A Broken Social Contract, Not High Inequality, Led to the Arab Spring

• Author: Shantayanan Devarajan - Elena Ianchovichina
• Pages: 1-4

IMF

Volume 18, Number 2 Summer 2017

www.imf.org/researchbulletin

B U L L E T I N

In This Issue

1

A Broken Social Contract,

Not High Inequality,

Led to the Arab Spring

5 Structural Reform

Packages, Sequencing,

and the Informal Economy

9 Q&A: Seven Questions

on Fintech

11 IMF Economic Review

12 Recommended Readings

From IMF Publications

13 IMF Working Paper s

19 Staff Discussion Notes

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Research Summary

A Broken Social Contract, Not High

Inequality, Led to the Arab Spring

Shantayanan Devarajan and Elena Ianchovichina

During the 2000s , inequality in Arab

countries was low or mod erate and,

in many cases, declining. Yet there

were revolutions in four countries

and protests in several others. T his

so-called inequality puzzle can be

explained by noting fir st that, despite

favorable inequality measures,

subjective well-being was relat ively low and falling sharply, especially for

the middle class and in the c ountries where the uprising s were most intense.

Increased unhappiness wa s associated with dissa tisfaction with the quality

of public services , the shortage of formal sector jobs , and corruption. The se

sources of dissatisfac tion suggest that the old soc ial contract, under which the

government provided jobs , free education and health care, an d subsidized food

and fuel in return for a subdued p opulation, was broken. T he Arab Spring

and its aftermath ind icate the need for a new social contract un der which

government promotes private sec tor jobs and accountability in serv ice delivery

and citizens partic ipate actively in the economy and society.

For decades, the Middle Ea st and North Africa (MENA) had been mak ing

steady progress in reducing ext reme poverty and inequality. Not only did the

region reach the United Nations Millenn ium Development Goals related to

poverty and access to i nfrastructure ser vices, but it made important strides

in reducing hunger and child a nd maternal mortality and increa sing school

enrollment (Iqbal and Kiendrebe ogo 2016). Inequality of opportunity dec lined

in Egypt a nd some other countries in the region (Hassine 2011; Assaad and

others 2015). Income inequality was either consta nt or declining in most MENA

economies and remained moderate by internat ional standards.

Standard development indicators did not capture t he growing discontent.

Once the uprisings occur red, however, is sues of equity and inclusion caught

the public eye. Income inequal ity was cited as one of the factors b ehind

the Egypt ian revolution (Hlasny and Verme 2013; Nimeh 2012; Ncube and

Anyanwu 2012; Osborn 2011). The idea that income inequality is lin ked to

revolution can be traced to ancient ti mes (Muller 1985). Today, e ven though

it is understood that tolerance for income inequa lity varies over time and

across countries (Hirsc hman and Rothschild 1973), high income inequality

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