Considering the financial-economic crisis in Lebanon, the state of war-ravaged Syria, the impact of sanctions on Iran and the humanitarian crisis in Yemen, it is surprising to see many Middle Eastern countries score relatively well on the Human Development Index (HDI) between 1990 and 2019. The HDI is a focused measure of development that is based on life expectancy at birth, levels of education and standard of living.[4] Eight of the region’s 15 countries rank in the ‘very high human development’ range. In addition to all the Gulf countries, this also includes Turkey and Israel. With Iran ranking in the ‘high human development’ range, together these nine countries are home to the vast majority of the region’s inhabitants.[5]
Low levels of extreme poverty – at first sight
According to the World Bank, the region also featured relatively low levels of extreme poverty between 1990 and 2017 if one applies the international poverty line of US$1.90 per day (notwithstanding increases in 2015 and 2018).[6] In this period, regional poverty rates hovered between 0 and 8 per cent of the population in many countries, with Yemen being the negative outlier. It should be noted that the impact of Covid-19, US sanctions on Iran and Syria and the full extent of Lebanon’s crisis are not reflected in these figures. For example, the United Nations Economic and Social Commission for Western Asia (UN ESCWA) has since estimated that over half of Lebanon’s population can be classified as poor or extremely poor today, with the country’s middle class shrinking rapidly.[7] The roughly 11 million IDPs and 7 million refugees across the region form another group of poor and vulnerable individuals (slightly over 5 per cent of the entire population of the Middle East as defined in Box 1).[8]
Such cursory examination of well-known and often-used international data might lead one to think that the region has proven to be rather resilient in the face of crises and conflict and that authoritarian governance systems managed to generate substantial levels of basic development. Yet, such observations are typically based on aggregate data that disguise large intra-country differences (in case of national-level data), large differences between countries (in case of regional-level data), data of questionable quality or data that prioritise quantity over quality (e.g. years of education). To begin with poverty, the key risk to social stability is less the number of people currently classified as poor, but rather the high level of vulnerability to shocks that can tip populations into sudden poverty. Figure 1 illustrates the issue. If one takes US$5.50 per day as the poverty benchmark rather than US$1.90 per day (the international poverty line), the percentage of the region’s population that is poor explodes from c. 7 per cent to c. 44 per cent (2018). This finding is much closer to UN ESCWA’s observation that about two-thirds of the Middle East’s total population – around 250 million people – are poor or vulnerable when considering deprivation beyond income (including health, education and living standards).[9] According to the Arab Barometer, between 70 and 85 per cent of families across the region cannot afford to cover basic monthly needs or can only do so by borrowing or via aid.[10]
As Figure 1 shows, this situation has been the norm over past decades, i.e. large parts of the population across the Middle East have lived under precarious conditions for a long time. Further shocks that will jolt this state of affairs are already in the making. They include the tail-end of the Covid-19 pandemic, the unresolved war in Syria, the state of the Lebanese and Turkish economies, the gradual revival of IS, the unresolved Palestinian question and the uncertainty of a return to the nuclear deal by the US and Iran.
Source: World Bank, World Bank database, online (data retrieved on 15 September 2021).
Moreover, poverty is becoming entrenched. Recent studies show that a poor family today is likely to remain poor for several generations due to the inability of the economies in the region to generate new (good-quality) jobs in sufficient numbers.[11] Low labour productivity remains a particular and persistent challenge due to the dominance of capital-intensive oil sectors and overstaffed public sectors.[12] Low levels of educational attainment also play a role in entrenching poverty. International test scores show that about half of all public school pupils do not master basic reading, writing and mathematics.[13] This helps explain why nearly 60 per cent of the available labour force works in the informal sector.[14] Such findings also challenge the HDI by suggesting that the quantity of education – which the HDI measures – cannot be considered as a proxy of the quality of education.
Inequality and the Middle East as synonyms
The socioeconomic situation worsens when one considers inequality across the region as a relative measure of wellbeing next to poverty as the absolute measure of wellbeing. Both the World Bank and UN ESCWA note that (too) little is known of the issue and that by some measures the Middle East appears to show low levels of inequality. Nevertheless, on the basis of 2019 national income distribution data, the World Inequality Database (WID) finds that the top 10 per cent of the Middle East population gets 51–83 per cent of national income while the bottom 50 per cent gets between 3 and 14 per cent.[15] Figure 2 shows similar results that point to the Middle East as one of the world’s more unequal regions. When the aperture of the analytical lense widens to consider inequality of opportunity in addition to inequality of outcome, or when one applies a more integrated framework of inequality beyond income, the picture worsens even further.[16]
Sources: Assaoud, L., Inequality and its Discontents in the Middle East, Carnegie Middle East Center, 2020; Alvaredo, F. et al., ‘Measuring inequality in the Middle East 1990-2016: The world’s most unequal region?’, Review of Income and Wealth, 2018, online.
Stark inequality within countries tends to create and/or reinforce existing rural/urban, gender and ethnic divides.[17] Even in the Gulf states, massive disparities in income and wealth exist, especially between nationals and foreign residents (mostly low-paid migrant workers that the kafala system keeps in a form of modern servitude).[18] Inequality between countries in the Middle East creates regional relations of clientelism, with poorer states typically beholden to richer states in one or several dimensions (e.g. Egypt ceding the Red Sea islands of Tiran and Sanafir to Saudi Arabia in exchange for loans and central bank credit). This increases competition between the region’s main powers by reducing the foreign policy autonomy of states such as Jordan and Bahrain, but also Syria and Lebanon.[19]
Limited possibilities for escape through salaried work
In the face of high levels of poverty and inequality, what about opportunities to improve one’s socioeconomic status through formal labour? Fairly high levels of unemployment in parts of the region show that this is difficult (see Figure 3). Only the Arab rentier states along the Persian Gulf and Israel have relatively low levels of unemployment. With the exception of Saudi Arabia, these countries have fairly small populations and lack inclusive growth due to the dominance of the oil sector and low levels of productivity, with the exception of Israel.[20]
Source: International Labour Organization, ILOSTAT database, online (data retrieved on June 15, 2021).
