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How one country responded to disappointing Doing Business scores

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The following story is about how one country responded to disappointing Doing Business scores to reform its rules and regulations for its own benefit. Would discontinuation of this instrument mean its non-availability to others?

The above image is for illustration and is of iStock.

How one country responded to disappointing Doing Business scores

By Akhtar Mahmood 8 October 2021

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On September 16, 2021, the World Bank discontinued the Doing Business (DB) report, one of its flagship diagnostic products. This action follows what the World Bank called “a series of reviews and audits of the report and its methodology.”

The DB report, published each year since 2004, was one of the World Bank’s most influential reports in recent years. Every autumn, people around the world would wait eagerly and, in some cases, with some trepidation, for its release. Over time, the reports increasingly attracted the attention of heads of governments who wanted to see their countries do well in the rankings.

When the DB report came out in 2015, the Indian government was disappointed. Soon after taking office in 2014, Prime Minister Modi announced his government’s intention to bring India’s ranking into the top 50 within a few years. Several reforms were carried out in the following months, which the Indian government hoped would put India on a trajectory of rapid annual improvements in the ranking. The 2015 report (officially called “Doing Business in 2016”, since the World Bank always gave the report a forward-looking title) indicated only a modest improvement in India’s rank, from 142 to 130.

The World Bank explained to the Indian government that while several reforms may have been enacted on paper, Indian businesses did not report feeling an impact on the ground. Some responded, “What reforms?”, while others heard about the reforms but had not seen improvement on the ground. The reforms could not be officially recognized until the private sector reported real improvements. The World Bank suggested that the government put in place feedback loops to provide real-time information from businesses on whether the reforms were being well implemented. The government, instead of whining further about the scores, started working on such feedback loops. For several regulatory reforms covered by the DB indicators, it started surveying businesses on whether they felt any reform impact on the ground.

From February 2016 to May 2017, the government carried out a series of business-to-government (B2G) feedback exercises and focus group discussions (FGDs) on how much the businesses were aware of the enacted reforms and their views on the quality of reform implementation. Nine B2G feedback exercises were carried out. Topics covered construction permits (three surveys each in Delhi and Mumbai), starting a business (two surveys), and trading across borders.

The exercises revealed several implementation gaps, some major and some minor. An example is construction permitting. A business survey carried out in Delhi in March 2016 revealed the following implementation issues: a) significant lack of agency coordination—architects still need to obtain approvals from up to 10 different agencies; b) some facilities for online payment were not properly implemented and certain fees were still paid manually; c) very low awareness of the online system among users; d) no way to track the status of an application; e) information lacking on documentary and other requirements. In other words, the reforms had not gone far enough to have impact on the ground.

This feedback exercise helped generate several recommendations to address the deficiencies. These were provided to the Municipal Corporation of Delhi (MCD), and most were acted upon. Follow-up feedback exercises in October 2016 and February 2017 validated these actions while generating additional recommendations for further improvement. A similar effort was made in Mumbai.

The impact of these efforts can be seen in the trends in India’s performance on the “Dealing with Construction Permits” indicator. In the Doing Business in 2016 report, India’s ranked 183 on this indicator. Thirty-three procedures were involved taking 191 days according to the indicators. Two years later, the number of days had come down to 144 with a modest improvement in the rank to 180. The more substantial improvements came the following year when the DB report published in October 2018 indicated a reduction in the number of procedures and days required to 18 and 95 respectively. Still a long way to go but enough to propel India’s ranking on this indicator to 52. While all this improvement cannot be attributed to the feedback exercises alone, it is possible to trace a substantial part of this improvement to actions taken as a result of these exercises.

The Indian government also recognized that the DB indicators did not cover many regulatory interfaces that created problems for businesses and that the indicator measures were based on conditions in just two cities, i.e., New Delhi and Mumbai. Thus, in parallel to its efforts on the DB front, the Indian government embarked on an ambitious regulatory reform program at the state-level covering all states and union territories in the country. A long list of regulatory reforms was identified covering several regulatory areas, and state governments were instructed to carry out the reforms. Called the Business Reforms Action Plan, the program started in 2015.

