When approached by Polity Press editor Louise Knight to write what could be used as a textbook in courses on the political economy of the Middle East, I was hesitant. Having taught such courses over the years, I was aware of existing texts, most prominent of which is that initially written by my old friends Alan Richards and John Waterbury, then revised and updated by my newer friends Melani Cammett and Ishac Diwan. On reflection, however, I realized there was a need for a book complementary to rather than competitive with others in the field. If the new book were to focus on the state and its relative capacities to guide economic development, it would facilitate understanding of the economic outcomes on which other books concentrate.

My ensuing exploration of the origins and natures of Middle East and North Africa (MENA) states and assessments of their capacities to manage economies convinced me of two fundamental propositions. The first is the power of path dependency. These states and their effectiveness are products of their histories, hence reasonably fixed and unlikely to change swiftly or substantially. Linking histories to current forms and behavior is thus a central feature of the book and one that connects the past not only to the present, but also to the future. The second proposition is that MENA states have not well served the interests of their citizens, an assessment given empirical weight by the extensive comparative data made available in the last decade or so. The book draws upon this data to evaluate the performance of states and economies cross-nationally and longitudinally, thus adding comparative dimensions not typically addressed. This volume, in sum, is an old-fashioned political economy, in that it constitutes a return to an analysis of the political causes of economic outcomes, the original focus of that historically grounded discipline.

While developing these ideas and writing them up I have become indebted to many institutions, friends, colleagues and even relatives. As just indicated, I have long been an admirer of and learned from Alan, John, Melani and Ishac, not only from their jointly produced book but from their voluminous other writings as well. Ishac kindly shared with me papers delivered to the conference he organized in Paris in 2018. More recent interactions with colleagues at Harvard, Sciences Po and the Naval Postgraduate School, among whom I would like to single out Tom Bruneau, Philippe Droz-Vincent and Davide Luca, have enhanced my understandings of both MENA and other states, their origins, the roles played within them by coercive agencies, and their developmental impacts. Amr Adly, a pioneer explorer of the Egyptian and Turkish states, has informed my thinking while providing numerous empirical insights. Readers of the manuscript whose suggestions substantially improved it include Guilain Denoeux, Glenn Robinson, Sarah Smierciak, my son, Ziyad Springborg, and two anonymous readers recruited by Polity Press. Louise Knight not only inspired the volume but provided invaluable advice throughout. Tim Clark copy-edited the manuscript in record time and with his usual professionalism. My sincere thanks are extended to all, none of whom bears any responsibility for the final product.

I appreciate permission being granted by editors to include herein portions of material that initially appeared in different forms in their publications. These include Roel Meijer and Nils Butenschon, in whose The Crisis of Citizenship in the Arab World, published by Brill in 2017, my chapter, “The Effects of Patronage Systems and Clientelism on Citizenship in the Middle East” appeared; Anne Joyce, editor of Middle East Policy, in the Spring 2018 issue of which my “Deep States in MENA” was published; Benedikt van den Woldenberg, co-head of the editorial office of Orient, in the January 2019 issue of which my “Globalisation and Contentious Politics in the MENA,” appeared; and Jacob Passel, editor of The Middle East Journal, which published my “Arab Armed Forces: State Makers or State Breakers?” in its Summer issue, 2015. Finally, I would like to thank Rashid Chaker, Division Chief for the Near East and South Asia of the Office of Opinion Research for the US Department of State, for assisting my understanding of results from public opinion polling in the MENA.

The national economies of the Middle East and North Africa (MENA), and the region’s economy as a whole, are today in a disorder that is deeply rooted historically and structurally and therefore not susceptible to rapid resolution. MENA nation states have been profoundly shaped by their respective pre-colonial histories, their encounters with colonialism, and the subsequent interaction between them, their region, and the world beyond. Variation in nation-state capacities—the means through which they govern—result from those historical legacies. Although the differences in national capacities are substantial, none of the Muslim Middle Eastern states is capable of managing its economy at a globally competitive level, as selected performance evidence will demonstrate. This raises the question of why these overgrown but weak states have been unable to escape their historical legacies, so still lack adequate governing capacities. The answer will be sought through investigations of how so-called “limited access orders,” typically long established, are defended by deep states, the behavior of which in turn undermines the capacities of government as well as civil and political societies.

