Samuel Cohn: Global Social Trends

A great deal of the conflict we observe in the Middle East is popular protest concerning bread and butter issues. Sectarian disputes over religious issues do exist, as do ethnic conflicts and simple power struggles between the supporters of political rivals. However, a lot of the unrest in the Middle East involves the economic well being of poor people. When poor people are taken care of, they tend to be apolitical and peaceful. When poor people are having resources taken away from them, they defend themselves. To do so, they join those political allies who promise to make them whole.

For a very nice discussion of these issues, see Raymond Hinnebusch’s “Rise and Decline of the Populist Social Contract in the Arab World” in World Development 2020. “Populist social contract” is not a particularly meaningful term in American politics. It was an extremely important concept, historically, in Middle Eastern politics. Where it existed, it was usually accompanied by social stability. Where it did not exist, there was often social turmoil. Hinnebusch provides a very complex and nuanced account of the rise and fall of these populist social contracts. He is a thorough and well-informed scholar. When he says that a change in a given country involved the simultaneous interaction of twelve different social causes, you should believe him. In the interest of brevity and clarity, I will vastly simplify his story. Even if his history of the Middle East is reduced to rudimentary elements, that basic version tells you a lot about uprisings and internal conflict in the Arab world today.

A populist social contract was a quid pro quo arrangement between a government and its local population. That population would keep the current regime in office. In return, the rulers would provide generous social and economic protection to the middle and lower classes. Such arrangements have long been a feature of Middle Eastern governance. Most readers probably remember the story of Joseph in the land of Egypt where he prophesized seven years of good crops and seven years of famine. The Pharaoh may have been all powerful – but he knew he was expected to stockpile grain during the seven good years because he would have to distribute food to his people during the seven lean years.

The exact composition of benefits varied from one nation to another. But they typically included welfare payments, subsidized food, subsidized gasoline, subsidized housing, public medical care, restrictions on employers’ right to fire workers, and widespread access to land and water for farming populations and the provision of patronage jobs. Some of these were modern innovations. Public medical care and subsidized gasoline only became relevant in the twentieth century. Others of these were the promise to protect longstanding customary rights. Farmers had traditionally the right to graze their herds on common land. Local guilds might have had a customary monopoly on practicing their trade. The ruler’s popular support depended on maintaining those privileges.

A key feature of the populist social contract was a public commitment to protect populations from adverse economic events. Food would be provided in the event of a famine. Jobs would be provided in the event of a depression.

Around the 1990’s, all of this disappeared. Governments largely abandoned the populist social contract. Government protections disappeared. Ruling elites allied themselves with cronies in the business class and with international capital. There was a huge sell-off of public assets to private interests, both foreign and domestic. Government expenditures were cut – including most forms of benefits to the poor. There were reductions in access to both education and healthcare. Wealthy private interests were allowed to privatize land that had previously been open to all users – and to monopolize sources of water that had previously been generally available. Members of both the middle classes and lower classes found themselves newly destitute. The disappearance of benefits and the apparent selling out of the country to political cronies and foreigners generated massive amounts of anger and discontent. With the government no longer taking care of people in distress, people turned to whatever philanthropic organizations they could find. These tended to be religious. In the old days, to get economic support in times of trouble, you had to be a supporter of the current regime. In more recent times, to get the support you might need, you had to be a pious and loyal member of your mosque. Secular political parties and groups became less important. Religious political groups became everything. The government welfare programs of the fifties, sixties and seventies had brought political stability to the nations in the Middle East. When those government welfare programs were taken away, social discontent became very severe. Religious organizations stepped into the void, creating the politicized Islam we see today.

