 Ladies and gentlemen, dear friends, welcome to all of you on behalf of the Carnegie's Middle East program. I'm very happy to welcome you all for discussing what I think is a very important and interesting report on the economics of the Arab Springs or the Arab uprising. We often tend to forget because of the, let's say sensationalist and maybe cataclysmic aspect and phenomenon of ISIS and what we have today that at the root of this Arab uprising, which is a probably very deep and long-lasting historical phenomenon, there are structural issues and factors like economics, social issues and others. Just to remind you that in 2010, when things started, if you browsed Arab region from Tunisia to the east, to the Masryk, you will remember that all started with a young man, Azizi, burning himself for mainly economic reasons. He was a young graduate guy, not finding jobs, humiliated by the political police in a city. And this is how it started. In Syria, years before the uprisings, there were several reports talking about severe droughts in several parts of the country, maybe in the northeast that led to a huge rural migration. According to, I think, the World Bank reports and others, Syria was having around 300,000 jobless people every year on the job market, young graduates. So all this explains, in fact, partly what happened. Very shortly, I think what's very stunning in this report and probably our two distinguished guests will talk about it, is the fact that governments did not see this arriving. And the reason why they didn't see is a very paradoxical but explainable reason. Because the indicators, the macro indicators were paradoxically and surprisingly quite well, quite good, I mean, they were showing that things were, at least on some levels, getting on the right track. And this is a very classical explanation about social upheavals. It means that, in fact, people and societies were, because of that, entitled probably to expect a much better life. So they were entitled to expect better access to services, better quality of life, and probably better dignity. And I remind you all that probably the first slogan of the Arab Revolution from Tunisia to Yemen through Syria and Libya was Al-Qarama, dignity. So for those of you who are familiar with social and political history, this is very familiar, Tocqueville, Alexandre de Tocqueville, that knows, I mean, who knows very well the US, by the way, that told us about the French Revolution that, in fact, it happened because things were getting better at the eve of the revolution. And he calls this phenomenon relative frustration, meaning that when things are better, people expect much more benefits from the macro results. And if they don't get them, they are pushed towards revolt. So this is why I think this report is very interesting and enlightening because it shows the picture before the revolutions. It shows a very, let's say, balanced picture and complex picture. And then, of course, some of it explains the evolution and, let's say, the bad evolution that we witnessed after that. To discuss this very interesting report, we have the big chance of having today the two drafters of this report. First of all, on my right, Dr. Elena Iancovicina, who is, in fact, the lead economist at the office of the chief economist for the MENA region at the World Bank. And she will be discussed. And some comments will be added by the chief economist himself, who is on my left, Dr. Shanta Yanan Devarajan, who will also, for 10 minutes, maybe add some comments on the future prospects. I have to say that there's a third culprit for this report, who is Dr. Lili Motaghi, who is not here today, but so Tribute has to be rendered to her. And for those of you who are interested in this report, copies are hard paper copies are at the door, so don't hesitate to pick them up. I will give the floor to you, Dr. Elena, for maybe 15 minutes, and then we'll turn to the comments. Please, the floor is yours. Thank you so much for this kind introduction. And thank you for inviting us to present here. You're very right to say that the numbers, especially the ones that economists look at, typically is led most observers and policy analysts. So what happened was that when we looked at these events after they happened, we tried to understand what was going on. And of course, the Arab Spring events, we heard from the people on the streets, brought issues of equity to the forefront of the public attention. Yet when we looked at the data, we found that there is no evidence of high or rising monetary inequality in the Arab countries prior to the Arab Spring. In fact, what we noticed is that for most many countries, expenditure inequality or income inequality was low to moderate. And even when we obtained data to correct for missing top incomes, for example, in the case of Egypt, we used real estate data to correct for that, the level of expenditure inequality in the country doesn't rise much. So then we looked at other areas. We looked at wealth disparities. And of course, these are larger than income or expenditure inequality, but more difficult to measure accurately. When we try to measure aspects of wealth inequality using, for example, data on hidden wealth in offshore haven bank accounts, we found that actually there is no big gap between the countries in the MENA region and the rest of the world. And what was even more interesting is that this gap has actually declined substantially over the course of the last two decades. So then we were puzzled. And we thought, well, if monetary inequality does not explain or cannot explain the Arab Spring event, where should we look? And we looked at subjective well-being data. And when we started our analysis, we noticed that, in fact, right before the Arab Spring on the eve, there was a substantial decline in subjective well-being levels in many MENA countries. These declines were particularly pronounced for the Arab Spring countries, including Egypt, Yemen, Tunisia, Libya, and Syria. And the declines were broad-based. They included declines in levels of happiness for the middle class, the middle 40%, not only the bottom 40%, which include mainly the poor and the vulnerable. So what we observed is, in essence, what you already mentioned, a so-called unhappy development paradox. What we had in this country is moderate growth, substantial development progress happening at a time when many people, the majority of the population, felt less satisfied with their life, less happy. And what we had basically by the end of the 2000s is we had the MENA countries among the least happy places in the world. And, in fact, when you look at that, their position is even stark, more stark, when compared to countries of their own level of development, compared to a similar level of development. The countries that were least happy were Syria and Libya, among the set of countries that we looked at. Yes, look, Libya. And then, of course, because of the low level of inequality, it couldn't have been a factor in these low levels of happiness or life satisfaction. So when we did more rigorous analysis, we find that the very same factors that are associated with these low levels of happiness actually triggered the Arab Spring uprisings. When we look at surveys on what were the reasons why people marched on the streets. And