollapse. further contributing to thedeepmalaiseandfrustrationex- penenced by those living under repressive regimes. As many observers have noted, these are the proximate roots of the uprisings, indisputably confirming that the polit­ ical and economic spheres remain inseparable and intertwined. They remain central to any assessment of the future trajectories of the region.

Yet much of the discussion around these issues of political economy has been frus- tratingly superficial. Even in radical accounts of the Middle East, analysis tends to re­ main overly focused on the surface appearances of poverty and relative measures of inequality rather than engagingwiththe nature of capitalism as a systemic totality that penetrates eveiy aspect of social life. This is a major weakness in the understanding of the region. Thejm^al distribution of wealth is not an unfortu^te consequence of wrong-headedeco^cpoli^ra"compiraty^5SteIw^^ supporition of capitalistla^^emselvesrnieaS^^

s^^t^Sr^^iSSmTlargetyTinfum patterns of capital accu­ mulation in the Middle East, the structures of class and state that have arisen around it. and their interconnection with capitalism at the global scale.

This book is intended as a contribution to such an analysis. Itbynompana purports to provide a comprehensive account of all aspects of the region’Ipditi^a^^S^Biii^ detailed narrativeQftheuprising5y^i^Ii^g^gtEiti^yofe%^^n,mtTy7;^7T^^ Its goal IS to trace in broad outline some of the most significant transformations of the Middle East through thel^sofMa^t p^ticaTeco^i^Its Welty lies^dm em-

phasis on capitalism and class as crucial pivots of analysis, two categories frequently downplayed in standard approaches to the Middle East. It further attempts to take se- nously the nature ofdieregonasor^on-to trace the changing hierarchies at the re­ gional scale as an integrated unity that shapes social formations at the national level. In this manner, the book hopes to sketch the essential backdrop to the revolts while demonstrating how important political economy is to understanding the Middle East.

/

Theories and Perspectives 3

Approaching the Middle East Conventional accounts of political economy in the Middle East tend to adopt a sim­ ilar methodological approach, which begins, typically, with the basic analytical cat­ egories of "state” (al-dawla) and "civil society” (al-mujtama' al-madani)The former is defined as the various political institutions that stand above society and govern a countiy. The latter is made up of "institutions autonomous from the state which facilitate orderly economic, political and social activity”* or. in the words of the Iraqi social scientist Abdul Hussein Shaaban. "the civil space that separates the state from society, which is made up of non-govemmental and non-inheritable economic, political, social and cultural institutions that form a bond between the individual and the state.All societies are said to be characterized by this basic di­ vision. which sees the state confronted by an agglomeration of atomized individ­ uals, organized in a range of "interest groups" with vaiying degrees of ability to choose their political representatives and make demands on their political leaders. Thejnstitutions-of civil society organize and express the needs of people in oppo­ sition to the state, "enabling individuals to participate in the public space and build bonds of solidarity.” ♦ The study of political economy becomes focused upon, as a frequently cited book on the subject explains, "strategies of economic transforma­ tion, the state agencies and actors that seek to implement them, and the social ac­ tors such as interest groups that react to and are shaped by them.”*

Aconspicuous feature of the Middle East, according to both Arabic- and English- language discussions on these issues, is the region s apparent "resilience of authori­ tarianism”—the prevalence of states where "leaders are not selected through free and fair elections, and a relatively narrow group of people control the state apparatus and are not held accountable for their decisions by the broader public."^ While much of the world managed to sweep away dictatorial regimes through the 1990s and 2000s. the Middle East remained largely mired in autocracy and monarchical rule—"the world’s most unfree region.” as the introduction to one prominent study of authori­ tarianism in the Arab world put it.^ Adizaying array of typologies for this authoritari­ anism has been put forward, characteristically dividing the region between authoritarian monarchies (the Gulf Arab states, Morocco, Jordan) and authoritarian republics (Egypt. Syria, Algeria. Yemen, Tunisia).® TTiese authoritarian regimes are typically contrasted witha third categoiy, the so-called democratic exceptions, in which "incumbent executives are able to be removed and replaced.Israel is frequently held up as the archetype of this latter group—with Turkey. Iran. Lebanon, and Iraq (following the 2oo3 us invasion) also included, each with a vaiying "degree” of democracy.'®

An entire academic industiy has developed around attempting to explain the appar­ ent persistence and durability of Middle East authoritarianism. Much of this has been

4 Adam Hanleh

heavily Eurocentric, seeking some kind of intrinsic "obedience to authority” inherent to the "Arab mind.”" Some authors have focused on the impact of rehgion. tracing au­ thoritarian rule to the hea^y influence of Islam, and the fact that "twentieth-centuiy Muslimpolitical leaders often have styles andusestrategies that are veiy similar to those instituted hy the Prophet Muhammad in Arabia some i4ooyeare ago. Similarly, others have examined the source of regime legitima<y in places such as Saudi Arabia, where the ruler s personal adherence to religious standards and kinship loyalties" supposedly fit

the "political culture" of a society whose reference point is "Islamic theocracy coming from the ablest leadeisofatribetracingits lineage to the Prophet.”*^ Other moremodern explanations for authoritarianism have been sought in intra-elite division.'* leaders' skills at balancing and manipulating different groups in society-so-called statecraft,'S natural resource endowment,’® and the role and attitudes of the militaiy.'^^lthesfiap^ proachesjhare the same core methodological assumption; the key categories for un­ derstanding the Middle East—and, indeed, any society—are th^ statP on counterpnsed with rivil society, on th^ ntbpr

s^te/civil society dichotomy underlies another frequemialthough not un­ challenged) assejlionjnade in the literature on the Middle East-that of a two-way causjniBlUien.ffienautboritaii^ wwikBe,ssjif capitalism.’® According to this perspective, authoritarianismnot only means that political and civil rights are weak orabsent but also that the heavy hand of state control interferes with the operation of a capitalisteconomy.’9lndividualsarepreventedfremlreelyengagingmmarketactivities whfle state elites benefit from authoritarianism by engaging in "rent-seeking behav­ ior -usingtheir privileged position to divert economic rents that pass throu^ the state for their own personal enrichment and consolidation of power." Authoritarian states seek to dominate and control economic sectors throu^ their position of strength, al­ locating rents to favored groups in order to keep society in check.“ In the Middle East, as a result, "private property is not secure from the whims of arbitraiy rulere... [and] many regimes have yet to abandon allocation for alternative strategies of political le­ gitimation. and hence must continue to generate rents that accrue to the state.""

Within t^worldview^ri^ency of freedom is neatly located in the rpal m nf

l«rks cver-presfigUntfae state. The histoiy of the region is thus characteristically recounted as a long-standing strug^e between the "authoritarian state”and"econoniicandpoHticalliberali2ation.”Toldfromthis perspective, the nar­ rative usually begins with the emeigence from colonialism in the aftermath of World War II, when various independence movements sou^t a definitive end to British and French influence in the area. These independence movements were typically led by militaries or other elites, which sefred power in the postcolonial period and began an era of "statism” or "Arab socialism.” By the 19803. however, these authoritarian states

Theories and Perspectives 5

would come under severe strain due to die inefficiencies of state-led economic devel - opment and die desire of increasingly educated populations for greater economic and political freedom. These pressures for economic liberalization were compounded in the era of globalization by the ethos of "democratization" that swept the globe through the 19908. There was—as two well-known scholars of the Middle East put it—a "direct correlationbetween economic performance and the degree of democracy.. .the more open and liberal a polity, the more effective has been its economy in responding to globalization.”*^ Authoritarian states that had "waged literal or metaphorical wars against their civil societies and the autonomous capital that is both the cause and prod­ uct of civil society” might sometimes choose the "ri^t" economic policies, but these were inevitably "dead letters in the absence of implementation capadty, which only a dynamic civil society appears to be able to provide.”** Capitalism was, in short, best suited to—and a force for—democracy. *s

This logic was vridely replicated outside of academia throug^i the 19908 and aooos, forming the core justificationfor a wide range of so-called democracy promotion pro­ grams. Integral to this was the US , estab­ lished in 1983 and funded by the US State Department. NED. in turn, supported other organizations such as the National Democratic Institute (NDI) and the International Republican Institute (IRI)—linked to the Democratic and Republican parties respec­ tively—and bodies such as the Center for International Private Enterprise (CIPE) and the Solidarity Center (affiliated to the AFL-CIO). Ahost of other private corporations and NC?Os were also involved. Throu^ these institutions, the US government focused on programs that twinned the extension of neoliberal policies with the democracy pro­ motion agenda in the global South. As then president (?eorge W. Bush noted in ^004,, this policy was based around "free elections and free markets.”*® It was a form of democraty understood in the narrow sense of regular electoral competitions, usually waged between different sections of the elite, which largely aimed at providing popu­ larly sanctioned legitimacy for free market economic measures.*^'While organizations such as NED, NDI, and IRI were the most visible and explicit face of thi.s polity orien­ tation, all international financial institutions were to employ the same basic argument linking "free markets" and "arrant civi1-soeif»ty" with the weakening of the author­ itarian

In this vein, the response of Western governments and institutions to the revolts of 2011 and 2012 was largely predictable. Instead of viewing the Arab uprisings as protests againstthe "freemarket” economicpolicieslongchampionedbyWesteminstitutionsin the region, tb^ were framed as essentially political in nature. The problem, according to the Western an^e, 1^ in authoritarianism, which stifled markets, and the popular rage expressed on the streets of the Middle East could thus be understood as pro-capitalist in

6 Adam Hanleh

Middle East m May aou, that the region needed "a model in whieh protectionism gives

^ytoopenness, the retnsof commerce passfromthefevto the many.andtheeconomy generates jobs for the young. America's support for democmcy will therefore be based rreT”! P™‘”Sreform. and integrating competitive markets R h T °,r T ® of the World Bank. Robert Mhck, argued that fermlts in TuniljiTccurmd^ause'^^tool^ueh "red

wouldberepeatedincessantlybyWestenipoli<ymakersthrou#.outac..and,oTau-

ocratic states had stifled economic freedom; "free markets" would be essential to any sustained transition away from authoritarianism.

A Marxist Framework of Class and State Instead of t^be state/civil society dichotomy that characterizes these standard ap­ proaches, this book adopts a radically different framework for investigating the po- ht.caleconomyoftheMiddleEast.Itsb^cs.artingpointistheuoiionofclassasthe key socu^oiy from which to comprehend the dynamics otamrsoeien, d,

on class leads to fundamentally^c^nriastiagpercepti^s of the role and nan,re of f " --tlgllgggj^be^en marimts and p^tical democracy, and the assessment

°f^°q££m^esjuchasthosettospreainto^^

°»“'"“^'>^‘otheconceptiondcvelopedbyMant,isunderstoodasanexpres- sionof the relations that people form between each other around the process of pro- ducirrg aooie^ s needs. This differs from the way it is typically viewed by standard soco ogical approaches, in which class is seen as a eategoty of income or a group of peoplewhodothesametypeofwork.>.CapitalistsocietyischaracterizedbythepriLe

ovmerstp of the means and products of social production. The essential class division mtos between those who own the means of pmduction (capitalists) and those who

ehttlethoicebut to sell their capacity to workinorder to be abletomeet their needs m the marketplace (workers). Capitalists draw their profit from the ability to force workers to produce commodities that can be sold at a greater price than the money sp».onproductionitself.==RatherthantakingprivatepropertyandprivateinterestI

as^turdlygtven, Mantemphasized thatthty are socially determined, "achieved only ™thin the conditions laid down by society and with the means provided hy society. hence.. .bound to the reproduction ofthese conditions andmeans.-=aassjnfither

ongoing process of accumulation anH An emphasisonclassdoesnotmeanthatotherdivisionsdo not exist withinagiven

Theories and Perspectives 7

society. Class fonnation is a process involving real human beings, and this means that the concrete conditions of class afways carry speuiflu cliaraeteri&tic8=-dfgend^race. age, national origin, and so forth—that are given particular social meaning through their process of coming into being.^ Approaching class in this manner helps to guard against economistic views that tend to set up class as an abstract category shorn of its particularities. It means, for example, that it makes little sense to speak of class in a concrete sense without also acknowledging that it is simultaneously gendered as it forms. Moreover, in the Middle East context, as well as globally, class formation cannot be understood without tracing movements of people across and within borders—it is thus also marked by distinct and concrete relationships between geographicfll apacfts.^ These processes need to be considered concurrently if a full picture of class formation is to be grasped.

It is also important to acknowledge that there exists a wide variety of labor relations within any capitalist society. In the ^obal South, the worldly class rarely manifests in the "piire” form that Marx emphasized in Capital, made up of individuals, each of whom "as a free individual can dispose of his labour power as his own commodity" with "no other commodity for sale."^ In reality, capitalism continues to reproduce and integrate into the process of accumulation various "forms of labor exploitation."^ including slaveiy. indentured labor, child labor, sharecropping, dormitoiy systems for migrant workers, and forms of subcontracting. Workers frequently depend upon non-wage activities in order to reproduce themselves (such as the farming of small plots of land or unpaid family labor). Within both rural and urban spheres, classes are typically stratified according to vaiying levels of wealth and power. In the Arab world, all of these complexities are crucial to describing the specificities of capitalism and class.

Keeping these subtleties in mind, it is nonethele.s.s accurate to state that conven- tional accounts of the Middle East generally downplay questions nf c1a««^ p»HtTring it to just one of many different interest groups." such as "business elites." This is a funda­

mental flaw in mainstream conceptions of civil society, which, as Ellen Meiksins Wood has pointed out in herseminal analysis of the notion, is a "conceptual portmanteau [that] indiscriminatelyhimpseverythingtogether from households and voluntaiy associations to the economic system of capitalism."^ In this manner, the state/civil society dichotomy serves to "conceptualize away the problem of capitalism, by disaggrp-gating socip.tyintn fragments, with no overarching power structure, no totalizing unity, no .tystemic coer- cioi^—in othpr wnrHa nn o^pitalist system, with its expansionaiy drive and its capacity to penetrate every aspect of social life."^ Academic approach^ that present the ideal of liberal democracy as the desired policy goal—supposedly guaranteeing the same ri^ts and responsibilities for all "civil society actors" regardless of wealth, social status, or ac­ cident of birth—act to obfuscate this reality of class power. The economic realm is sepa -

8 Adam Hanieh

rated from the politicalsphere. Capitalism itself isrenderedinvisihlethroughamridical scnmof equalrights-thatpositsettualitywherenoneettists

Anemptasonpatte™sofelassformatio„leads,f„rthennore,toashatpIydiffer- entnottonofthestatethanthatemployedineonveationalframeworksofartalyBisAc-

itjtggmi^he nature of politicjmsttation^ as the state is a histori'^y

around^aprnhs^uIdtiomTTm^™ i^epresen7S5ddife5d*Slrass ntctur^emedmtmgeoni^ilto^SbtySJE^jS.^^

^^^^!if!!^in™™.notasepLrpt;^e5S

desenbes tt. the set of inst.tut.onaI fonns *rough which a ntling class relates to the restofsocety. ‘'OHmansuseof relate"herehasave.yspeci7feaning basedupon

J readtngof what he describes as Mare's -philosophy of internal relations." Within hts perspectree, the relatioja«is^bettreen objects shoMd not he eonst.ee,a e.^jod^ctsth;;;;;;i;;i;;^artofw^^

undeFaggg^to be seen as ■reiatioimmtainingjn

embedded do not eatst outside” these objects (or extemaUy) but are intrinsic7heir

JITT' ^"^yi-^^^Phasis moves away ------- ^an^.solatedcategoriespresentedtoi^e empirical wnrldfs„et,l7r

teholds wrththe state .sactuallypartofwhat constitutes i.asaclass.stateandc7

*eeond.nonsofer.stenceforlhefonner.Ananalysisofthestate. therefore. m.,s,be.-! h an exammato of the anatomy of

p7caUy-«nsd?aCTa wh7ob^lv

.7°.7^^"Eoli»ioalfonn£^nra7;Z;;;;^^

Theeschewalofthisconsidemtionisamajorwealmessofstandardapproachesto

r.tanan.sm and the fonn of the state in the Middle East. By treating the state as

Theories and Perspectives 9

a disconnected, all-dominating "thing*' rather than as a social relation formed along­ side the development of class, these perspectives treat the institutional forms of society as determinant rather than determined.+s In contrast, within the Marxist framework, thentntn.'g foTTO IS hp. foiind in contingent factors such as cul- ture, religion, resource endowment, leadership styles, or the institutional arrange­ ments of rulingfamilies but rather in the specific nature of napitalist flonimnlatinn in_ that particular societv. The authoritarian giii.sp. of the Middle East state is not anomalous. and antagonistic to capitalism, but is rather a particular form of appearanrfi nf (Capi­ talism in the Middle East context. The task becomes one of demonstrating how and why this is the case—not beginning with the appearance of the state and investing it with determinant explanatory power.

In line with this basic methodological approach, a major goal of this book is to con­ vey some of the principal aspects of the intertwined development of class and state in the Middle East—tracing where and how various classes in the region (both capital and labor) originated, what their accumulation is based around, how this has shifted over time, and the ways in which this process of class formation links to the nature and changing attributes ofthe state, ^th this perspective in mind, there are three key cx)n- cepts employed throu^out this bnnV that rprpiirp fiiwhpr plahoratiom the interna­ tionalization ol class and StatertHIpenalism. and neoliberalism.