MENA economies, with the partial exception of Israel, face challenges of varying magnitude. In the Arab states that have dissolved into civil war—Syria, Yemen and Libya—national economies no longer exist. In the other Arab republics—Algeria, Tunisia, Egypt, Sudan, Lebanon and Iraq—per capita GDP growth has flattened at below 2% annually, a low rate by the standards of developing and emerging economies. Rates of unemployment and poverty, driven by comparatively high population growth unsupported by adequate job creation, have risen above those of comparator countries in other developing regions. A “30/30 rule” provides a rough estimate of those rates—30% of youths unemployed and 30% of the population impoverished. Arab monarchies of the Gulf Cooperation Council (GCC), which are the MENA states most heavily dependent upon oil and gas revenues, have stagnated economically since the dramatic downturn in hydrocarbon prices from June 2014. They face the daunting challenge of urgently diversifying non-sustainable rentier political economies away from dependence on energy revenues. Jordan and Morocco, the other two Arab monarchies, present more mixed pictures. The former’s economy depends ever more precariously on its regional security role, as its production of tradeable goods, exports and even remittances have failed to keep pace with population growth. Morocco’s exports of agricultural commodities and manufactures, along with phosphates, have been increasing, but this bright spot among Arab economies is dimmed by relatively slow per capita growth, poor human resource development, and unequal distribution of national income.

Non-Arab Turkey and Iran are faring better, but no longer remarkably so. The former’s “economic miracle” that commenced with the new millennium has now ended, as indicated by per capita income hovering at $10,000 for a decade. The combination of rising debt, stagnating productivity and political insecurity have subdued foreign investment, previously the main driver propelling rapid growth. The “peace dividend” Iran anticipated from agreeing in 2015 to the Joint Comprehensive Plan of Action (JCPOA) to temporarily suspend its nuclear program did not materialize in the hoped-for magnitude and, in any event, the JCPOA was unilaterally abrogated by the Trump Administration in 2018. Low oil and gas prices combined with stagnating exports of those hydrocarbons have eroded hopes for a dramatic increase in foreign currency earnings that might have driven more rapid economic growth. Only Israel in the MENA has managed to achieve high rates of economic growth and to graduate its economy to OECD levels of output, export diversification and overall sophistication. But Israel’s is the economy least interconnected within the region, having very few backward or forward linkages that might pull along the broader MENA economy. Israel’s very success as an outlier appears to attest to the region’s dead weight, drag effect on its “inliers,” a hypothesis that receives further support from Morocco’s comparative economic success. It is the Arab state most connected to the European and least connected to the Arab economy.

As for the regional economy, its relative underperformance both results from and contributes to its comparative lack of integration. Low rates of intra-regional trade, especially of an intra-industry nature that arises from production integrated across borders, reflect persisting tariff and increasingly non-tariff trade barriers. Service sectors, especially that of finance, continue to enjoy substantial protection, so are comparatively inefficient and non-competitive internationally. Regional physical infrastructure is deficient, providing inadequate transportation and communication linkages, to say nothing of failing to adequately capitalize on possible synergies from energy sharing. The region-wide oil economy that was predicted in the mid-1970s and early 1980s to emerge from connecting petrodollars, surplus Arab labor and imported technology to diversify and industrialize, failed to materialize. Oil-rich Arab states, out of political and economic motives, have chosen instead to substitute non-Arab for Arab migrant labor. Public and private capital transfers from GCC to other Arab countries have declined as a proportion of total GCC investments and expenditures, which have increasingly been directed toward the West and East Asia. The MENA economy has not moved up value-added ladders other than in downstream hydrocarbon processing. Its share of global manufacturing has been in steady decline since the oil boom of the 1970s. The MENA economy is not being driven forward by infusions of technology, capital and managerial expertise in a manner analogous to the “flying goose” model of East Asia, where Japan and now China have led the way for emulators such as Taiwan and South Korea. Potential MENA “lead geese,” which could be non-Arab Israel, Turkey and/or Iran, are precluded from playing that role for both political and economic reasons, while Saudi Arabia’s economy is too oil-centric, Dubai’s too service-centric, and both too expatriate-dependent, to be widely emulated.