these factors included dissatisfaction with standards of living, dissatisfaction with the high unemployment rates, and the labor market conditions, specifically the poor quality jobs, corruption and unfairness, which led to overall very high levels of frustration among people that they cannot get ahead by working hard. So what we did was we looked also at areas that drove these declines in standards of living. And we find that there was widespread dissatisfaction, particularly with the quality of public services. And dissatisfaction increased, especially in the Arab Spring countries, in Egypt, to Asia, Syria, and Yemen. The percentage of people dissatisfied, for example, with public transport, housing, health, and education increased there the most. So if monetary inequality cannot explain the Arab Spring events, can it nevertheless shed light on what happened in the aftermath? And we looked at that, and we know that since the Arab Spring, all of us follow these events very closely, the region has gone from relative calm before the Arab Spring to multiple revolutions, regime changes, civil wars, and more recently escalation in terrorist activity, which culminated when ISIS occupied vast territories of Syria and Iraq. So in short, what we have now is an Arab world. The Arab world is in a crisis, in a crisis. And so it's important to look at that. And what we find is that while expenditure inequality or income inequality cannot explain the Arab Spring, the relationship between regional inequities and inequality among ethnic groups or sectarian groups can shed light on the aftermath. In particular, when disparities among regions in a country are very large, which typically is not a problem, but when they coincide with ethnic disparities, they can create problems. What we know from our research is that the regional inequality, in fact, rose in many countries in the Arab world prior to the Arab Spring. For example, while in Syria, average incomes increased substantially on average, the incomes of the households located in the northern parts of the country lagged behind. So again, this refers to the point that you made about the lagging populations. And these are precisely the areas where ISIS, the Islamic group, has been able to occupy and establish a presence. So while grievances by themselves do not lead to civil wars, grievance-motivated uprisings can turn into civil conflict when groups organize a lot of ethnic or sectarian and other lines use these grievances to obtain public support. So in some, what we have is a region which on the eve of the Arab Spring was among the least happy parts of the world. The Arab Spring uprisings were triggered not by feelings of frustration about high-income inequality but about broad-based dissatisfaction, widely shared feelings of frustration about quality of life factors, corruption, unfairness. But what we find in the aftermath is that the spread of extreme violence has to do with the fact that regional inequality which rose in that period prior to the Arab Spring has overlapped or exacerbated ethnic and sectarian tensions and disparities. Thank you. Thank you very much, Dr. Yakovicina. In fact, two things come to my mind after having heard you and read the report yesterday, which again is very interesting. The first one is maybe a remark of, I mean, disciplinary remark when such a report puts emphasis on qualitative analysis more or factors more than quantitative and talk about the lack of, let's say, the deficit in explanation by purely looking at the figures and et cetera and having to look at the mindsets, at psychological, social issues, welfare, inequality, sense of frustration. This is a revenge, let's say, for social science. It's a bliss for us who work more on, let's say, the qualitative side of things and on the narratives side, which is, I think, important. It shows that our two disciplines or our two, let's say, jobs have to sometimes concur and collide. The second explanation or the second thing which is, I think, very interesting, and this is a transition to you, is this phenomenon of violence. It's stunning to see that, in fact, the two countries that were probably turned out to be the more violent after the Arab Spring, Syria and Libya are the ones that you mentioned having the lowest level of happiness and satisfaction before the revolution. So I think the explanation here is quite simple and linear. And I think what's very important is what you said and what is very well shown in the report, i.e. this kind of correlation or adequation between the sense of grievance in macroeconomic terms and the divided character of societies along sectarian, ethno-sectarian lines. So I think that this is something utmostly crucial for us, social scientists and political scientists, to note. I think that also this gives us clear indicators for exit strategies and solving, let's say, approaches to solve this problem, which, in fact, leads to the second interlocutor this morning, Dr. Shantayanan Devarajan, that will exactly focus more on the future prospects and maybe the ways to exit from this, what you call, very interestingly, this inequality puzzle in the mean of it. The floor is yours. OK. Thanks very much, Joe. And thank you all for coming. This is a great opportunity to exchange some ideas. Before getting into what I was going to talk about, I can't resist responding to your first comment. And I'm not going to concede defeat that this is a victory. And it's an important point. This is not a distinction between qualitative and quantitative data. Both these sets of data are highly quantitative. And really what we're finding is that the traditional indicators that we use, like GDP per capita or the level of income inequality, are proxies for welfare, or proxies for how people actually feel. And what we're realizing is that they are imperfect proxies. And thankfully, we have now quite a lot of data, quantitative data, on how people actually feel, because you can ask them. And it seems to me that instead of going through all this machinery of trying to come up with indirect indicators of how people feel, just ask them and listen to what they have to say. And that, I think, is the lesson for both our disciplines coming out of this work. Now, I think the big challenge, having done this work, this analysis or diagnosis of the problem, is what do you do about it? We do have a crisis in the MENA region. There's no question about that. I sometimes refer to, at the World Bank, we refer to fragile countries. We may be in a situation where we have a fragile region. Now, in this setting, I want to go back to give a particular interpretation of the data. And that might help us figure out where to go forward. And the way I would look at it is that before 2010, or basically since independence, there was a particular social contract at work in this region, which is that the state provided jobs, state was the main employer in the formal sector, provided free health and education, and subsidized food and fuel. And that was one side. And then maybe in return for the state's largesse, the population didn't raise its voice very loudly. And in fact, tolerated some of the elite capture that we have observed. And that contract, for the most part, actually delivered on some of the basic development indicators, which is what Elena