What brought on the change from governments allying with the poor to governments allying with the wealthy and with international banks and corporations? Essentially, the political power of bankers changed. In most periods of history, bankers are extremely influential in both national and international politics. In the nineteenth century for example, British banks made most of the fundamental economic development decisions for both Latin America and the Middle East. In one extreme example, in the late nineteenth century, a coalition of British and French banks were given full legal power to run the Egyptian economy and supervise all Egyptian state expenditure due to the Egyptian government being overly indebted. (On the British and French financial control of Egypt, see David Landes’ Bankers and Pashas: International Finance and Economic Imperialism in Egypt. Harper, 1958)

The wealthy in general, and bankers in particular, are not supporters of populist social contracts. Social contracts are financed by taxes on the rich. Social contracts in the Global South are often financed by taxes on foreign banks and corporations. The wealthy and foreign capital were paying the bills for the generosity of local strongmen.

Furthermore, populist guarantees of traditional rights limited the expansion opportunities of the upper classes. Creating large farms to jumpstart export agribusiness was hampered by legal protections of the land rights of smallholders. Water supplies for these large farms were limited by legal protections of the water rights of local villagers. Modern industrial enterprise was held back by limitations on managers’ rights to fire workers, legal protections of the rights of traditional guilds and economically nationalist policies that restricted foreign ownership of strategic enterprises. Sometimes these rules led to massive inefficiencies whose removal would have stimulated economic growth. Other times, these regulations protected viable infant industries, saved promising national firms from being financially drained by foreign owners, and maintained markets for local products by insuring high wages and with it, high consumption. Generally, the opposition to populist social contracts came from the upper class as a whole – and not necessarily bankers per se. However, bankers in their good periods had more strategic power than any other economic faction. This allowed them to effectively oppose populist social contracts when conditions warranted.

From the 1930s to the 1970s, however, the power of bankers and financiers was at a temporary low. In the 1930’s, global geopolitics was dominated by the Great Depression. In the early 1940’s, they were dominated by World War II. From the late 1940’s through the 1970’s, the primary preoccupation of the Great Powers was the Cold War. The Great Depression delegitimated bankers who were blamed, rightly or wrongly, for the collapse of the world economy. Furthermore, the financial community’s primary source of leverage was the ability to grant or deny international loans – or to enforce payment conditions on countries that were in default on their loans. The Great Depression saw an all-out collapse of international credit operations. Bankers were not issuing any new credit lines. Therefore, local governments did not have to please bankers in order to obtain such credit lines. Financiers’ ability to control governments through dictating the terms of loan repayments became meaningless in the 1930’s. Most of the countries in the Global South had defaulted on their debts. There were few active loans to pay back. Therefore, the leaders of less developed countries were free to run their governments as they saw fit. Social contracts were popular with the lower classes – and helped to keep existing governments in power. There was little reason not to both make and honor generous promises to the poor.

During World War II, the Western powers were primarily concerned with defeating the Nazis. During the Cold War, they were concerned with defeating the Communists. What bankers wanted had little to do with these overriding geopolitical concerns. To the extent that the United States and Western Europe took any interest in the affairs of poor people in Arab nations at all, their concern was that these groups did not radicalize, become communist or support the Russians. The West was very concerned about Nasser in Egypt who was a self-avowed Arab socialist. The Americans worked with Saudi Arabia to get Nasser thrown out of power. However, in most cases, if a Middle Eastern government wanted to run a populist social contract, and such policies were believed to increase the stability of the nation in question, the Western powers were happy to leave that contract in place. The protests of bankers or of local economic elites would have fallen on deaf American and British ears.

By the 1990’s everything had changed. The Fall of the Berlin Wall had made the fight against global communism irrelevant. The world had also experienced a crippling debt crisis in the 1980’s. Most of the poor nations of the world, including most of those in North Africa and the Middle East, had overextended themselves with foreign loans. Those countries could not repay their obligations to foreign banks. There was an extremely non-trivial threat of a massive debt default throughout the Global South. This default that would have led to an economic meltdown in the wealthy nations.

