Is it ‘the economy, stupid’ also in Egypt and Tunisia?

Many commentators have referred to economic factors – stagnant incomes, high unemployment, price rises and rising poverty – as factors behind the Egyptian (and also Tunisian) revolutions, alongside the lack of political freedom, the liberating force of modern communications tools, etc.

I haven’t had time to study this in detail, but here are a few numbers that shed some light on the issue.

Let’s start with overall living standards (as measured by GDP per capita at purchasing power parity. See Fig. 1, data from the IMF WEO database)

It is useful to benchmark the Middle East and North African countries against Latin America, as back in 1980 the two country groups were at a similar level of GDP per capita. Economic performance in the Arab world has clearly been disappointing, not least in Egypt, which has signally failed to catch up at all even with its sluggishly performing neighbours. Note, though, that Tunisia considerably outperformed its peer group, coming close to Latin American wealth levels from a low starting point.

Fig. 2 shows price developments (annual average consumer price inflation, also from the IMF) for the same groups and countries.

Here we see also a generally poor performance in Middle Eastern and North African countries compared to Latin America, which had increasingly successfully battled the inflation demon in earlier decades. But, again, the situation has been particularly worrying in Egypt: inflation has been high since 2004 and spiked alarmingly (before being dampened by the economic crisis). Here again, though, rising prices can hardly serve as a plausible explanation for popular discontent in Tunisia.

The data on the labour market situation (which are from the ILO KILM database) are somewhat more patchy (and so do not lend themselves to graphs). The overall picture is of a consistently poor performance in both the countries hit by social upheaval.

Employment rates in Egypt have stagnated since 1991 (when figures begin) at just around 42% for the total population above 15, less than a quarter for youth and barely a half for adults. In other words jobs growth has barely kept pace with the growing working age population, not to talk about an increasing participation of women in the labour market.  The employment rate figures for Tunisia are similar overall (somewhat higher for youth and lower for adults).

In Egypt unemployment (as estimated by ILO) grew steadily from about 5% to around 10% during the 1980s: a level at which it has broadly remained constant ever since. In Tunisia the situation is worse, with the unemployment rate since 1989 (figures for the 1980s are not available) fluctuating between about 14 and 16%. Many of the protesters were young (men). Measuring youth unemployment is a tricky issue at the best of times and the ILO data are somewhat patchy, but there is a clear sign of a growing youth unemployment problem in Egypt: the rate rose from under a quarter in 1998 to over one in three in 2005 before dropping back (I have no information on the extent to which the crisis negatively affected youth unemployment). The few data that are available for Tunisia point to a similar order of magnitude.

For what they are worth the very patchy poverty and inequality data for Egypt do not actually suggest a trend towards rising inequality or poverty (but the last figures are for 2004).  There are no useful data for Tunisia.

Summing up this quick look at some relevant numbers, Tunisia actually performs reasonably well on per capita growth and inflation, but has long-standing labour market problems which can be presumed to have become exacerbated in the recent crisis. Egypt’s economic and labour market performance have both been dismal even by the undemanding standards of other countries in the region. Rising prices have certainly been a worry recently, and this may well have exacerbated inequality, hitting the poor hardest, even if the data do not show a long-term worsening of inequality.

It seems safe to conclude that the two revolutions were not sparked by a dramatic worsening of economic conditions for the broad mass of the population. To the extent that economic factors played a role, it seems more plausible that a long-term, growing frustration with limited life opportunities, and career chances, especially among the bulging cohorts of young workers and students had built up and finally boiled over. The thought of many more years of the same drudgery, under the son or other relative of the current incumbent was too much even for relatively privileged members of society.

But it wasn’t just facebook what did it.

Update: Paul Krugman has since made a similar point.

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