was referring to, that poverty was low, income distribution was relatively low. Education in terms of attainment indicators was extremely good. Child mortality was falling, and so on. But that contract was not sustainable. And in particular, the state could no longer afford to hire everybody who comes out of school. And that's when it started to break down. And that's when we began to see that people who aspired, who went to school like it was easy, who went to school and expected that if they did well in school, they could get a job, were left without that possibility, or they needed to have connections, wasta, to get these jobs. And what we're seeing in the aftermath is that when one side of the contract was broken, that is the state was no longer able to deliver what it was, the other side felt they had no reason to stay quiet anymore. They were not any longer benefiting from the largesse of the state, but they wanted to exercise their voice. And in particular, what you observed was that you had an emerging middle class. People who benefited from that education and all of those subsidies and everything else, they came into the middle class. Their aspirations were even higher. And now they're frustrated. Because just when you make it, you're not able to capture what you hoped for. And this is the frustrated, what do you call it? Relative frustration, that's right, that Dutocqueville was referring to. So I think in terms of going forward, what we really need to be thinking about is a new social contract. This old social contract is broken. And we can't put it back together again, much as some people might try, that we really have to be thinking about a social contract where the state, instead of being an employer, is the agent that tries to promote the private sector to create jobs. The problem is that when the state stopped hiring, the private sector did not grow, mostly because of all the elite capture that the state had managed to undertake. We have now data on crony capitalism in Tunisia, Egypt, and lots of other countries, where monopolies stopped the small and medium enterprises from growing and creating jobs. Syria being engaged. Syria also being in that list. We don't quite have all the data yet on Syria. There have been some problems collecting it. And similarly, with health and education, while the old social contract delivered in terms of getting the kids into school, it wasn't clear they were actually learning something. And so we have very poor quality indicators in terms of performance and tests comparable across countries, including in very wealthy countries like Qatar and so on, which score much, much worse on the PISA scores than, say, a country like Vietnam, with a fraction of the per capita income. And also, these subsidies, particularly the fuel subsidies, while they were meant to protect the poor, seemed to have backfired. First of all, fuel subsidies tend to go over a large part of it, go to the rich, because they're the ones who drive the SUVs and so on. But more importantly, they actually undermined some of the public services that people care about. They helped contribute to the depletion of water, because a diesel subsidy is an incentive for farmers to use water pumps more. And though you have a country like Yemen, which is basically, which is one of the most water scarce countries in the world. Sana'a itself is almost out of water. And yet Yemen grows highly water-intensive crops, because it's profitable as long as the fuel is subsidized. And one particular crop is cut in that respect. So I think we have a sense that the new social contract has to be one where the state is encouraging private sector job creation, rather than being the employer of first resort. That is encouraging accountability among teachers in schools and doctors in the clinics. And instead of these highly distortionary ways of protecting the poor, like fuel subsidies or even food subsidies, that the state actually moves towards a system of cash transfers that are targeted at the poor, where you give them cash and let them choose what they want to buy. I mean, one of the problems with fuel subsidies is that the state is saying to the people, if you want to get a benefit from the state, to consume fuel, which some people, particularly poor people, probably don't necessarily want. So I think we have a sense of what the contours of a new social contract will look like. The question is, how do you get there? How do you approach it? And I think that's the big challenge for us. And let me just share a couple of thoughts we've had and we are working on. One is, there's no question that every policymaker in this region is very concerned about unemployment, particularly youth unemployment. Now, if we can, as we have shown, the link between unemployment and elite capture, then at least we can start having a conversation about that trade-off. I mean, to put it crudely, if you want to do something about the unemployment problem, you've got to do something about the cronies, because they are just two sides of the same coin. And that actually is a way for a conversation in the country about what are the levers in order to address the unemployment problem, which everybody agrees is a big problem, but actually address some of the underlying features. And it's the same thing with education. If you want to improve the quality of education, which everybody wants to do. I mean, people are concerned about this low quality education. You have to do something about the accountability of teachers' unions. And then you can start a dialogue, as we are having in Morocco and Tunisia, between the teachers' unions and parents' associations and so on. And then finally, getting to the violence. Now, that's a very big problem, which I'm sure even the combined wisdom of everybody in this room probably can't solve. But I think there's a small piece of it we might be able to make a contribution to, which is what causes young people to join ISIS, including people from, by the way, not even in the most unhappy places. That is Tunisia is a major source of recruits for ISIS. And Tunisia is one of the better off countries. But what there seems to be is, again, this broken social contract, that young people are frustrated when they don't have access to, or they can't aspire to the things, or they can't get to the things that they aspire to, such as jobs and quality services. But more importantly, when the state suppresses their protests with violence, they begin to completely lose confidence in the state of being able to deliver anything. And because security would be one basic thing that the state is providing. So if we can turn that around and at least try to find ways of promoting jobs in the private sector that young people can then aspire to, can change something in the quality of services by shifting the system of subsidies, we might be able to make a small contribution to what is a really serious problem facing the region at the moment. Thank you. Thank you very much, Dr. Devarayan. First of all, I fully agree. It's very interesting, this issue that you raised, which we call in political science the authoritarian pact. It is a contract between state and society, mainly in the Arab world, that was, in fact, established since the 50s, that I give you relative prosperity. You do business, and