The Politics of Sustaining Growth in the Arab World: Getting Democracy Right

Arab growth has been both unsustainable in the long run as well as characterized by high short run volatility, especially in the period affected by the massive oil price shocks since 1985. This paper seeks to explain these two devastating features of the region’s growth. Our analysis corroborates the view, most notably articulated in the work of Dani Rodrik, that this phenomenon is not just a failure of adjustment policy in the technical sense. The lack of sustainability of Arab growth, our evidence suggests, is in fact a symptom of a much deeper phenomenon, reflecting the interactive effects of the susceptibility to large shocks, the relatively high degree of “latent” conflicts in several Arab societies and the limited institutional capacity for resolving social conflicts due to the appalling standards of democracy in the region. The latter motivated the second pivotal question addressed in this paper, which asks why the region has lacked the right political institutions for sustaining growth. Drawing on the insight of a recent work on determinants of democracy in the Arab world (Elbadawi and Makdisi, 2003), which emphasizes the role of intraand inter-state wars and oil dependency in explaining the “freedom deficit” in the Arab world, this paper argues that “getting democracy right”(i.e. real and robust democratic transformations) would require resolution of the violent conflicts afflicting the Arab world today. Moreover, the paper draws out the implications of the recent American-sponsored Greater Middle East Initiative, claimed to be aimed at promoting democracy and development, but believed to have been deliberately silent on addressing the Arab-Israeli conflict.