Internationaltzatfon of Class and State Marx himself famously noted that capitalism always acts to "tear down eveiy spatial barrier to intercourse, i.e., to exchange, and conquer the whole earth for its mar­ ket ... [as capital develops] the more does it strive simultaneously for an even greater extension of the market. This observation has been strikingly confirmed in the contemporary world economy, where the production of a typical commodity involves labor and inputs from across the globe. The place where a given commodity is eventually sold is very likely not the same place as where it is produced. The largest capitalist firms consider their production and marketing decisions from the perspective of a global marketplace, not simply from within their own national borders. These processes indicate, as Christian Palloix noted in the 1970s. that the commodity is "conceptualized, produced, and realized at the level of the world mar­ ket. ”+7 Palloix termed this fundamental characteristic of global capitalism "the in - temationalization of capital"—a tendency signaling that capitalism was "a social system driven by the encompassing accumulative imperatives of a world market. ”♦*’

Internationalization takes place through a variety of means, including the estab- lishment of joint venture.^, the expansion of foreign direct investments CPDis). the listing of rf>mpanif?°^»^w^^aggtnnkjnarlfPtR and the licensingofbrandsand agency

10 Adam Hanieh

rights, Mor^as the geographical scale of accutttolation grows the cost, of

ternattoml bankmgsystemTThrji^S^;;;;;^;;;^^ ^

mcreasinglysettheproductionandrealtationofvalueattheleveloftheworW o nece^lysig.fyag™wingitttetpet.et.tionofo™e,^pal^^^^^

ntemationalizationalsonecessitatesarethinkinffofthenaturpnfst f ■ w.thMftecomempontyworldnurket.Ac^o,atio„isalwaystemtoriahLd-rr

sr~

c:sr“-“-=—:ir

Theories and Perspectives 11

In his pathbreaking account of ^obal labor histoiy, Marcel van der Linden makes a powerftil case fordre importance of overcoming such methodological nationalist bi­ ases. Van der linden notes that methodological nationalist approaches "consider the nation state as the basic, self-evident analytical unit for historical research... Cross - border or border-subverting processes are perceived as distractions from the 'pure' model. "5+While itisclearthat "[I]na^obal perspective, the existence of nation-states obviously remains an essential aspect of the world ^stem, ” Van der linden argues that the existence of these states need "to be thorou^y historicized and relativized vis-a- vis sub-national, supra-national and trans-national aspects.”^ An important aim of this book is to highlight the salient^ of this approach to the Middle East. In a region that is so integral to the way that the world system has developed, state and class for­ mation should be reconceptualized through this multi-scalar lens.

One useful way of thinking about these notions was elaborated by the Greek theorist Nicos Poulantzas during an earlier set of debates regarding the relationship between US and Exunpean capital in 1970s Europe.Poulantzas argued that internationalization was leading to the growinginteriorization of "foreign” capital within the domestic social formation. In other words, in contrast to positions that posited a ceaseless conflict be­ tween national and foreign capital, Poulantzas asserted that all capital—regardless of its national origin—was compelled to orient to the global scale anH ^ simiiltaneouslv. foreign capital had become intffmalizfH as a largely iT<Hict7ngiTirhnhlr rnmpnTifiTitnf the "na- tional bourgeoisie."s7This did not mean that nation-states bad lost their significanrp orthat there existeda single, transnational capitalist class, but ratherthat capital needed to be regarded as increasingly mristinfr beyond any locally specif

These debates bear particular signiticance in the Middle East because, as later chapters will demonstrate, the regional political economy has come to occupy a prime position in national economies over the last two decades. This means that it is neces­ sary to reject the Linnean style of categorization typical of comparative politics, which divides the Middle East into "authoritarian republics” and "authoritarian monarchies” and delineates the differences and similarities of neatly ordered states whose social relations are bounded by national borders and externally related to one another. Most important to this reconsideration of the regional scale is the role of capital from the Gulf Cooperation Council (GCC)—a regional integration project bringing together the six oil-producing monarchies of Saudi Arabia. Kuwait, United Arab Emirates (UAE), Qatar, Bahrain, and Oman. A chief premise of this book is that the internationalization of GCC capital has transformed the political economy of the region, becoming inter­ nalized in the class structure of nei^iboring states.

These trends cany far-reaching political connotations. Most significantly, they bring into question one of the favored concepts of much of the Arab nationalist move-

12 Adam Hanleh

Sabahi,hasempha5Ldthi, ,■ * leader Hamdeen

r:r“:r:“!S;r£"':”F--- insurance, and a clean envirnn * u- comprehensivein addition ,„l?re anr ^ '’ “'°^^‘^'=^'^“=SoaIs..s.edpp .or-lednaJn^LX

VaydreprintarTroLltre^ec

ifeIec,ed,,osuppor.dnsorien,ationJftWt!r.ree”2«^

Centrality of Imperialism

iringingeverdat^rspheresofhunta„ac.i.i;L~:;Xt“‘'“"‘“"’"^ out. control of capital becomes Vi^u • r ^ ^ process playsclose eonnecti„„l:ll“':''7“‘*f-"''“^^

and centralization This rekntWH • concentration ingfeature ofimn^rjalism^r

the tendeneyof dom;;;i;^^~lS-^' , ■"’Pcrialism captures forcibly etdracting profits from ail cII^hellltirrT''"

tuating the unevenness of the system as a whole ^ h I ■ ^ ^ ^ the interdependency ofstates as a nee ® ®^"^“I*aneously deepening

-:;=rf«====r '"-““•-'•"'-■•■•—iiSszSSS-

Theories and Perspectives 13

In contrast to many conventional approaches to the Middle East—which tend to treat imperialism as ^onymous with colonialism and date its end to the close of World War II—this book highlights imperialism as an essential and •" shaping of the region's political economy. As later chapters will discuss in sor*** , the Middle Elast differs from other areas of the ^ohe i n that its vast supplies of hyd m - carbons conferunon it an immensely significant geopolitical weight. Forthis reason, the major imperialist states—headed by the United States throu^out the contemporary postwar period—have placed the highest priority on exercising power over the region and preventing any challengers from gaining a foothold.

Th^ are two foremost aspects to imperialism emphasized throughout this book. The first of these is the dialectic of rivalry and unity of interests that characterizes the relationship between the major imperialist powers. On the one hand, the internation­ alization of capital has generated hei^tened levels of competition between the large corporations that dominate the global economy, and this is refracted through increased interstate competition. Consequently, inter-imperialist rivalry remains a salient fea­ ture of the world market. On the other hand, the very nature nf intPmatinr>aii?fltjqT-. demands greater coordination and cooperation between states in order tp maintain the required conditions for accumulation as a whole. This is all the more relevant in contexts such as the Middle East, which has been in a constant battle to free itself fmm imperialist control—a path that, if successful, would have enormous ramifirations for tVip ftntirp, rapitf^Hst gysTem Forthis Fcason, the importance of controllingtiw Middle East not only stems from inter-imperialist rivalry—an attempt to command a "poten­ tial chokehold on other leading powers”**—but is also driven by a common existential interest on behalf of aU imperialist powers in preventing the peoples of the region from determining their own future. These dual tendencies of cooperation and rivalry are vital to understanding the ways that imperialism continues to interact and shape the political economy of the Middle East.

Second, imperialism is too often '"tah hy many theorists on the Left—as solely a question of military or political domination. Whilp this honk pyplorp-q thpsp aspects of imperialLsm in snmp. dptail. it emphasize-s the fart that impfirinlu;m isprimarilx o question ofexploitatitm ^nothfl<iiCTg.^itatej. mui is prinripaflyfinund up irt./i'inuiflo/rm - noTnicdomination. Much of the analysis ofthisbookis concerned with tracing the pro­ jection of economic power in the Middle East by imperialist states—the attempt to integrate Ae forms ^^rmimulation in the i^on into glntnl pmriiiotinn ehflm.irgnd-

subordinate local classes to the exigencies of capital in the core countries of the world ijiartet. This tendency is linked to the dialectic of rivalry and cooperation noted above, but more generally it has had vital implications for class and state in the Middle East. It means—as later chapters will show—that capitalist class formation in the Middle F^st

14 Adam Hanteh

hasJemmemcreaam^^Oiedtotl^bbsandflo'vsQ^ Oneof5heeffscteM.iraperiaIism,motherwords,hasbeentogenesteadon5esticcaD- ■^^■st^pjnaaahotheMddleE^^ ofg'oJaKunEerialisOcaEb^^ Iier-.t makes little sense to speak of a -patriotic bourgeoisie" in tbe Middle East that IS somehow oounteiposed or in eonfrontabon with international capital and inwhich hopes for a national project for liberation can be invested.

Neoliberalism The main period that this book focuses on is the neoliberal phase of eapitalism whmh had its origins in the global crisis of the .970s, was consolidated during the nnd-.98os, and continues through to the current day.'t Drawing from a range of sources including classical liberalism and Austrian and monetarist economics, neohberahsm s policy prescriptions are now familiar across the globe: privatiza- hon. cutbacks to social spending, the reduction of barriers to capital flows, and the imposition of market imperatives throughout all spheres of human activity. The Middle East was no exception to the worldwide embrace of these policies by gov­

ernments and ruling elites-and a major aim of this book is to consider the pro­ found consequences that they continue to hold for class and state in the region.

As later chapters will outline, however, neoliberalism needs to be seen as much more than thefamiliarUtany of economicpolicieswithwhichitis typically associated. ts essence lies, as David Harvey points out, in an attempt to reconstitute and

atrengdien class power in the favor of capital.^ Its policies emeiged out of the systemic needs of capitalist social reali^. Specifically, the nim to neoliberalism reflected the accumulation needs of capital in an era of internationalization, i.e.. capital with accu- inulation spaces increasingly spread across a global level. Its logic came to penetrate <dl national social formations and was specificaUy concerned with the ways in which thescfoimations were integrated into global circuits of accumulation. Byspeedingup the rate^twhidicap^oves across and through national snace.s. and

'n'«'*id“PteadadoptionofneoliberalpoIicieswasfaciIitatedbytherestiucturingof *e world market that took place during the 1980s and 1990s. IJdth the collapse of the Soviet Umon and the integration of China into the global economy, capitalist social re­ lations spread throughout the world, compelling all states to comply with norms set at the international scale.‘t In regions such as the Middle East, this process was closely re­ lated to the economic crises of the .98^sandth«reasur«eaBtriesfseedj<H^ exchange revenuesinordertoservice*eit4e!!lfiblig^,Arangeofinternational in-

Theories and Perspectives 15

stitutions drove the technical implementation of neoliberal policies—notably the Inter­ national Monetary Fund (IMF) and the World Bank—while governments front thfe Utiited States and Europe pursued bilateral trade and financial agreements with the regiuii.—

This book traces the neoliberal transformation of the Middle East over the last two decades. Its focus goes beyond the policies themselves to examine the ways in which neoliberalism has underpinned the modalities of class and state formation. Specifi­ cally, the penetration of neoliberalism has been a pivotal force in shaping the produc­ tion and development of working classes as well as the nature of capitalist class formation around the new internationally connected circuits of accumulation. It has also lent a particular dynamic to the nature of the state apparatus, closely connected to the spread of authoritarian regimes. As always, these processes must be tackled across national, regional, and international scales.

Afinal core feature of nfin1iKf»ra1 Mp.nlngy—ertiApH in rnnvpntiftnaljtnaiipmip counts of Middle East develnpropTit—is fhp ^Inim tn an apparent neutrality and "ob- jectivity” of analysis. A key intention of this book is to unpack these claims and to denionstrate that they not only are false but actually conceal a discursive attempt to defend, maintain, and extend the uneven and exploitative, nature of capitali.stn in the Middle East. Assertions of an ideologically detached or impartial methodology (even, as is often the case, when such assertions are only made implicitly) deny the inherently partisan nature of all attempts to comprehend social reality. In contrast, this book is unequivocally framed as a challenge to the status quo. This partisanship is not a weak­ ness of the analysis but rather a potential source of strength. If it is true that capitalism is the root source of the region’s problems, then confronting this critically and openly provides the best route to capturing the reality of the contemporary Middle East, pre­ cisely because it opens up the ri^t kinds of questions and ways of thinking about the problems posed. If it is not true, and the region's difficulties stem from the antimonies of authoritarianism and the free market, then the analysis will fall. The point is to be explicit about this fact—recognizing that a certain political perspective and standpoint on reality is inevitably embedded in any set of methodological assumptions. There is no claim here to neutrality: the book openly takes sides.

The Structure of the Book ^th these initial methodological and theoretical perspectives established, it is now possible to summarize the basic structure of this book. The first point to note is the contested and controversial nature of what constitutes the "Middle East.” Different definitions of this area are used both within and outside the region. The book employs a variety of generally synonymous terms—Middle East. Arab world, and Middle East and North Africa (MENA)—depending on the context.'^" Most of

16 Adam Hanieh

.he analysis concentrates on the experiences in the Arabic-speaking conntries of

mattonm

chan. f 'haraceristics. In general, however, while different

.genons social and political forces in the area, reconstituting patterns of stateand l^s and opening the way to die penetration of neoliheral refol It has altered the

patterns of accumulation internal to the region itself while differendaUv intear K various sonesofthe Middle East into the world market

This global perspective helps to framethe account, in ehaptersSand a. of,hen -d impact of neoliberalism. The firs, of these chaptem outlines some demelTfmmmm

fornix T' --'fo™ has linked capital

TicbookthenmmstotwoimportantcasesmdiesthatamdeeplycoItrdmAe ^pmwhiehtheregionalpohdcalecnnomyhasformedthrnughL O^pters considers these themes in die Palestinian fc. Bank, examining the ways *a, Israel, occupation has shaped the development of Palestinian capitalm alone

g y neoldieral Unes. A core argument is that the question of Palestine needs to bf vieweddiroughdiepr«mofcapitalis,developmen,,linkedtod.enatiireofimperialism

Theories and Perspectives 17

in the Middle East, not solefyvia a ri^ts-based perspective that focuses on the copious examples of hiunan ri^ts abuse that take place under Israeli control. Chapter 6 con­ centrates on the extreme^ significant case of the Gulf Cooperation Coxmcil (GCC) coun­ tries. It presents an overview of class formation in the Gulf, emphasizing the pivotal position of migrant labor alongside the development of laige capitalist conglomerates across the GCC. A major consequence of this has been the internationalization of Gulf capital in the Middle East; this phenomenon is examined empirically through the in­ terpenetration of the Gulf with class formation in the representative example of Egypt.

The book ends with a discussion in chapter 7 of the 2011-2012 uprisings and their implications for further political developments in the region. The backgroxmd and context are laid out for each of the most prominent revolts—Egypt. Tunisia, Yemen. Bahrain. Libya, and Syria—as well as broad outlines of the Western and regional re­ sponses. The aim is to situate these uprisings in the context of the previous chapters. Once again, it is important to emphasize that this book does not present an exhaustive account of the politics and blow-by-blow details of any specific case study^and cer­ tainly not a definitive assessment of events that are still unfolding. Rather, it outlines some of the commonalities and specificities of the uprisings, demonstratingthat their trajectoiy can be best understood through the evolution of state and class as mapped throughout this book. Taken as a whole, th^ indicate that the long-standing social crises facing the Middle East—including the prevalence of authoritarianism, the per­ petual economic exclusion, and the maiginalization of much of the region's popula­ tion—are not a result of too little capitalism but are direct consequences of capitalism itself. These processes of class and state formation constitute the lineages of revolt.

CHAPTER 2

Framing the Region: Imperialism and the Middle East

T he contemporaiy Middle East is shaped by two important and interlinked dy­ namics. First, since the mid-twentieth century, the region has represented a vital zone within the wider global economy. Its vast supplies of hydrocarbons, coupled with the prodigious financial surpluses that accompany them, mean that

control of the Middle East is a source of enormous strategic power and thus a long­ standing flashpoint of global conflict. Second, however, the dynamics of the Middle East’s own social formation, and the stnigglfts ffiat are inevitably bound up with them^ form a crucial counterpoint to the rivalries and collusion of foreign powers. For this reason, the region is much more than simply an object of external domination—the histories and strokes of the region are supremely relevant, existing alon^ide and within the stoiy of foreign rule. The purpose of this chapter is to consider the inter­ action of these two dynamics and their implications for contemporaiy patterns of class and state formation. Subsequent chapters will discuss in detail tb^ the region’s social relations under the impnrt nf nrniniri iiti'im The aim here is to set the scene for that discussion by providing an overarching account of how the tra- jectoiy of imperial domination since World War II has shaped the specificities of the neoliheral era. the means throu^ which this domination has been extended and en­ hanced. and the w^ this has been articulated with—and altered by^particular forms of resistance.

19

20 Adam Hanieh

pos.™rpen^e,aJ!i5gtoeon^^ ^ g^^*^--^°'^^-gn<y^ateg),mitiaUy relied upon^^ationofvariousTe-

po„daIhes,se«li„gi„,hela.er96osonastategicpar.nershipW.hIs..el, Iran, and Saud. Arabra as a means to eonfront dte growing s.mng.h of Arab nationalist move­ ments, ^ mdtiary defeat pushed baek struggles in Egypt and elsewhere, the United Statesalsoemployedfoodaidandotherformsof assistance,oloekdevelopmentpat-

paved the way for mounting fiscal problems Urat culminated in the debt crises of the JOS and .960s, finally opening the path to the neoliberal reforms that will be ex- plored in later chapters.

This early hi Jry confirms that imperialism is not simply a prestion of military

uner^ 7

77 F„p4„ r^ atronsl^th the region thro,,slulm-.99ooarrd^,riraa.^a^eIlas^ rise of new

oSiuol^gr^jyadfessia The various bilateral trade and financial agreements 777 T" n“' ■■™”ked the nature of capitalism in J Mrddle East, By reconfiguring the patterns of production and consumption they have acted to subordinate the region to the circuits of accmnulation in the^vantd

7.‘ r7* “““T ™ried paths of integration of the Middle 77 ? “ono-f'vill be an essential element to discussions of the neoliberal era in later chapters.

The Transition to US Power Jrld War H srjaled a major shift in both the nature of capitalist production and

structure of the world market. Most significantly, the end of the war witnessed 7777 of capital. Capitalist firms, led by those headquartered in the United States, expanded overseas and oriented their productron toward international exports. Between .959 and r964, US companies mor «the rate of more than three hundred pe^ear

more than ten Jes the prewar rate.' New industrial sectors also emerged at this Urion?‘t d “‘'’“'■y- '«> US multinationals such as Dow. Jton Jb.de, and Standard Oil. These companies manufactured substitutes for namra lyoccurnngmaterials-plasties. synthetic fibers, pesticides, fertilisers Inte77'T^^^7 increasingthe scale and scope of commodi^ production.- nternatronalrzatron brought with it a fundamental reconfiguration of the trans-

Framing the Region: Imperialism and the Middle East 21

port sector. Central to this was. of course, mass automobile production, which ex­ panded as factories were built throughout Europe under US-backed reconstruc­ tion plans. Large-scale commercial land and air transit also grew rapidly in the immediate postwar pprind as tV».> firct "glfthaP* niRrkets began to take shape.

