'Crony' capitalism: widespread, durable

OxfAn: Excerpts:

".... Links between business and political power are apparent across the Arab region, but are strongest in Egypt, Syria and Tunisia where they are an essential instrument of regime support....in the sense of an economy dominated by a small number of powerful monopolists closely connected with the ruler and his family -- exist most strongly in Egypt, Syria and Tunisia. They are present in a less concentrated form in the oil states of Algeria, Iraq, and Libya and also in Morocco and Jordan. The appearance of such 'cronyism' within Arab presidential regimes is of a relatively recent origin, and the result of more of less the same processes, namely: the enforced removal of most of the old entrepreneurial class due to the nationalisation of their assets and their subsequent flight under post-independence authoritarian regimes; later attempts to re-create a private sector during the first wave of liberal market reforms in the 1970s and 1980s; and the sale of state assets to a small group of persons and networks closely associated with the regime, which use them to monopolise certain key sectors of the economy. Such associates have played an important role in a new elite of senior army officers, bureaucrats and, in some instances, members of the ruling family -- all with a strong interest in regime survival, sometimes by the succession of the ruler's son (as in Syria in 2000). They have worked collectively to prevent competition from small- and medium-sized business while manipulating liberal market reforms to the disadvantage of their smaller competitors, for example by trying to impose a regime of transparency and accountability on the latter while ensuring that their own activities remain largely secret..... The details can vary significantly: Syria. There are only some ten leading figures -- mostly Sunni businessmen allied to senior members of Alawi-dominated army and security services -- who, since the 1980s, have catered to a small and highly-protected local market. Egypt. There are a few more than 30 families close to the presidential family and the ruling party who are only able to dominate limited parts of a much larger and more open economy. Tunisia. The system is different again, with domestic economic activity dominated by contacts of members of President Zine El Abidine Ben Ali's own family, mostly those of his first and second wives and many of their male relatives, leaving the country's flourishing export industry largely to foreign capital. It has been suggested that both the Syrian and Egyptian regimes have wanted to keep the number of official monopolists small, the better to manage their activities while benefiting from their presence as an internationally-recognised private sector. The same logic may also have applied in Tunisia, although it would seem more likely that their numbers are limited less by choice than by the existence of individual family members who are willing and able to work together to manage their business interests without allowing crippling competition between them. As for market size, its relative smallness in Syria and Tunisia makes it easier for a handful of monopolists to combine to prevent domestic competition via their own clout, supplemented by their domination of whatever business associations the regime may choose to establish. However, in Egypt, a much larger market and the greater possibility to export provide opportunities for new competitors not only to emerge but also to organise themselves in new pressure groups, such as the Egyptian Businessmen's Association. ..... In Algeria, this has involved a passage from a small number of powerful political figures dominated by the military until a decade or so ago to a much larger elite, some of whom, with presidential assistance, have obtained key monopolies as a result of privatisation or other supposedly liberal economic measures. In Iraq, quite a large number of business families were not only able to profit from President Saddam Hussein's sanctions-breaking policies in the 1990s but also from the huge contracts awarded since 2003. Only in Libya is the process of rent-seeking more opaque, due largely to the unusual character both of the Qadhafi regime and the role within it of the leader's sons. Morocco and Jordan. In the larger monarchies, most large contracts -- especially anything connected with the military -- are in the gift of the king: In Morocco, the king is also an important economic actor in his own right, owning many enterprises and a great deal of land -- a position which commoner entrepreneurs have to take into account. In Jordan, the Hashemite kings have never gone into business themselves, leaving the opportunity to exploit the country's meagre resources to a set of business interests involved in the thriving Free Trade Zones as well as other partnerships between Jordanian and foreign capital. Meanwhile, the number of potential native cronies remains small. Outlook. 'Cronyism' in its most recent Arab form remains relatively new and for the most part dominated by the same persons running the same businesses -- as yet with little succession from father to son. By and large, this has allowed such enterprises to prosper and, in some cases, to improve their managerial skills ... However, such associates are a basic component of each regime's support system and, therefore, as wedded to regime survival as the presidential family itself. It is here that one of the major contradictions of the Arab presidential security state is revealed: On the one hand, such regimes strive to legitimise themselves by economic success, most often by a process involving the type of opening up that associates either seek to resist or to harness to their own interests. On the other, politically-motivated groups, perhaps close to a possible presidential successor such as Gamal Mubarak in Egypt, may come to understand that their own political success could involve the pursuit of national economic policies harmful to some of the cronies' business interests. While it is too early to speculate whether a serious conflict between political and economic interests inside any regime will emerge, it is possible to imagine a situation in which monopolists might seek some new form of organised representation outside the regime in order to protect themselves. 'Cronyism' is likely to continue in its present form in the Arab world until one of two conditions are fulfilled. Either the senior figures will be financially independent enough no longer to require constant regime support or the leadership of the regime itself will conclude that 'cronyism' is incompatible with regime survival.