Progress was monitored through annual indicators that ranked states according to their performance on implementing the reforms. The first such indicators, published in 2015, did not take into account business feedback. However, seeing the usefulness of the feedback exercises carried out as part of the DB program, the government changed the state-level reform indicators in 2018 by making a substantial part of the indicator scores dependent on business feedback.

The powerful demonstration effect of such feedback exercises had touched individual state governments too. In 2018, four state governments, Chhattisgarh, Jharkhand, Orissa, and Rajasthan, expressed an interest in knowing why there was poor uptake of self-certification and third-party certification options provided in business inspection reforms carried out by these states. At their request, the World Bank carried out an independent feedback exercise that could help design corrective actions to improve uptake.

The Indian experience from 2016 onward is a good example of what the DB indicators can lead to if governments use them well. First, the government refocused its attention from reforms on paper to reforms on the ground. Second, it recognized the importance of consulting with the private sector, which knows best where the shoe pinched, and designed corrective actions based on the feedback. This iterative process helped improve reform implementation quality. Third, the government recognized that while the DB indicators were useful, they were not adequate to diagnose the myriad of regulatory issues that businesses all over India faced. Thus, the government embarked on a more comprehensive, state-level, reform program, and, inspired by the power of indicators, underpinned this program by a set of performance indicators. Finally, once the pioneering DB-related feedback exercises proved useful, they created a demonstration effect, first within the central government, which replicated such exercises for the state-level reform program, and then on individual state governments.

BROOKINGS

Akhtar Mahmood, Former Lead Private Sector Specialist – World Bank Group

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Nobody running Lebanon, says central bank boss

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Nobody running Lebanon, says central bank boss, as reported by Laila Bassam and Nafisa Eltahir, whilst hitting back at criticism over fuel subsidy removal.
The above image is a general view of Beirut central district, Lebanon, August 22, 2019. REUTERS/Mohamed Azakir

A view of Lebanon’s Central Bank building in Beirut, Lebanon April 23, 2020. REUTERS/Mohamed Azakir/File Photo
Lebanon’s Central Bank Governor Riad Salameh speaks during an interview with Reuters in Beirut, Lebanon August 6, 2018. REUTERS/Mohamed Azakir

BEIRUT, Aug 14 (Reuters) – Lebanon’s central bank governor said nobody was running the country as he defended his decision to halt fuel subsidies that have drained currency reserves, saying the government could resolve the problem quickly bypassing necessary legislation.

In an interview broadcast on Saturday, governor Riad Salameh pressed back against government accusations that he had acted alone in declaring an end to the subsidies on Wednesday, saying everyone knew the decision was coming. read more

Part of Lebanon’s wider financial meltdown, the steadily worsening fuel crisis has hit a crunch point, with hospitals, bakeries and many businesses scaling back operations or shutting down completely as fuel runs dry. read more

Deadly violence has flared in fuel lines, protesters have blocked roads, and fuel tankers have been hijacked this week.

The central bank’s move to end subsidies, which will mean a sharp increase in fuel prices, is the latest turn in the financial crisis that has sunk the Lebanese pound by 90% in less than two years and pushed more than half the population into poverty.

Salameh said Lebanon could recover but it was not possible to say how long that would take. “So far you have nobody running the country,” he told Radio Free Lebanon.

The central bank has effectively been subsidising fuel and other vital imports for the last two years by providing dollars at exchange rates below the real price of the Lebanese pound – most recently at 3,900 pounds to the dollar compared to parallel market rates above 20,000 – eating into a reserve which Salameh said now stood at $14 billion.

In order to continue providing such support, the central bank has said it needs legislation to allow use of the mandatory reserve, a portion of deposits that must be preserved by law.

“We are saying to everyone: You want to spend the mandatory reserve, we are ready, give us the law. It will take five minutes,” Salameh said.

The government has said fuel prices must not change, leaving fuel importers, who say they cannot import at market rates and sell at subsidised rates, demanding clarity.

“HUMILIATION OF THE LEBANESE”

Critics of the subsidy scheme say it has created huge incentives for smuggling and hoarding by selling petroleum products at a fraction of their real price.