All these trends were underpinned by a growing demand for inputs of energy and raw materials. Internationalization—because it was premised upon ^obally oriented production circuits—demanded large increases in energy use. And here. too. there was a shift—away from the centuries-old use of coal—toward oil, and later natural gas, as the principal sources of energy. Oil had become, in the words of Simon Broml^. a "strategic commodity."^ Its greater energy density and portability (relative to coal) ma^e it ideal for powering automobiles, airplanes, and modem militaries.+ Not only did these hydrocarbons supply the necessaiy eneigy for industrial production and transportation, they also formed the basic feedstock for the vast array of products gen­ erated in the new petrochemical industries.

Throu^ the first few decades of the twentieth centuiy. the bulk of the world's oil production had been located in Europe and the United States. But following a wave of discoveries during the 19203 and 19803, it became clear that the Gulf region of the Middle East—Saudi Arabia. Kuwait, Iraq, Iran, and the smaller Gulf states^held the world's largest supplies of cheap and easily accessible hydrocarbons. This brought with it profound geopolitical consequences, conferringon the region a potentially decisive role in determining the fortunes of capitalism at the global scale—"a stupendous source of strategic power," as a US Department of State memo described Saudi Arabia in 1945.^

But concurrent with this transformation in the nature of capitalist production were sweeping changes to the Middle East state system. The existing nation-state borders were largely a result of British and French machinations, which had divided the region into various colonies and assorted protectorates in the early twentieth centuiy alongside the collapse of the Ottoman Empire. World War II. however, had significantly disrupted thes^old colonial structures. Adeep-seatedyeamingfor independence had been per— colating for decades and—with the weakening of British and French hegemony during and after the war—a resurgence of anticolonial stru^es shook the established patterns of rule. Squeezed by mounting financial and political crises at home, the former colonial powers were faced with burgeoning movements demanding control over their natural resources and strategic transport routes, and the ri^t to freely determine relations with other countries. The increasing intensity of these .struggles raised the spe pter of pnpnla^r sovereignty and national independence Av^r what Viari argiiahly hp(-f>ni.g thftmost im­ portant zone in the world market.These challenges to British and French rule tookplace in the context of the ne\yg1ot-»^i th^ nphffi ^fwnr The United States had emerged as the preeminent capitalist power, its military and economic

22 Adam Hanieh

leadership vastly superseding^ older colonial rivals of Europe.* At the same time

owever.|heSo™tUmonhadwongreatprestigethroughitsresistancetoNaiu Germany and^alsoseeldngto emend its global reach. Asamsult,manyof,he AmbleftistanT

—malmovementsthathademergedinthepost^rperiodlookedtowardaUiances witiiheSovietgovemmentasameanstoearveoutspaceagainsttheircolonialmastem

™“'™“e“‘'<>nofthesedynamiesthatshortlyafteriyorldWarIl,USpresident Hjo' Truman declared, in a famous speech to Congress, that the United States ivould actively intervene around the world in support of its interest and those of the "free rvorld. AlthoughthelrumanDoctrine,asithecameiaiown,wasframedlargelyra

^spoi^e to a gr^ing Soviet influence in Turkey, Greece, and elsewhere, a. the root of US ore.^ policy concerns were the various independence and left-wing move­ ment tha had emerged in the wake of Europe's destmetion, Trumans speech did not ire^y.eferencetheMiddleEast,yetitssupmmesignifieancewasundotd,tedlyfo^ mostmthennndsofthespeechwriter^nearlierdraft confirmed theimportanceof the regions great natural resources.*^

the Middle East-and clearly cognizant of the importance thattheregionheldfoHte

recast the natine of political rule during the postcolonial period. Die strate^ LtiL

^urs^dbytheUmtedStates,incloseaUiancewi*BritainandFmnce,wasto™gotiate Uie handover of power to leaders who were viewed as amenable to continued fLgn

doniination.albei.intheframeworkoffonnalindependence.Britainhadearliersho™

iX) » Egypt (in .9„) and Iraq (in 93a)i«flinewg„vemments,ledbypro-Britishnilerawhoallowedacontinuedpres-

ence of fore.^ troops and largely acquiesced to orders from London. It was with this

end of French Manda,eini943, and the Emirate ofTransjordanaater called Jordan)

upon Libya its independence, under the control of the country's monareh, Kingldris In most countries, however, this reliance upon pro-Western monaiehs anLban

eh,escouldnotsuivivelonginto,hei95osandi96os.Dledepthofthe problemfaced y the Westeni powers was confirmed in .951, „i,h die nationalization of die British-

owned and -operated Anglo-lranian Oil Company (AlOC) in Iran. Iran's recently ap- pommd prime minister, Mohammed Mossadegh, had been emboldened by mass mobdnahons across die country toeiqielAIOCand place Iran'soilinsmte hands'The nadonahzanonofAlOC was foUowedayearlater,ini9S,,byadrama,ict«m of events mEg^t, where the coundy'smonarchandaprincipalally of colonialismin die region.

ng Farouk, was ousted by a military coup led by the popular officer Carnal Abdel

Framing the Region: Imperialism and the Middle East 23

Nasser.’ Nasser s comii^ to power forced the withdrawal of British troops from Egypt in 1954 and led to the independence of the Sudan in 1956. Nasser confirmed the West’s worst fears when he turned to the Soviet Union for militaiy support as well as technical and financial assistance for laige-scale infrastructure projects such as the Aswan Dam. Egypt’s newfotmd sovereignty was crowned with the nationalization of the British/French-controlled Suez Canal in 1956—an action celebrated by millions of peo­ ple across the entire Middle East. As Nasser took these steps, anticolonial struggles were also growing elset^ere in the region, most notably in Algeria, where a guerrilla war for independence was launched against the French occupation in 1954. Althou^ French control did not end in Algeria xmtil 196a, the Algerian revolt was a significant factor in propelling France to grant formal independence to Morocco and Tunisia in 1956.

In response to these challenges, the United States elaborated the so-called Eisen­ hower Doctrine, proclaimed on January 5.1957, as part of a "Special Message to the Congress on the Situation in the Middle Elast." Decrying the threat of "international communism," Eisenhower guaranteed US readiness "to employ the armed forces of the United States to assist to defend the territorial integrity and the political independ­ ence of any nation in the area.”'® Althou^ Eisenhower’s speech was framed, as Tru­ man’s had been, by the supposed Soviet threat, much of his speech alluded to events in Egypt, particularly the nationalization of the Suez Canal. Eisenhower noted that the canal "enables the irations of Asia and Europe to cany on the commerce that is essential if these countries are to maintain well-rounded and prosperous economies, ” and that the Middle Eastwas a "gatewaybetween Eurasia and Africa... [with] about two thirds of the presently known oil deposits of the world.... The nations of Europe are pecu­ liarly dependent upon this supply, and this dependency relates to transportation as well as to production."”

Eisenhower’s doctrine wp^f foet in in wherp a pro- Nasser government, led by Suleiman al -Nahiilsi. had <Yimp pAwpr anH sm^ght to curb the powers of the Western-backed monarch. ICing Hussein.** Buildup upon the anti- Briti^ sentiments that were running high foUovring the nationalization of the Suez Canal, Nabulsi canceled a treaty between Iordan and Britain artrl frrclfts^rrf^- lations with China, the Soviet Union, and Egypt. In response. Hussein dismis-sed the Nabulsi government, banned all political parties, and placed Iordan under martial law After Hussein expressed tacit support of the Eisenhower Doctrine, the United States respondedwith financial and political aid, replacing Britain as the major Western sup­ porter of Jordan.*^

As this crisis unfolded in Jordan, the United States also moved to support pro- Westem forces in Syria by backing conservative politicians and encouraging Turkish and Iraqi plots against the country.’^ Here the attempts failed, serving only to further

24 Adam Hanieh

generate support for Communist andArab nationalist forces. Ini958, Egypt and Syria formed the United Arab Republic (UAR). a short-lived attempt by Nasser to form a union based on Arab nationalism, which was embraced by Syrian elites in reaction to the strength of the Communist movement in Syria.'s Responding to the formation of the UAR. Jordan and Iraq formed the Arab Union, a federation of the two monarchies that was set up as a pro-'Westem counterpoint to Arab nationalism. The unity lasted only six months, however, ending with the assassination of Iraq’s King Faisal II in a military coup largely inspired by the overthrow of Egypt's monarchy in 1953. As these Western allies teetered. British troops were dispatched to Jordan to support King Hus­ sein (with the support of Israel and the United States), while US Marines landed in Lebanon to bolster the pro-Westem government of president Camille Chamoun.'^

By the mid-1960s, popular and underground movements claimingfidelityto Arab nationalism and left-wing ideologies were shaking all the pro-Western regimes in the region. A most important and often overlooked part of this history was the range of deep-rooted strokes takingplace in the Gulf region, where strikes and worker move­ ments threatened the stability of corrupt and decrepit monarchies. In Ralirair. for ex­ ample, where the first political party in the Gulf had formed in 1954. militant labor Struves occurred throu^ the 19608 that culminated in a three-month uprising in March 1965 following the sacking of hundreds of workers at the Bahrain Petroleum Company (BAPCO). These stru^es were led by Communist and nationalist leaders who fused agitation against the ongoing British presence in the Gulf with demands around worker and social issues. The strikes drewsupport from wide layers of society, includinghi^ school students who walked out in solidaritywith the workers.'® Worker actions and nationalist-inspired movements were also widespread in Saudi Arabia, Kuwait. and the smaller (3ulf emirates. Elsewhere in the Arabian Peninsula. an armed struggle was launched ini963 by the Front fortheliberationof Occupied South Yemen (FLOSY) and the National Liberation Front (NLF) against British control in Yemen.'’ The mood of the time was encapsulated in the formation of the Popular Front for the Liberation of the Occupied Arabian Gulf (PFLOAG) in 1968. which viewed its base of operations as extending throughout all the Gulf states.*"

The Character of Arab Nationalism The landscape of Middle East politics from the vantage point of the mid-1960s was thus deeply marked by the chameleonic character of Arab nationalism, which as­ sumed a variety of forms differing radically across time and place.*' While the Arab nationalist movement was represented most prominently by Nasserism in Egypt and the rival factions of Ba'athism in Syria and Iraq, its ideology and political practices resonated powerfully in every countiy in the region. At numerous points in its his-

Framing the Region; Imperialism and the Middle East 25

toiy.Arab nationalism, particularly initsNasserist variant, would clash sharply with

imperialist interests in the region. The overthrow of colonially backed monarchies, thenationalizationofthe Suez Canal, and the laterconfrontations around Israel (dis­

cussed below) are potent indications of this fact. All these points of resistance gen- erated wiHP...pread sympathy and deep-seated feeling8_ofHideamg3ig^lU^aiaj^ Arab socletyrMUuTns of people^ld a^nuine nostalgia for this era that remains

mHi-lihiy inscribed in political and cultural practices to the pres_entd^ - is important n^mJelishlTf the c^ntationsaolhimperialism

and ignore the configurations of class powerthatma^ the rise, nf Arab natiQnaUst. ^ ideology. Too often the reasons behind the failures of the movement are attributed to th^^taiy and poUtical defeats inflicted by external forces or the contingent actions of individual leaders during the 1960s and 1970s. While these are no doubt a cntical partofthemovement'shistoiy.theycanobfuscatetheclassdjmMnicsth^ervated ,l,„...„,^i...ftt..ri^^mn^notablvthefacttoArahnatinnalifimrestedonacon-

tradictorv ideology focused nn ftnh unity. rnnsnimiRly downplayed the. reality of class stmg^e.” Indeed, many Arab nationalists, such as the Syrian inteUectu^ AdibNassur.condemnedafocusonclassasbeingdivisivetothecauseofArabunity.*"

Likewise. Michel Aflaq, one of the leading founders of Ba’athism. called on Arabs not to "lose their nationalism nor to confuse it with the felonious notion of class interests, so asnottoendanger national unity."** Initsdominantfonns.thisorientationactually ended up prioritizing the development of national capitalist classes, and was partly enabled by the presence of the Soviet Union. Itwasthis(ultimatelyunsuccessfidlne- gotiation of Cold War rivalries that generated thejB^sibility for Arab natiQpglism to

fV.^ ^ntradietions stemmingfrom itSPTft-napital firientatioiund its apparent

confrontations with imperialism. The state-led fn-rtyriTirr necessitoteiLthf Himinatinn of instltU:

tional r niifiointinTiri-IWnrt--^ colomalism-^jhaUdOfikedflie capitalist grouB5.Nasser captured this sentiment weflinhis^jsa^

rPhilisophrof the Wattonl. in which he argued that the revolution was a j'..j^».[n^c«v._^igf^enotelassstruggle"thatbroughttogether"p^ soldiers, intellectuals and national capital" as an alternative to "the alliance of exploita­ tive capital and feudalism. This strug^e was an important, albeit partial, explanation of the character of the land reform that took place in the 1950s and 1960s (see chapter 4). Tn practice, it did nptnecessarily meanjiejestruction of those old social eUtes-:^ -----an important componentofthe new capi^cl^es^bur^

thein-stitutional formsthatrsBlsafinled those olderfflcialxelations,The development of this local,state-8upportedbourgeoisiealso helps to explain one driving forcebehindtheconfrontationwithimperialism-anattempttoattainbasic sovereignty

26 Adam Hanieh

--SsSSiii^ssssr^r2.::=rM~jss:r*-^”~“ r~3£~=~X"i:

1—r4r5rrl^£“c.r:popu.a,:„„.hadfae=d„nderr"tdT s=s=s~ E=:S^S=~rexpt-ssrr,";"™'*-' the ““’■f'="”>' ‘^^■"■“ help to explain the evolution of the Arab states in

~r£;

Framing the Region: Imperialism and the Middle East 27

Arab states vrere layingth£ grmindwnrlr for sTrirrt nf nlibpmVfronnmir pmynmn that would belauncbftd und-^r*^^ f‘V?p^r^f nf the IMFand World Bank. Bvthe mid-igSos. most of the Arab states had rftnriftntftd from a ronfrontatin-n with impAinalittm fnward a protracted incorporation into US and European power structures in the region. Somewhat ironically, as later chapters will trace, this incorporation actually helped strengthen the development of the national capitalist classes sou^t by Arab govern­ ments for decades. This occurred, however, not througha break with impftrialism but throu^ the insertion of this emergent class into the circuits of accumulation developed by the advanced capitalist states over the region as a whole.

1970s and 1980s: The Mechanisms of Counterrevolution Overcoming Arab nationalism and subsuming it into the structures of imperial rule took place through a combination of political, militaiy. and economic means. The overriding characteristic of this process was the widening of hierarchies and the differentiating of power at both the regional and national scales. Bymagni^dng the region’s uneven patterns of development while simultaneously tighteidimfs interdependencies, foreign powers were able to lock cp.rtain snrial fnrrps within the Middle East into a frampwnrlr nf gtiarpH intpr^ctc /^ppnQpd tn fh<->eivnf |he Y.int majority. In spite of significant opposition, the principal consequence of these changes was the tempering of any anti-imperialist features of Arab governments and the sustained rollback of the populist measures on which they rested.

On tlw political and military front. Western governments—led by the United Sfates— initially pursued this strategy through strengthening alliances with three main regional pillars: Saudi Arabia. Iran, and Israel. Each of these countries was provided with large amounts of financial and military aid, and the specific socioeconomic and political characteristics of these three countries enabled them to emerge as the main articulation of US and European influence in the region. Their position within regional hierarchies was strengthened, and in return, they helped to confront the various radical movements that had developed duringthe 1950s and 1960s, whether nationalist or left-wing.

In the Gulf, the Saudi monarch. King Saud. had long been reliant on US aid and military support following the arrival of US oil companies to the country in the 19308. But Saud’s anachronistic regime and close relationship with the United States faced the rise of revolutionary and nationalist movements duringthe 1950s and 1960s, which were severely repressed with the open support of US and British advisors. The influx of huge flows of petrodollars into the Gulf in the 1970s as a result of oil price rises (flrst in i973-74and again in 1979-83) underpinned the growth of a Saudi ruling class that was exposed to profound threats from below and from the wider region (see chapter 6). In this context, an alliance with the United States (and Britain) helped to strengthen

28 Adam Hanieh

the position of the Saudi monarchy and the social forces connected to it, laying the basrsforapanieularform of regional dominance.ha,haspemis,edintod.epLen,

In return for Western militery and political support, *e Saudi regime was ail too

n through the eorrupHng influence of petroMars, which could be used to baekpio-Westemforees in the region withouta direct link to Western funding,^ In line wiflt this logic, Saudi Arabia was encouraged 0 employ Islam as a regional counterweight to nationalist and left-wingorganizations

ot^mnng Islamic summits" that asserted Saudi influence and challenged Egypt's role^theleadingAmbstate,-Avitriolicpmpagandawaropenedupbetweenthe&udi and EOTtian governments, leading the US Senate to object to bmadcasts from the Voice of QmoradtostationcallinguponSaudieitizens to-overthmwthese lackeys who

of 'he^a. Th^proayeonflietwithEgypttookimrnostvividfonnduringtheeight-year NoAyemenei^war,whereSaudiArabiawasthcmainsupporteroffl,eroyalist,p„,- ntish forces that had been overthrown in .96a, while Egypt backed the mpublLn

movements arrayed against the ousted monarchy. In the ease of Iran, the United States (and Britain's M.6) had engineered a coup

gainst Mossadegh inipsS.bringingtopowerapro-Westenigovenimentloyal to the

raman monarchy, headed by Mohammad Reza Shah Pahlavi,f The United States ex- phatlyconeeived ofiran as the prineipalbaseofcontrolforthe Gulf region, and mil­ itary fundmg reached *1,7 billion under the first Nixon administration (1968-73) nearlyteetimesflielimitse,byNixon'spredeeessor,LyndonJohnson,3'A.9rm:

port y 0 rand Corporahon-a prominent think tank closely connected to Wash- uigton polity r^ers-noted that Iran was a critical feahire of US power in the Gulf eeauserteotdd help achieve many of the goals we find desirable without the need to

mtervene m the region, Thisjole^eon^y demonstmted in r 078 with the

^_eD^airebeUiom,a£owerM^

* US helreopters and other weaponry, succeeded in crushing the rebeUion ” US

rm imry support to Iran skyrocketed from 1978 onward, amounting to more than ttbbilhonannuallyfrom 1978 to .975, Inaddition, Imnmceivedthemostsophistieated

weaponry availablefmmtheUSmilitaiyarsenal,NAstheUnitedStatesextendedmil-

SAVWtl^tbecamerenowned for its vicious repression of ary internal dissent. UeothermajorpivotofUSpowerinthebroaderregionwasthestateofIsrael As

a settler-colonial state, Israel had come into being in .948 thmugh the expulsion of around fliree-quarters of flie original Palestinian population from their homes and

Framing the Region: Imperialism and the Middle East 29

lands.^ Due to this initial act of dispossession and its overarching goal of preserving itself as a self- defined "Jewsh state," Israel quickly emeiged as a key partner of foreign powers in the region.^ Inextricably tied to external support for its continued viability in a hostile environment, Israel could be counted on as a much more reliable ally than any Arab state. Duringthe 1950s. Israel’s main external support had come from Britain and France.^ But the Jxme 1967 war saw the Israeli militaiy destroy the Egyptian and Syrian air forces and occupy the West Bank, Gaza Strip, (Egyptian) Sinai Peninsula, and (Syrian) Golan Heights. Israel’s defeat of the Arab states encouraged the United States to cement itself as the countiy’s primaiy patron, supplying it annually with billions of dollars’ worth of military hardware and financial support.