The political deficiencies of MENA nation states result primarily from the combination of their previous histories followed by their encounters with colonialism. Historically “embedded” countries whose pedigrees as virtual nation states extend over centuries or millennia, including Egypt, Iran, Morocco, Tunisia and Turkey, had better prospects for developing what the historical sociologist Michael Mann has referred to as infrastructural power than those with shallower historical roots, such as Libya, Algeria, Sudan, Lebanon, Syria, Yemen or Iraq. The colonial dialectics which drove nationalism and ultimately independence varied from country to country, reinforcing or undermining pre-existing potential state capacities. As a whole, however, MENA post-colonial states were relatively brittle, depending more upon Mann’s “despotic” than his infrastructural power, incapable as they were of truly penetrating the heterogeneous societies over which most ruled. Repression or patronage were thus inevitably the primary means of ruling, neither of which was compatible with sustainable economic development. Both approaches depended upon states that would exercise power arbitrarily and carefully select the few to whom it would grant political and economic access. Republics and, to a lesser degree, monarchies created “deep states” to defend their limited access orders. Those deep states in turn undermined the nominal, visible governmental institutions upon which effective governance and the rule of law must rest. Erosion of nationalist legitimacy through the sheer passage of time since the end of colonial rule, combined with economic stagnation resulting from the structural deficiencies of the political economies of these post-colonial states, has eroded the legitimacy of incumbent elites and caused ever increasing mass political disaffection. That in turn has necessitated yet more repression and/or patronage, reinforcing the downward economic spiral in which these states are trapped.

This book will elaborate these ideas theoretically and empirically in the following chapters. It will do so within the discipline of political economy as it was originally articulated, which is to say, with a primary focus on political factors driving economic outcomes.

Chapter 1 will review explanations of the MENA’s cross-national and longitudinal comparative underperformance offered by scholars of political economy and related disciplines. The common theme of these explanations is that weak institutions have failed to provide adequate governance, including that to support efficient political and economic markets. While inadequate contemporary institutions are so because they are “path dependent,” in the sense that they have evolved historically as subsequent actions have been conditioned by previous ones, today’s institutions in the MENA are also the result of contemporary contextual factors, key of which is economic dependence on hydrocarbon exports.

Chapter 2 will discuss pre-colonial legacies of state formation in the MENA and how varying degrees of “stateness” prior to the imposition of colonial rule impacted subsequent development of state effectiveness. Measured by governance capacities, degree of societal cohesion and quality of political leadership, MENA countries are less effective than comparators and face greater obstacles to enhancing that effectiveness, which varies substantially between countries. Those with historical roots with capitals and borders pre-dating the colonial era (Morocco, Tunisia, Egypt, Iran and Turkey) display greater effectiveness than those with “artificial borders” fabricated and managed by colonial powers and, in some cases, the settlers and national leaders chosen by them, which include Algeria, Libya, Lebanon, Syria, Sudan, Iraq, Israel/Palestine and South Yemen, as well as the Arabian Peninsula states that were shaped by interactions between locals and imperial powers, but with no colonial settlement (GCC countries plus North Yemen). The principal exception to this general rule consists of the small Arab oil exporters, which essentially imported their states and the personnel to run them from the West, and Great Britain in particular.

