Can Arab Leaders Spend Their Way Out Of Discontent?

In response to Tunisia and Egypt, many Arab governments have rolled back subsidies to keep food prices low. Economics as well as freedom play a role in the Arab world's turmoil. However, buying their way out is a short-term solution that will be costly. Algeria, Syria, Morocco and Jordan will have budget shortfalls, and the World Bank will not look kindly. Kuwait gave every citizen $3,000 and still, protests are called for this week. Unemployment among the young is one of the fundamental problems fueling unrest. In Saudi Arabia, a new study shows that 70 percent of crimes are committed by unemployed college graduates.

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Nervous Arab leaders have watched dissent spread from Egypt and Tunisia to their own borders, and they have responded with money, lots of it. Since the uprisings, the prices of fuel and staple foods have dropped, while government salaries have jumped.

NPR's Deborah Amos reports from Riyadh on why this may be a risky policy.

(Soundbite of cash register)

DEBORAH AMOS: Take a walk down the aisle of any supermarket in the Middle East - this one is in the Saudi capital - and check the food prices. Staple foods are remarkably cheap. A loaf of bread is less than a dollar. The government subsidizes the price.

In Saudi Arabia and most of the other Gulf states, oil revenues pays the bills, but the poorer Arab countries, from Jordan to Yemen, where discontent is rising, those governments are on a spending spree, and they are dipping into overstretched national budgets.

Economists warn that trying to buy your way out of unrest may be a short-term fix, but it has long-term consequences.

Mr. ABDEL AZIZ ALUWAISHEG (Economist, Gulf Cooperation Council): Well, definitely, I think it could backfire.

AMOS: That's Abdel Aziz Aluwaisheg, a top economist with the Gulf Cooperation Council.

Mr. ALUWAISHEG: The system of subsidies as it exists now is a throwback to older days when governments had more means.

AMOS: The means are shrinking as the world economy is changing. Energy costs are up. There's a worldwide food price hike. So as the big spenders pay more to keep food prices down, they'll have to borrow more to pay the bills, says Aluwaisheg.

Mr. ALUWAISHEG: Governments like Jordan and Algeria and others really do not have the reserves to sustain that for a long time, and then they would have to again face the problem another time.

AMOS: Jordan's national debt had doubled over the past decade. The government response: cut government services and subsidies. But that was before the street protest, says Greg Gause, a Middle East specialist at the University of Vermont.

Mr. GREG GAUSE (Middle East Specialist, University of Vermont): The king dismissed his government, which had been a government that had moved toward economic liberalization opening to foreign investment.

AMOS: Jordan's phase-out of subsidies was quickly reversed. In the past two weeks, Algeria and Libya cut prices on sugar and rice. Morocco vowed to keep food affordable. Syria reversed subsidy cuts on heating oil.

These governments had been moving from government-controlled economies to market-driven. But the move has squeezed the educated middle class, says Gause.

Mr. GAUSE: That leads, of course in the short term, to higher prices, to harder time for people to find a job because private-sector employers tend to be more efficient, they need fewer workers.

AMOS: So, in the short term, stability and even survival is the major concern.

Mr. GAUSE: The king in Jordan read the Egyptian story as being one of I had better slow down on my economic liberalization.

AMOS: Now, even some rich Gulf States are under pressure. In Kuwait, Facebook groups have called for Egypt-style protests next week. Political scientist Khalid Dakheel says Kuwait's royal family got the message.

Mr. KHALID DAKHEEL (Political Scientist): They just handed money and food both. Three thousand and seven hundred, I think, was (unintelligible) dollars for every Kuwaiti. So I think the ruling family is trying to buy off the public.

AMOS: Buying the public doesn't address a fundamental problem common to all Arab governments, says economist Abdul Aziz Aluwaisheg, and that is unemployment among the young. It's the highest in the world.

Mr. ALUWAISHEG: People are starting to see the link between unemployment and greater issues. This is something that I think security people have known all along, to recognize the potential, the destabilizing potential, of unemployment.

AMOS: Borrowing to keep food prices low puts off the economic reform that helps create new jobs. A recent Saudi study showed a relationship between unemployment and crime, says Aluwaisheg.

Mr. ALUWAISHEG: The correlation was amazing and I think something like 70 percent of crimes, economic crimes, were committed by unemployed university graduates.

AMOS: Criminals can be punished, but that's not going to stop the dissent on the streets and on the Web. Those voices are rising. The question for many Arab states: When does the anger and protest and demand for change reach a critical mass?

Deborah Amos, NPR News, Riyadh.

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