The threat of global financial collapse was averted, largely by a quiet but painstaking gradual replenishment of the reserve assets of leading creditor banks. However, the financial rescue package mandated the imposition of draconian repayment plans on the debtor nations – including the debtor nations of the Middle East. Whether the sanctions that were imposed were reasonable or excessively stringent is a matter of legitimate dispute. However, there is no question that the repayment measures that were imposed on the debtor nations were extremely harsh. The crisis years of the 1980’s were followed by the neoliberal years of the 1990’s, in which the same international financial organizations that managed the initial liquidity crisis were now given free rein to restructure the economies of most of the poor nations of the world to prevent a future debt crisis from happening.

Many of these measures were poorly conceived and ended up hampering rather than accelerating the process of economic growth. But the effectiveness of the bankers’ programs is not what is at issue here. What matters is that finance capital was given the political power to micromanage the economies of the debtor nations – meaning the economies of most of the poor and middle-income nations of the world. The international financial community wanted the populist social contracts abolished. Abolished they were – with little anticipation of what the political consequences of such widespread disruption would be.

In order for debtor governments to pay their debts, they had to reduce other non-debt related expenditures. Welfare payments to poor people were cut. Health services to poor people were cut. Expenditures on public education were cut. Subsidized gasoline for the middle class was eliminated. Subsidized food for the poor was eliminated. Government employment was slashed. Vast numbers of both middle class and poor people were thrown out of work in economies that offered few alternative private sector jobs. Standards of living collapsed. Destitution became widespread.

As if this was not enough, the economy was opened up to foreign investors and private special interests in the interest of “stimulating economic growth”. In some cases, there were market-rational reallocations of public economic resources. But, as often or not, political cronies of government politicians would wangle sweetheart deals for themselves. Alternatively, these cronies would get lush jobs working for foreign corporations – and would steer juicy deals to their new employers. Some of these deals produced growth. Others did not. Either way, poor people saw themselves losing land, water, salary levels and jobs, while the rich and well connected were making fantastic fortunes. Popular disillusionment and anger were widespread.

Abandonment of the populist social contract meant that the locus of charity moved from big government to private religious organizations. Islamic philanthropy became integral to the economic survival of many poor people. The mosques were providing the example of selflessly taking care of the needs of others. The state was providing the example of politicians and their cronies looting both government and the economy. Admiration for religious leaders soared. Admiration for political figures plummeted.

Getting social assistance from religious sources meant that one had to be a pious virtuous practitioner. Local clergy could tell who was an insincere, hypocritical faker and who was a genuine true believer. Assistance would have gone to those who had bona fide and profound attachments to the faith. Family survival would have induced pious husbands or wives to exert moral pressure on their less religious spouses. The need to provide a secure future for one’s children would have induced parents to provide strict religious teaching in the household, and to send children to religious schools. The closing and worsening of secular government schools would have provided further incentives to pursue religious education.

Mostly, however, religious organizations provided a channel for people to express their moral dismay over what was happening to their countries. Religious leaders themselves were just as concerned as their members with the new abuses of power by secular leaders – and the exploitation of poor people by foreigners and the wealthy. It was not hard for the clergy and the laity to see eye to eye on the need for concerted action oriented towards re-establishing what was perceived as social justice. If there were purely theological teachings or gender teachings that got wrapped up into the package – that is just what happens when cultural institutions become involved in the protection of the material interests of their members. Finding protectors and allies in the market place means having to accept much of the ideological program associated with one’s benefactor. In the American South, where government welfare benefits are few and far between, both poor whites and poor blacks have had to turn to their churches for support. The result of such dependency is internalization of the teachings put forward by their ministers and by the community.

Hinnebusch makes many more legitimate points than I can repeat here. I strongly urge curious readers to read his article in the original.

However, if the reader is to take away one and only one point, it should be that political struggles that seem to be religious or ideological often have a material base.

If the reader were to take away a second point, it is that having a government that provides benefits and protection to the general population, produces social stability, low levels of internal violence and peace. Governments that allow the rich to freely take away benefits from everyone else foments discontent and defensive mobilization.

There are more reasons to take care of the poor besides just being nice.