Salameh said the bank had been obliged to finance traders who were not bringing product to market, and that more than $800 million spent on fuel imports in the last month should have lasted three months.

Despite an unprecedented wave of imports, Salameh noted there was no diesel, gasoline or electricity. “This is humiliation of the Lebanese,” he said.

Lebanon’s sectarian politicians have failed to agree on a new government since Prime Minister Hassan Diab quit last August after the catastrophic Beirut port blast. He has continued in a caretaker capacity since then.

Salameh said Lebanon could exit its crisis if a new government was formed that would embark on reforms. The Lebanese pound was “hostage to the formation of a new government and reforms”, he added.

The government has said steps to end subsidies must wait until prepaid cash cards for the poor are rolled out. Parliament approved these in June, but the financing has yet to be determined.

“When is the card? Let’s assume in the best case after two or three months … we will spend $3 billion while waiting,” Salameh said.Reporting by Nafisa Eltahir/Laila Bassam; Writing by Tom Perry; Editing by Kirsten Donovan

The Thomson Reuters Trust Principles.

First World, Third World? Let’s coin new binaries

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In a Khaleej TimesOPINION AND EDITORIAL, Michael Jennings of the University of London comes up with criticism of the now well-established labels of First World, Third World, suggesting that it is time for coining new binaries. Then First World, Third World? Let’s coin new binaries; but what about the MENA region’s stand, one would ask. The answer is below per the IMF’s Economic Overview.

First, the illiteracy and educational indicators are significantly more unfavorable for women than for men. Second, MENA countries compare poorly to other countries when account is taken of spending on the social sectors, highlighting the impact of distorted labor markets, an inefficient educational delivery system, and neglect of female education. Third, when various human development indicators are combined (e.g., as in the UNDP human development index) the region’s ranking among countries in the world is less favorable than that based on income criteria alone.

The picture above is for illustration and is of the World Bank Blog.

First World, Third World? Let’s coin new binaries

22 June 2021

All too often, these terms have played into wider prejudices about places that reflect and are fed by the values ascribed to each.

For anyone living in ancient China’s Zhou empire in the first millennium BCE, the world was simple: they were in the “Zhongguo”, or Middle Kingdom, and everything outside was barbaric. Understanding the world at the height of European imperialism also was easy. On maps, vast swaths of territory were coloured in hues denoting each empire. Human nature strives for simplicity, and today we have come up with a multitude of descriptions for the world’s regions. But terms such as North/South and First World/Third World have flattened diversity and complexity through a simplistic binary gaze.

It isn’t just a problem of simplicity, though. All too often, these terms have played into wider prejudices about places that reflect and are fed by the values ascribed to each.

We can see this on social media, where the rise of intemperate comments and put downs against others can often be based on the implied superiority of where one lives or comes from. Social media weaponises and reinforces prejudices and racism that come from a facile understanding of the world. More than ever before, in an age of parity between the informed and the less-so, we must be careful of the words we use to describe each other.

Trying to analyse and explain the world has always required some generalisation. We lump together countries or regions that share some similarities and gloss over details and important differences. But describing the world is not just about looking for objective points of commonality or difference. It involves recognising different world views, assumptions and values. The problems come when one side of that binary division of the world gets to decide what is the norm, reflecting the realities of global power and ongoing colonial legacies.

Since the end of empires, two dominant ways of dividing up the world have emerged. The first reflected the Cold War, seeing the world through the prism of an existential conflict between the democratic-capitalist West and the communist East, comprised of the Soviet Union and China. The “rest” — which related closely to maps of former colonial territories — were the regions in Africa, Asia and Latin America that together comprised the arena for this battle of ideas and influence.

The second way took a more economic perspective, categorising regions through their GDP or level of “development,” and allocated various terms to describe those differences. Some — such as the terms “low-,” “middle-” (or “emerging-”) or “high-income countries” — are unapologetically economic in their focus, based on levels of GDP that still conceal great diversity within populations. These remain widely in use but at least have the virtue of being a label one can escape: Tanzania and Benin recently moved into middle-income status, while Mauritius has now joined the group of high-income countries. But other terms have attained wider reach within popular and analytical vernacular. The terms “North” and “South” were always less about geographical location than about distinguishing between the rich and globally powerful regions and the poorer, less powerful ones. “Developed” and “un-/under-developed” have similarly focused on poverty.

