Absent Middle Class Key to Gulf Stability
The lack of a strong middle class in the Gulf is delaying economic and social development. Part of the problem is generational, as the previous populations were too small to allow a middle class to flourish. But the emerging middle class also faces serious problems as their concerns are not at the centre of government planning.
This is because in all Gulf states the government still dominates the economy. Therefore a huge dependence on the state fosters a lack of entrepreneurial or professional motivation among the people, which in turn is exacerbated by government bureaucrats concentrating on how to give services to people, rather than developing laws which would encourage them to stand up for themselves.
The alarming state of the Arab middle class is the subject of an interesting study by Booz and Co, titled the Bedrock of Society, which draws out some important broad themes for government policy to think about from a survey of about 1,500 middle class individuals in Egypt, Saudi Arabia and Morocco.
“Governments must work to expand the middle class, primarily through social, economic and political reforms that empower the private sector,” said the Booz and Co report. “At a fundamental level, rather than providing jobs, the state should aim to provide economic opportunities, strong educational institutions and a level playing field”.
The importance of putting the middle class at the heart of policy thinking has been recognised by many. For example, Lubna Olayan, deputy chairman and CEO of Olayan Financing Company, Saudi Arabia, said that “building a thriving middle class is the core of any prosperous, resilient society, and failure to provide the growing ranks of low- and middle-income citizens with a sense of mobility and aspiration could lead to social instability,” when she spoke at a World Economic Forum debate.
During her comments she criticised the slow development of the middle class in most Arab states, but praised what was happening in Dubai where she saw a large number of young Arabs choosing to move and live in the emirate, which had built an economic and social environment that encouraged the development of the middle class, unlike many other Arab states, she said.
The Booz and Co report makes clear that the current middle class is not satisfied with their economic prospects, although not unnaturally the Saudis are a lot more cheerful than the Egyptians and Moroccans. But the report makes clear that the majority of Arab middle class employees are salaried and work in the public sector, in stark contrast to more developed countries where the small and medium sized enterprises figure prominently in contributing to gross domestic product (GDP) and employment. As a result of this disparity, the middle class in the Middle East and North Africa (Mena) region is unable to act as a stabilising factor against external economic shocks.
A key requirement of a committed middle class is good education. And even among the economically content Saudi middle class, most young people in the process of finishing their schooling do not think that the Saudi education system has equipped them with the right skills for the job market. The challenge of educational reform is one that educationalists in Saudi Arabia (and other states with similar profiles) will have to deal with quickly.
The UAE does not face the problems that Saudi Arabia has with its curriculum, but school reform is a major priority in the UAE too. For example, the work of the Knowledge and Human Development Authority (KHDA) in Dubai, and the Abu Dhabi Educational Council’s New Model Schools are all part of the wider trend to ensure that education moves away from learning by rote and encourages young people to think.
But it is remarkable that the Arab middle class still wants to live and work in their home countries. When asked if their country is the right place for them to be successful, a substantial 28 per cent ‘completely agreed’, and an even larger 37 per cent ‘agreed’, meaning that 55 per cent of the poll felt that they could succeed in their home country.
It is significant that this question focused on the respondents’ sense of success. For example, it did not ask if they were prepared to endure another few years, but identified their own feeling that they would do well and positively flourish. This sense of determination or optimism is a very important social asset that governments should recognise and be willing to work with.
It means that governments should prioritise social and economic programmes that promote entrepreneurialism. And this should not just focus on providing cheap start-up capital, but should take it to another level of support: like building centres of excellence where like minded companies can find each other and build cooperation.
It also means removing the legal fear of failure and sorting out a good bankruptcy law, so that when a start up business fails, the entrepreneur is able to pick up the pieces and start again, rather than being sent to jail.