THE STATE AND ECONOMIC SECTORS
Despite state efforts to the contrary, statism and rentier practices have not helped the state establish its desired levels of control over the different sectors of the economy. In broad terms, Middle Eastern economies can be divided into three main sectors: formal, informal, and semiformal. The characteristics and agendas of the semiformal sector are especially instrumental in contributing to the basic “weakness” of Middle Eastern states in relation to their societies, as manifested by their inability to control or regulate many of the economic interactions of the more affluent social actors. Even the most extensive programs of statist development, of which there have been plenty in the Middle East, have failed to quell or even to penetrate the vibrant capitalism of the semiformal and informal sectors of the economy. Countless other small business establishments are, at best, only seldom regulated by the state. However, the economically derived social autonomy that ensues as a result does not automatically undermine the authoritarianism of the state, as these sectors are more concerned with maintaining economic independence from the state than with pursuing political goals. Thus, despite crises of rentierism throughout the region and apparent moves toward economic liberalization, economic actors in the Middle East so far have not emerged as advocates or supporters of political change. When economic actors have put their economic clout to political use—as Iranian bazaar merchants did during Iran’s 1978–79 revolution—they have failed to permanently curtail state power vis-à-vis society. Whether the private sector in the Arab world emerges as a source of political change as a result of the Arab Spring remains to be seen.
Much of the literature on the political economy of the Middle East focuses on the formal sector and its relations with the state.56 A few other studies, equally rich in depth and insight, concentrate on the informal economy.57 Although there have been some perceptive studies of the bazaar merchants and other economic “informal networks,” none examine systemically the semiformal economy and the pivotal relationship between its actors and the state.58 The core of the semiformal sector is made up of merchants who operate out of small, nondescript stalls, often found in the commercial districts of cities large and small, especially in the bazaar area and other inner-city marketplaces. In relation to each of these sectors, the state faces a basic problem of penetration. Given that the formal sector is—theoretically at least—the most organized and is bound by procedures and official regulations, the state has the most influence and control over its activities and its growth in size and productivity. In contrast, the informal and semiformal sectors remain largely outside the state’s purview, the former often because of the state’s deliberate neglect but the latter despite the state’s efforts to the contrary.
As in the rest of the developing world, the formal sector in the Middle East is made up of business establishments and enterprises that tend to be large, may be partly or wholly owned by the state or by private interests, and, despite occasional attempts at evading government regulations (e.g., labor laws and import-export fees), are by and large subject to the state’s official policies and laws. Within the formal sector, economic endeavors range from those occurring within the state bureaucracy—which, at least technically, is subject to close government scrutiny and influence—to those of private enterprises, whose owners are eager to skirt government regulations whenever possible. While extensive programs of economic liberalization have been launched in the Middle East—as seen in Iraq before the Gulf War and in Egypt, Jordan, Tunisia, Turkey, and the Persian Gulf states—the state continues to own numerous enterprises and closely regulates many others. In fact, even in Egypt and Turkey, which have undergone some of the most extensive economic liberalization programs within the developing world, state-owned enterprises continue to be seen as “indispensable to accomplishing the productive and distributional goals of national policy.”59 The state bureaucracy, in which the bulk of the urban middle class finds employment, remains particularly massive and cumbersome despite occasional state promises of greater efficiency and streamlining.60 It is often through the bureaucracy and state-owned enterprises that Middle Eastern states perpetuate the ruling bargain. They use the economy as a tool through which they reinforce patron-client relations with domestic and at times extranational actors and, eventually, enhance their standing in society.61
No matter how direct or extensive the state’s influence within the formal sector may be, it can at best only indirectly affect the overall life and internal dynamics of the informal sector. The informal sector itself may be divided into two economic groups. One—the mobile informal sector—is forced to move from place to place and from job to job in a constant struggle to make ends meet. It is primarily composed of what is traditionally referred to as the lumpenproletariat: recent, unskilled immigrants from the countryside whose inability to secure regular employment forces them to resort to creative ways of earning a living. Male immigrants usually work as day laborers on construction sites, although a more frequent source of employment for both males and females is domestic service in the houses of the upper-middle classes and the wealthy. Countless others shine shoes on sidewalks or sell fruits, vegetables, bread, cassette tapes and compact discs, lottery tickets, or other items. Though not to the extent found in Latin America, children living in the streets are also becoming more and more prevalent in some of the Middle East’s larger metropolitan centers, such as Alexandria, Cairo, Istanbul, and Tehran. With little or nothing at stake in the village communities they left behind or the urban community in which they remain marginal and alienated, these members of the informal sector drift through life from one low-paying job to another, frequently at the mercy of wealthier shopkeepers, construction foremen, or others in the middle classes who can easily hire or fire them.