Israel’s victory in 1967 signaled a decisive turning point in the evolution of Arab nationalism.^ While pro-Westem regimes continued to be challenged from below ly various radical movements, and new nationalist governments came to power in South­ ern Yemen (1967).^ Iraq (1968), and Libya (1060), Israel’s victory dealt a devastating blow to the notions ofArab unity and resLstance that had eiystallized mnst sharply in Nasser’s %ypt.'*° The military defeat was symbolically reinforced by Nasser’s death in 1970 and the comingto power of Anwar Sadat, who subsequently moved to reverse many of Nasser’s more radical policies. The priority placed ly the United States on its relationship with Israel was further highlighted in r973. following anotherwar between Israel and a coalition ofArab states led by Egypt and Syria. Despite initial Egyptian and Syrianadvancesintheopeningsalvosofthewar.USairliftaofthelateatTwilitaTypfpiip-

of imperialist strategy unfolded—the region’s econnrpie guhyigatinTT

The Economic Front Alongside these political and military defeats, much of the Arab world was faced at the time with the realities of the global economic slump that had begun in the early 1970s. This downturn bad two important ramifications for the Middle East. The first of these was the increase in oil prices in the early 1970s, which produced a sharp rise in the cost of oil for oil-importing countries in the region (while simultaneously feedingthe prodigious growth in petrodollars for the Gulf, as noted above). The sec­ ond impact of the world crisis was a drop in global demand, which hit export levels and created severe balance-of-payments problems for oil-importing countries. This was the context in which two interlinked elements emerged as central features of Western strategy in the region—aid and debt. Both mechanis^tfi rein­ forced the political and military defeats nnmpwlTiTi^ a n-vninontation and openingup nf Ineal enoTTomies tO the world market—a move later consummated in the economic program of neoliberalism.^'

30 Adam Hanieh

pohcymthe ^1^,9603. underfte Kennedy-era Food for Peace program. Thiswaam

1 only did it help dispose ofUSy.^^aurpI„ses.italsobckedArabg„vernme,.h,in.oadependen^

E^ti-i wheat tmportsand 38 peroent of total supply, increasirig ,0 99 perZnd

Us“ “P'^«"^PoE<ical in nature. «i,h dte USambassadorto Egypt noting that the intent was to establish a conseious association

suZdr‘“ eration of govenunent delegates at a .96a conference of the Non-Aligned

ts support for *e repubhcan forces in Yemen and its various political and miUtaryl

fo^eUmtedStatestoresumethisaidinanattempttobuildacloserrelationsJpwi*

SuS ZZZ" ™ 0” fifthoMUSMmdgiobally.apowerMindicationofUShopesforSadatandhissubseoucnt t^raceof US foreignpohcygoalsintheregion. This aid was further supplement^dby therpohc.es to encourage the disposal of US agricultural surplt^es to E™

Food aid and cheap wheat sales deeply impacted the nature of agriculmre and food P^uctronmtheMiddIeEas.and.aiddrehasisforthcneolihe.rrans“::y

and rcwremtZ'- f™” 'h^ United Smtes ddscwherc, and asaeonsequenee, agricultural g^temswereprogressivelyunder

»ned.lnst.dof.dyingonfarmemtop.nducefoodfordomesticLrnmp:i^^^^^^

fries across the rcgron became increasingly reliant upon imported grain and other consut^Z'f^I

dlen to ,3 percent as rmports rose to massive Ievels.t‘The process was mirrored in geria, Morocco, and Tunisia-underpinned in drose countries to a greater eZby

ubsidrzed gram imports from Europe rather than the United States «

Id market (and hence ertposure to fluctuating global prices), they also paved the

y °''E™'"°g'>=^'ls°findebtednessasaccesstoforeigncurrencybecameakeydc em^ntofwhetheracountrycouldmectitsfood needs, inthelc ofEg;'The:e

developments wereanimportantpartofSadat-sdecisiveturiitowardtheUnitedStates

Framing the Region: Imperialism and the Middle East 31

throu^ the 19708. The 1978 war was estimated to have east amund billion, and the general fiscal semeeze caused bv rising food and enei^ imports led Sadat to seek loans from US and European lendp.rs as well as reginnal rnnetR nf RiirpliiR capital fiufih as the Gulf Arab states.*® Hie latter played a decisive role in bringing Egypt into the US orbit, with Saudi Arabia, Kuwait, the UAE, and Qatar forming the Gulf OrganiratinTi for the Development ot Egypt (CODE) in 1076 to provide aid to Egypt. The condition for Gulf financial aid was the abrogation of Soviet influence in Egypt (the Soviet- Egypt - ian Friendship Treaty was canceled in March 1076) and the stnVt tV|P US Treasury, IMF, and Vorid Bank over a series of economic to subsidies and a deregulation of the Egyptian po^d-fwhich would raise the cost of imports) .*9 GODE was initially slow in providing funds, waiting for Sadat to agree to the conditions laid down by the World Bank and IMF, but as the Egyptian government moved to amend laws to allow repatriation of profits, free flows of capital, and tax-free holidays, and attempted to lift subsidies, the money was forthcoming.

Similarly, elsewhere across the region, the combination of ^obal economic turmoil and the rising costs of food aiul energy imports meant countries were forced to borrow increasing amounts in order to st^ afloat. Hiese debtjexels accelerated dramaHt^ally after the US government sharply raised interest rates beginning in 1079—3 mnvf! ralleH the Wolcker Shock," after Paul Volcker, then chairman of the Board of Govffmors of the US Federal Reserve.s^Because most Arab debt was held in US dollars, the gpilf^ interest rates hit countries in the Middle East very hard (particularly when coupled with the ^obal recession of 1981-82). By the mid-19808, Algeria, Egypt, Jordan, Morocco, and Tunisia were paying 3o-6c: percent of their entire export earnings just to service them debt (see table 2.1). At the same time, new loans had to be taken on in ordei^o keep afloat, and so overall debt stock actually rose despite the continual outflows of debt service (seetable2.i). Inotherwords, indebtedness increased eachyear in tandem with growing debt and interest repayments. Debt thus represented an ever-escalating drain of wealth from the Arab region to the richest financial institutions in the world.

38 Adam Hanieh

™^®W“-AnFrAwass.gned;dthBahramoaSeptember.4,,oo4 andleris

^oiT^rrr' Zpant

duty free ' ,

^•*'™f<»-“dBahra.ntoalIowprivateUStnedicaI,educatioaaI,legal andothey

Ttorattons to enterthe marketplace. The marfcet-openmggoa] ofthe WAwas ex plicitly applauded by the Advisog_CQmmittf^^ fn. ^

other JTtese trade and fmaneiai agreements have helped undeTtin a shift in the US eco-

„s““:rr=t: rrs

. o, ^ ^PP^^dix 3 demonstrates th#»

s.a.andEspt.forexample,USagrietdtnralproduetshaveconstitutedbet«een3o nd 50 percent of aU US exports through the aooos-indicating that the North Afri

dependen^onftafoodimponsnotedahovehasehangedh;;;!.

Framing the Region: Imperialism and the Middle East 39

Tliese same patterns are also reflected in the sphere of capital flows. Althou^ for- [; eign direct investment (FDD originating from the United States is generally much tower in the Middle East than that from European or Gulf countries (see chapter 6).

I the United States has developed a dominant financial relationship with the two central ' poles of the regional economy—Saudi Arabia and Israel. In the case of Saudi Arabia, the United S^tes has long been the largest source of FDI. holding iS.y percent of FDI stock in the country in 2010. significantly more than the other countries in the top five (Kuwait holds 9.9 percent. France 9.0 percent, Japan 8.5 percent, and the UAE7.4 per­ cent)This is particularly important because Saudi Arabia became the largest lyst economy for FDI in the MENA region during the 2000S.^Most FDI in Saudi Arabia is targeted at the petroleum refining, petrochemical, contracting, and real estate sectors. In the case of Israel. US companies were responsible for a remarkable 82 percent of all FDI in Israel from 2008 to 2008. equiyalent to €28 billion.®® Reflecting the unique characteristics of the Israeli economy, most of this inyestment was aimed at sectors such as software, electronics, biotechnology, and advanced research and development.

The European Union: Imperial Rivalries and Consensus As these American initiatives progressed through the 1990s and 2000s. the Euro­ pean Union also sought to strengthen its trade and financial influence in the Middle East, moving to draw the region—particularly the countries surrounding the Mediterranean—closer to European production and trade networks. The EU’s ori­ entation to the region demonstrated the dualities of rivaliy and shared interests vis- a-vis the United States—both zones looked to extend their penetration of the region while participating in the further consolidation of the Middle East’s neoliberal tra­ jectory through the common mechanisms of debt. aid. and the promise of increased market access. The EU’s goals were initially codified in the Euro-Mediterranean Partnership (EMP). also known as the Barcelona Process, launched at a meeting in Barcelona in November 1995 between the EU and foreign ministers from Algeria, Cyprus. Egypt, Jordan, Israel, Lebanon. Malta, Morocco, the PA. Syria. Tunisia, and Turkey. The final communique of the Barcelona meeting was quite open about its intentions, highlighting "the promotion and development of the private sector... [andj the establishment of an appropriate institutional and regulatory framework for a market economy” as a principal aim of the new partnership. The EU admitted its longer-term objectives frankly, noting that its overall purpose was "to create open economies by the opening-up of markets . .. [and] the elimination of trade barriers.” This would require the acceleration of "Fiscal, administrative and legal reforms as well as deregulation of public services ... in order to raise the level of foreign direct investment in the southern Mediterranean economies."®’

40 Adam Hanieh

~;zzr„L‘rr:r““"““-^*"r^:rr~r-'="-

r—Sr—““r™^ sectors such as £^0^ “™“' “ well-compeUing counWes ,0 open up

:=r.r“”S29r“

.i.^.^jSnr^srT':“rr-Lr^:r‘:“r“"-‘-"Malilaransnpami™ s,a«m,«, P^'™a “J ««ial refcn™ in ihe tributedwithanother€4. 80ft Kill- ^ . 999A€3.435billionmgrant8wasdi8- centoftheMErfuXlrd^^^

includingmorethanecoomill- ‘ A-^ ' ^ ^^PStment programs.

;no.her:.o3,:“rp:“:t:“

favourable to the developntenf of the private sectL T “™°nment

Framing the Region: Imperialism and the Middle East 41

liberalization (Algeria. Jordan, 'Rinisia), privatization of state-owned companies (Al­ geria, Jordan, Tunisia), and financial sector opening (Mororyio and T7iTiisia) .98 Ry the EU assessed that hinding bad achieved "significant progiess... Luwaids the lib­ eralisation and the regulating of the economy, in particular in the banking system where progress towards competition has been achieved, lYas H''! wards the restoration of the balance between the public and private sectors [i.e., pri- vatization], thou^ unequally. Evaluators noted that the liberalisation of the capital market went further than the labom- market. "99

In ?oo3, the European Lkjmmission outlined an updated vision of the relationship with the EMP countries, which became known as the European Neiriibourhood Policy (ENP). The ENP also applied to non-Mediterranean neighbors of the EU such as Ar- menia, Azerbaijan. Belarus, Georgia, Moldova, and Ukraine, and was intended to com­ plement the Barcelona Process. It set up a framework for intensifying negotiations with EMP countries throu^ a series of diree-to-five-year action plans drafted by the EU. which laid out what steps countries would need to take in return for continuing Euro­ pean aid. The ENP differed from the EMP in that it involved a much more exphcit focus onintegratingMediterranean countries into European markets, althouf^, importantly, it ruled out the possibility of accession to EU membership.'” Moreover, it placed heavy emphasis on the goal of closer economic integration between the cnuntrifis of thp MediteiTanean.*°*The justification for this was unambiguously framed in the interests of European capital, with the EU commissioner for external relations, Chris Patten, noting that South-South integration "will create larger markets, which will serve as a strong incentive to make the region more attractive for foreign direct investment."'®* One of the mechanisms by which this was encouraged was a decision to establish so- called "rules of cumulative origin"—meaning that goods made up of a variety of inputs from different Euro- Med coimtries could be treated as having the same origin, provided the producingf^^intripgKAU»Tf>/tA.^|Tp.ar>.opfcj between one another.'^ In this manner, the EU hoped to encomage coimtries in the region also to sign FTAs between one an­ other. "Cumulative origin" would, in the words of Patten, encourage "economic oper­ ators from different coimtries to get together and perform the different stages of their production in the country where it produces greatest profit. It would have a significant effect on encouraging joint ventures in the region, and it would enable all to take ad­ vantage of the specific economic structure of each partner."'**

Around 3007, differences emerged within the EU regardingthe best way to advance the ENP process. These differences were reflected in a proposal put forward by Nicolas Sarkozy duringthe French presidential campaign of 2007. in which he suggested the establishment of a Mediterranean Union (MU), modeled on the EU. Saiko^’s proposal envisaged the MU as consisting of countries surrounding the Mediterranean, and thus

42 Adam Hanleh

excluded EU member countries such as Germany. The European Commission and German chancellor Angela Merkel came out against the MU for this reason, as did pro­ posed members, such as Turkey, who feared the MU would be used as an alternative to full membership in the EU itself. Other EU member states such as Italy. Spain, and Greece gave their support to the suggestion. At the beginning of 2008. Sarkozy modi­ fied his su^estion to include all EU member states, not just those bordering the Mediterranean. It subsequently became part of the Barcelona Process, and was pre­ sented as a new phase of the EMP at a conference in Paris in July 2008.

By the end of the decade, the consequences of these agreements for the Middle East region were clear. Most importantly, European control over e:q)ort markets was consolidated (see appendix 1). The EU was consistently the largest exporter to every Euro-Med partner country through the 20008—for Algeria. Morocco, Tunisia. Libya, and Lebanon, the EU was supplying around half of all imports; for other EMP states, the EU share was consistently over 25 percent. These EU-produced goods were gen- eralfy high value-added, technically advanced items—machineiy and equipment, ve­ hicles, and aircraft (see appendix 2). Concurrently, the various regional agreements acted to tie the productive activities of EMP countries to European markets as exporters of low-wage manufactured goods, agricultural products, and natural resources. These trade patterns were particularly stark in the case of M orocco and Tunisia, where around 75-80 percent of all exports were going to the EU through the decade—mostly textiles/garments and agricultural goods (appendixes 1 and 2). Textile and garment exports were also significant for Jordan and Egypt, althou^ a larger proportion of these tended to go to the United States as a consequence of the various bilateral agreements noted above. The defining characteristic of this trade for many ENP countries—the ex­ change of technolonnallv advanfiod-gonds proHiirad Hvtbr FIT fnr lahnr-intpnoiw clothing and agricultural goods manufactured in the Middle East—is indicative of one mechanism of ihe tralisfer ot value Itom the Middle FiflP* cnpitalinmjf^ This has been reflected in persistent and wideningtradp. deficits with Rnmpp

Moreover, this orientation of tradpLtiflwhTpril ■ i ........priva­ tization and the (^ningup of ownership to foreign investment. From 2008 to 2008, French. SpanislTanHTtalian invest^were particularly prominent in the region-

buying up newly privatized assets in the utilities, real estate, banking, and industrial sectors.'®* North African countries—notably Morocco, Tlinifiin and pQ'pt-^vrrr a iwajor targetoLtbeseinvgstment flo^. Through these investments, industrial and agncultural activities in EMP countries were frequently incorporated in early produc­ tion stages of vertically integrated conglomerates that straddled the Mediterranean it­ self—again. particularly in textiles/garments and the food industry (see chapters Sand 4). For this reason, any growth in exports that might have accompanied increased ac-

Framing the Region: Imperialism and the Middle East 43

ce.stoEuropeanmarket8acmaUyendedupflowingtofinnsthat«erelintedtoEuro-

pean conglomerates through joint ventures or, in some cases, direct ownership.

