international analysis and commentary

Questioning economic assumptions in the Mediterranean region

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Sometimes it is wise to question widely held assumptions and expectations, particularly when major change has upset the status quo. This is certainly the case in the southern shore of the Mediterranean region, where the superficial stability of political systems has for a long time hidden the underlying fragility of the social and economic fabric. In the aftermath of the Arab revolts – whatever their longer term outcome – it has become clear that social and economic factors can have dramatic political effects when certain factors reach a critical mass, but also that persistent political structures can hinder progress in the other areas (even after part of the ruling elite has been removed).

On this backdrop, Aspen Institute Italia organized an international seminar in Hammamet, Tunisia, on June 15-16 – the days in which a curfew was imposed on Tunis following some violent clashes in the capital between the police and Salafi groups. Inspired by the discussion at the seminar (in the context of the Aspen Mediterranean Initiative), here are a few pragmatic – i.e. apparently non-ideological – assumptions that we should question in order to better prepare ourselves for further changes to come in the region.

First, a fundamental expectation since the early stages of the Euro-Mediterranean dialogue has been not just that the region would benefit from more integration, but also that it was indeed a geographical expression in search of a single “vision”. In fact, it could not be clearer that we have a mosaic of sub-regions, mostly clustered around large urban centers – which incidentally is nothing new, given that Fernand Braudel wrote extensively about the Mediterranean as a network of cities. The nodes of the network have the potential to make it function more effectively as a system of exchanges, but local differences and specializations are the solution, not the problem. Contagion and spillover in the days of the Tunisian and Egyptian revolts allowed for an unusual degree of exchange and sharing, but did not render the various countries more similar than they were before. This was not a tsunami, it was a series of local waves caused mostly by local forces. It is crucial that we keep into consideration the highly fragmented nature of the region in making policy decisions – at all levels, from the national to the European to the Euro-Arab to that of international organizations.

The second assumption to be questioned is that the countries of the Mediterranean basin will be permanently attached (and almost magically attracted to) Europe and the European Union. Leaving aside the legitimate concerns about the future of the EU as a tightly knit strategic actor, there are other options to be considered, such as closer integration with the Gulf countries, which in turn would link the Mediterranean more to parts of Asia than to Europe. Geography does matter, of course, but there are cases of economies with distant ties that are relatively unaffected by events in their neighborhood – Israel is a prime example.

A third form of conventional wisdom posits that international politics will always get in the way of economic goals, especially when large and costly infrastructures are involved: this problem is supposed to severely constrain the opportunities for more interdependence across the southern shore countries (which is traditionally very limited). In fact, there are instances of close “connectivity” that withstand even acute political and security crises, such as electrical supplies from Israel to the Palestinian territories, which have never been interrupted. On the other hand, it is true that tensions in the Sinai peninsula are complicating economic arrangements between Israel and Egypt. In sum, the general assumption about interdependence needs to be qualified: building connectivity is indeed very hard in a politically tense environment, but managing existing forms of interdependence may be much easier on the basis of practical cooperation.

The fourth assumption to be reassessed has to do with a specific and crucial type of infrastructure, i.e. energy connections: for all the emphasis on green energy, especially by the EU and some individual European countries, the key to a more balanced mix probably lies in much more efficient energy production rather than renewables as such. Available technologies for conservation, as well as continuing technological innovation, can make a huge difference, leaving countries and industries relatively free to pursue their own energy mix – provided efficiency improves.

A final piece of conventional wisdom regards the key role of small and medium-sized enterprises (SMEs) in the economic development of the southern Mediterranean. According to various recent studies and reports, for instance by the World Bank, a rather simple change of perspective would greatly benefit programs to support SMEs and entrepreneurship more generally: what really matters is SMEs with growth potential. In other words, there is no particular virtue in being and staying small; quite the opposite, small size often means difficult access to credit and not a deliberate choice. Thus, business climate (including of course the regulatory framework) and the credit system are the essential elements of more successful strategies for SMEs that may or may one day transform themselves into larger companies.

Ultimately, the short-term outlook of Egypt (after a second round of presidential elections held in the absence of a constitution and of a parliament) is very uncertain at best, and very bleak at worst. Tunisia is in better shape but there are reasons for serious concerns. In any case, the trends that will determine the future of both countries two or five years from now are at the intersection of politics and economics: the social frustration sparked by economic deprivation and a total lack of trust in government authorities is still widespread and can ignite fresh protests unless a new economic course is set rapidly. The clock is ticking.