you don't care about politics. You leave the political sphere for me. This is a contract that is today completely broken. It is ended for many reasons. We don't have time now to delve into them, partly because of also the end of the rentier state model, and et cetera. It's very interesting to see that in the three countries where revolutions were started very early, you had the same type of chronic capitalism. Tunisia, the Trabulse family, Egypt, the Gamal Mubarak complex, and in Syria, the Rami Mahloof phenomenon. That, in fact, evicted not the poor segments of society, but the middle class and the entrepreneurs. So in fact, which explains the structure of the social pact, of the authoritarian pact, which, in fact, also explains that these revolutions in the Arab world are not the classical type of bread revolt like we used to have in the past. It is a middle class revolution, which is very interesting. And it tells something about the social contract that has to be reinvented. And this is something very dear to us here in Carnegie because in the Middle East program, we tend to work a lot on this new social contract, on pluralism, on the new kind of, let's say, the state-society relation in the Arab world. The second remark has to do with violence. And here I have a question, maybe, to begin with the Q&A session, the violence, the phenomenon of violence. First of all, you're fully right. The foreign fighters joining ISIS in the Arab stock, the number one country is Saudi Arabia. Number two is Tunisia, i.e. two of the countries that are apparently better off economically, which also breaks, let's say, the simplistic explanation that, in fact, misery leads to extremism, which is not very true or very simple. But my question is, and you said it, I mean, today we have more and more uncontrolled spaces in the Arab world. Spaces that are completely escaping the state or any form of organized monopoly of violence, let's say. Huge lands in Syria and Iraq, probably two times Great Britain, Libya Desert, Sinai, part of the sub-Saharan Sahel, and et cetera. What can we say, what do you know about the political economy of these spaces, of these uncontrolled spaces? And can we, I will be very provocative, can we go along theories like, for example, our colleague Stephen Walt from Harvard that says, finally, ISIS is maybe a very frightening phenomenon, but at the end it will become a normal state like any other revolutionary state. I don't buy at all this theory. But from a political economy point of view, can you say something about, let's say, the organization of these? Actually, to be honest, that's the kind of question I was going to ask you. You're the best at talking, right? No, because we are not political scientists anyway. All I can say is that we have tried to do some work on just the economics of ISIS. And even that is really quite puzzling. I mean, the sources of income are unclear. And in fact, how they manage it and how they move towards providing the kinds of services that are enough to maintain control, as you were saying, is also unclear. I mean, there's anecdotal evidence that they're taxing, if you like, the civil servants in the areas that they control in Iraq, because the government Baghdad is still continuing to pay the civil servants. And that's a major source of revenue. Well, the oil is somewhat controversial. People don't know exactly how much they're getting from oil. And their estimates range quite broadly. And then they're probably getting private contributions from elsewhere. But then also, how are they able to translate that revenue into expenditures? Are these fighters who come all the way from other places willing to work at very low wages? I mean, is it essentially a, that's a rent that ISIS is exploiting? We don't, unfortunately, it's a very difficult thing to get data on. If I may add that, what's interesting is that, at least in Syria, and partly in Iraq, the success of ISIS is that it is a better payer than other organizations. A fighter that probably takes around $100 in Jabhat al-Nusra or other factions of the Syrian rebellion takes $500 in ISIS, which in fact is uncomparable. So it's unmatched, but you will join ISIS very mechanically. Right, but would you like to add something on this issue of uncontrolled spaces and violence? Not exactly on that, but I think we are trying to understand using, again, perception data on the process or on the set of people who are sympathizing to radicalized ideas and extreme violence. Those who are comfortable with attacks on civilians, when they're civilian casualties. And what we notice is that this set of people, first of all, it's extremely small in every country that we look at and we focus on the developing world. But what we know from this regression analysis is that people who are more easily radicalized tend to be younger, tend to be struggling. They tend to be unemployed. And importantly, there is another characteristic which you mentioned is that it's not only economics. They tend to be relatively uneducated, even though we have high profile cases of perpetrators who have very tertiary education. We find that people who are sympathizing with these ideas are those with primary education or less. But importantly, they distinguish themselves because they're willing to sacrifice their life for their beliefs. And here we come to an area where there is not much research, at least by economists, on the strength of the beliefs and how extreme groups have been able to capture the imagination of young people around the world and to follow them because they offer something that is different and something that generates strong emotions. This is exactly what I think is now very well demonstrated. The main good that ISIS sells to its recruits is utopia. They sell the idea of utopia and joining this idea of the caliphate, which is by definition a utopian idea. We'll open now the floor. I will ask you to briefly introduce yourself before putting your question and try to put a question and not a very long comment. Please. I'd like to drill down on Bill Lawrence, Middle East North Africa director at CSAD, and my question also comes from the fact that I was former North Africa director for Crisis Group and we did both political and economic analysis. First of all, I'd like to address the last five or six issues that you raised in one sort of comment question. First of all, Boisezi was not a graduate, he was a dropout. The reason we all thought he was a university graduate is because the Unemployed University Graduate Sintesia who were one of the three main forces that made the revolution, revolution wanted him to be and so there was this whole creation of the narrative there. Second of all, the governments knew. I was in high level meetings with the governments of Libya and Tunisia in the mid 2000s and they knew everything that was going on. They just weren't saying it publicly because they thought it would affect FDI and other things. So you have to separate between the public messaging and the private messaging of the governments. All of the countries we're talking about and some of the ones we're not talking about have officially or unofficially 50%, and you've mentioned this, but 50% of the economy and labor force in the informal sector. Hernando de Soto, and this gets at your comment about who's willing to kill themselves, right? Hernando de Soto looked at the 400 self-immolators after Boisezi. 