Rising Powers? ^ While the European Union and the United States continue to dominate the polit­ ical economy ot the Middle East, rising powers have increasingly hudt separate and competing alliances with states in the region,- This has been_yeflec!e^

of thererion-strade and financialflm;^JjM!£^iSSpt^ LMoT^^^^li^ahrain, alUoiingesjnJhe^woridliave_seen a declining.

from_the EU or UnitedSmtesoyerhisjasld^. m,. gaTfarian, Syria, and the Gulf states, diispropor^ has fallen be^

T.,.l.,7a;;;jh&;;^n^lndiaJLnl^. China was one of the top three sources

of expail^^regiontortw^i^outot seventeen countries (seeappendmih^ regards to exports from the Middle East, India, East Asia, Brazil, and Turkey rank

as significant markets for goods produced in the region. GhinaandRussiahavebeentheleadingactorsinthisentiyofemergmgpoweroimo

theregion,Notsurprisingly,thesetwocountrieshavelookedatfonmngl.^iiithe regionthroughthose states that lemainedlargely outside of theorbitofWest^power

over the last two decade^notably Iran and Syria, By the end of the aooos had becomelran'sbiggesttiadingpartnerandthelargestpurchaserof Iranianoil, Russia s UricswithIranwerefociisedonthesaleofmilitaiyhaidware,altho«ghthesecameund pressureduetosanctionsimposedonIranasoftheniid-aoocs,Thecloserhnksamo^ Lsia,Chiiia,andIranwerecoiifirmedmaoo5,whenIranwas granted observer status attheShanghaiCooperationOrganization(SCO),aregionalsecuritygroiipi^ofBussia

China, Kazakhstan, Kyrgyzstan, TajikUtan, and Uzbekistanfoimded inaooi, forfull membership inthe SCO inaoo8,althoughthis has not been granted due to th

ongoingUN sanctions. Some observers have suggested that the potential co^olidahon of the SCO into a ti^iter military and poUtical alliance could form a possible counter

weighttoNATOinfluenceintheMiddleEast/CentralAsiaregion. « c ■ ’ ^iaandChinahavealsofomiedstiongrektiorishipswithSyria.In,,02RSy^

-...nlcut Bashar al-Assad, agreed to allow Russia to^nvert a naval port lo^te^ L » permanenmilitac^tosem wouldbeRusaia-sorJysuchbashm^I^^^gHrnSii^mentsigmm become Russias most important ally in the Middle East, a fact refle«ed in Russian armsexportstoSyria,whichaccountedforaboutiopercentofRusmastotMwea^m salesduringtheaooos,-Chinaislikewiseti^tlyliiikedtoSyriaasthelargest exporter

44 Adam Hanieh

the Middle E^stbysoo6™,hSaudiLab' A cent)a„dOma„a„dtheUAEMr f '^'''”"™“'‘”P°"=^“>“‘''6P=-

tinned ,„ i„el^ X l r " ^

ss~silifS of a US-centered^orM ---------------------™:^y^ong-term contestation

with.hepatten.sofunevendevelopmen.in.heMidre'^.rXr'^*"’™’”^ brace of neolibera] reforms * '^Atbe region sem-

m.e„sificadonofneoliberalisn.i„p,acessuohaafana.dSyJrfea,^^^^^^

7pnmdeafurU.er*“lr„Tor.towr^'’”®^™^“‘^^"'*''^“^^

Framing the Region: Imperialism and the Middie East 45

Conclusion The protracted domination of the Middle East by Western states has developed through a variety of different rowans hut tF.^ hayp v,ppn sistenti deepen the uneven and comhinfd nf thf re^nn wid^n tVi.» hierarchies of states and their interdependencies, and utilize the resulting dif­ ferentials of power to consolidate control^The forms and patterns of these arrangements have shifted over the last five decades, but their result has been the same. This strategy has not only acted to realign the specific relationships between different zones in the region and the major capitalist powers, but—most signifi­ cantly for the analysis throughout this book—has also generated a specific set of relationships internal to the region itself. There are six core characteristics to this realignment that can be initially sketched here and will he fiirtbpr dpvpinppd in subsequent chapters:

1. The Eurppeon Union has brought doserto itself the key Euro-Med countries, most rwtably those ofNorthAinca. The productive and commercial activities of these countries have been tightly linked to the Eurozone as neoliberal reforms have proceeded apace. This has meant a reorientation of North African economies toward the needs of European capital—fixing the Mediterranean as a subordinated and dependent adjunct of its lai^er nei^or throu^ trade and foreign direct investment flows,

g. The integration of Mediterraneanproductit>e sectors with Europea n capitalism has acted to deepen social differentiation both toithin individual na tian-states as well as between the r^n os a whole and Europe. In other words, the relationship with the EU has helped to shape the trajectoiy of class formation (again, most notably in North Africa), by simultaneously enriching (and drawing closer to the European project) a tiny layer of the region s elites. As subsequent chapters will confirm in detail, the intertwining of trade and investment through the EMP has played an important role in reinforcing the concentration and centralization of capital in the hands of large domestic and foreign capital through key sectors such as textiles/garments and agriculture."^

3. Stmultaneously. the UnitedStates has constructed privileged relationships with two core piUars ofitspotoerin the re^n—Jsrael and the GCC (specificaUvSaudiArabia). These two pillars are distinct from other countries in the region in that they form the apex of hierarchies in the regional space. Their relationships with the imperialist core differ from the rest of the region in that they are both able to retain a greater share of the value generated in the region (Israel through its advanced industrial exports and the (XIC through its control of l^drocarbon supplies). The United States rein­ forces these regional hierarchies through aid (militaiy and financial) and political support to these two poles, while also being deeply enmeshed in their economies through flows of FDI and other financial relationships.

4- The United hnc n.l<!nntt/>mpt/>A fg jtsg these two poles as the axis for tte drawing to- getherof the wider region under its hegemony. Jordan and Egypt have played a specific

46 Adam Hanieh

and hi^y important role in this process through the QIZs and other agreements with Israel. TTie European Union has also emphasized this point throu^ the framework of the Euro-Med negotiations. This means that the question of normal­ ization with Israel has a specific centrality to resisting imperialist influence in the region, as does the wider Palestinian movement against ongoing dispossession. This also helps to explain the specificity of class formation in the Palestinian terri­ tories (see chapter 5).

5- ^ deepening ofneoUberal Ttforms, whidi has been the necessary corollaryof both the EU and US resttv,cturing of the region, has also acted to widen the hierarxhical relationships uathm the region os g ■whole. Most notably, this has meant the strengthening of the position of the Gulf Arab states within the Middle East and North Africa. This has been most sharply expressed through the internationalization of Gulf capital and the enmeshin^f Gulf conglomerates with domestic rapitaligt (see chapter'??!

6. These realignments also need to be placed in the context of potential ckaUenfyj! to IJR/ European hegemony at the dobed scale. While the EU and the United States continue to dominate the political economy of the region, rising powers—notably China and Russia—have increasin^y built separate and competing alliances with states in the region. This has been reflected in a partial reorientation of trade and financial flows across the region, but its most important feature has been the alliance of Rus­ sia and China with those states that remained largely outside of Western hegemony throu^ the 2000s (notably Iran and Syria).

These six features of the regional scale confirm the deep interconnection of im­ perialism with the political economy of neoliberalism in the Middle East. Imperialism is not principally a military project-despite the significance of force to the way it op­ erates—and to conceive of it in this way is to mistake the outward appearances ofWest- em intervention for its essence. Rather, imperialism is primarily about ensuring the ongoingsubordinationof the region's political economy to the forms of accumulation in the core capitalist states of the world market. Seen in this light, neoliberalism is much more than simply a menu of "free market" economic policies; it represents a radical restructuring of class relations that acts to facilitate and reinforce the region’s domination by external powers. In so doing, it generates a set of social forces that are internal to the region itself, and that have an objective stake in supportingthe new sta­ tus quo. This restructuring has not just involved the transformation of class and state within individual nation-states but has also produced a new set of hierarchies and in­ termeshing of social relations across the regional space as a whole. These observations form the basic analytical lens through which to approach the different aspects of the region’s political economy, as explored in the following chapters.

CHAPTER 3

Mapping the Neoliberal Experience

met dieir basic needs, the +;„«thflthadearliercharacteri2ed

*e Arabworid. Tto mation.focu8ingontbeexpenencesmr^_^-----------,...........

TTtamifactunng activity is donu-------- ^------ — ^ adoption

the forefront of neoUberal ref . r lUw Theirintegration U,ei.e—poUciesasa^odelfornei^ring— in.otheworldmarke,hasalsofono.edsundarroutes^chho^-^ World Trade Orgarmatiorr (TO) and Aasociatron Agreemerr.a rrrth dre P

Uniorr,andhasacloserelaaonsMp«ththeUni.edStatea. 47

48 Adam Hanieh

This chapter, however, does not purport to present a detailed account of the neo­ liberal experience in these four states. Its goal is to map more broadly the principal

, motivations of the neoliberal project and the w^ thishas been expressed through *"^4/poIicies that share all their essential features regardless of the country involved. Th^

. tiret section examines some of these key policies, includingprivatization. labor rriarbet deregulation. liberalization of trade and investment, and changes to markets.'^ /.y

-r-^^mphasis is placed onunderstandingthe logic by which these policies have been jus­ tified and their consequences for the broader political economy. But this chapter also demonstrates that neoliberalism is much more than simply a set of economic policies. Th^econd parttums to a further important component of the neoliberal project, the institutional reconfiguration of the state-specifically, the ways in which the form of state power itself h^g shifted, radically modifying its kev fiincfinirs. the of decision-making, and its fiscal operatinriR, Taken together, this examination of both the poli(7 logic and institutional characteristics of neoliberalism provides an essential insight into how state and class were reconstituted in the region in the decades leading up to the goii revolts.*

Privatization and the Discourse of Crisis From the early 1980s onward, all major international financial institutions (IFIs) typically begainl^ reports on the Middle East ^ivanfiii^^^ipedfemTm- pej^ing crisis. Econ^ic disaster^rasS^proaching. according to thf- TFT« due

to the combined effects of a rapid expansion in the region s labor force and the lack of emplojonent growth. From aooo to goio, average annual growth in the labor force was predicted to reach over 3 percent a year, double that of any other countiy in the global South.^ Forty-two million additional people would be looking for work by the end of the decade. Without faster economic growth, the region would face massive social costs in the form of spiraling levels of unemployment, the proliferation of urban slums, and the growth of informal labor markets. Hard­ est hit would be youth and women. In this context, the region would soon suffer a tsunami of urban decay and social discontent unless there was an urgent volte- face in economic policy.

Predictably. this talk of crisis completely sidestepped the history of imperialist in­ tervention as outlined in the previous chapter. Two centuries of occupation and war, the forced dependency on external markets for food and technology, and the ongoing drain of wealth through debt and other capital flows were simply disappeared from the terms of the debate or posited as a consequence rather than as a cause of the region's predicament. But with the scale of the problem established and its framing neatly cir­ cumscribed, IFIs took the lead role in articulating a direction out of the potential crisis.

Mapping the Neoliberal Experience 49

Indeed, "some kind of crisU’-as the World Bank noted in aooS-was seen as very much an opportutuqT because it would help compel policy makers to make a firm

commitment” to a new economic trajectory.* The solutionadvancedbythelFIsto this imminentemployment crisis was seduc­

tively simple. Theway to avert theloomingsocialexplosionwasthrougharapidaccel- eration of economic growth. This growth could best be achieved by unfettering the private sector and cormectingwiththeworld market, allowingcapitalismto "me« the growth injobs required in the region.. .to absorb thenewentrantsto the laborforoe

and to address the stock of unemployed."* The private sector would become, m the words of the World Bank, the "engine of strong and sustained growth."* Most impor­ tant, it was necessary to be cognisant of the shift inthe international context that rnade this private-sector-led growth an imperative. The choice was clear, the new^ cconnruv" meant a world market that was "a winner-take-all environment, where "rewards go to the most hospitable environments Cfor capital mvestaenl] ■ ’

Animatedbythin^all subsequent IFI-led policy refotmhasbeenprincipally oriented toward the "enabling" of market relations and the removal ofbamerstopn- vate sector investment. Central to this project, of course, was the goal of reducing the ■

size and scope of the public sector through privatization. State-run enterprises were said to be less efficient, act as a drain on fiscal resources, and reduce growth because of the "perverse incentives and contradictory demands" placed on managers of state- owned enterprises." Privatization of state-owned firms would improve the efficiency of markets and helpattract new investment. Indeed, asoneprominentArab advocate

of privatization argued, it was "the most important initiative Arab governments can

take to encourage foreign direct investment. ’ , , i. Privatization thus becameacenterpiece of tiieSAP^tweredevelopedthr^gh

the iq8os and in thel^oBos with the laying down of a legislative and mstitutio^,

framework for selling state assets as a requiremento^ctural adjustment, and e^

ership across seven countries throu^ this period, with the total proceeds reaching over$8 ibiUion (see table 3.i).“Althou^arange of countries were involved in pn- vatizationdeals during this decade. Egypt. Morocco, and Tunisia dominated the seU- off From 1988 to 1999, Egypt's privatization receipts reached $4,172 biUion, w^e Morocco and Thnisia recorded $3.i billion and $0.59 billion respectively-together. these three countriesconstituted 97 percent oftotalrevenuefromprivatizationmthe

region and were also the dear leaders in sheer number of deals.

y So Adam Hanieh

55-05 63.81

Algeria Jordan Lebanon 123 Morocco 3.099.13 ^fiypf 4.172.62 Yemen o-79 Tunisia 598.78 Total 8.107.18

1988- 1999 2000 2001 2002 2003

7 568

o 2.110 3oo

20 280

8.285

869 20 o o

82

112

36o 173

o

>-55«

2004 2005 2006 421 884

= 55 o 236

‘47 2.178

o 121

2.616

52

o 208

0

650 7-583

214 2.282

2007 2008 161 o

556 o

552 3ii

61 2.891

Total 2000- 2008 1.702 1.798

236 7.626 11.182

o 284 480 3.648

••265 27-746

104

681

° *27 O 847

.....

.heSApTpeedblrnteW™^'""™'’'”®^^™'^™

s=fr~—X's: inMorocc„,theco„n,„vi,htheTeol ,

.ipr.=r-rr==T“. s—:~r

Mapping the Neoliberal Experience 51

duce the size of the workforce prior to privatization, thereby making the company more attractive to a potential buyer and potentially gaininga stake for themselves following the sale of the firrn.'^ In many cases, loans from international institutions were used to assist in the restructuring and upgrading of facilities prior to sale—burdening the state with debt while investors received newly retooled and modernized factories.

One important innovation in Egypt’s privatization process was the use of sn-p-allpd <<> Employees Shareholders Associations (ESAs). ESAs involved tbp-Hisfrihiitinn nf an ownership share to workers and were fraTned tn publir as a "dpTnoerafizatinn” of capital ownership—with one government official even claiming that they represented the "summit of socialism."'* Behind closed doors a much more candid assessment prevailed, with a leading US conservative think tank noting at the time that such schemes were an "ideal vehicle for the privatization of government-owned enter­ prises” because, by offering workers a share in the comparty. it could turn "worker op­ position privatization into strongsupport. "‘■‘5 The leading push for ESAs came from USAID, which noted in igSt; that an ESA represented "a method of transferring a parastatal to private ownership.”'^ ESAs were even linked to debt-for-equity swaps— the US government would swap the debt that a country owed to it for ecpiity in a newly privatized company, and then sell this equi^ to workers. In this manner, the country’s debt burden was directly offloaded onto workers while th^ wprp. stmultanffyiigly pn- listed to help in the privatization of their own company.

Egypt was the first country in the edobal South to trial the ESA approach. The ex­ periment involved a USAID-backed project to privatize the Transport and Engineering Company (TRENCO). a publicly owned tire producer supplyingSi percent of the mar­ ket in Egypt.'7 USAID’s Center for Privatization provided the project loan to the Egypt­ ian government through its Commodity Import Program—a scheme through which the US government granted loans on the provision that they be used to import US- made goods. Four basic "pillars" underpinned the project, according to USAID: restor­ ing free markets, restoring private proper^ in the means of production, limiting government power in the economy, and promotingwidespread access to capital own- ership. The project established a new company. Alexandria Tire Company (ATC), which was owned by TRENCO and a group of investors including the Italian tire com- paiy Pirelli and a number of local and regional banks. In addition to these investors, workers from TRENCO and. later, those employed at ATC itself would receive shares in the company.'® The number of shares that each worker received, however, was pro­ portionate to salaiy^nsuringthat the majority of shares actually went to the top man­ agement of the company, as did the positions on the board that ran ATC.*’ USAID noted that the advantage to this method was that it "unites the interests of workers with other interests, foreign and domestic... reduces likelihood of strikes and other stoppages"

52 Adam Hanieh

and createda-broaderpoliUealconstituemyagdnst redistributive taxationandover-

when ATC fully privatised and transfemd to Pirellis tnajority otvnetship. Later in 2005. TRENCO itself was sold to French-based Michelin.

Duringthe.99os.virtuaUjjlpri^liopi„E^,^„^^^,,^^,p^^.^,_'^__^^_

P tSyoutofthe ^ “"P^H^Msgdelis^privatization had been sold.^TLtis nt;±;;;;r.a drantattcrilytn,oo4, htnvever.foUotvingtheappointmentofthe-government ofbusi-

oJeTfW ^edft^sjnsludmgmgcmm^thadpre^^^^

^ 7 e ."•■■‘■•■notedthathiseconomicprogramwas-commendablefand] attachestoppnon5r,„.„„demizinggovennnentandtoredueinggovennnentinterfer- enoemnwket mechanisms, necessary conditions foraceeleratingEgypfstransfonna- tionrnto adynanuc, pnvate sector-driven economy.While the number of wrkets in pubhc sector enterprises had fallen bymorc than half fromt994 to ,oo.,the IMF rvas

rngto asset sales over ,005^006 had already "surpassed expectations Tire IMF's hopestvere not disappointed. The period from ,004 to ,008 sarv Egypt's

Pri^tohonpmgramturnsharply toward telecornmunications,banking. and tealestam sectom ^t had seen little attention in the earlier decade. The method of privatization also shrftcd to drrect offerings to potential investors, sometimes without even publicly

ann„uncrngthesalesofassets.-Buye.swaegaeraI^i„,enrational firms, Gulf-basrf

^b^nr^3mporianUptlm^s.rug^^ drat emergedZiZ;;:;;;;;;:;;^^.^^^ ^tstotalrecerptsfrompr^SS^^^^J^^^^^^J— ableyo^nt of aU privatization revenues since the inception of itsstrucUrral aHj,.,-

reformer" in T R T ■'■ *°°b, the country was crowned the "World's TopReformer by the World Bank and the International Finance Corporation.

