They're Still Waiting for their Bread, their Freedom, and their Social Justice
May 16th, 2012
May 16th, 2012
In many ways their request was simple. Bread. Freedom. Social Justice. Those are things most of us can agree are human rights. And in January of 2011 when protestors took to the streets in Egypt, and chanted “Aish, Horreya, Adala Egtema’eya” (“bread, freedom, and social justice”) they were calling not just for political reform, but for economic and social reform, as well. And while their slogan reflects the complex interdependence of those forces, none of them can be attained with chanting alone.
The advantage of political protests and uprisings is that they provide quick headlines. They can focus attention on a singular, isolated problem [a dictator, a war, a certain law], but they do not need to address—or agree upon—the solutions to the world’s complex problems. Now, after the uprisings and after the rulers have been deposed, Arab Spring countries have to put together the pieces. They have to confront those complexities. But over a year later, those pieces continue to be very disjointed and those complexities remain unsolved. Food riots have continued, inflation and unemployment have reached new peaks, and freedoms continue to be repressed.
Of course, dozens, even hundreds, of scholars have already addressed the whats and the whys of these challenges. But most have ignored the pressing problem of illicit financial flows, particularly in how their flows are both caused by and contribute to these challenges. Here’s my attempt to begin to fill that gap.
These challenges are not one size fits all. It’s difficult to make blanket-statements, even across somewhat analogous nations. For example, unlike other Arab Spring countries, Tunisia has achieved sustained growth since 1960 and has largely satisfied the requirements of a structural economic transformation from and agricultural-based economy to a more diverse one based on manufacturing and services. Libya, on the other hand, has a relatively high GDP as a result of oil revenues, but is overly dependent on revenues from oil exports.
But we can make some generalizations. For example, while of invaluable political consequence, the Arab Spring itself has in part imposed costly economic and financial challenges on Middle Eastern nations. Political uncertainty has driven down the numbers of investments and tourists and driven up the affected nations’ cost of borrowing on the international financial market.
In a region already marred by economic and financial challenges, these developments pose an unwanted additional trials. All of the Arab Spring nations need to diversify their economies and strengthen their private sectors. Malik and Awadallah (2011) have posited the singular failure of Arab countries is that they have been “unable to develop a private sector that is independent, competitive, and integrated with global markets.” And an overwhelming portion of the Middle East’s population is composed of young adults under 30, many of whom are unemployed. In fact, in order to reach full employment, MENA nations must create an astonishing estimated 100 million jobs. The root of many of these structural problems lies in these countries underdeveloped financial sector—also a side effect of illicit financial flows.
Of course the Arab Spring itself occurred in large part occurred as a result of corruption, income inequality, and greed by the political elite. Those are the very forces that drive illicit financial flows. They are some of the core reasons that between 2000 and 2008, Egypt lost US$6 billion per year to IFFs, Tunisia hemorrhaged US$1.16 billion, and the family of former dictator of Libya, Moammar Ghadhafi’s held an estimated $33 to $60 billion, in what are likely the proceeds of corruption, in financial centers around the world.
But, paradoxically, while ousting these dictators was necessary, it is not sufficient to stem the flows of illicit money. In fact, in the short run, removing them from power actually may increase these nations’ loss of capital. To some extent, we’ve already seen evidence of this phenomenon. Last week, the Money Laundering Reporting Office Switzerland reported the number of reports on suspicious money transactions in Switzerland increased some 40 percent in connection with Arab Spring countries last year.
The reasons for this are simple. Without the political and financial reform necessary to stem the flows of illicit capital, they will continue unhindered. It is the underlying macroeconomic conditions, the laws, the culture, and the greed of a wealthy elite that drive these flows. And while a country’s leader is critical to setting these conditions, he or she is not the absolute.
So now that Ben Ali of Tunisia, Mubarak of Egypt, and Qaddafi of Libya are officially gone, we must address the underlying drivers of illicit financial flows. If they do not, we may well see an increase of these flows in these countries post-Arab Spring. Otherwise, although the headlines will not reflect it, nothing will be solved. The citizens of these countries will continue to be wanting in their need for bread, for freedom, and for social justice.