From Revolution to Renaissance – The Case for Modernizing Business Enabling Environments

 

From Revolution to Renaissance – Changing the Cultural Landscape of Economic Life in the Arab World

The fall of Zine el-Abidine Ben Ali and Hosni Mubarak in the face of popular uprisings in Tunisia and Egypt simultaneously created a sense of great possibility and uncertainty. Continuing resistance across the region in the face of brutal repression and unrestrained violence confirms that we are witnessing something fundamental and historic. It is the beginning of a redefinition of the relationship between the state and the individual in the Arab world. As the Arab Spring matures into its summer, fall, and perhaps even winter, it is impossible to judge how this tectonic shift in the political and social landscape of the Middle East and the Maghreb will play out. Despite this, there are opportunities to begin laying a foundation that will help countries in the region move from revolution to renaissance.

In a singular act of rage and protest, Mohamed Bouazizi gave voice to the frustration and alienation of the Tunisian people that launched a revolution. Days later, Egyptians launched their own revolution. Those in Bahrain, Jordan, Libya, Syria, Yemen, and elsewhere followed suit. The simple fact is that no one saw it coming. Yet it came in torrents. The inspiration for these revolutionary movements is not ideological, but rather, quite practical. It speaks to the basic human need for dignity, respect, and the freedom to earn a living and care for one’s family. This is the great awakening of the Arab Spring. It is a popular rejection of a political system designed to advance and perpetuate the privilege of a few at the expense of the many. Once this yearning finds expression in the collective consciousness, is it possible to beat, imprison, and torture it out of the population?

The historic developments underway in the Arab world represent a change in expectations about the fundamental bargain between the state and the individual. Formerly, the state guaranteed security, stability, and a modicum of social protection. In exchange, the citizen was to remain docile, compliant, and quiet. Well-practiced at employing a variety of instruments of reward, control, fear, and coercion, the state’s ability to enforce this bargain seemed unshakeable. As the Arab Spring uprisings destroy the edifice of state invincibility, there is nothing immediately at hand to stand in its place. In Egypt, for example, the military’s influence remains dominant, but its true intentions remain unclear. It is not yet clear how this saga will play out.

The term “revolution” as used here denotes “a fundamental change in the way of thinking about or visualizing something.” What is spreading across the Arab world is a radically new way of thinking about the state-citizen relationship in which the needs of the citizen ultimately define and drive the political agenda. This may, or may not, find its expression in democratic forms similar to the Turkish model. It is likely that this revolution will lead to rather different outcomes for different countries depending on the unique circumstances of each. For example, it may be that in Jordan and Morocco a transformation of accommodation is already underway. Elsewhere, the opposite impulse is playing out as tyrants resort to brutal repression and indiscriminant violence.

The tearing down of despotic regimes is a necessary first step in a revolutionary process. To achieve a stable and prosperous future, however, a second revolution must take place - one that fundamentally changes the conduct of economic life in the Arab world. This second revolution has three elements. First, it requires a fundamental change in the nature of the relationship between the state and the economy. Second, it requires a change in the character of how firms do business with each other. Third, and perhaps most significant, it requires a transformation of the business culture of how firms do business.

The “demonopolization” of state control over the economies of the region is long overdue. For decades, multilateral organizations, bilateral donors, academics, politicians, intrepid business leaders, and others have called for less state intervention in the economies of the region. Elites routinely promised and then undermined incremental reforms such as partial privatization of key sectors by asserting effective control through private means. It is by no means shocking that virtually all key sectors of the Egyptian and Tunisian economies – from agriculture to transportation – are controlled by those connected to the regime either by familial or political ties. A systematic mapping of the interlocking state ownership structures within these economies is a necessary first step toward an orderly, transparent, and socially equitable process of national-scale privatization. As we learned in the aftermath of the collapse of the Soviet Union, however, mass-privatization without effective mechanisms of governance, transparency, and accountability can lead to theft on a mass scale.

Changing the culture of business-to-business dealings requires a change in the rules. The rules as currently written and interpreted favor the elites. The second revolution is about changing the rules and making the enforcement mechanisms actually work. Business environments in which dealings are heavily relationship driven serve to isolate rather than protect. Economies dominated by family owned businesses tend to mute competition to preserve group harmony. Where organizational control and decision-making are concentrated in the hands of a single, powerful executive, the scope, and scale of business growth is limited to that individual’s effective span of control. Limited transparency in financial reporting and uncertain dispute resolution mechanisms increase the risk and therefor the cost of doing business. All of these circumstances are well known. Analyzed and discussed for years, now is the time tackle these issues head on. While these reforms are essential and overdue, they are not nearly as important, or as difficult, as changing the business culture of the firm level. It is only by addressing this third challenge of the second revolution that the promise of an Arab renaissance can be truly unlocked.

A business culture founded on the assumption that workers cannot be trusted is self-limiting. Similarly, a business culture that discourages creativity, initiative, and risk-taking is destined to second-rate status in today’s global economy. The third stage of this economic revolution is clearly the most difficult. While the first two discussed above can happen within a decade, changing the culture of business in the Arab world will take a generation or more. The good news is that this process is already well underway; reducing state intervention and increasing transparency and accountability will only accelerate this trend. As jarringly difficult as it will be, modernizing labor laws will increase labor mobility; ending gender marginalization will lead to increased productivity; doing away with lifetime employment for civil servants will improve public services; and building stronger linkages between the education system and the business community will produce workers better able to meet the demands of the global marketplace.

What would an Arab economic renaissance look like? It is just as envisioned by Mohamed Bouazizi. It is a world based on respect for civil rights. It is a world where a humble man can feed and care for his family. It is a world with a promise of a better future.

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