Labor Market Deregulation Closely connected to the acceleration of privatization in the gooos was an attack

H rI tZ ' of--k more generally. According to the argument dvanced by OTs, rf wages were lowered and social protection measures rou!d back

as much as practrcally possible, investment would then become more attractive to the Private sector. It was a logic that led to some petveme conclusions, the World ank plainly argued, for example, that maternity leave in the Middle East was a

Mapping the Neoliberal Experience 53

cause of female unemployment and that stronger labor codes actually led to in­ creased levels of unemployment and informalization.*® In line with this perspec­ tive, loan packages through the 1990s and 2000s identified "labor market deregulation” as a top priority—explicitly targeting minimum wage laws, severance pay. regulations over hiring and firing, and payroll tax. In place of tbcft«>- rpjynlatinTTc governments were urged to promote the casualization of the workforce—described by the World Bank as a shift to "more fle-HbU lairing av.H prncedures."^

Tliis deliberate erosion of working conditions was tightly interwoven with tbepiioTr to privatize. As the previous chapter noted, the public sector was the dominant em­ ployer in many MENA countries, and popular support for the Arab nationalist regimes rested partly upon their abilityto provide workers in the public sectorwith secure jobs, relatively high wages, and the promise of a pension following retirement. Workers nat- urally found these conditions attractive, hut from the perspective of the private sector itwas hi^y problematic—better conditions in the public sectormeantthat real wages acro-ss fiiz seetora omilH not he rpHnped because "the dominant role nf gnvpmmpnt aa employer introduces rigidities in the wage structure that distort labor market incen­ tives."*^ A core feature of the neoliberal project was to take aim at these "rigidities. ” attemptingto reduce real wages and conditions in the public sector in order for a "re- aligiment of incentives toward work in the private sector" to take place.*^ By reducing the costs of labor, those companies slated for privatization would become more attrac­ tive to investors and, moreover, would not have to compete with better work conditions in the public sector once they were sold. In this sense, privatization and labor market deregulation were two sides of the same process—a generalized degradation ofworking and social conditions aimed at making the private sector more profitable.

The practical policy implications of this logic were soon made clear. Working con­ ditions in the public sector had to be significantly worsened in order for private sector employers to be able to pay lower wages and still attract workers. Alongside privatiza­ tion, governments needed to "reducEe] government employment and the wage bill [throtigh measures such as] lowering remtmeration for new entrants, adjusting the pay scale to strengthen the link between compensation and productivity, and focusing on nonwage benefits that distort labor decisions, such as generous pension tystems and family allowances that add to the lure of employment in the public sector."^®

To help this process along, the World Bank established its anmial Doing Business inde^n aoo3,_yduch. among other indexes, ranked countries nn thflir "Rigidity nf Employment." Countries were rated on a series of measures, including the following: mala it cheap and ca^ for companies to fire people, employ workers on temporaiy contracts rather than permanent ones, require employees to work for more than fifty hours a week, give the shortest possible time for paid annual leave and any notice of

54 Adam Hanieh

redundancy, and pay the lowest possible minirnmn wage. These rankings came to be widely utilized by businesses and governments for assessing the pace of reform, serving as a benchmark for the region or, as the World Bank described it. a "cholesterol test for the regulatoiy environment for domestic businesses. "3'

Labor market deregulation moved relatively slowly through the logos, but by the had become a major focus oTloanpackagesbetween TR^and Arah

emments. Throughout the decade. Egypt. Jordan. Morocco, and Tunisia all passed major laws that saw the introduction of temporary contracts in place of permanent ones, lifted limits on the repeated use of these contracts, and made it easier to fire workers m the public sector.^^ These measures were hi^y controversial and met with significant resistance due to the huge social consequences they carried. It is perhaps for this reason that the language used to describe deregulation became increasingly obtuse-perfectly illustrated in the World Bank’s endorsement of newlabor legislation m Tumsia m 2010 as a policy that "enables firms to react to economic realities by ad­ justing their factor inputs, including labor, and thereby Wring the transaction costs for open-ended employment."^

PPPs and the Infrastructure Target Thewaye^nvatization duringlha^floos represented most fiindam^ntally a rect_^nsfer of wealth to domestic and foreign capital (see appendix 4 and chapter 6 for more detailed discussion of the beneficiaries of this process). But despite

many essential services across the MENA region continued ^^bT^o- vfded SSaTmibygoyemmei^Energy. transport, and water stand out in this re­

gard, the complex infrastructure networks necessaiy to maintain these utilities have seen relatively low levels of private sector involvement and remain generally state-owned. For this reason, the privatization of public utilities and associated mfrastructures-with their promise of potentially huge profits for private in- vestors-became a major target of neoliberal governments from 2005 onward.

The push to p^tize service^rovision in these key sectors focused nn of Fubhc^nvate Partnerships (PPPs)-a means of encouraging the outsourcing of pre­ viously state-run utilities and services to private companies. In a PPP. a private com­ pany provides a service in contract with the govemment-typically. this may include activities such as water distribution, waste disposal, running ports, or building and operating infrastructure such as highways and power plants. Forthis. they receive pav- ments from the government orthroughthe usersof the service (such^highwavt^s).

APPP is a form of privatization, which, inthe words of one of its foremost proponents. Emanueljavas. is^usefid^ase because it avoids tl^inflammatory eti'ect of 'pn-

vatization on those ideologically opposed."*^

Mapping the Neoliberal Experience 55

PPPs differ from ^ical privatization deals in that they often involve the partition­ ing of economic sectors into a large number of integrated fiinctinns. each nf whieb is contracted out separately. PPPsm the electricity sector, for example, may involve sep­ aration of the generation, transmission, and distribution of power among a variety of companies orcontracual arrangements. In the water sector, the tasks of water produc­ tion, treatment, storage, retail distribution, sanitation collection, treatment, and dis­ posal are often unbundled and contracted to different providers. This separation institutionalizes a market-driven logic into the eveiyday reproduction of the economy that is difficult to combat because the precise responsibility for various functions can be hard to identify. Moreover, the state may retain a role in one or more of these func­ tions. socializingthe risk and cost of less profitable activities while profit-making func­ tions are shifted to the control of private capital.

A number of PPP deals have been signed across the MENA region. Perhaps the country that has moved fastest in this regard is Jordan, which has PPPs for power gen­ eration, water provision, and management of the Amman airport terminal. By 2006. Jordan had 40 percent of its population receiving drinking water from a private provider.^* PPPs have also been launched in Morocco (water), Tunisia (desalination, electricity, and airports). and Egypt (wastewater). But despite this range of sectors and countries, the development of PPPs remains at an early stage. Laws to govern the use of PPPs are still being drafted in Jordan, while Morocco and Tunisia have no specific legislation to deal with PPPs. Egypt passed a PPP law on Juty 1.2010. but the govern­ ment unit in charge resigned for fear of retribution following the oustingof Mubarak.^

PPPs carry withjhem important implications for the broader neoliberal project. As with privatization in general, PPPs are heavily reliant upon the removal of any own- ership regulations and harrier<t to inv^RtTYient. such as curreney-errhangip rnntmlg nr restrictions on the repatriation of dividends. They also require the liberalization of market prices, which generally increase witii the privatization of the service. But be­ cause of the large amount of fundingtypically needed for infrastructure, and the com- pleaty of PPP-type projects that can extend over decades, the development of PPPs is much more dependent than normal privatization deals upon the deepening of domes­ tic financial markets. If PPPs are to be funded domestically and in local currency, they require a wide range of domestic and foreign-owned banks to provide lending, bond markets where governments and corporations can take on debt, and active equity mar­ kets Frequently, PPPs will see firms borrow from financial institutions in a number of different coimtries—they thus promote deeper regional interlocking of financial markets (this has been noticeable in the case of Europe). International institutions often provide loans for PPPs and have been closely involved in devising policy around the sale of infrastructure and services. Of note here is the EIB, a financial institution

56 Adam Hanieh

particularly active in promoting privatization in the Mediterranean region as part of the EMP process discusg**'^ i" phaptBr PPPs thus Viplp tn ftirthpr pmVn»H leading neoliberal institutions in state decision-making.^

For all these reasons, the growth of the PPP market is contingent upon, and helps to catalyze, a broader set of policy changes, which can sometimes be difficult to identify (and combat) due to their diffu-sion across a rangp of different state institutions. Major international financial institutions such as the European Bankfor Reconstruction and Development (EBRD) and the ElB fully understand these linkages, and for this reason have explicitly identified PPPs as a strategic leverage to the further deepening of neo­ liberalism. Furthermore, they have targeted the relatively low level of PPP deals in the region as the next major area of policy intervention—a goal that has continued following the 2011 uprisings (see chapter 7). As such. PPPs fl<i tVi^_n<»wfa/-.A of privatizationin the MENA region—tKat /»ata3^g i»r>nrmausfiignificance forboth labor and capital.

Opening to the World Market Arange of internatioa?! Agr^pmcnts .signed hy MKNA countries from themid-^Qo.s onward provided the conteYtfprthrnr ronjiiinnl [nodHiiiMii nfpnvfltiffntinn unj labor market deregulation. Tunisia. Egypt, and Morocco joined the World Trade Organi­ zation (WTO) in 1995 and were followed shortlybyjordaningooo. Asthe previous chapter noted, all four countries established Association Agreements with the EU between 1995 and 2001, and Morocco and Jordan signed FTAs with the United States in 2004 and 2009. respectively. The implication of these agreements was laid out in a major World Bank report issued in 2008. Trade. Investment, and Development in the Middle East and NorthAfrica, which prescribed a fundamental shift in trade and investment policies as the anchor of a broader neoliberal restructuring. The three- hundred-page report nmed that changes in the^ature of international prnri^tinn networks meant that there were^inw gradations of specialization" within thejaluft chains of mosHtidustn^The M^Ajegion had a comparative advantage in thia new global marketplace because of its relatively cheap labor, which gave it ''virtually unlimited” prospects within the world market.^9 By opening the region to trade and capital flows, foreign investment would be drawn to this cheap labor, and the in­ creased competition would force changes in the "productivity” of domestic capital. This would help to catalyze a transformation in the region’s economy "from public, state-dominated to private, market-oriented activities; and from protected, im­ port-substitution to competitive, export-oriented activities.

In line with this logic, policy makers in the four countries were ui^ed to quickly cut tariffs, eliminate nontariff barriers, depreciate the real exchange rate, reduce reg­

Mapping the Neoliberal Experience 57

ulation. and open up to foreign investment in both industiy and services.Import tar­ iffs were slashed by 80-50 percent through the 20oos.^’ Governments moved to abol­ ish any legal distinction between foreign and domestic investors in most economic sectors, permitted the free repatriation of profits, and drastically shrank state support to domestic industries.^ Special economic zones sprangup across the region—aiming to attract foreign investment by offering incentives such as reduced or zero corporate tax rates, cheaper prices for land rental, and subsidies for hiring.

These policies were conceived veiy much as a single package. Opening up to the world market did not just mean the reduction of tariffs or the liberalization of foreign capital flows but was also predicated on the privatization and deregulation of telecom­ munications, transport, and financial services—described as "behind-the-border trade and investment constraints” by IFIs.« In this sense, the agenda of trade and in- vestment liberalization helped to lock in an overall policy trajectory across the entire economy. Morenvpr. thisroTnhinafion nf policies clearly constituteda.self-reinfnrf^ing fyrip r.nnnfrif>g int^Trasinglv dependent upon capital inflows, domestic in- diifitnVft nnahlp ffvYVMnpf.|<> againstforeign-prndiiced commodities, and a further stage of liberalization was required to incentivize the investment climate in competi­ tion with nei^iboring countries or regions. Taken in conjunction with the privatization of state-Q^vned firms, the combined effects meant that the general character of a coun­ try’s production and consumption was ever more determined by the patterns and ne^s of capital accumulation beyond the national scale.

The substantial impact of these changes on the structural characteristics of both capital and labor is well illustrated in the textiles and garments industiy—one of the most important noT^-njlindiittria! gprtors in the, region. In 1998. textiles and garments constituted 87.8 percent of all manufacturing employment in Morocco. 88.9 percent in'I\misia, 29 percent in Egypt, and 10 percent in Jordan.** For Morocco and Tunisia, textiles and garments remained the leading employment sector throu^out the 2000s. In Egypt, the industiy ranks second only to food manufacturing, with the countiy’s Misr Fine Spinning and Weaving representing the lai^est textile company in Africa and the Middle East, employing more than twenty-five thousand workers. In addition to the industry’s huge workforce, textiles and garments also constitute a significant proportion of nonagricultural exports—for Tunisia, around 40 percent of the countiy’s entire exports dxiring the first half of the 2000s.

Despite the ongoing importance of the sector to each countiy’s political econ­ omy. the last twenty years have seen a sweeping decline in wages and conditions and a major restructuring of ownership patterns and industrial structures. This began with accession to the WTO, which meant that cheaper clothes and textiles entered domestic markets as import barriers came down, placing enormous pressure on

58 Adam Hanieh

domestic companies. In Egypt, sales of pr^dw’frn ff‘11by half be- tween gooo and 200^. as foreign competitors drove Egyptian firms out of the do­ mestic market.*^ Textile and^rlnthing imports-grew-iy-ftfeund-goQ^ifiicenLfEiim aooQ to aoo8 \^^e domestic production stagnated.*^ As import barriers dropped, larger companies began to shift toward j^Ypnrt-pnVntfti^ y.iviHiwi^r. Often these export industries were located in specially created economic zones, where labor and environmental laws were lax and foreign investments were granted preferential tax and other investment incentives.

InitiaUy exports grew rapidly, to Europe for Morocco andTunisia, and to the United States for Egypt and Jordan throu^ the QIZs. But in the mid-aooos all four countries were severely hit by the end of a key GATT protocol, the Multi Fibre Arrangement (ME^. Tlie MFAhad set quotas on the amount of textiles and garments that countries in the ^obal South could export to the North; it was the central ^reement governing world trade in textiles and garments firom 1974 to 2004. Its termination on January 1. 2005. meant that the most important markets for textile and garment exports, the EU and the United States, were opened to Chinese and other, potentially cheaper, exports. The increased competition placed further pressure on MENA producers. According to the World Bank, textile and clothing exports to the European Union fell ly 5.8 per­ cent in Tunisia. 7.4 percent in Morocco, and i3 percent in Jordan in the year after the MFA agreement expired. In Timisia. job losses were estimated between thirty-five thousand and fifty thousand between 2000 and 2005, the higher ftgure equivalent to 20 percent of the sector's workforce. In Morocco, the number of people employed in the clothing industry fell by 10 percent ftom 20o3 to 2007, with one in ten of the coun- tiy’s clothing and textile companies closing during that period, according to the Mo­ roccan Textile ProducersAssociation (AMITH).'W

In the lead-up to the end of the MFA, the World Bank called on Morocco. Tunisia. Jordan, and Egypt to "lower labor costs, increase productivity, and improve access to cheap inputs” in an attempt to remain competitive.s” This was necessary, the Bank commented, despite the fact that costs of labor in the textile and garment sectors of Egypt and Jordan—$0.82/hour and $o.46/hour, respectively, inclusive of all social costs—were alrea^ "lower than or comparable to those of most Asian exporters." Mo­ rocco and Tunisia had costs less than "some Eastern European countries and Thrkey" ($2.56/hour and $2.o5/hour, respectively).s* In order to achieve a reduction in costs, the Bank xuged countries especially to draw in the large, underemployed population of women into the textile and garment labor force—not because of concerns about gen­ der equality, but because the very large wage gap between women and men could pro­ vide a comparative advantage to the MENA region.®* The World Bankput forth Mexico as the model to emulate—low-wage manufacturing zones where foreign-owned fac­

Mapping the Neotiberal Experience 59

tories produced for export markets (maquUadoras) and women constituted more than half of total employment.®^

Tl^se exhortations to drive down conditions were largely fulfilled. Governments moved to privatize major textile and spinning mills (particularly in Egypt) and passed law that further deregulated the labor market. The net result was a severe deterioration in labor rights and wages, facilitated by the growth in informal work conditions and the~ increasingexploitationofwomen in "micro” or small enterprises where minimum social security, and other leffll rights were not in effect. Female employment in the textile and garment industry grew particulartybigfa in Tlmisia. Jordan, and Morocco—reaching 65.70, and 80 percent, respectively, of total employment in the industiy. Egypt had rel­ atively fewer women working in textiles and garments—approximately 15 percent in 2008, althou^ this figure does not accurately capture the large informal sector in which women are predominant.®*

These trends of feminization and poor working conditions helped to reinforce par­ ti cular_foniw_of^^^^^on^So^^w^T^S^^rE^^cmm^^^^^^^^^^lly a

platform for cheap labor, in which clothing was "cut, made, and trimmed” accoT-f^*Tipr to the specifications of international firms. Morocco and Tunisia were tightly affixed to European markets and investment, with large Italian. Spanish, French, and German companies setting up in their export zones to produce for the Europeari market. Both countries now send around 90 percent of their apparel exports to the EU and are the top two MENA exporters to the area. In Tunisia, where 2.100 firms employed more than 200,000 workers in 2008, an ILO report noted that an estimated 68 percent of the con­ tracts in the textile industiy were temporary and 19 percent were nonstandard—con­ firmation of how important labor market deregulation was to the industiy.®® In Morocco. 150,000 workers are employed in registered firms with equal or greater numbers es­ timated to work in the informal sector, includinga significant number of children. One study found women workers in factories supptying Spanish companies working fifty- four hours per week for less than $i/hour.5^ European foreign investment in the sector typically takes place in joint ventures with large domestic coi^omerates, indicative of the way that a domestic North African bourgeoisie has been adjoined to foreign capital, with each benefiting ftom the general downgrading of wages and conditions.