90% were informal economic sector actors all with barriers to entry, which gets at the business environment aspect of what you were saying. So we have two problems here, right? We have the huge numbers of unemployed university graduates bigger, more unemployed than the rest of the population and all these unemployed people in the marginal areas, the vast majority of whom are in the informal sector. So how do you link up those two problems into one big solution? The answer is neither the traditional public sector, nor the traditional private sector can generate the jobs or the growth, right? So you need other private sector mechanisms. That's why everyone's been talking about entrepreneurship. And then I would add to that social entrepreneurship and national service. There's been a lot of talk about it, no action. So in Tunisia, in a pacified Libya in, you can take these large numbers of university graduates and take a set of social problems they're gonna address, public health issues, literacy, local services, governance, whatever, and apply them to that and then have projects that pay local populations to help them. And that's sort of killing three birds with one stone. For me, there's almost no other way to generate the amount of socially positive economic activity to capture this 10 to 15 year glut of university graduates that we have who will continue to cause problems. So that's my question coming. And I wonder what you have to say about that. In the informal sector, university graduate, problem that there's really no obvious answer to. Okay, yeah. Very important to introduce them in this issue of informal sector, which I think was a little bit like. You're absolutely right. And we actually documented in the report that it's about 40, 50% on average. And in some countries like Yemen it's 80% is informal. And in fact, it's more than the frustration of the people working in the informal sector because it's highly insecure, low paying jobs. It also is the source of why women drop out of the labor force. Because if it's insecure for you and me, it's even more threatening if you're female. And so you've got educated women. Levels of education of women is now comparable to that of men dropping out of the labor force. And men has the lowest labor force, women's labor force participation in the world. So that's a very serious problem. Now, at the other point I would fully agree is that all of the job creation, the private sector job creation, the net private sector job creation in Tunisia, in Lebanon, in Egypt has been one person firms. They're startups. That's it, right? All of these other firms are not creating any jobs. So that's absolutely, that is the key. The question is how do you allow these one person firms to grow into five person firms, to 50 person firms, to 100 person firms, right? And that's what's missing. Now, it's almost like you don't need a specific feature of the informal sector for that or a program for the informal sector. I think you have to improve the business climate. The business climate is just appalling in the region. We have very few, well it's very difficult for firms to go out of business, which makes it very difficult for firms to enter into business. So weak bankruptcy laws and things like that. There's problems with access to finance for the micro enterprises that we were just talking about. But it turns out that that problem with access to finance has to do with the fact that the banking sector is also monopolized. So you have three or four banks that are very cozy with each other and don't see any reason why they need to lend to micro enterprises. And then it comes to the crony capitalism. In Tunisia, you mentioned the Trabilzi family. So we've done this work where you find that the Ben Ali family clan, that's both sides of the family, had special interests in telecommunications, in transport, and in banking. And these three, but these three alone were able to thwart an export led industry in Tunisia. Because if you want to export, and Tunisia is a very well located country, it's pretty good infrastructure, educated population, they should be a big export powerhouse. Instead they have very little exports to the European Union. Why? Because well you need telecoms, you need transport, and you need banking services if you want to be an exporter. The telecommunications prices in Tunisia were the third highest in the world, right? Next to Congo, Brazzaville, and Myanmar, right? Something's going wrong here. Well it turns out there's only one telecoms company and it's owned by the family friend. You mentioned the business climate, which leads also to the question of rule of law, which is by definition a political reform subject. So meaning that in fact all this economic issue finally leads to the question of political reform. Question here and then Michel, can you introduce yourself? Thank you. Michael Kurtziger worked on the Middle East for the Department of Agriculture. We're all very familiar with the massive movement of refugees from Syria and from Iraq and Afghanistan and to Europe. But you said nothing about the brain drain. Are all of these people leaving now these countries and going to somewhere where there are more opportunities? And that of course, if that is the case, I understand it's in Greece and in Libya, that of course will have a major problem just multiplying all the problems that you're talking about. Thank you. That's a very good point and I think that we have observed this brain drain for a long period of time, much before what we observe now. I think what we have is a very diverse region where a lot of the, we have the whole spectrum of countries from very low income like Yemen and other ones. Egypt also has relatively low income per capita levels to the GCC countries where incomes are very high. So for the longest time, we've had the most educated people, the most capable getting attracted by the much higher salaries. So those who were not working for the public sector would go and work in big companies there. Now what we observe with the refugees is that of course there is a big push, negative shock that is pushing people out and what's happening is that again, the higher skilled people are able to find jobs elsewhere much more easily than everybody else, but we also have a vast majority of people who are basically displaced and they don't have the skills to cope and we have the tragedies that are unfolding in neighboring countries and now that has reached Europe. So what we need is really an international response and addressing this on multiple levels for addressing the immediate needs of these people wherever they are, stuck. But then also thinking of how we can help them to at least protect the next generation, the kids, because many of the refugees are mostly kids, women, elderly and they're trying to survive even sometimes without a male head or any relatives around. So there is a lot of poverty and vulnerability issues that have been sort of we need to really work on that. Michelle Dunn from the Carnegie Endowment. Two questions. One of them is could you say more about how cronyism in the main countries inhibits the creation of jobs because it inhibits in some cases the