There were two important pieces of news about the Arab Spring revolts this week. One the one hand, the National Transitional Council in Libya have claimed victory in libya after the death of Colonel Muammar Gaddafi. On the other hand, a report published by Geopolicity shows that those same protests have brought devastation to their economies, while regimes that have suppressed protests have prospered.
Countries that have been affected by the protests have seen huge drops in GDP and government revenues. Libya’s public revenues (taxes and other inputs to government) have collapsed by 84%, while Yemen has seen a 77% crash. In short; if you’re a despotic ruler, your income just disappeared.
Contrast this with the countries that managed to avoid protests. Saudi Arabia’s royal family, for example, successfully avoided public unrest by appearing to offer political concessions; in the next (local and pretty irrelevant) elections, women will be able to vote. Countries like United Arab Emirates, Kuwait and Qatar have seen significant increases in GDP over this period.
The incentives are clear; repress and be rewarded. It is easy to look at the cold logic of this calculation and think that there will never be an overthrow of those dictators left. Their people will see the damage done by the revolutions in Egypt, Tunisia, Libya and Yemen and conclude that it isn’t worth it. But from an economic stand-point, that doesn’t seem likely. The Arab Spring may enable greater stability in the long run, and encourage investment from overseas firms that had previously been wary of the changing whims of local autocrats. While Foreign Direct Investment (FDI) was high in Libya beforehand, reconstruction will be needed in the short term. Companies are being encouraged from every corner to capitalise on the ‘Libyan gold rush’.
Political freedom could increase Libya’s potential GDP in the long run, creating more jobs and economic prosperity than ever seen under Gaddafi. Compare that with the future of Arab despots, where companies are increasingly suspicious of ingrained corruption fostered by a lack of accountability, and you’ll see that while the process of gaining political freedom may be costly, in the long run forgoing such freedoms will have a far more detrimental effect.
For those living in a cave for the past ten months, there is a great interactive infographic from The Guardian here on the Arab Spring from the first spark in Tunisia to current developments.