Posted by Ehsani on Saturday, August 11th, 2012
This morning, Mitt Romney picked Representative Paul Ryan as his running-mate as the Republican party attempts to win back the White House from President Obama.
This choice is noteworthy because it will make the economy and the country’s fiscal challenges the focal point of this election. Mr Ryan is the current Budget Committee Chairman. The upcoming election is unlikely to be about Mr. Obama’s color or Mr. Romney’s religious beliefs.
Why is this important or relevant?
As many readers know, I have been highlighting the importance of economics for years when it comes to Syria. Following the previous note entitled “Could Syria’s Current Predicament Have Been Avoided Over A Decade Ago?”, a number of readers thought that the post was too simplistic. Surely, one cannot blame the current crisis on the failure to allow the Damascus Spring to flourish during 2001.
It is extremely difficult to agree on the main factor that led to the Syrian crisis. Over the past 17 months, several reasons have been offered. The list includes:
-Sunni-Shia (Alawi) sectarian divide
-Syria’s position with respect to Iran.
-Breaking the resistance.
-The heavy handedness of the security apparatus.
-Lack of economic opportunities for vast majority of the populace.
The above list is by no means complete of course. As the regular readers of this forum recall however, I have long maintained that issues relating to the lack of economic growth constitute the dominant factors behind not only the Syrian uprising but those in the region as a whole.
Insufficient economic growth coupled with widespread corruption (I consider both related) is a lethal combination. In such an environment, the cake that is made up of yearly income/production is too small to be shared by the majority of the population. Without expanding the size of the cake, the ranks of the unemployed will swell and incomes will stagnate and fall in real terms. Incomes will not be able to keep up with both inflation and a fast growing population. This important topic was addressed in a post six years ago this month.
Back in August of 2006, I wrote a “Personal Memo” :
The key points discussed in the note are:
“Syria is made up of two separate countries: Syria 1 which contains close to one million people and Syria 2 which contains the remaining 19 million.
Syria 1 is made up of the affluent, highly connected industrialists, merchants and very high Government officials. Given the high standard of living of this group, one would expect them to support the regime and the current status quo. While most may admit that that progress has been slow, they are quick to point that given the circumstances, the country is on the right track. They highlight their latest cell phones, home and office Internet connections as well as their brand new cars as irrefutable signs of the economic and social advances that the country has been experiencing as of late. Seen from their prism, the Syrian economy seems prosperous judging by the superb outdoor dinners, number of servants, lovely homes, fancy cars, latest cell phones, rising land values, and monopolistic businesses.
Life could not be more different for the 19 million people of Syria 2. It is clear that this silent majority has suffered the brunt of this grave economic mismanagement. This is evident in this group’s salary levels. If they were lucky enough to have jobs, salaries of this group is likely to be around Syp 10,000 ($200) per month. Their average family size is 6-7 (four to five children).
The vast majority of the population is likely to suffer even further going forward. Though inconceivable, their children may fare even worse than their horrific $6 payday. The population explosion has resulted in scores of unemployed men walking its major cities. Those residing in the rural part of the country have fared even worse. Their decision to locate to the big cities has made things even worse. It is my conviction that this regime cannot reform fast enough to arrest the decline in its economy and the standards of living of its citizens.”
To be fair, the above challenges are not unique to Syria. The demographic challenge covers the whole region. The oil producing region of the Middle East is blessed with staggering earnings from energy production and exports. This is likely to delay their day of reckoning. The Kingdom of Saudi Arabia reportedly spent an extra $65 billion last year to fend off any hints of domestic discontent. The none-oil producing countries of the region simply don’t have anywhere near such financial resources to do the same. For countries like Egypt, Yemen and Syria to have a chance, they need to engineer China-like economic growth rates in order to survive. Without such growth, their young populations will keep revolting for years to come.
I will conclude with a another short article that I wrote back in the fall of 2010 following the events of Tahrir Square and prior to the start of the Syrian uprising:
“In the twenty-five years between 1980 and 2005, Yemen’s total fertility (children per women) averaged 7.49. Iraq’s was 5.67. Saudi Arabia, Syria, and Egypt averaged 5.42, 5.19, and 4.25 respectively. In contrast, the United States and Western Europe averaged 1.96 and 1.56. Over the same period, real economic growth in the Arab world was largely stagnant. When populations double every twenty-five years and real incomes stay constant, future revolutions are baked in the cake.
Economic reforms like those offered by the political establishment lack the speed or vigor to match the droves of young men waiting to enter the region’s labor force. The region’s official unemployment rates mask the severity of the problem. Close to 40 percent of the population is under the age of fourteen and they will soon join the labor force. Furthermore, women’s labor participation rates are in the teens, the lowest in the world. This is also likely to increase. Consequently, real economic growth in the region must match Chinese levels—and fast. With no vibrant industrial policy, insufficient energy and renewable water resources, an outmoded education system, and median house price-to-income ratios close to ten (the United States is at three), Arab countries are riding their Titanics straight into their respective icebergs. Tunisia and Egypt are only the beginning. Yes, the Arab world could do with less corruption and more democracy and freedom, but none of this is likely to matter. The region needs to create between eighty and ninety million jobs over the next twenty years. This is 12,500 jobs a day.
Expect the Tahrir Square of every Arab capital to occupy our evening news for years to come.”