One of the reasons for instability in the Arab world is the rampant crony capitalism in the region. We have argued this in the past. Indeed the young man’s suicide which sparked the uprising in Tunisia a few years ago was directly tied to crony capitalism.
(From the National Council on US-Arab Relations)
Many in the Arab world believe their nations have already gone through a period of free market reform and that it has not worked. This misconception deprives many of an economic alternative and vision for the future.
In fact, economic reform before the Arab Spring was frequently phony; all too often it was crony capitalism dressed up in the language of free markets. In many nations, it simply replaced government control of the economy through government to elite control via the handing off of state assets, monopolies, and other rent-seeking opportunities to friends, supporters, and relatives of the regime.
The “progress” in some nations in divesting state enterprises and opening up the market through privatization was therefore often illusionary. The old elites simply took the “privatized” assets and continued their control of the economy under crony capitalism. This is the very opposite of economic freedom, with the rich and powerful suppressing the opportunity of others.
Rather than releasing entrepreneurial drive, such a system protected privilege. Yet governments in the region and international institutions like the International Monetary Fund promoted it as “free market” reform.