attraction of labor intensive industries. I'm thinking for example, I thought you're the World Bank report more jobs, better jobs on Egypt did this in detail for that particular country but I think it's a broader phenomenon. Question number two is is it possible for cronyism to be addressed and corrected within a political system without a political transition? In other words, without a more pluralist, more accountable political system, is it still possible for a political system without pluralism and accountability to address cronyism? Are there examples of that from other parts of the world? Okay, I'll take that. I'll take the bait. First, what cronyism does to labor intensive industries? In fact, we have a book with the title is Jobs or Privileges. It is a very direct link. One of them was what I was illustrating because what does cronyism do? It gives monopoly power to certain industries, the ones that the cronies are owning. Monopoly power means that the prices are artificially high. Now, that's why it's typically non-traded goods. It's typically banking services, banking, transport, telecommunications, which is the ones you can get away with because traded goods you have to deal with world prices. But the fact is that these are goods that you need as inputs into your production, including labor intensive industries. Say, if you're running a garment manufacturing industry, you still need to have telecommunications to talk to your people whom you're selling to. And if that's costing you the third highest in the world, that makes you uncompetitive. So that's just one straight link. But there's some more subtle links, actually. I'm glad you asked that. Because one thing we also find is the role of fuel subsidies. And fuel subsidies are also, I mean, there is a fairly clear link between fuel subsidies and, or there's a link between cronies and energy intensive industries, right? So there's a disproportionate number of connected firms that are in the energy intensive industries. Now, it also turns out that energy intensive industries are capital intensive. So that they actually are discriminating against labor intensive industries. But another way, the fuel subsidy is a tax on labor. So it's not that hard to imagine why countries with high levels of fuel subsidies also have a major unemployment problem. Hi, I'm Perry Kamak, also here with Carnegie Endowment. I think all three of you mentioned the effects of rentier systems, economic systems. I'm kind of curious about the second order. I mean, I think at a state level it's pretty understood whether you call it Dutch disease or resource curse, you know, kind of how a preponderance of oil resources kind of discourages over time, kind of alternate economic sectors. But I'm kind of curious if that's happening at a regional level as well, if there are second order factors. So for instance, I mean, economies like Tunisia, Egypt, et cetera, they're very reliant and I would say increasingly reliant, whether it's remittances from the Gulf, whether it's assistance from kind of oil rich countries. So one, is there a kind of regional rentier system at work here that kind of is inhibiting countries, I mean like Morocco, whether it's Morocco, Jordan, et cetera. And then the second kind of follow up is how is the kind of collapse in oil prices and the reduction of, you know, obviously the Gulf countries, most of them have the resources to weather that storm pretty well over three, four, five years. But what does that do for these other countries, the post-revolutionary countries that we're really talking about here, thank you. I just got back from Jordan, so I can relate to what you're saying, because I think Jordan is an example of that kind of what you call the second round effects. You know, to put it another way, Jordan seems to be an oil rich country with no oil. That what they're actually earning is what some people call, I think some political scientists call a geopolitical rent. You know, it's an island of stability in a location rent, you know, in a very volatile region. And as a result of that, they receive high payments, remittances, direct aid from, that's what, Jordan, you know, from the Gulf as well as from the United States. And as a result of that, they've had trouble, they have the Dutch disease without any oil, that's the puzzle. Now, what's been happening is, again, you alluded to with lower oil prices, the size of those rents that they might earn is actually diminishing. But there's another interesting phenomenon going on, which is what I was there in Jordan trying to do, which is it turns out that the nature of globalization or value chains is changing, where firms are now not locating their factories on the other side of the world, like in China or something like that. Because today, and paradoxically, you can manage a factory, the machines by internet. Right, so it doesn't matter where they're located. But it turns out that because of that, the headquarters company wants to have face contact, face time with the managers in the other places as a result of which they wanna locate nearby, not too far away so that they can actually get on a plane and see each other in about three hours. So that's why the US is locating, US companies are locating their branches in Mexico, the Western European countries are locating their branches in Poland and Romania, the Japanese companies are locating in China. Now, think about Jordan that way, right? Jordan is as close to Europe as is Poland, parts of Europe, right? So Jordan could actually be part of that global value chain as the globalization changes. And the way I tried to put it is, they're going from a geopolitical rent to a geo-economic rent. Their location is gonna help them but for a different reason because they're close to Europe. Thank you very quickly. Delphine Eldarda, I'm working on the urban development in many agencies, the World Bank and UN habitat. My question is about this new social contract which is not really already there and people feel that and they are frustrated because of that, the old social contract was broken but we don't know what the next one will look like. And there is something very striking when we look at all these countries is the common hyper-centralization of the state apparel. There is no decentralization. This region is very reluctant to decentralize contrary to the rest of the regions. We don't have mayors, we don't have municipalities which are important institutions and coping mechanism for people. And I was wondering how detrimental this lack of decentralization is preventing us from moving and shifting towards the new social contract and how we as the donors and international community can we push for more awareness of the state because the states won't decentralize themselves and it's a top-down huge decision to kick off this reform. So how can we just weigh this important question and make it important in our programs? Yeah, I think this is a very crucial aspect, the question of decentralization. That's a very good question because it links also to what happened after the Arab Spring uprisings. There was a lot of hope that things would change and there would be successful transitions in many places right after the events but what happened instead is really reversals or reversals to what it was in many