Arab Spring and catch-22 scenario

The day after the recent crackdown on the Muslim Brotherhood in Egypt, three major western and multinational companies — oil major Royal Dutch Shell, auto giant General Motors and Swedish home appliances maker Electrolux — announced that they are suspending their businesses and restricting staff movement.
The move, which was in direct response to violent political developments engulfing Egypt, highlights the relationship between politics and economy once again.
Part of the turmoil that has characterized most of the Middle East region for more than two years now — and called Arab Spring — is attributed mainly to economic reasons.
Rising rates of unemployment and inflation, which are making it difficult for many to meet their ends, forced people to turn their attention to politics and politicians.
Politicians’ failure to come up with policies to address these issues and other growing problems are seen as the main obstacle and the answer was to push for a regime change.
With changes taking place in Tunisia, Egypt, Yemen and Libya at various degrees of violence, the turmoil is far from over.
This is because these countries have entered into an extended transitional period, where various political forces and players are yet to agree on the rules of the new game and settle on some form of legitimacy so as to focus attention on the crucial aspects of economy that was one of the main factors pushing people to the streets in the first place.
That uncertainty is well demonstrated in Egypt, the pivotal country and region, where an elected president was ousted exactly one year after assuming office.
Yet his removal complicates an already complicated situation in the country. And the announcement by the three major multinationals is a good indicator of that.
These companies are employing thousands of Egyptian workers and if that suspension of activity turns into a permanent one, the deteriorating economic situation will have only one way to go: more deterioration.
Available literature speaks usually of countries in such transition periods and the strong relationship between political instability and negative economic performance.
Political instability can have negative implications in terms of economic performance, reduced or negative GDP growth, low productivity, rising inflation and unemployment rates, and curtailment of foreign investments.
A prolonged political crisis could lead to harsher economic repercussions.
On average, these transition periods witness a decline in a short term of two to three years subject to time expansion. It depends on how soon authorities could take measures to introduce a national program or a road map to stem political instability.
Over this period, the GDP is expected to contract by anything between 1 to 7 percent and it may need up to five years to pick up again and start growing
Unemployment can grow by 2 percent annually at best, while foreign direct investments (FDI) can also drop between 10 and 40 percent during the turmoil and will need some five years to return to where it was in the first place before the revolution or uprising began.
It looks like a catch-22 scenario where political instability discourages businesses from focusing on their prime area of concern, which leads to poor economic performance. This situation itself could fuel more political instability.
Added to the complex situation is the fact that young people, who are hit hard by the worsening economic situation in terms of unemployment and rising inflation, are the first to take to the streets to represent the bulk of population, which adds more pressure on politicians to try to come up with solutions.
But such solutions have proved hard to come by now more than two years after the Arab Spring.
All four countries — Egypt, Tunisia, Libya and Yemen — are moving toward more political and security instability than toward settling their differences.
Part of the problem seems to be focusing on the type of the movers of these revolutions that exceed the conventional political forces of traditional parties.
Faceless young and active groups using social media efficiently to air their voices find it difficult to have a seat in the new political set up, which leads to more anger and a feeling that their revolution had been stolen, a feeling that helps in fueling political unrest more and more.
Part of the problem is that unlike what happened in East Europe, following the collapse of the Berlin Wall, the European Union was there, and ready to help and give guidance to lead the East Europeans into an agreed upon model of multilateral representative democracy, respect for human rights and rights of expression and association.
That was the case in the Arab Spring.
And that is why the G8 group came up with the Deauville declaration two years ago. It also made efforts to pass through this difficult transitional period with the help of a number of regional and international organizations. But these efforts are yet to deliver any tangible impact.