Political economy simply means the study of the interrelation between politics and economy. It entails the study of how institutions develop and manage to cope in areas of communism, socialism and capitalism which are the major political systems. Political economy also turns out to be a battle for resources between the major groups in the government. In this case we will pay keen interest on the outcome of the political unrest in the Arab nations in North Africa. This wave of Arab Spring of unrest affected Egypt and Tunisia sometimes last year and early this year. Morocco and Algeria were also affected but in these nations it was just some riots and protests nothing so serious. This paper will view the effects of these political unrest in the economies of the affected nations.
The article was published by the Real Instituto Elcano and is named A Political Economy on North African’s Transition. The author of the articles is Gonzalo Escribano and it was published on the thirty first of January this year. The paper focuses on the political unrest in the North African Nations for the past two years. The possible causes of the civil unrest and the possible effects of the revolts against the government especially when it comes to the economy.
When we talk about political economy it is an evaluation of the relationship between the politics and the economy of a nation. It is generally an assessment of the wave of the political revolts that saw the overthrow of incumbent regimes and the after effect which is the nations plunging into economical crisis. For there to be a democratic rule, there must be the agreement between the political and economic forces in a nation. The emergence and rise of the middle class and also the decentralization of an economic power are key for there to be a good relationship between politics and economy.
In Tunisia, there society considered more modern in terms of of the socio-economic ecosystem were the first to revolt against the law. These political case can be viewed as a business scenario to make it much easier to understand. The urge to revolt tends to increase when the opportunity cost of of a revolt is lowering and this tends to make nations with a high inequality in the resources and low economic opportunities more prone to revolutions than nations which have high economic opportunities. What democratization factors made the Northern Africa nations more prone to civil unrest and later on led to the overthrow of the Libyan, Tunisian and Egyptian dictatorships?
The effects that were later passed on to the economies of the parent nations after the revolts. Economically, the North African nations have achieved good results ranking in the high and medium in the High Development Index: Libya being position sixty four, Tunisia number ninety four, Algeria holding the ninety sixth position, Egypt in position a hundred and thirteen and Morocco being the last in position a hundred and thirty. Over the last decade, life expectancy has greatly increased and schooling has also progressed. Algeria, Libya and Tunisia has on average had many years of expected schooling of Medium Human Development Countries and Arab States Morocco and Egypt on the other hand have are at an average of both country groups.
The slow economic growth during the revolt especially after the leaders were taken out of power can be associated with the international financial crisis and the Euro crisis also. The impact of the crisis even affected the macroeconomic balance. The attempts to stop both social unrest and deepening of economic downturn led to the fall of fiscal income and expenses on the other hand were fostered. A rise in subsidies, public wages and public jobs saw the rise and growth of fiscal deficits in Egypt, Tunisia and Morocco for years 2011 and 2012.
After the revolts which started off in early 2011, cases of increased poverty, food scarcity and inequality were also recorded to be on the rise. In the last two decades, there has been a rise in the number of human population and there was a slow down in the pace of improvement in the second half of the second decade. However, only Algeria, Tunisia and Egypt were able to reach the HDI rank. Food subsidy reductions have been common in the past and is attributed to the recent demonstrations. It is not however known whether the access to food has been a problem I the nations.
Egypt, Morocco and Tunisia are however experiencing problems with their nutritional levels. Libya had a problem with malnutrition levels and the nutrition figures in Algeria are also staggering. It is however debated that the poverty levels in the Northern Africa nations were underestimated. The progress in the reduction of poverty is however slow and very insignificant and are considered the slowest in the region and do not seem to slow down the poverty levels in the Northern part of the continent. There is however a more sophisticated argument regarding the economic causes of the Arab revolts is all about modernization and social transformation.
The involvement of the North African regimes and their ability to deliver on socio-economic urges and also the legitimacy of autocracy was getting a major challenge from the broader and very demanding middle class. It also lay emphasis on the involvement of these North African governments and the fact that the cost of autocracy cannot be compensated for the meager economic benefits.
The emergence of the North African balances in the political economy is well written down in the regions political economy literature. After the colonialist left, they had put in position structures that shaped the economic and regional balances between their parent nations. This led to state-led growth, the importation of the strategies of substitution which in turn generated a class of managers and rent seeking employees. Due to the increase in the debts, this model first failed in the 1980s. However, with the help of the economic elites, it led to the stabilization and liberalization of policies.
The political economy of the North African nations traditionally has been based on the political networks which majorly base on popularity. The exploiting of economic reforms and renewing of rent active strategies is also one of the bases of political economy. In Egypt and Tunisia, the two leaders who were taken off duty after riots had put in place architects who would extract rents from their nations. A revelation made by the popular WikiLeaks in the year 2006 showed that the US ambassador to Tunisia reported that most of the Tunisia’s elites were actually related to Ben Ali, the the president.
Their relationship was based on the group called a “Family”. In Egypt, the connections was being based by one of Mubaraks son and this led to conflicts of interests between the son and the military. In Morocco, the Mazkhen constitute of a a very hidden network of influence around the palace. The economic preferences and interests around the palace include a number of famous businessmen who conduct activities between the public and private sector. In Libya, the Gaddafi family had taken over oil mines and all the revenue was under the scrutiny of the family.
There has also been a conflict between foreign investors and the ruling elite. Most of the foreign nations and investors have to adopt exit strategies to optimize their returns when it comes to investments. In a way, the foreign investors have a positive effect when it comes to modernize the economic system but have one negative effect. They do not change the political economy balance and when we look at the Middle East, they have no commitment to the promotion of democracy.
After the Arab Spring, all North African affected nations increased public wages and public works. This was done as a method to take away the tyranny of bad leadership and at the same time put the interest of the masses forward. These measures have however created an advance for social justice and changing the system of leadership to bring about a more inclusive method that incorporates growth and the sharing of wealth. The correlation between the political systems and the economic growth are however different in these nations. This is because of the different social systems and the resourcefulness of every nation.
The enlargement of the working middle class, slowly renewing business and and economic elites is viewed as another measure of reassuring the restoration of the economic systems. The main obstacle may however be the implementation of short term economic policies which at times prove to be politically expensive. Such methods include the food rationalization and energy subsidies which are implemented in through social targeting, external liberalization continuation, fiscal unsustainability, resistance and maintenance of a prudent micro-economic stance.
It is proven that is very hard for an economy to manage in a government or nation is in political transition. A good political mood sets it off for good business and investment opportunities and structures actually. What we have in the article is not the picture of a modest society but the real world in which we live in now. Africa is a growing continent and nations in these continent are weighing their options between exploring its economic options and the realization that policy space is quite reduced.
It is necessary for every nation to know that politics and the economy go hand in hand. An economy of a nation cannot be good where as the nation is sunk in civil strife and political instability. The leadership in the nations should also make it their duty to ensure there is economic growth in their countries. In this case, they should ensure the implemented programs are successful and are aimed at serving the country not causing harm lastly, corrupt and unethical leaders should be scrapped away to avoid the case of a government failing under the nose of its elite leaders who had a chance to do something yet they choose not to.
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