The term I grew up with, the “Third World”, was originally coined in the 1950s by the French demographer, Alfred Sauvy, to describe those nations that were part of neither the Western nor Eastern blocs. By the 1960s it had become firmly linked to poverty, under-development and poor governance. In a world that still contained third-class train carriages, in which “third” was inevitably less good than “first”, the term was applied to those parts of the world where the majority of citizens were people of colour — and which, coincidentally, had been under imperial rule. The racism and patronising undertones of the term were readily noted and understood by those on the receiving end.

What underpins all these ways of compartmentalising the world is the assumption that the European and North American models of development, with the same governance and other values, are the end-goal for all global regions. The closer you resemble these two, the more you can claim entry to the North, the First World and to “developed” status. These terms assume that emulating Europe and North America makes a country better, so it’s what every other nation should aspire to.

Yet rich Middle East states like the UAE or Asian nations like Singapore have no desire to replicate Western norms. In the 1990s, Malaysia’s then prime minister, Mahathir Mohamad, sought to articulate the “Asian Values” that marked a departure from a Western paradigm that twins development with liberalism.

Clearly, the binaries and indexes we are left with are not objective or scientifically indisputable. They are based on what counts most to a minority (albeit powerful) portion of the world. Is a nation’s GDP the sine qua non of being “developed”? What about Costa Rica and Cuba? Both are significantly poorer than the (very much “developed”) US, yet both enjoy better health and quality of life across a number of different indexes than their First World neighbour. As the past year has shown, rich countries contain enormous pockets of inequality and poverty — residents of a poor housing estate in Manchester might share more with those from a working-class area of Hong Kong than they care to admit.

Over the past couple of decades, the terms “Global North” and “Global South” have emerged in reference to global regions. While there is still some overlap with old terms, they do attempt to acknowledge how important discrepancies in power are in shaping relations and opportunities. They are at least an attempt to do away with disparaging terms for particular regions.

I use those terms myself, but with significant reservations. Do they really avoid the division of the world according to colonial legacies?

While that might make sense from the perspective of the Global North, would someone in India, for example, see themselves as more aligned with, say, Kenya, than with Thailand or even South Korea? It all depends, of course, on what you’re comparing with and on what the context is. It solves some problems, but not all — and it certainly does not distance you from a perspective and values that are far from universal. Perhaps it’s time for voices from outside Europe and North America to come up with new terms and for politicians, academics and journalists within Europe and North America to listen. There is much talk these days of decolonising education, development aid and global health, among other things. So how about decolonising our perspective on the world?

Michael Jennings is reader in international development at the School of Oriental and African Studies, or SOAS University of London, where he works on issues related to global health and the politics and history of global development.

A quiet governance revolution in Qatar?

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Robert P. Beschel Jr. and Tarik M. Yousef inform that In a region where the governance news is seldom good, on May 6, something very unusual happened in Qatar. Was it a quiet governance revolution in Qatar? wondered these authors in a Brookings article. We would agree that this is happening in the so-called autocratic monarchy of the Gulf and not the other republics of the MENA region. Here is the story.

A quiet governance revolution in Qatar?

17 June 2021

Qatar’s Minister of Finance Ali Sharif Al Emadi attends the opening ceremony of a forum for Arab financial institutions in Tunis on April 8, 2014.
REUTERS/Zoubeir Souissi (TUNISIA – Tags: POLITICS BUSINESS)

The Minister of Finance, Ali Sharif al-Emadi, was taken in for questioning over a variety of alleged crimes, including misuse of public funds and abuse of power. Al-Emadi had held his position since 2013 and was widely perceived to be one of the most effective finance ministers in the Gulf. Within a day, he was stripped of all governmental duties, as well as his roles in other  publicly owned companies and financial institutions. Moreover, the anti-corruption probe is reportedly widening, with scores of businessmen and government officials being questioned by law enforcement authorities and financial regulators.

