Jordan is out of troubled waters, for now

Like other Arab countries, Jordan is a welfare state that is at the core of society’s social contract.
Sunday 10/06/2018
A young man sits on cardboard pieces in Amman. (Reuters)
The calm after the storm. A young man sits on cardboard pieces in Amman. (Reuters)

More than seven years after the “Arab spring,” protests extended to Jordan and demonstrations against austerity measures forced Jordanian Prime Minister Hani Mulki to resign. Jordan is confronted with the conundrum of reducing the country’s deficit by rewriting the social contract and facing local instability or doing nothing and plunging the country in insolvency.

Demonstrators in Amman demanded the repeal of price and tax hikes, which the government eventually agreed to. “Protesters this time were members of the middle class and of economic syndicates, namely engineers,” said Wael Khateeb, an anthropologist.

Reuters reported that the move would have raised taxes on employees’ income 5% and corporate taxes up to 40%, in line with the terms of a 2016 $723 million loan from the International Monetary Fund.

Years of wars in neighbouring countries have weighed heavily on Jordan’s economy. GDP growth has been less than 2% in the last few years, a relatively low figure for a developing country.

Official unemployment figures are at more than 18% and much higher among young people. In 2017, the World Bank predicted that one-third of the Jordanian population would be living under the poverty line within a year. The country has faced waves of migration and is home to more than 2 million refugees.

This resulted in a massive debt-to-GDP ratio of 93.4% in 2016, with an average increase of about 6 percentage points per year, an analysis by Kirk Sowell published in Sada Carnegie stated. Sowell said Mulki’s policies slowed rising debt by increasing internal revenues and, to a lesser extent, reduced spending on electricity subsidies. Increased taxes were essential to the grand bargain.

Yet, like other Arab countries, Jordan is a welfare state that is at the core of society’s social contract. This puts a heavy burden on countries that are supposed to provide free education and medical care, subsidised fuel and electricity and public-sector jobs. Khateeb noted that civil service, security apparatus, municipalities and government bodies employed 55% of workers — one of the highest percentages in the world.

In Jordan, and elsewhere in the Middle East, the social contract has resulted in local populations largely surrendering political rights to secure employment, education and economic subsidies. With a paradigm shift triggered in 2011, protests cannot but build up as governments follow the path of economic reform.

However, social inequalities, lavish lifestyle of ruling elites and corruption, as well as instant modes of communication, have led to a mobilisation of impoverished social classes. Jordan, admittedly significantly less corrupt than Iraq and Syria, ranks as the 59th most corrupt out of 180 countries, according to Transparency International’s Corruption Perceptions Index 2017.

The causes of the Jordanian protests are very similar to those of the 2011 revolutions that shook Jordan as well as Egypt, Syria, and Tunisia. While in Jordan, demonstrations were contained, the drivers that marked this phase — discontentment with quality of life, unemployment, corruption and generally the perception by the middle class of an erosion of its resources — were used by experts such as Mohamad Abu Ruman or Hassan Abu Haniya to explain the rise in jihadist activity and terror attacks across the country that marked the post-2011 phase.

The replacement by Jordanian King Abdullah II of Mulki with Harvard graduate Omar Razzaz and his decision to withdraw the controversial tax reform could momentarily calm the population. However, Jordan, like other Arab countries, will eventually have to go forward with painful reforms that will squeeze the middle and lower classes.

A time will come when cosmetic changes, such as replacing the prime minister, will no longer pacify populations. Or will the impoverished be thwarted by fear of generalised instability, as many in Jordan experienced with the onset of the Syria war?

Jordanians, like other Arabs, will no longer be satisfied to finance economic changes to fix their countries’ ills and will demand greater transparency, accountability and greater political inclusion.