Chapter 3 traces the further historical development of MENA stateness through the colonial and post-colonial eras and that of today’s globalization. The colonial encounter and the nationalist elites it generated substantially impacted contemporary MENA states. Those that went through a full dialectical confrontation, resulting finally in independence led by civilians informed by the political practices and beliefs of their colonial antagonists, developed the most cohesive institutions, as best exemplified by Tunisia. The military cut short that dialectical process in several other countries with anti-monarchial coups. In still other countries monarchs remained in place, either legitimated by nationalist struggles or external combat (Morocco and Saudi Arabia), or simply backed by the British. Neither militaries nor monarchs have developed state capacities as effectively as have civilian political leaders, such as those in Tunisia, Turkey, Israel and, to a lesser extent, Iran.

Globalization’s take-off from the mid-1980s, combined with the end of the Cold War and a reduction in the geo-strategic rents it had generated for the MENA, induced the region’s states to undertake the political and economic reforms required to ride the globalization wave and extract benefits from it, including capturing more foreign direct investment (FDI). Two decades of rapid globalization, however, did not produce a new liberal age in the MENA. Most if not all reforms of MENA political economies came to an abrupt halt with the Arab uprisings of 2011, which themselves followed the global economic crisis of 2008–9 and which presaged several years of stagnating globalization and slower economic growth. As globalization has slowed to a crawl, MENA states have scrambled to meet intensifying domestic and regional economic and political challenges. Just as they turned in unison in a liberal direction in the late 1980s as globalization intensified, so they then turned en bloc in a conservative one, shoring up state authority over the polity in their search for ways and means to confront intensifying economic problems. Commonly accused in the MENA of being a false flag for neo-colonialism, globalization has paradoxically been more beneficial than harmful for the region. It is the slowing of globalization that poses the greater threat to the MENA’s political economies because it puts downward pressure on oil and gas prices, renders more difficult the challenge of diversifying economies away from hydrocarbons, and reduces support for liberalization.

Chapter 4 explores the root cause of the general weakness in the MENA of infrastructural power, which is the capacity of a state to interact effectively with civil society in the formation and implementation of policies as regards provision of order, the formation of a coherent national outlook or ideology, and management of the economy. That root cause lies in the domination of the region’s political economies by what institutional economists, led by Douglass North, have called “limited access orders.” These are systems in which order is based on political elites appropriating for themselves privileged control over the economy and the rents accrued therefrom, barring access to “outsiders.” The chapter discusses how the MENA’s limited access orders operate, the political and economic consequences of limited inclusion due to curtailment of citizenship rights, and the dependence of these orders on gate-keeping by deep states, contending interpretations of the historical origins of which are reviewed.

Deep states in the republics are analyzed and their possible existence in monarchies assessed in Chapter 5. Typically comprised of militaries, security/intelligence services, ruler’s “households,” and legal/judicial systems, republican deep states vary in their degree of institutionalization, their rootedness in social forces, and whether they have been constructed from the top down or the bottom up. These characteristics in turn impact the ways and means by which they acquire resources, and hence impact economies. While deep states are to be found in one form or another in all the republics, only in one monarchy, Jordan, is one clearly present. But in the other monarchies deep states appear to be emerging as the level of internal coercion and external conflict rises, coupled with intra-elite tensions due in part to declining resources.

Chapter 6 is concerned with the degree to which MENA states have succeeded in including their populations in the making and implementation of public policies, in providing them with health and educational services, and in ensuring public security and order. Measures of state capacity to effect inclusion include the institutional performances of bureaucracies and representative bodies, such as local governments and national legislatures. The World Bank’s comparative assessment of the engagement of stakeholders in rulemaking processes in such bodies reveals that “the Middle East and North Africa stands out as the region with the least inclusive rulemaking.”¹ MENA bureaucracies are centralized and stove-piped, thus providing neither access to citizens nor adequate administration. MENA parliaments rank exceedingly low on the “parliamentary powers index.”

Human capital growth is produced by health and educational services. By virtually all standard measures other than proportion of age cohorts in school, MENA education is underperforming. Equivalent years of schooling based on standardized, globalized tests indicate that MENA students are not learning at globally competitive rates. In the initial iteration of the Human Capital Index based on 2018 data, only one MENA country ranked in the top 50 of the 157 countries included. According to these and other global comparisons, the MENA is not producing the levels of human capital predicted by its GDP per capita and essential if it is to become more competitive in the coming generation.