The publicity surrounding al-Emadi’s ouster is unusual. Throughout the Gulf Cooperation Council (GCC) countries, most high-level cases of corruption or official malfeasance are handled quietly and without ceremony. The officials involved typically resign or leave their posts suddenly, with limited media coverage. Rumors swirl but are rarely confirmed, and investigations almost never result in prosecution, fines, or imprisonment. Kuwait, for example, witnessed a number of high-profile corruption allegations that led the prime minister to leave office in 2011 and the cabinet to resign en masse in 2019, yet no prosecutions followed. In the United Arab Emirates, a corruption probe resulted in the late Mohammed Khalfan bin Kharbash, the Minister of State for Finance, being removed from office in 2008 and charged with embezzlement in 2009. However, he pleaded not guilty, and the case never went to trial.

There is one major, and controversial, exception to this rule: the November 2017 arrest and imprisonment of 400 prominent Saudis in the Ritz Carlton hotel in Riyadh. Supporters of this decision, including many Saudi citizens, maintain that the imprisonment of these individuals was well deserved and long overdue. Critics allege that it had more to do with the consolidation of power by Crown Prince Mohammed bin Salman than with the actual guilt or innocence of those charged; they also claim that the funds recouped came from an effort that resembled a “shakedown” more than a bona fide attempt to recover stolen assets or enforce the rule of law.

In the immediate aftermath of the Ritz Carlton arrests, some observers maintained that the move would be disruptive and create uncertainty, scaring investors away. Others argued that it would signal a seriousness of intent and purpose that would be beneficial to the country in the long-term. The short-term effects of the arrests were indeed disruptive: foreign direct investment in Saudi Arabia fell precipitously in 2017 before rebounding in 2018 and 2019, albeit to lower levels than before. The long-term effects of the decision remain to be seen, although there is a wealth of evidence that countries with lower levels of corruption are better at attracting investment and have higher levels of economic growth over time. It would not be surprising if other countries conducting public crackdowns on corruption followed a similar trajectory to that of Saudi Arabia—an initial drop in foreign investment due to added uncertainty, followed by increased investment downstream if the effort is viewed as serious and credible.

According to Transparency International’s 2020 Corruption Perceptions Index, the Middle East and North Africa (MENA) region “is still perceived as highly corrupt, with little progress made towards controlling corruption.” The reality is more nuanced, with wide variation in performance across the region. For instance, the U.A.E. and Qatar are ranked 21st and 30th, respectively, by the Corruption Perceptions Index—a position placing them ahead of countries including Spain, South Korea, and Portugal. The bulk of MENA countries fall in the mid-range. There is also a significant cluster of countries in the lowest ranks, including Iraq, Libya, Syria, and Yemen, which are perceived to be among the most corrupt countries in the world.

Two elements of the region’s anticorruption efforts are particularly worrying, even with regard to regional leaders such as the U.A.E. and Qatar. The first, as the International Monetary Fund and others have noted, is the delayed progress on “next generation” governance reforms, which stretch beyond eliminating petty corruption and improving the quality of service delivery. This agenda involves thinking more carefully about the boundary between the public and private sectors; improving transparency and public accountability; making regulatory processes more streamlined and predictable; and strengthening the independence of agencies charged with investigating and prosecuting corruption. It also involves moving forward legislation on income and asset disclosure, as well as cracking down on money laundering.

The second troubling feature of MENA anti-corruption efforts is the relatively static nature of the region’s performance over time. According to the World Bank’s Worldwide Governance Indicators, the region’s composite scores for controlling corruption have actually fallen consistently from their peak in 2002. The persistence of these chronic “governance deficits” has been viewed by many as the root cause for the region’s repeated political crises over the past decade, starting with the Arab Spring revolutions in 2011 and continuing through to the protest movements of 2018-19 in Algeria, Iraq, Lebanon, and Sudan.  In all of these countries, concerns about corruption were among the most prominent public grievances.