The second group within the informal sector is stationary. It is made up of rural immigrants who are slightly better off and whose resources or savings have enabled them to purchase small stalls or shops from which they sell goods and at times even certain services. Small shopkeepers and grocers—especially those in the inner cities, the slums, and small towns and villages—are the most common examples of such stationary entrepreneurs. In some of the larger fringe communities, however, such as Cairo’s City of the Dead or Istanbul’s Kasimpasha, one may also come across individuals with stalls or other settled spaces in which they practice dentistry and medicine (in addition to performing circumcisions), lend money, service the neighborhood’s cars, serve tea and coffee, sell alcohol or other beverages, and perform a variety of other functions. Most of these family-run businesses remain small and, despite the hiring of neighborhood children for negligible wages, seldom enable their proprietors to build up substantial savings.
Because of mounting problems of underemployment and insufficient job opportunities in much of the Middle East in recent decades, especially outside the oil monarchies, the lines between members of the stationary informal sector and the urban lower-middle class have become increasingly blurred. It is extremely difficult, for example, to pinpoint the socioeconomic background of the owner and employees of a small mechanic shop, an herbalist, or a fruit seller. Making the distinctions even more muddled are the close personal, kinship, and neighborhood ties that pervade Middle Eastern societies: for example, friends, especially youngsters, from different economic backgrounds working together or for each other.62
In ordinary circumstances, both the mobile and the stationary members of the informal sector have minimal and sporadic contacts with the state and its agents. This holds true even for those who own small shops or stalls. For a minority of stall owners, their only contact with any state agency comes at the start of their operation, when they formally register themselves with the government. Many, however, continue to operate without officially registering. Subsequent contacts with the state or with its agents—building code inspectors or those from the Health Ministry, for example—are practically nonexistent. In fact, members of both of the categories in th
e informal sector tend to view the state, including those affiliated with it, in an adversarial light.63 “Those in the government have done little to assist us,” goes the conventional wisdom, “and not evading them can end up costing in fees, taxes, or bribes.” The stationary informal sector, with its entrepreneurial, self-starter mentality, is especially keen on evading the intrusive reach of the state. For a low-budget, small-scale business that relies on its immediate physical and economic environments to survive, government regulations can be both prohibitively costly and unimaginably tedious to bear. The rural immigrant starting such a business, already wary of state institutions, has neither the time nor the resources to go through official licensing procedures or to abide by the endless array of rules and regulations the state imposes.
None of the states of the Middle East make concerted efforts to penetrate or drastically influence the stationary informal sector. The manpower and the institutional capabilities needed to extend the reach of the state that deep into urban society often simply do not exist.64 From an economic and bureaucratic standpoint, state leaders and policy makers do not rank the regulation of small, largely informal businesses high on their list of priorities. Far more fundamental and pressing difficulties within the national economy—the price of oil on the world market, the rate of inflation, currency reserves and foreign loans, IMF-mandated austerity measures, the official and unofficial exchange rates, unemployment—demand more immediate attention from the state.65 Few state leaders, in fact, are oblivious to the safety-valve function of the informal economy: informal traders and enterprises, especially so long as they refrain from dealing in contraband and smuggled goods, can serve as useful means through which an otherwise desperate segment of the population earns a living.66 That continued economic marginalization is thus perpetuated and that a potentially lucrative tax base for the state remains outside its reach seem a small price to pay for keeping a potentially dangerous—easily mobilizable—fringe social class economically active.
Even if Middle Eastern states decide to bring the stationary informal sector under their regulatory supervision, as some have done on rare and brief occasions, they are likely to face numerous practical problems in implementing their policies. How would the state ensure that all of the businesses in operation were officially licensed or registered? One of the state’s most feasible options is to hire inspectors—or to assign existing civil servants—to go through different neighborhoods and determine which business establishments are legally registered and which ones are not. To my knowledge, so far none of the states of the Middle East have adopted such a tactic, nor have they assigned such a task to their conscript soldiers.67 Even if such a tactic were adopted, given the pervasiveness of social and personal bonds in Middle Eastern societies, it is unclear how many of the state’s hired agents would actually initiate measures that might well result in the closure of a business that was someone else’s main source of livelihood. Reducing the strength of interpersonal bonds by assigning employees to inspect businesses in cities other than their own also seems impossibly difficult for the state to coordinate and afford.
