Peace and democracy in the Middle East: the constraints of soft budgets.

• Author: Anderson, Lisa
• Position: Continuity and Transformation: The Modern Middle East

On 13 September 1993, life-long foes Yasir Arafat, Chairman of the executive committee of the Palestine Liberation Organization (PLO), and Yitzhak Rabin, Prime Minister of Israel, signed an agreement to "put an end to decades of confrontation and conflict ... and strive to live in peaceful coexistence and mutual dignity and security ...." To this end, they agreed to establish an "elected Council for the Palestinian people in the West Bank and the Gaza Strip" and declared that "in order that the Palestinian people in the West Bank and Gaza Strip may govern themselves according to democratic. principles, direct, free and general political elections will be held for the Council...."(1)

For political scientists no less than for political practitioners, peace and democracy often seem to be natural partners. We are told that democracies do not go to war with each other, and the prospects of armed conflicts are said to be further enhanced by the high profile of the military in many non-democratic regimes.(2) Skeptics were quick to question the commitment of both the Israeli and the Palestinian leadership to democratic government in Palestine, however, even after the conclusion of the agreement. As Edward Said, one-time member of the Palestine National Council (PNC), wrote:

Will there ever be truly representative institutions? One cannot be very sanguine, given Arafat's absolute refusal to share or delegate power, to say nothing of the financial assets he alone knows about and controls.... Alas one can already see in Palestine's potential statehood the lineaments of a marriage between the chaos of Lebanon and the tyranny of Iraq.(3)

These concerns were not allayed by the draft of the "provisional basic law" for the transitional period that was later envisioned in the Oslo Accords. The Palestinian human-rights lawyer Naseer Aruri noted "a serious question about whether the new constitution protects the Palestinian people against autocratic rule." There was also ample evidence that a concentrated, personalistic power structure was envisioned in which, as stated in the document, the basic law "must not infringe [upon] the tasks and responsibilities of the PLO."(4) Although the fate of democracy in Palestine was not sealed when the Israelis evacuated Jericho and the Gaza Strip in May 1994, its prospects appeared dim.

Elsewhere in the Arab world, advocates of democracy have been faced with similar challenges. In Algeria, for example, the government steadfastly refused to entertain calls for democratization or liberalization, and instead waged a war against its Islamist opponents that cost more than 40,000 lives in the 3 years after parliamentary elections were cancelled in 1992. The Tunisian government jailed the country's leading human-rights advocate when he declared his candidacy in the country's presidential race in 1994; the incumbent President, who had come to power in a palace coup 7 years earlier, preferred to run unopposed, and claimed 99 percent of the popular vote. Neither Syria nor Iraq, nor most of the countries of the Arabian Peninsula, bothered with even the trappings of democracy, while a number of those that did - Lebanon, Algeria, Yemen and perhaps even Egypt - seemed to see their democratic experiments degenerate into uncontrolled violence.

Why have the Middle East and North Africa been so inhospitable to democratic change, when much of the rest of the world seems convulsed by liberal revolutions? Many observers attribute the region's reluctance to democratize to its culture and traditions, particularly Islam. As Elie Kedourie writes, "democracy is alien to the mind-set of Islam."(5) Yet the repeated demands for human rights, political liberalization and democratic government in the Arab world in the 1980s and 1990s - demands which actually yielded contested parliamentary elections in Morocco, Algeria, Egypt, Jordan and Yemen - belie uniform hostility to democracy. Clearly, a substantial number of Arab Muslims supports the adoption of democratic procedures and institutions.

The resistance of most of the governments in the Middle East and North Africa to democratization is striking, however, and if a common Arab and Islamic culture cannot account for the divergent attitudes of governments and their citizens, the reluctance of these governments in the face of the support of much of the citizenry for more liberal or democratic politics must be derived elsewhere. The argument advanced here suggests that the explanation may be found in the political economy of the region. The nature of the insertion of these states into the international political economy - notably the widespread, indeed endemic, reliance of the governments on what political economists call "soft-budget constraints" - provides a powerful explanation of the strength of authoritarian governments and the frailty of their democratic opponents.

Many factors have contributed to the making of the political regimes of the developing world. They are partly reflections of local cultural predispositions, partly remnants of imperial impositions and partly the results of deliberate choices by domestic and international policy makers. While not denying the complexity of political causation, the argument proposed here privileges a particular and quite specific characteristic of non-market economic transactions - the soft-budget constraint - in order to highlight its significance in both the domestic and international political economy of the developing world in the late 20th century. The magnitude of non-market transactions in any given set of economies varies, even among the developing countries, and therefore the significance of soft-budget constraints in shaping politics also varies. As I hope to show, however, for most of the developing world, and particularly for the Middle East and North Africa, non-market transactions have been very important not only in the domestic economies but also internationally. These countries have moved from subsistence and local exchange to participation in the so-called "world market" in an historically specific pattern of integration that has been marked by the mediation of exceptionally strong political imperatives and enterprises. Because the character of political resources is so intimately bound to the nature of economic extraction, an assessment of the prospects for liberal or democratic politics among the Palestinians and throughout much of the Middle East - and perhaps elsewhere in the developing world as well - requires that we examine the interaction of their economic and political relations with the rest of the world.

Financing Regional Stability in the Arab World

The modem states of the Arab world reflect the interests and policies of the great powers of the 20th century - Great Britain and France before the Second World War and the United States and the Soviet Union thereafter. By and large, European imperialism came relatively late to the Middle East and North Africa and was characterized by a preoccupation with the geostrategic - as opposed to economic - value of the region.

To ensure low-cost access to the region and to guarantee their global strategic interests, the European powers first attempted to identify and support compliant local political authorities in protectorates of varying degrees of formality. When the regional political system collapsed with the demise of the Ottoman Empire in the First World War, the European powers reconfigured the political and economic landscape of the region, inventing new states and imposing European-style administrations, thereby creating a regional system that would secure European political interests with relatively little investment of imperial resources.(6)

Because of the high priority accorded to geostrategic concerns, neither the imperial powers nor their Cold-War successors were highly motivated to invest in the region. With the exception of oil, private foreign investment was low throughout the 20th century. Industrialization was discouraged - indeed, Charles Issawi argues that the first half of the 20th century was a period of "deindustrialization" - and by many conventional indicators, the Arab world lagged behind even other developing regions.(7) By the final quarter of the century, the region's profound reliance on the industrialized countries was virtually unrequited, and the region was conspicuously absent from the growing integration of the world economy. In the late 1980s, the Middle East was a minor trading partner of the industrial powers (the U.S., Europe and Japan), and if oil were factored out, export figures would fade into insignificance. Indeed, in 1989 and in 1990, just before the Gulf War, foreign investment in Malaysia alone approached that for the entire Middle East, just over $2 billion a year.(8)

Despite the relatively minor contribution of the region's economies to international trade, however, international finance and investment have been essential to these states or, more precisely, to their regimes. From their inception, Arab states have derived substantial government revenues from sources outside domestic production, typically from what have been called exogenous rents. The importance of this profile first became apparent in the large oil producers in the region and was described in the literature on the "rentier state."(9) In fact, however, it has proven to be only a subset of a more general pattern of international rent-seeking on the part of local governments. In the early days of oil exploration and production, Middle Eastern governments quite literally drew rents - or royalties - from the exploration and exploitation concessions they granted to foreign oil companies. Over time, each government took increasing control of the oil operations within its borders, but, as the title-holder of all subsoil property rights, the state remained the recipient of substantial revenues that far exceeded domestic productive...