Could it be that Qatar’s recent move heralds a transition toward new and more serious anti-corruption efforts in the Gulf and wider region? And could the country’s public efforts inspire other MENA governments to do better? In response to queries about the arrest warrant for al-Emadi, the Qatari Minister of Foreign Affairs underscored the importance of institutions and noted emphatically that “no one is above the law.” A day prior to the finance minister’s arrest, Qatar’s emir abolished immunity from prosecution for public officials, leveling the legal playing field for all. Such steps, if translated directly into a robust governance reform agenda and taken forward with skill and tenacity, could very well open a new chapter in strengthening the rule of law and building effective and equitable state institutions in both Qatar and the wider MENA region.

Robert P. Beschel Jr.

Nonresident Senior Fellow – Brookings Doha Center

Tarik M. Yousef, Nonresident Senior Fellow – Foreign Policy 

Director – Brookings Doha Center

Colluding With the Corrupters

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Michael Young in an interview, with David Linfield who argues that international donors are benefiting existing power structures in the Middle East. It is all about Colluding With the Corrupters.

Preamble

Corruption spread deep and for some time in the MENA region with social, political, and economic implications, but with differing penetrations rates. All because the area can divide into two types of governance. The autocratic monarchies live with side by side with the so-called republics. Few of these latter countries know a higher degree of corruption than the first-mentioned countries. In any case, all have made the fight against corruption a priority by passing laws and adopting strategies to combat crime. But in vain.
Colluding with the Corrupters could quickly summarise a situation where such deviant behavioural attitudes originators can be traced back out of the region.

  • January 29, 2021

David Linfield is a visiting scholar in Carnegie’s Middle East Program. He is on sabbatical from the U.S. Department of State, where he is a career foreign service officer. Linfield recently wrote a commentary for Carnegie, titled “International Donors Are Complicit in Middle Eastern Elites’ Game.” In mid-January, Diwan interviewed him to discuss his article, and more generally to examine the anti-elite feeling that has permeated protests throughout the Middle East in the past year, notably in Iraq, Jordan, and Lebanon. The views expressed by Linfield are his own and not necessarily those of the U.S. government.

Michael Young (MY): You’ve just written a commentary for Carnegie, titled “International Donors Are Complicit in Middle Eastern Elites’ Game.” What is your argument in the piece?

David Linfield (DL): My argument is that the United States and other international donors have put significant clout and resources behind promoting economic liberalization in the Middle East, while they have been hesitant to put similar emphasis on political reforms. By political reforms I mean boosting transparency, combating corruption, and empowering elected officials. International actors have partly justified this approach by suggesting that economic reforms are a better way of promoting stability and less risky than political changes. But I contend that recent events in the region suggest that these policies are making violent, sudden change in the region more likely, not less so.

When adopted in the context of authoritarian political systems, economic reforms such as privatization have tended to benefit existing power structures, exacerbating economic inequality and citizen-state tensions. The World Inequality Database now ranks the Middle East as the most unequal region in the world. While economic inequality has decreased worldwide since the 1990s, it has remained constant in the Middle East.

By supporting policies that have inadvertently led to such entrenched inequality, while neglecting political reforms, international donors have contributed to citizens’ frustrations with their relative economic status while leaving them without peaceful institutional means of expressing their grievances. This is all a recipe for instability, which is the opposite of what donors want.

MY: You write that “[e]merging solidarity among previously competing groups, grounded in [economic inequality]” is a feature of the growing resentment of elites in the Middle East. Are you suggesting, to borrow from Marxist jargon, that we are seeing the emergence of a sort of class consciousness in certain countries that may have revolutionary potential?

DL: Most of the protests in the Middle East since 2018 have focused on economic inequality and corruption. Whereas previous demonstrations in the region tended to consist of a homogeneous ethnic group—whether from a particular religious sect, region, or group of tribes—these recent protests have been more diverse.

Common frustrations with inequality appear to have led people from lower-income communities to demonstrate in common cause—albeit sporadically and tentatively—against what they see as a corrupt and multisectarian elite that has failed them. We have seen this happen most explicitly in Iraq, Jordan, and Lebanon.