The state’s approach to the mobile informal sector also tends to be one of unofficial tolerance. Many of the same difficulties (or lack thereof) that hinder the state’s relationship with the stationary informal sector also influence its conduct and posture toward the mobile informal sector. Nevertheless, the state’s treatment of the mobile informal sector tends to differ from that of stall owners in two important respects. In the “inclusionary” polities of the Middle East—those of Qaddafi’s Libya, postrevolutionary Iran, and Saddam Hussein’s Iraq—members of the lumpenproletariat have frequently formed an overwhelming majority of the state’s foot soldiers.68 As chapter 8 demonstrates, all three of these states created paramilitary and quasi-political institutions whose primary purpose was to mobilize popular political support for state leaders and to carry forward the unending plethora of revolutionary projects—the Islamic Revolutionary Guard Corps in Iran, the Popular Army in Iraq before 2003 (also known as the Popular Militia), the Revolutionary Committees in Libya—that the state constantly embarked on. Membership in these and similar organizations has by no means been limited to recent rural immigrants. In fact, almost all influential positions within such organizations are filled with ideologically committed militia “commanders” who come from mostly urban, middle-class backgrounds. Nevertheless, becoming part of the burgeoning rank-and-file popular militia benefits not only the rural immigrants but the state as well. It enables the lumpenproletariat to become as much a part of the economic and political mainstreams as possible. These and similar state-affiliated institutions provide rural immigrants with shelter, a meager but sufficient income, and, most important, a new purpose in life and prestige among co-immigrants and in the village communities left behind. The benefits to the state are just as compelling: a ready pool of recruits who are easily mobilizable and who do not come with the preexisting ideological baggage often acquired in the cities.
In a second important respect the state treats the mobile informal sector somewhat differently. Although statistical evidence is not available, it often appears that the state is more eager to prosecute the lumpenproletariat who commit criminal acts than those with more economic resources and social or political connections.69 The state, both in the Middle East and elsewhere, often uses the punishment of the poor and other marginal elements of society to demonstrate its determination to combat crime, to impress society with its powers, and to intimidate its opponents.70 For example, according to Amnesty International, in Iran the state routinely uses “force against marginalized segments of society to assert its power,” frequently imposing harsher punishment on the poor than on the wealthier.71 Early on in the life of the revolution, recidivist thieves, an overwhelming majority of whom come from society’s fringe elements, also routinely had their fingers amputated as other criminals were forced to watch. In Algeria, villages and small towns, which are used as way stations to bigger cities by many rural immigrants, also bore the brunt of the country’s bloody civil war of the 1990s. In 1997, government militias—known as the Groupes d’autodéfense (self-defense groups) or Patriotes (patriots)—allegedly massacred two thousand villagers in the Blida and Medea regions near the capital, another three hundred in the village of Rais, and some two hundred in Bentalha.
The approach of the Mubarak regime in Egypt to the less wealthy, from among whom most of the state’s opponents came, is instructive. Egyptian security forces frequently used heavy-handed tactics in the poorer neighborhoods of Cairo, Alexandria, Asyut, and elsewhere to ferret out members and sympathizers of the opposition group Gamaʿa Islamiyya. These and similar operations were not surprising given that the security-conscious state was suspicious of its citizens and feared, often for good reason, the violence of the Gamaʿa. However, from the launch of the infitah in the mid-1970s onward, the Egyptian government’s economic policies consistently angered many of its opponents. For example, the 1996 repealing of the 1952 Land Reform Law, which had guaranteed farmers security on rented land, considerably heightened tensions between the state and those who were finally forced to abandon the countryside and to live on the fringes of urban areas. In many respects, the state’s campaign against the Gamaʿa and the Muslim Brotherhood acquired an economic, class character.
The same type of inequity in the state’s punishment of the less wealthy occurs in the oil monarchies, where most of those on the margins of the economy are expatriate workers from Yemen, Jordan, Egypt, and South and Southeast Asia. In the emirate of Ras al-Khaimeh (in the UAE), begging is punishable by flogging. A consistently large percentage of individuals executed in Saudi Arabia, which has one of the highest execution rates in the world, are foreign nationals working in the country at menial jobs and earning minimal wages.72 In Kuwait, nomadic bedouins have no citizenship rights and are frequently harassed and viewed with suspicion by government forces.
The third sector in Middle Eastern
economies is semiformal, composed of an entrepreneurial class with substantial economic resources. Unlike the formal and informal sectors, whose economic activities are marked by extremes of procedural formality or complete informality, the semiformal sector operates out of formally established enterprises but conducts its business with little regard for formal procedures or regulations. Although the business establishments active in the semiformal sector are often officially registered and licensed, many of their transactions are conducted informally and unofficially, bound not by specific government regulations but by internal, complex dynamics that have evolved within and between the businesses. Usually operating out of small, rather nondescript shops and stores that give a misleading impression as to the high volume of capital they generate, these businesses generally fall into one of two categories. Many specialize in the sale of one specific type of item—fabrics, carpets, jewelry, leather, copper and brass, bridal and dowry goods, herbs and spices, nuts and dried fruits, patisseries. There is often only one owner, although some stores are owned by a partnership of two or more entrepreneurs. Many of these businesses are found in the bazaar—in fact, these are often the only businesses found in the bazaar, with each wing of the bazaar or section within each wing housing similar businesses. Nevertheless, there are too many of these establishments to all fit into the narrow alleys and limited spaces available in the bazaar. They can therefore be found throughout the business districts of most larger towns and cities as well.
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