Jordan differs somewhat from Morocco andTunisia in that 98 percent of textile ex­ ports are shipped to the United States through factories located in QIZs. The majority of these factories are foreign-owned. mostly by Asian and Indian investors, and are full package suppliers”—sourcing fabric, designing, and assembling clothes for sale

to the United States. Unlike in North Africa, the vast majority of workers in the QIZs are migrant women from Asia (Ban^adesh. China, and Sri Lanka, and to a lesser extent India and the Philippines). According to reports from the mid-20008, working con-

60 Adam Hanieh

ditions in maiq^ of these QIZ factories were aldn to involuntary servitude, in which work­ ers were placed in debt bondage, compelled to continue working in order to pay off mon^ owed to recruiting agents. The US National Labor Coalition alleged in 2006 that more than ten thousand migrant workers had had their passports confiscated by fac­ tories in the QIZs. Despite claims by the Jordanian government that these abuses would be addressed, a 201 o report by the US Department of State noted that cases of forced labor, physical violence, and the withholding of wages were still present in the QIZs.5?

Egyp^s clothing exports are more diversified than the other three cases, and the country also^ a mucfalM;^7d^e5tic market. About 40 percent of Egypt's clothing

exportaii^O the United States. largely produced in about five hundred factories located Another 3o percent is sent to the EU and is manufactured in non-QIZ industrial

zones. International companies such as Marks & Spencer. GAP, Walmart, Levi Strauss. Target, and Calvin Klein source their clothes from E^tian factories. The structure of the industgf is marked by a pronotmced vertical integration—ranging from rnttnn har­ vesting. spinning, and weavingto manufacturing and distributing clothes. Traditionally, state-owned companies were dominant, but this shifted dramatically foUowingthe pri­ vatization wave initiated in the mid-20oos. In 2oo3. public firms held a go percent share of spinningand 3o percent of apparel production; by 200Q this had shrunk to 50 percent and lojercent, respectively.^Privatization corresponded with a severe deterioration in work conditions. Egyptian garment workers experienced a L percent Hmp in r^al wages between 1999 and_3goxand the workforce plummeteri fmm 3^oo jn gpop to 244.646 in2oo8.S9 One of the largest producers in the country. Shebin El-Kom Textile Company, privatized in 1997, laid off more than 50 percent of its workforce over the lattgrhalfof the 2ooos. ̂As privatization proceeded, foreign investors entered the sector ina majorway, with FDI increasingly nearly 3oo percent duringthe thirteenyeare from 1995 to 2007. Much of this has been fromAsian countries and the Gulf region, with Arab investments increasing from 2 percent of total investment in textile and clothing in 1995 to 14 percent in 2007.*’’ The net result has been the consolidation of large, vertically in­ tegrated capital in the industiy—both domestic and foreign-owned.^

The Power of Finance A final, critical element of the neoliberal package has been the development and restrucliinng of financial markets. :i 'hiB re.stnictiiringwas characterized bya sene-s of standard steps advocated by IFIs^ notably (1) the removal of government con- trols or itiflnenre nn credit allocatien. lendinff^mlicies and interest rates; (2) openii^up the banking sector to foreign compfititinn and privatization of state- run ^nks; and (3)i]^roduction of a range of non-bank financial markets such as 8tocks.-innrTgagOr-infiurance. and bond markets. These measures were broadly

Mapping the Neoliberal Experience 6U

begun in the mid-1990s as conditionalities of World Bank and IMF loans as well as requirements connected to WTO accession.

Interest rates and lending were liKprali^^^H in Tn-nicia (1^87). Jordan (1990), Mo­ rocco (1990-1996). and Egypt (early iqqos) , which meant that governments no longer controlled the distribution of credit and commercial banks were able to lend with mi n - imal restrictions. Prior to this point, banks had been compelled to lend to the state, and private firms tended to rely upon short-term loans or medium-term lendingpro- vided to strategic sectors by state-owned development banks. The liberalization of credit meant a veiy rapid increase inlendingto the private sectoi^the ratio of domestic credit to the private sector as a proportion of GDP more than doubled in Egypt fixim 1992 to 2002 (22.3 percent to 54.7 percent), and also increased significantly in Mo- rocco Ub-4 percent to 40.4 percent in 2Q02I. and Jordan percent to 70^ percei^.^^ Only in Tunisia, where earlier government lending had led to large levels of surplus licpiidity, was there a sli^t decrease (66.g percent to A-? .3 percent).

This increased credit to the private sector was directed to a small number of bor­ rowers associated with influential businessmen and laigc con^omerates. and thus was an integral part of the state-led support of the capitalist class. In the case of Egypt, one commentator calculated that in early 2000. 42 percent of the 2o(^ hiHinn Egyptian pounds extended to the private sector went to only 34.3 clients, with 28 of themtalnnp- i3 percent of the total.^ By 2002, nearly 18 percent of nonperforming loans were held by only 12 clients. He points out that well-cormected business groups were generally able to borrow with insufficient collateral and no formal procedures. In many cases, these borrowers were tightly connected to the Mnharak rpgime and tbp stafft—the so- called rmwabol-quroud (Loan MPs) were ^r>tV<P^QQ/-.crnrnTnninga1nanfIiR- tribution network connecting public banks, businesses, and the political system.^

As banks increased their lending to the private sector, the banks themselves un­ derwent dhw^esofownerehip^In 2001. state-owned banks had held 79 percent of banking assets in E^ypt. By 2007. followinga wave of banking privatizations, this had dropped to gg percent. Similarly laige reductions were seen in Morocco (79 percent to 38 percent) and Tunisia (58 percent to 42 percent). Jordan does not have any state- owned banks.®^ Foreign banks also entered local markets foUowingthe entry intn of the General Agreement on Trade in Services (GATS) as a WTO treaty in 1995. which obligated states to open up their financial sectors to foreign investment. From 1995 to 200Q. foreign banks as a proportion of total banks increased from 36 to 50 percent in Morocco, 6 to e;2 percent in Egypt. 11 to 40 percent in Jordan, and 36 to 50 percent in Tumsia.^ Assets controlled by these foreign banks also increased—reaching23 percent of total banking assets for Egypt and Jordan in 2009,84 percent for Morocco, and 28 percent for Tunisia.^

/■

62 Adam Hanieh

In addition to opening up branches, foreign banks also moved to btiyup Hnmpstio baTiks. Injordan. by 2007. the three largest banks were all majority foreign-owned.^ InTunisia, four of the top ten lai^est banks were foreign-controUed and three had sig­ nificant minority ownership.^ Four ofthe seven largest Egyptian banks were foreign- ownedinsooS, although the top three remained statP-nwnpH v Alongside the growing domination of private capital over the banking sector, there developed a very pro­ nounced concentration of control; in Jordan, the three largest banks held 47.8 percent of^ssets. in Egypt 53.88 percent, in Tunisia 28.64 percent, andinMorocco 64 percent (figures for 2007; 2006 for Morocco).?*

This growing power of finance was further strengthened bv the expaTisinn nf markets^though stock exchanges already existed in Morocco (est. 1929) and Tunisia (1969). these had remained largely dormant (with market capitalization less than ^ percent of GDP) until reforms in the early iggos made it easier for cnmpanips tn hiry

sell shares.?^ Stock markets were reactivated in Egypt in iqq2 and set up for tb*" kT tuneinJordanini997. wealth increasingly circulated and amassed through

shareholdings, the stock market became ajpHm^ fnnilttnfing thr ac cumulation of the largest corporate groups In Egypt, the average size of a company listed on the country s stock exchai^e grew more than twelve - fold from 2001 to 2007— total market capitalization rose by 700 percent to reach 86 percent of GDP, upfr^

3^percent in 2001.?^ In Jordan and Morocco, the size of the stock market increased by similar amounts (600 percent and 500 percent growth in market capitalization, re­ spectively). Concurrently, market capitalization became concentrated in a tiny number of companies. In Tunisia, for example. 10 percent of market capitalization in 2007 comprised just one company, the Poulina Group (discussed further in the next chap- ter).?5 Concentration was even more pronounced in Jordan and Morocco, with one privately owned bank, the Arab Bank, constituting more than one-third of the Amman Stock Exchange, and Maroc Telecom, a state telecom privatized in 2001, malangup 20 percent of Morocco's market capitalization.?^ In Egypt, companies controlled by just

. seven families represented more than one-fifth ofthe country's entire stock exchange capitalization in 2008.??

'I^® exponential growth of equity markets was closely linked to the liberalization of real estate and the increasing significance of capital flows throurfi the built envi­ ronment. This was particularly notable in Egypt, where the govemTn^nt launched an

^..■.y^l-yUrban development strategy in 1997 focused on the pstah1ishm«»nt nf r|pw niti<»s and ^1^6 'reclamation" of desert areas. Laws were passed that slashed property taxes and permitted foreign ownership of real estate for the first time. Seventeen cities were planned as part of the new development strategy, with the construction, development, and marketing of these cities managed by private real estate companies involved in a

Mapping the Neoliberal Experience 63

diverse range of sectors such as residential housing, shopping centers and malls. tourism, and hotels. These companies were typically controlled by laige private capital groups in partnership with state investments, and included government-owned en­ tities that were soon privatized (e.g., Nasr City Housing and Development. Heliopolis Housing Company), massive construction and industrial companies that expanded into real estate development (e.g.. Bahgat Group. Talaat Moustafa Group. Oriental ■Weavers), new companies established for particular projects (Sixth of October Devel­ opment and Investment Corporation. Palm Hills Development), and large regional developers, usually GCC-based (Emaar. Solidere, Barwa, Damac). To support these companies, the Egyptian government embarked on a vast sell-off of urban areas by auctioning land at cheap prices or negotiating closed -door agreements with individual companies. Allegations of corrupt transfers of land to private interests were \videspread and became a prominent feature of court battles post-January 2011. As private own­ ership of urban land expanded, real estate companies listed themselves on the Cairo Stock Exchange, thereby attracting additional capital flows from those hoping to ben­ efit from the growing market and contributing to the upward trend of equity prices. From the mid-2000s nnwarria^ilQQH nf capital frnm the GTX^ into Egyptian real estate and stock markets markedly reinforced these tendencies, as pools of surplus funds arisir^ from record oil prices sought profitable avenues for investment.

This expansion of Egyptian real estate was critically dependent upon further in­ novations in finance, notably the establishment of mortgage and bond markets. As the supply of housing grew, banks and other financial institutions were particularly keen to diversify into mortgage lending as the next lucrative component of their credit port­ folios. A mort^^jaij^haipnmdfidtheJegislali^icamfiitDrkiQrj:eaL£stateieiMiing_ ..rni. in 1_____ 1;____ Cl__________:.l i____________________ C__________ J .i_ _ Z ''*5

was passed in 2001. and a few years later, leading financial institutions formed the ^yptian Mortgage Refinance Company (EMRG) to provide mortgage refinancing for banks and finance companies. The EMRC bundled together mnrtgagp.«t .«?old hy fhp.«ip companies in bonds, which were offered for sale on Egypt's emerging bond markets. Throu^ this process, the lendingbase for property development could expand, while the risks arising frnm theg^mns were ^hiftpd away frnm fhp financial institutions themselves. The stock and bond markets thus fapilitatp-d the liguification of land and property, turning the bricks and mortar of the built environment into a financial in- strument that could be securitized and commodified In this manner mutiialfy re­ inforcingeffects of credit liberalization, the privatiTation of land and other state assets. and the_deepening of bond and equity markets constituted a pHnHpal npviia nf accu­ mulation for large domestic and foreign conglomerates.

Across the region, financial markets thus underpinned a tran.sfnrnip*^»»^ strucmre and power of the capitalist class itself. The markets permitted a qualitative

64 Adam Hanieh

j leap m the scale and scope of capital accumulation, pooling funds from local and re- / gional investors, including those from the state itself. Liberalization of credit often /circulatedthroughrealestatemarkets.fedthegrowinginvestrnentinfmancialm^^^ / "'ents.Laige.family-ownedcon^omerateslistedtheirsubsidiariesonthestockmar-

( Lets and thereby expanded their capital base. They also took shares in banks and

privatized companies, which were sold throu^ Initial Public Offerings (IPOs) on the new exchanges.^InthismaMer^^cial institutions becameincreasin^yintercon- nected^Wthindu^roughcon^^ eratesj^lveaj^-aljgc dfdifferent business activities. In short, financiaU^i^t..» helpedjobridgeallthecon^ente and influenceofth^l^t domestic and foreign condomerates over everv a.snprt nf social life. ' ^ ^-----

Centralization and Authoritarianism—A New Institutionalization of State Power The policies described above were met with repeated waves of popular protest, in- cludinglarge-scale demonstrations, labor and student strikes, and the emergence of newpolitical forces. Overcoming this resistance was a necessary element to

ol^^oliberal project, and it was ^hrmrh the consoj^ation^dictatorships and authoritarian regimes. In Tunisia, the com­ ing to power of Benj^Un a 1987 coup marked the real commencement of neolib­ eralism. and foreign governments across Europe and the United States backed his long rule in large part for this reason. For example, the World Bank noted enthu­ siastically in 1993 that Ben Ali appeared "eager to encourage and accelerate the restructuring and privatization process. "79 Egypt’s Mubarak, who succeeded Sadat m 1981, expanded theinjitah ("opening" or "open door" policy) of his predecessor and was warmly endorsedbythelMF and World Bank with the signing of thei99i Structural Adjustment Plan. In Morocco, King Hassan II unleashed repeated crackdowns against labor and political movements resisting the Structural Ad­ justment Plan inaugurated in 1983, repression that came to be known as the "years of lead." Jordan’s King Hussein presided over two decades of martial law. author­ izing mihtaiy and security crackdowns on students and others protesting the be­ ginnings of liberalization in the 1980s.

These kings and dictator led the roUbackof the limited social gains made in the immediate postindependence period because th^ were willing to turn their security and miUtaiy forces against those rcsistingthe new liberalization. 'Hiey were embraced by IFIs and Western governments alike, yrho clearly understood their pivotal role in the success of the new economic diktats and knowingly endoised repeated acts of re-

Mapping the Neoliberal Experience 65

pression. Of course this relaiinnship between authoritarianism and neoliberalism is not unigue to the Arab world (as the examples of Chile. South KarM, and TVirkev il-, lustrate), but these essential facts of history remain an inconvenient truth for those who today attempt to link neoliberal reform with "democraiy."

At the sarnie time as governments meted out repressi^ against those who resisted the neoliberal turn, the new policies also very much depended upon the cultivation of a domestic social base. A n^riad of institutional actors were involved in this process. These included presidents, ruling families, key government ministries (notably min­ istries of Bnance), central bank personnel, leading academics, industry lobby groups, and chambers of commerce. Their policy choices helped to advance a shift in the struc- tures of the state itself, acting to protect and fos^ a p^eriiil hmirgpnisie that grew in the interstices of the changing economy. Among this melange of state and business leaders, the role of international institutions was—^as the World Bank put it in a major 3004 study on MENA employment—one of "bringii^together the best knowledge, ex­ pertise, and experience” in order to establish "priorities and directions for a compre­ hensive and structured policy reform agenda.”®® This coordinative function, centered on articulating an ideological justification for policy choices, was just as critical to the internal construction of neoliberalism as aiq^ external compulsion or conditionalities.

The success of this project depended upon a sharp realignment in the institutional character of the state apparatus itself. Hus was the other side to authoritarianism, placing the increasingly centralized nature of political decision- making in the of a sin^e individual or small, xmaccountable committees. By enabling economic policy to become progressively the purview of a tiny few rnnarinuBiy s«>qn^^|ered fmm the hroaHer in­ stitutions of thestate. this iusHtuHnnal rpetr>i/>tiiring<nrr^iniyfntml m^’nppnrritinn fmm within the bm^ucracy or broader society to the new economic measures. Tt also acted to render obscure exactly what decisions were being made imtil long after the fact, re­ ducing public debate around the trajectoiy of neoliberal reform and making it more dif­ ficult forlabor and social movements to moimt successful resistance to these decisions.

An excellent example of this can be seen in the case of Tunisian privatization. Law 89-9, passed soon after Ben Ali came to power, established the frameworkfor the in­ stitutional restructuringthat would underpin the sell-off of state firms (although, as a Worid Bank analyst drily noted, "for political and social reasons” the Tunisiangovem- ment intentionally omitted the word "privatization” from the law itself)-®'With the passing of the new law, decisions about which companies to privatize were concen­ trated solely in the hands of the prime minister, following the recommendation of a small committee that he chaired. CAREPP (Commission d’Assainissement et de Re­ structuration des Entreprises k Participation Publique).®® Another body, the Technical Commission for Restructuring Public Enterprises (CTAREPP), led by an individual

66 Adam Hanteh

appointed by the prime minister, was tasked with developing the overall strategy and "nuts and bolts" for privatization. In this context, it was hard for anyone within or out­ side the state to oppose or slow down privatization-a feature approved by the World Bank, which noted that Law 89-9 gave a "clear direction... and an efficient organi­ zational vehicle to implement the privatization program"®^ and that centralization of decision-making at a high level "defused jurisdictional disputes and rivalries... and streamlined the process. As part of its strategy to obfuscate the sale of state firms. GAREPP deliberately chose not to announce in advance which companies were the preferred candidates for privatization, making it difficult for workers to mount any sort of resistance because they were unaware of steps toward a sell-off until late in the process.®^ The World Bankalso praised this goal of avoidingthe "social consequences of such an announcement [of privatization]" as one that worked "reasonably well" and was "important to create momentum to boost the vdiole process."®®

International institutions were not simply external observers that applauded the ti^t centralization of state power in Tunisia from the sidelines. The IMF included "public sector reform" as a conditionality of the 1986 Structural Adjustment Package and assisted in developing the structures necessary for its implementation. The World Bank provided a $i3o million loan in 1989 to aid the functioning of GAREPP and pre­ pare companies for sale. As part of this loan, key elements of legislation-such as the performance contracts that public firms were expected to adopt as a prelude to pri­

vatization-needed to be agreed to by the World Bank prior to their approval by GAREPP.®? Even more directly, a paid consultant of USAID served as a member of CTAREPP and as an advisor to GAREPP from 1988 to 1990.®® The Japanese government helped with funds to privatize cement factories and the dairy industry. The United Na­ tions Development Program (UNDP) provided technical assistance to help with the listing of privatized firms on the stock market. All these organizations were thus con­ sciously complicit in fostering the authoritarianism and centralization of political power that accompanied the development of the neoliberal project.

