Wednesday, July 13, 2011

Eastern Europe vs Arab World

Unlike eastern Europe, all Arab countries (those with oil wealth and those without) have capitalist economies, in which prices and private enterprise play a big role. Yet it is a distorted, patriarchal capitalism, characterised by a dominant state, kleptocratic monopolies, heavy regulation and massive subsidies. This has fuelled corruption, stunted growth and left millions without jobs. High oil prices give petro-economies the wherewithal to counter discontent by dispensing largesse. Those without such wealth face a growing fiscal mess.

The economics of the Arab spring: Open for business? | The Economist

A good interpretation of the Arab Spring and the economic impact compared with eastern Europe example after communism.

So the Middle East’s economic transition could be a lot bumpier than
that of eastern Europe (which was itself a pretty rough ride at times).
The West’s strategy for assistance must change accordingly. Up to now
the focus has been on financial help: America has offered debt relief to
Egypt, the IMF has lent cash with few strings attached. That buys time
but does not promote reform. In future, aid should become more
conditional, aimed at helping private enterprise. And far more important
than cash will be the West’s willingness to offer freer trade and real
integration to the successful reformers and democratisers. Maybe not EU
membership, but something close.

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