places or civil conflict and one thing that contributed to that is the fact that these countries didn't have strong civil societies, didn't have ways because of centralized power and the dictatorships that prevailed had basically restricted to such an extent the ability of people to organize along different political ideas and especially those that had more sort of progressive ideas about the future. So what you had was overall a very centralized center usually in the capitals and there is very little attention to the periphery and so what the series sort of the classic example where we have this so evident with the power concentrated in a few cities mainly in Damascus but then the periphery suffering and what we knew is that prior to the, in the 2000s there was a drought which pushed many people from rural areas to move to the peri-urban areas but these people were not necessarily offered the assistance that they would need and partly is because again the cronyism and the way the system was set up was to satisfy the demands of those who are in connections with the ruling elites and so those farming areas were sort of overworked and absolutely as a way of moving forward first it is important for these countries to look at ways to strengthen inclusiveness but not only in the economic process but also in the political process where we would see more pluralism and more legitimate channels and formal channels of communicating desires communicating ideas where these ideas can be implemented and only that way the people of these countries would be able to come up with solutions ultimately for themselves. I think this is a very crucial point I mean it leads to this very old question of clientelism in the Arab world and Mediterranean societies in fact in general it has only of course an economic aspect but also a political aspect of building local citizenship I mean the kind of tie that links people to the government through intermediary bodies that in fact is very lacking in the Arab political culture as such it has to do with the ideological stock of centralized state nation building and et cetera I think this is a very crucial question. There was a question here and then the gentleman there. Will you speak with the Transatlantic Academy and before I was I was currently Europe for two years. I have a question from the European angle how important is market access to the EU in 2011 we heard many promises Catherine Ashton saying access market and so on so on but member states, EU member states are often reluctant. This is the biggest single market in the world. What can the EU do? Should the EU do more? Is the EU doing enough? And my second question is can we, I mean we talk very broadly now about the region is there a huge difference we would say between North Africa and the Middle East or could we qualify perhaps a little bit champions or countries where there's more chance to do more? Thank you. Yeah, market access is extremely important but it's not just simply for market access reasons. See I think if some of these particularly the North African countries can sign a deep and comprehensive free trade agreement with the EU it will help to keep the policy reform agenda ongoing. And particularly we need lots of regulatory reforms we need competition policies to be implemented in the country. That's to get around some of these monopolies and so on. And there's a deeply political, they're very difficult and everything else. If you have a DCFTA that at least lays out a roadmap that these are the reforms that we need to go even if the governments change and there's things there's uprisings and things like that we can stay on that path. And I think the example is Turkey. I mean, which it still hasn't gotten one of those but Turkey had an agreement a type of agreement with the EU that has actually enabled Turkey to improve its domestic competition, right? And Turkey has created many more jobs than say Egypt comparable sized country. So that's the kind of benefit that the market, it goes beyond market access. It is the discipline of the reform program. And also the business model, I mean small and medium enterprise in Turkey had a very crucial role in the economic growth, I think, especially on the... And they grew, I mean Turkey has, or Egypt has what we call the missing middle. We have lots of very small enterprises and a few large ones and Turkey has that middle. Thank you, my name is Amit Levi. My question is wondering if you have any comparative studies because it's not only the Arab Spring that we have seen, you have the Chinatown in China, you have the protests in Hong Kong, you have seen it here in the US Occupy Movement and throughout Europe. Is there is any link that's built all this movement together if we have any comparative data? Thank you. Because you've done some global research. Sure, I think actually what we observe in the Arab world is unique in its nature because where is the occupied movement in US and also the pickup of the idea that it's the issue of inequality, rising inequality in developed countries and other places in emerging economies like China is sort of different. It's more about the consequences of growing very fast in China and then in the process creating these disparities between people of different skills and so obviously those that were able to participate more actively and move to the urban areas are moving forward faster. So that's different. What we observe here is that there was an overall stagnation of which a large part of the private sector and so we had this issue of stagnating small and medium-sized companies and therefore the majority of people are actually unhappy with what's going on in these countries. So it's not about inequality. That's the big point of the report. It's about the frustrations of the middle class and in that sense it's good that you mentioned these other countries is because different regions have experienced different developments along this line in Latin America actually we have the incomes of the bottom 40% growing at higher rates than average. So there is some improvement there on in the direction of alleviating tensions in other parts of the world in the developed countries we observe a heightened sense of perceptions of inequality and many people struggling and being left behind. That's more of an equity issue or inequality problem. So the world is quite diverse and we've looked at other countries but we find that the airport is in a unique place and faces these sort of specific issues which are associated with all the structural bottlenecks that were present there for a long time. My name is Nate Mason. I'm currently an independent consultant. I was the commercial economic chief at the embassy in Libya after the revolution and for about five years I was the North Africa desk officer at the commerce department. My question which I'll explain after I ask it is what do you think marriage has to do with the Arab Spring and I ask that because when I was in the region something that Libyans, Egyptians, Algerians talked about a lot was the inability of young people to be able to get married primarily because in order to get married they had to be able to buy a house and they couldn't buy a house and furthermore even the people who may have been employed at the embassy or employed at the oil