This restructuring of state institutions was replicated across the Middle East. In Morocco, telecommunications privatization was driven by King Hassan II and his son, Mohammed VI, who established a group called G14 to push the case for liberalization. G14 included the chief executives of the state telecom carrier and the main newprivate telecom, and essentially wrote the legislation for privatization that was later enacted through a series of royal decrees.®9 Lil^se. Jordan. Egypt, and Lebanon havejmits orministerialcmnn^es dedicated to fast-trackingthe decisionsaroui^n>ttr^a- tion. writing kgidatio^ndjrop^iStargets for sJe. In all caseTAe

and execution of economic polity^has been distanced as far as possible firom any control or influence of legislative bodies within the state.

Mapping the Neoliberal Experience 67

Decentralization and Autonomy The growing centralization of political power confirms that neoliberalism is very much a state-led project, not, as is commonly assumed, one that has meant the un- derminingor eroding of the state apparatus. Butthe centralization of decision-mak­ ing has occurred concurrently with an opposite trend of decentralization, in which increasing autonomy is given to government departments in their planning and, most importantly, their budgetary decisions. This decentralization has been ideo­ logically driven by the ethos of "new public management," through which govern­ ment departments are forced to compete against one another for central funding, and market-based incentives increasingly become part of budgetary calculations. Departmental st^cess is measured through a "performance budgeting" schema that

ultimately concerned with the financial cost-effectiveness of mitpnta Tti«^ a ctrat- egythat can be marketed as being "more efficient." "less hnrf>aucratic." and "mnrft flexible." but essentially comofils individnai drpartments to take greater responsibility for fiscal matters (both expenditure and revenue). Given the vast needs and the general lack of resources, this displacement of fiscal control helps facilitate the implementation of fees-based service provision, in other words, to accelerate the commodification of public sector activities.’”

In Jordan, the third stage of the World Bank’s 2001 Public Sector Reform Loans (PSRL) provides a good example of this centralization/decentralization dialectic. Under pressure from the Bank, control over the Jordanian budget was ti^tly centralized in the General Budget Department, wdiile, simultaneously, different ministries and de­ partments were given considerable operational autonomy. Instead of funding these departments on the basis of annual estimations of input costs, "performance budget­ ing” was implemented in each sector and department, with fundingtied to the cost- effectiveness of the outputs achieved. Coupled with the decentralization of operational control at the local level, the emphasis on cost-effectiveness created a continual pres­ sure to reduce costs, cut services, and find other means to lower departmental budgets. This structural configuration meant that the government could pass a central deci- sion-as it did in March 3oo4^^en it issued a blanket directive requiring all ministries to cut utility bills by ao percent-and leave each department to determine how it could best meet the new fiscal requirements.’’

Ulmwse. in Egypt, a major feature of the institutional tygtyurtiiringnfth^statpwag the a^omeration of state-owned enterprises into sin^e, sector-wide holding compa­ nies. usually through the simple decree of Mubarak, that were progressively cut off from state subsidies and forced to compete on the market. Although they remained "state- owned,” this restructuring was consciously imderstood as the first step toward privati­ zation. Holding companies were required to adopt the basic principles of performance

68 Adam Hanieh

budgeting and profit mayimirjtion, with management given substantial autonomy in workforce matters and fiscal decisions. In the case of water, for example, a presidential decree in 2004 rationalized institutions involved in the sector into a single hnlrfiwgcom^ pany, the Holding Company for Water and Wastewater (HGWW). The company’s budget was no longerunderthe control and supervision ofThe People’s Assembly (the E^tian parliament), but a separate board of directors who were encouraged to seek joint ven- tures with private companies, offer shares, and make a profit throu^ the distribution and sale of water.^® Around the same time, the Egyptian Water Regulatory Agency was established with a mandate—alongside controlling service delivery and ensuringpolicies and regulations were followed—of promoting PPPs inthe water sector.^ In its first few years of operation, the HCWW underwent an institutional restructuring that reduced the size of its workforce and doubled the price of water for domestic users. From June 2007 to Januaiy 2008, more than forty demonstrations around watei^ubbed the "tiiirst protests"—were noted across Egypt in response to the increasing inaccessibility of water as a result of these measures.’* These included protests against an HCWW-affiliated company in the Kafr al-Shaikh province, in the north of Egypt, becatise it was diverting water away from their town to investors in a nearly summer tourist resort.

These examples show that the process of neoliberal reform is driven by the ability of a hi^y centralized political core to frame the context of decentralized implemen­ tation of its policies. This dialectic of centralization and decentralization has been the distinguishing feature of the institutional restructuring of the neoliberal state in the Middle East region—rhetorically founded upon "good governance” and "accountabil­ ity." while simultaneously strengthening the tendencies toward authoritarianism. By creating this form of decentralized, horizontal competition between different parts of the state, vertically constrained through the concentration of political power at the center, neoliberal governments naturalize the reduction of state activities as a normal part of everyday operations. This obfuscates the locus of power within state structures, shaping^e reform process as a multitude of decentralized management decisions that

difficult to oppose and organize against because of their diffuse nature, and whose ultirna^ source of power is hidden by the sequestration of undemocratic and unac­ countable committees within the state itself.

The State as Conduit of Wealth In line with these changing political and institutional forms of neoliberal rule, the state has also undergone a transformation in its fiscal structure. A key aspect of this has been a generalized cutback in social spending as more services are shifted to the private sector. Government expenditure as a proportion of GDP fell sharply in Egypt. Morocco. Jordan, and Tunisia through the 2000s. The main reason for

Mapping the Neoliberal Experience 69

this was the shrinking public sector wage bill—the share of wages and salaries in government expenditure declined 10 percentage points in Tunisia (65 percent in 20o3 to 55 percent in 2008). 8 percentage points in Egypt (26 percent in 2001 to 18 percent in 2007), 4 percentage points in Morocco (51 percent in 2005 to 47 per- ^ cent in 2008), and 4 percentage points in Jordan (20 percent in 2001 to 16 percent ^ in 2008).’5 'Fhifi trend ■ifi«.»gAir.prprivatization efforts and the downward pressure on public sector wages. Social services were particu­ larly hard hit by these cuts. Education spending, for example, fell by large amounts' in Jordan (i«^ to 12.1 percent of government expenditure). Egypt (7 to <^.7 percent), and Morocco C27to 2«;.7 percent) between 2004. and 2010.

Amajor target of cuts to social spending has been the state subsidy system—in par­ ticular. government subsidies for food and fuel. These subsidies, as noted in chapter 2. were an important feature of regime legitimacy in the postindependence period and provided a measurable level of access to basic food staples for the poor. From the 1980s to the early20008, subsidy levels were slashed across the MENA region as part of struc­ tural adjustment packages. In Egypt, for example, spendingon subsidies dropped from 14 percent of government expenditures in 1980-81 to 5.6 percent in iqq6-q7.’^ The Egyptian government adopted a variety of strategies to achieve this reduction: removing meat, fish, chicken, an ict Hrnpping the number of subsidized food items to just foui^-bolodi bread.’^ coarse flour, edible oil, and sugar; reducingthe num­ ber of people entitled tr? rreH’i'e mibsidiftsi alliu^^inf the price of sugar and bread to rise; and reducingthe quality and portion size of subsidized items.’** In Jordan, food sub­ sidies were essentially eliminated in the 19908 and replaced by cash transfers to par­ ticular sections of the population.” Tunisia and Morocco also saw a substantial drop inthe number of subsidized commodities and changes to entitlement schemes, which excluded much of the urban and rural poor.**®

Not all government spending, however, has hpen equally targeted for rednetinn. Confirming the ongoing linkages between authoritarian rule and neoliberalism, the share of government spending on the military and internal security has tended to re­ main veiy hi^ and in some cases has actually increased. In 2010. thenufitaiy^ndin- temal security constituted 84.1 percent of Jordanian government expenditure. i2.q^ percent in Egypt. 11 percent in Morocco, and 5 percent in Tunisia (Tunisia’s figures only include military spending.'®' In Jordan and Egypt, f^vppnditiirp on military and public security exceeded the combined education and health budgets eveiy year from 2oot; to 2010 and, in nontrafit to these social services, assumed a growingsl^re of government expenditure over the pftrind Moreover, these figures likely un­ derstate the true extent of military and security budgets, as the region's authoritarian governments rarely provide transparency in this area.

70 Adam Hanieh

t

Occurring alongside these shifts in V>ag ^ tranfiffrrmation in the nature of state revenues. There are two important aspects to this. First, in line with supporting domestic and foreign capital, governments have moved to redu^ tvirpnratf and income taxes and replace these with a value-added tax (VAT), which dispropor- tionally affects the poor.These changes to tax regimes were often directly initiated and written by international institutions. In Egypt, for example, a $6o million USAID project was launched in 1989 to restructure theEgyptian tax system. This project saw the introduction of a general sales tax in 1991 to replace the previous consumption tax, considered to "discriminate against imports" because it charged higher amoimts on goods broiight in from outside the country. The income tax structure was also changed, with the highest corporate tax rate reduced from 78 to 48 percent.In early 3005;. a new law was passed that dropped the highest corporate rate down to go percent, with

differentiation between family businesses and large foreign corporations. The same law slashed the hipest personal income bracket from 40 to 20 percent."^ With only fourbraekets-defined by the law. someone earning around $5;c;o a month was in the same category as a billionaire In Morocco, a VAT ^tem was also introduced, with changes in ^005 and 2006 increasing the rates on items that had previously been ex­ empt. including basic food items such as butter and salt. Revenue from the VAT grew at 20 percent ayear from 2005 to 2008. reaching 33 percent of the government's total fiscal revenue in 2008.While Morocco moved to adopt the VAT system, the top mar­ ginal personal income tax rate was slashed—droppingby half between 1985 and 2002.“^ Likewise. inJordanandTunisiaduringrecentyears. corporate tax rates have been se­ verely cut at the same time as a VAT ^stem was introduced.'"7

The second major shift in the way the state funds itself has been an increasing re­ liance on debt instruments such as government bonds. However, in contrast with the 1980s, duringwhich debt obligations to external lenders reached the astronomical lev­ els detailed in the previous chapter, the recent period has seen a move away from ex­ ternal borrowing toward the issuing of government bonds to domestic investors. Egypt, Jordan. Morocco, and Tunisia have been at the forefront of this change, which requires the deepening of bond markets, as noted above. All four countries now iss»^ dnmAcH- cally traded debt on thdr financial markets and have come to depend heavily on markets for state financing.'”^ One of the consequences is that interest repayments on public debt have become a major drain on government spending. Egypt stands out in this regard, with interest repayments on domestic debt as a proportion of government expenditure reaching 22.8 percent in 2010-more than total spending on education, health, and food subsidies combined.'®? Most of Egypt’s debt payments percent) flowto banks, financial institutions, and other investors operatingin domestic markets. In this sense, the state has become even more plainly a conduit forthe transfer of wealth

Mapping the Neoliberal Experience 71

to laige financial institutions throu^ the mechanism of the state budget. The chains of debt remain very much in place, only reconstituted in a different form.

Conclusion In every sense, the last three decades have seen the sustained erosion of basic eco­ nomic and social rights as a direct consequence of neoliberal policies. Hardest hit is an entire generation of youth, particularly young women, who have been con­ demned to a future of unemployment, low-wage work, and social exclusion. This situation is the logical and predictable endpoint of neoliberal reform, one that has been socially enginf f red n J^igV»1y TY>ar>npr hy Ural i^litPR ;}nd inter­ national institutions—not an accidental outcome of policy mishaps nr the arbi­ trariness of authoritarian rulers. These patterns are not unique to the four countries that have formed the focus of this chapter; all countries in the MENA region have followed the same basic trajectory, albeit at differing pace and scale.

Policies of privatization and labor market deregulation had a dramatic impact on wages and the security of employment. Companies foxmd it easier to fire people at will, and the use of temporary contracts vastly increased the overall precariousness of work. These characteristics were reflected in consistently hi^ imemployment figures, with Jordan registering an average of 14.1 percent over the 2000s, Tunisia 14.6 percent, Morocco 11 percent, and Egypt 10 percent."® As bad as th^ are, these official figures hide the much worse situation faced by youth; around 3o peroent of young people have consistently been out of work in Tunisia. Jordan, and I^ypt tbrou^out most of the last decade. Prior to the gjobal economic crisis, this figure was among the hipest of any region in the world and is even more striking when placed alongside the extremely low labor market participation of youth, with only around one-third of youth in work or actively .«M»ftldngcmplnyment (it should be emphasized that those individuals not seek­ ing work are not counted in employment figures)."* Not only are most ^wmg people jobless or not in the labor market, but the majority of the unemployed are also often youth—in Egypt, for example, about three-quarters of the unemployed are young."® This has significant social implications for countries where the governing elites are firequentfy aged in their seventies.

Moreover, in contrast to patterns typically observed elsewhere in the world, unem­ ployment is particularly bad amonguniversity graduates. The public sector traditionally provided jobs foryoungpeople graduatingfrom tertiaiy education, women inparticxxlar. and with the cuts to the public sector this avenue is no longer available. Fnr Rpypt and Jordan, n^rly half of all females between fifteen and twenty-four arc! iinpmpInyprL dmi- ble the rate of young men."* In Jordan, where the private sector went from empl<tying 42 percent of the workforce in 199519 employingyi percent in 2006. university gradu-

72 Adam Hanieh

ates constitute thesecond-largestgroupofunemployedpeople."5Theinajori^ of these jobless are womengraduates. who hadanunemployment rate of36.1percentm.006- nearly three times that of male graduates. In Egypt, the lai^t numbers of any categoiy ofunemployedpeoplearethosewithauniversitverliiri.tinr, wift.

uates making up nearly one-quarter of all unempIoYedfemales in lanf. In all MENA countries, rates of female unemployment are among the worst in the world."^

These painful figures, however, are themselves a substantial understatement of the extent of joblessness and job precariousness. 'The definition of "employed” in the region typically covers tho8eworkingiustahandfulofhoi.rsand_mnstimDortaut]vi.

aques^Iedescriplfljii^rtfaghugenumb£i^ofpeoDleworIdnginth.i.^ to^ Egypt, Morocco, and Tunisia, between 40 and 50 percent of all nonagricultural employment is in the informal sector.afigurethatisamongthefastest-growingof any placeontheplaneftOneresearcherhas found that three-quartersof new labormar- ket entrants in Egyptfrom3ooo-3oo5 joined the informal sector, up from only one-

fifth in the early 19705. Work in this sector is hi^y precarious, unpredictable, and lacldngmeffectivesocial protection. The enormous scale of this informality is the di-

<^°^eq»ence of three policies in particyg^ the commodification of land chapter 4):the privatization of state-owned firms, and the deregulation of labor mar- k^t is parallele^atially iii the prolifeTiti6n of laigepfruFBiH^S^i^ of dilapidated housing that surround most of the large metropolises in North Africa, zones of existence that carry critical political and social meaning (see chapter 7).“9

Levelsofunemploymentandtheexpansionoftheinformalsectorarethemselves mdicanveofthegrowingscale of poverty.Inthetwo countries wherelongitudinal wage

statistics are available, E^t and Jordan, real wage levels have worsened as a result of mfoimalization and precariousness. In Egypt, median real hourly wages declined by 6.7percentbetweeni988and30o6.TTiededine inprivate sectorwagesoverthesame period was 16 percent.'” In Jordan, real wages in manufacturingdeclined by i.gpereent from 3001 to 3oo8.‘*' Figures from a 3006 national survey in Jordan found that the poorest 3o percent of the population earns only 11 percent of the total income.'” Ac­ cording to the most recent statistics, the number of people living below the poverty Ime is around 40 percent in both Egypt and Morocco and .3.8 percent in 'fiinisia Combined with cuts topublicspending, this has hadadisastreusimpactonsocialcon- duions-between 3000 and 3006. 30 percent of children in Egypt and Morocco demonstrated stunted growth as a result of malnutrition.'^ and illiteracy remains at astonishingly hi^ levels in Morocco (44 percent of the adult population). Egypt (84 percent), and Tunisia (33 percent). '®s

These bleak social trends, however, are only one side of the story over the last two decades. With the region inserted into the world market on the basis of its cheap labor

Mapping the Neoliberal Experience 73

and a flexible, informalized workforce-fuUy subordinated to the needs of accumula- tion in the EU and the United States—neoliberal pnlinips Haw af>t^d to nurhirp growth of large domestic capital and provided enormously profitable opportunities for foreign investore. This is powerfully confirmed by the region’s rapid economic growth—Morocco, E^ypt, Tunisia, aiul Jordan all eqierienced a real annual GDP growth rate that averaged over 5 percent from aooS to 3008, with GDP per capita rising be­ tween 20 and3o percent over the same six-yearperiod.'*^ As this has proceeded, own­ ership of tb«» majnr t‘rr>T>nmio gprlnrc iTiprpagip|y]v cnnnftntratcd in the hands of the tinv few wbrt havp V»ppti hy ytpmlibpral rpfnrm

Tfrese trends point to an incontrovertible conclusion: the transformation of the last period has not simply been one of growing poverty, unemployment, or social ex­ clusion; it has also involved, at its most fundamental level, the growth and consolida- tion of a domestic capitalist class, tightly linked through myriad «-»ViatTnplT^ accumulation to the state and foreign companies, fmmiseration and accumulation are forcerully connected—neoliberalism has enecnvely acted to redistribute wealth from the region’s poor to the wealthiest layers of society by subsmning every aspect of social life under the logic of capital. This radical reconstitution of class power remains at the core of the neoliberal project in the MENA region—and is an essential element to any assessment of the revolutionary dynamics of 2011.