Some of the slogans used in recent protests in these countries do indicate the emergence of class consciousness. When the Jordanian Teachers Union threatened to strike in summer 2020, they framed their plight as a class struggle against those who had “looted the country.” The 2019 Lebanese protests included slogans like “down with the rule of the thieves.” Iraqi protestors in 2019 and 2020 told media outlets that their struggle was about taking the country back from “thieves.”

MY: In light of your assessment, how have the traditional fault lines among Middle Eastern populations that regimes have manipulated to retain power—things such as sectarian, tribal, or regional divisions—fared in what you describe as a changing environment?

DL: The traditional fault lines in Middle Eastern societies are still very much present. Emerging class-based tensions have not fully supplanted preexisting divisions based on ethnicity, religion, and tribalism, but rather now coexist alongside them more than before. That said, the trendlines I described earlier suggest that class-based divisions will continue to grow in relative importance and have the potential to reshape existing political alliances and divisions.

In addition to the demonstrations I mentioned earlier, another indicator of the power of class solidarity is a 2019 experiment by researchers from the University of Pittsburgh and the Lebanese Center for Policy Studies. The study, which assigned hundreds of Lebanese people into different conversation groups having varying compositions based on sect and class, found that when Lebanese people gathered with other members of the same class, they exhibited markedly less support for sectarian politics.

It’s too early to craft a comprehensive assessment of how emerging class-based tensions will interact with longer-standing societal divisions in the Middle East. One reason that we’ll have to observe for a longer period is that Covid-19 shifted the focus dramatically from political and economic challenges to the health crisis. But given that the pandemic exacerbated economic inequality, with lower-income communities bearing the brunt of related economic disruptions, we probably won’t have to wait long before class discussions reemerge.

MY: If the problem is that economic liberalization has reinforced elites, what are you recommending as an alternative approach by Western donors? And what makes you think that such an approach would have any chance of working?

DL: The alternative approach I’m recommending is for international donors to incorporate measures to promote transparency and combat corruption into existing economic liberalization efforts. These political reforms are also good for business and economic growth—as noted by the International Monetary Fund (IMF) and World Bank reports I cite in my article. The IMF’s recent insistence that Lebanon address corruption before receiving additional loans is a positive step to putting teeth behind their analysis.

Other helpful steps would include pushing to empower the many weak legislatures across the region beyond their current rubber-stamp roles, which would provide an alternative to protests for frustrated publics. If international donors put the same clout behind good governance that they have behind economic liberalization, they’ll make peaceful and durable progress more likely in the Middle East.

MY: Are you not reading too much into anti-elite solidarity? Ultimately, states in the region have shown that they will resort to violence in order to survive and societies have often gone back to being silent. Why will this change?

DL: Ruling elites in the region have demonstrated that they are willing to go to extreme measures to maintain their benefits. I am not suggesting that elites will somehow decide that they should altruistically begin to share resources with the rest of society. Rather, as your question implies, I am arguing that the elite behavior of concentrating power and resources is an unsustainable strategy that will ultimately foment violence and harm everyone’s interests, including those of the elite.

Autocratic regimes tend to resort to violence when they feel they have run out of other options, but rely more often on nonviolent coercion and intimidation to maintain daily control. By the time regimes turn to violence, it tends to be a prelude to their loss of control—or a stage where they are nearing that.

The strategy of international donors focusing their influence and resources on economic liberalization instead of good governance has not succeeded in bolstering stability and strengthening citizen-state relations. Instead, the policy has exacerbated class-based tensions and increased the prospects of unrest.

These trends are not linear: demonstrations in the region against economic inequality and corruption have ebbed and flowed. Ruling elites remain intent on doing everything they can to outmaneuver these latest challenges to their vested interests. Longer-standing societal tensions based on sect, region, and tribe also continue to simmer and remain exploitable by elites. But the overall direction of the region is still toward economic liberalization in the midst of authoritarian entrenchment. As long as that remains the case anti-elite solidarity is likely to build. International donors are inadvertently contributing to these increasing citizen-state tensions. Instead, they could be fostering more durable change that would make the region more stable and prosperous for everyone.