companies even young men with good jobs their income may have been rising as you've noted but housing prices were rising faster. So even if they were appeared to be doing better they in fact were doing worse than their parents. They couldn't get married and then you also see who talks about this a lot is ISIS, right? ISIS spends a lot of energy trying to get single women by one way or another into the caliphate. So it's just interesting that I haven't heard anything about marriage here but I hear about it a lot in the region. Yeah, it's interesting you mentioned it. There's no question that it is one of those factors that leads to the frustration of the young people that if they don't have a job they have to live with their parents and then it's difficult to get married or if they don't have a good enough job they can't marry the person that they want to and things like that. And in fact, Dan Bromley professor at the University of Wisconsin has just written a paper which he calls the Arab Spring Stress Test where he's looked at different indicators if you like of the Arab Spring countries and one of them is the age of marriage as a factor as that there was a spike there was an increase in the average age of marriage of women in those countries that had a revolution and two others that have yet to have a revolution. I want to add to this. I think this is an important issue but it sort of reflects the societal changes also because during this 20 to 30 year period we've also had very much an increase in the educational levels of women. So one thing is the hardship that men cannot find good jobs in the public sector and there is also a perception that these jobs are better from a status perspective so they can attract a better partner and have better life. But women may be delaying also marriage because they're now educated and they have aspirations and so we find general frustration among young people that they cannot satisfy their goals or their aspirations to what their life should be. Maybe the last question. My name is Matar Brahim, former MP from Bahrain and former member of the Financial and Economic Committee in the Parliament. I would like to follow up about the question regarding the Saudi and the Gulf influence on the Arab Spring countries and the low prices of oil and their impacts. Do you see anything that keep you optimistic that new initiatives may come from Saudi Arabia to take the right decisions regarding the economic challenges that they are facing and their impact on the other Arab countries who were affected by the Arab Spring? This is a risky way to end. Yes. No, no, I think all of the Gulf countries, including Saudi Arabia, by the way, I was just in Kuwait, that's maybe I'm even more optimistic there, are rethinking the social contract. The subsidy is a clear, a big issue, the fuel subsidies and some of them, as you know, UAE has already basically eliminated its fuel subsidies. Kuwait has done it for diesel but hasn't done it for petroleum yet and there is discussion in Saudi Arabia, even in public discussions about that we can't sustain this. So I think there's definitely progress there. The other big issue in these Gulf countries is the civil service wage bill. When you have countries like Kuwait where 90% of the male labor force is employed in the public sector, it's not surprising that you don't have much of a private sector that can grow and I think something has to be done on that. And again, there's, in Kuwait, there is a discussion about let's rethink this whole idea of using the public sector wage bill as a way of transferring oil revenues back to the citizenry. Maybe a last question. The work for the Center for Immigration Studies and to go back to what you're saying about the uniqueness of different rising movements in the world. I was wondering about Lebanon. I couldn't but ask a question about Lebanon. Why you have this, I'm sure dissatisfaction about but there's no real uprising. So is it, how do you explain that? Is it the lack of social cohesion, maybe sense of identity? What's missing for a real movement of unrest? I think Joe should answer that. Yeah, exactly. This is a political question for a Lebanese to answer. But we didn't find that Lebanon, even though it has higher level of inequality in Lebanon compared to other countries in the Middle East, we didn't find that its levels of happiness were actually lower or going down substantially prior to the Arab Spring. So we didn't, Lebanon was not a, the data didn't signal to us that sort of process is underway in Lebanon. Now, since then, of course, Lebanon has been a country which has been substantially by the spillover effects of the Syrian crisis. And what we know, we have another study looking at the effects of the Syrian war and the spread of ISIS in the Levant. And there we see that other than Syria and Iraq, poor capital incomes decline the most as a result of the refugee flows. And all the other things that happen, we don't really incorporate the increase in risk premium, but which of course affect investment there. So we have sort of a move toward more negative economic developments there. And so only the future can tell this, the sentiment is changing constantly. So that is not to say that there are things that won't occur as in the future. But prior to the Arab Spring, we didn't see what we were seeing in the Arab Spring country. Yeah, maybe, I mean, I don't know if the Lebanese are happier people than others in the Middle East, I'm not so sure. But lately, lately, Naila, if you've noticed, I mean, I think the use think movement is a kind of occupy to get back to the question of the gentleman in the back, which is in fact, I think a new form of social protest and citizen identification in the Arab world, the use think movement in Lebanon, something in Iraq is happening now, the last two months, which is also very promising, a kind of protest against corruption. It has nothing to do with Iran, big political issues, et cetera. It has to do with corruption, transparency. So I think that the Arab world is of course particular, but nothing is really particular in fact in social science. I mean, everything is comparable also. So things are particular, but also comparable, and I think that we have to look at that. You talked, we talked a lot about frustration in this region that led to the revolt. I think that now frustration is here in the room because we have to stop a very interesting debate. I would have liked to go on. And I think that there are very, very interesting questions that were opened and put on the table. I think that this is a very promising experience that we had here, this dialogue between us, and I hope that we will be able to pursue it in the future, and that Carnegie will be always open to host such, let's say, such debates from the World Bank and other institutions. I would like you to join me and thank our two very distinguished speakers. Thank you so much. Thank you. Thank you, that was great. Thank you. Thank you. That was amazing. One question that Morocco and some of the other countries tried to handle, and ran up against a huge influx of transports everywhere else. I understand all your reasoning. So given the huge resistance there, would the answer be what, vouchers for informal transport security? You can have, or you can say.