The International Labour Organization notes that unemployment rates have not improved in most Middle Eastern countries since the Arab uprisings of 2011.[21] This is despite the fact that better work prospects were a key demand of protestors and that governments throughout the region have used public sector employment to assuage social discontent. In any case, goverments face a double dilemma, which indicates that the limits of this approach are nearing: it is both too expensive to bring a significant percentage of new entrants into the public sector labour force each year and high public payroll bills also reduce the scope for investment needed to diversify the economy.[22]
Given the demographic composition of many Middle Eastern states, youth (un)employment represents an especially difficult policy challenge with numbers roughly double those of general unemployment figures. From 2011 to 2019, youth unemployment averaged around 17 per cent, with increases occurring after 2019.[23] This points to the problematic nature of formal labour markets that are characterised by limited access based on connections (making birth and social class important variables of success) and a sharp divide between the ins and outs in terms of protection. Youth (young women and young men) and women (of all ages) have the lowest levels of access and the poorest prospects. In the relatively young demographies of the region, these two groups represent over half the population.
On a final point, it is worth noting that unemployment figures relate to the formal economy and only represent a small part of the problem. In most of the Middle East, the informal economy is larger than the formal economy and employs more people. In 2014, the World Bank estimated that the average MENA country employs 68 per cent of its labour force in the informal economy,[24] which in turn accounts for about one-third of GDP.[25]
Corruption as a sign of contempt
It is in the context of high levels of vulnerability to poverty, significant inequality and poor (formal) labour market prospects that corruption acquires greater salience. Specifically, it comes to be perceived as an attribute of self-enriching elites – already wealthy to begin with – and a symbol of contempt for the many that live under challenging day-to-day circumstances. According to Transparency International, 9 out of 14 countries in the Middle East score below 50 in the Corruption Perception Index 2020 that uses a scale of 0–100, with Denmark scoring highest at 88. Figure 4 shows the scores. Syria, Iraq, Iran, Yemen and Lebanon are plagued by very high perceptions of corruption, ranking among the lowest-scoring countries in the world.[26] But Turkey and a few Gulf states also score relatively poorly, i.e. feature significant perceived levels of corruption. Compared with other regions of the world, the entire Middle East fares badly and shows few signs of improvement since 2012.
Note: The vertical axis indicates the scores of individual countries on the Corruption Perceptions Index on a scale of 0 (high perceptions of corruption) to 100 (low perceptions of corruption). The highest-scoring countries are New Zealand and Denmark that score 88 out of 100 (2022).
The prevalence of corruption is linked to the region’s abundance of authoritarian political orders due to the fact that the close and opaque connections between ruling-, business- and security elites facilitate grand corruption.[27] For example, research shows that increases in the price of oil in the Gulf states translate quasi-automatically into increases in the proportion of hidden wealth as elites systematically capture part of national revenues for private use and place it in offshore accounts.[28] Similar problems of rent capture arise in countries with high levels of foreign aid, large financial sector flows, large real estate sectors (e.g. Turkey) and even remittances. Reducing corruption typically requires higher degrees of professionalism and neutrality in the civil service, greater media freedoms and more dynamic civil societies than authoritarian elites are prepared to tolerate.[29]
Gulf versus the rest of the Middle East?
It is not surprising that the Arab countries bordering the Persian Gulf (except Iraq) score better on nearly all indicators reviewed so far than the rest of the Middle East. Reasons include first and foremost their natural resource wealth, but also their more consolidated and more stable political orders, more capable bureaucracies and relatively small populations (less so in Saudi Arabia).[30] These factors help to translate abundant oil dollars into higher levels of economic prosperity for citizens – with rich elite pickings on top.[31] While Iran and Iraq have similar natural resource wealth, they feature larger and more diverse populations than the Gulf states, less effective bureaucracies, and their political orders are less consolidated. However, the quality of macro-economic and social data in the region is poor[32] and falsification (or data polishing) is a likely practice in quite a few places.[33] For example, it is noticeable how little upward or downward development there is in the poverty, inequality and perception of corruption data despite the occurrence of events that would lead one to expect sharp deterioration as well as some improvement. In consequence, poverty, inequality, unemployment and perceptions-of-corruption gaps between the Gulf states and the rest of the Middle East could well be smaller than what is commonly assumed.
Outlook
Over recent decades, a significant part of the Middle East population has been living in poor conditions – defined in terms of poverty, inequality, unemployment and (perceptions of) corruption – with no obvious way out. It is likely that the compounded effects of the Lebanese crisis, several conflicts (Syria, Turkey’s Kurdish areas, Iraq, Yemen), sanctions and Covid-19, among other issues, will tip more people into greater misery. What is less clear is whether such a situation will deepen existing clientelist relationships and practices; create rifts within ruling elites; stimulate greater protests, provoke radical revolutionary movements or induce extremist religious militancy; or even invite greater foreign intervention (e.g. Iran in relation to Shi’a populations). For such answers, we must turn to analysis of the region’s political orders and levels of geopolitical competition.