MENA states are also deficient in power, measured by their provision of public security. Development requires domestic law and order and military defense against external enemies. Although MENA states invest disproportionately in security, they generally fail adequately to deliver it to their populations. In 2018 countries in the MENA were the world’s least peaceful. Of the world’s ten most dangerous countries in that year, five were in the region. About 90% of the MENA population lives in countries more dangerous than the world average, while almost 100 million live in five of the most dangerous. MENA residents, in other words, experience comparatively little security, are exposed to high levels of domestic and international conflict, and are compelled to support costly militarization which militates against order and security rather than providing it.

Chapter 7 assesses MENA state capacities to manage the economy, of which the most longstanding, vital measure is revenue extraction. Heavily dependent upon direct or indirect revenue from hydrocarbon exports and public foreign assistance, MENA countries extract less revenue from direct taxation than any other global region or comparator lower-middle and middle-income countries. On other measures of state economic management, including fiscal responsibility, prevention of capital flight and corruption, and containing informalism, MENA states perform below levels predicted by their GDPs per capita. Of these various measures, fiscal responsibility is the most crucial and is typically measured by budget deficit and public debt as a percentage of GDP. Of the 19 MENA countries for which data is available, only four had budget deficits that were below the average of all listed countries. In 2018, the average deficit for all MENA countries was 7.9% of GDP, a figure almost four times the maximum deficit permitted in the EU. Not surprisingly, with budget deficits of this magnitude MENA governments have accumulated substantial debt, the median level of which in 2019 was about 50% of GDP. If one excludes the major MENA oil exporters, however, the median debt is 88% of GDP, more than double the proportion considered safe by the IMF for developing economies.

Chapter 8 investigates the causes and consequences of regionalization, meaning socio-political interaction, without regionalism, which is the formation of effective transnational, regional institutions and organizations. The most important cause is that national governments form limited access orders closed not only to their own citizens, but to mutually beneficial, institutionalized relationships with other regional states. Unlike in other regions and most notably the EU, where independent economic actors, key of which have been the bourgeoisie and their economic enterprises, have been strong advocates of regionalism, in the MENA such actors are comparatively few, weak and more dependent upon government. MENA regionalism is also rendered more difficult by dependence on hydrocarbon exports and the associated lack of product diversification, hence limited complementarity. Intense regionalization and its implied threat to incumbent regimes has long militated against institutionalizing regional inter-state relations. The intensification of that regionalization into virtual regional civil war renders the prospects for effective regionalism ever more distant.

Chapters 9 and 10 review the survival strategies of the weaker and stronger MENA states, respectively. With the partial exception of Israel, all MENA states are under serious and sustained political and economic threat. Survival strategies are remarkably similar within categories of states determined by their capacity levels, which are in turn reflective of their histories. The MENA states with significant pre-colonial histories as national entities, including Egypt, Morocco, Tunisia, Iran and Turkey, have sustained governmental coherence in the face of various challenges, but as they rely ever more heavily on repression, so do their economic development prospects recede. Many of the MENA countries that lack significant pre-colonial histories of stateness are either failed or fragile states, now facing the most basic of challenges to states, which is to maintain order within their territory. Prospects for economic development in these states are dismal.

The MENA monarchies are seeking to diversify their economies but, under sustained pressure from rising populations and stagnant “rental” income, are in effect in races against time. The monarchy with the lowest GDP per capita, Morocco, is diversifying at least as successfully, if not more so, than its fellow monarchies. Finally, both Tunisia and Israel are outliers in that their survival strategies hold out greater promise for long-term economic development. But they too face substantial challenges, whether mobilizing economic resources while sustaining national political coherence in Tunisia’s case, or devising a strategy to peacefully integrate into the MENA in Israel’s.

This book, in sum, represents a return to the origins of political economy by exploring the political causes of economic outcomes. It argues that those causes are deeply embedded in historical and contemporary structural factors, so the prospects for dramatic improvements in the MENA’s economic performance are slim.