July 04, 2005
Economic Growth, Media Modernisation and Competition in MENA
Given my abiding concern for seeing economic growth occur in this fine region – that is the MENA region – I thought I might return to some thoughts I have had following on prior comments on the business environment and the like.
First, a brief comment (or perhaps a rambling and extended comment) on mentalities, provoked by a conversation with one of the women who render my life complex (if interestingly corrupt and immoral) in regards to a local television effort to create a “star system” to promote local talent.
Rather like the Lebanese “Star Academy” it is an interesting way to bring up new talent and provide a public exposition of popular trends. As an added advantage, the local chicas who compete are quite hot with a distinct tendency to wear the latest inappropriate Leb Slut fashions, which is very hard to argue against.
The show itself is quite popular and representative of what the esteemed Abu Aardvark rightfully calls the “Nancy Ajram – Haifa Wehbe Culture Wars.” My only complaint in his regard is his chronic neglect of the francophone oriented Maghrebine aspect of this [granting he is a Rachid TAHA fan which somewhat mitigates his penchant for Charqi Leb Sluts over others] – rather typical of those Charqi oriented types, but I forgive him as a Father of at least two Aardvarks and a properly sporting commentator, despite his indulgence towards the more idiotic end of the commenting spectrum and the fact he circulates in academic circles [as, to be sure, an academic] where people write largely irrelevant inanities [not unlike the "blogosphere" or, well myself, but this is a mere hobby].
As an aside the blithering illiterate Know Nothings who speak of the region as existing in the 14th century should spend more time reading the Father of Aardvark(s) and watching regional TV. It might (although I write this in the sense of the sheerest and most unrealistic optimism) disabuse them of their cheap and impoverished stereotypes. However, I have no more hope that this will happen then I have hope the drooling economically illiterate twits of the “progressive” anti-development “fair” trade Left will lose their illiteracy and support globalisation and rational liberal economic policies.
But leaving my abusive parentheticals aside and returning to the subject at head, before my delicious Cuban products render me entirely incapable of rational thought, my dear friend who provoked this comment observed, as we watched the latest instalment for the new year, that the channel in question (which is State owned but began as a private endeavour before being nationalised largely for commercial reasons [bail out]) had done “nothing” for the winners of the last round.
Now this struck me as quite peculiar. Why should the sponsors or organisers of an effort promise anything at all to participants in a competition? Sure, the top X persons should receive a prize, but what duty is there to provide jobs to them? Is the channel not already providing a fairly serious public service in simply exposing (they just ran, I may add a competition for young(ish) entrepreneurs that warmed my heart although actual execution left a bit to be desired) local talent in a well-organised context? Why should such an effort also have to promise jobs? Is there not a sense of competition leading to results?
Now let me recall, the comment maker is a banker and in a general sense of liberal instincts. Nevertheless, the underlying instinct in the region, the underlying attitudes seem to me well reflected in “off the job” comments.
Let me answer my own question above, regarding the question of competition leadings to results, with the implied idea of merit being rewarded. While at once that is what these competitions are trying to demonstrate, in a region with official unemployment running upwards of 15 to 25 percent (depending on categories and the specific country), there is a real fear of job loss versus job gains. This is not surprising, nor perhaps irrational. Recall, behavioural economics tells us that one of the breaking points of our classical assumptions in regards to rational choice is there is an overweighting in real decision making towards loss-aversion.
As an aside, in a recent edition of The Economist there was an interesting reference to a study in behavioural economics based on “simian” economics – a fascinating article which merits reading – but whose findings in resume were that the ___ monkeys studied showed a pattern of loss-aversion in their trading behaviour essentially identical to that of humans. As the article notes, this rather suggests a hard-wired behavioural predilection with real evolutionary advantages.
Frankly speaking, if one removes the question from a purely economic framework and looks at it in terms of human trading behaviour likely being rooted in a hunter-gather past where, with limited reserves to absorb “losses” or shortfalls from risky trading (say of resources even within the group), the consequences of a loss on any given trade are rather stark – starvation say. In such a context, a bias to avoid losses would seem eminently rational (indeed one could probably if one were smarter than myself, find a way to look at it in an options framework of selling off upside to protect against downside). An issue for us economists to consider when thinking about economic behaviour in “stressed” and low-resource conditions where the economic actors in question have little capacity to absorb losses and where losses imply rather serious and above-all effectively permanent consequences.
In the context of the sclerotic, rent-seeking dominated economies of the region, above all outside the capital rich Gulf, it seems to me that one has to think about how well-founded easy assumptions are about the ability of the “socio-economic fabric” to respond to liberalisation (even though liberalisation is an absolute necessity).
Returnign to thinking about the particular framework in which many, I should hate to pretend to say more than that, people think of such actions (public or private) in the region. There appears to be some sensation, among even decently educated, of a “duty” to engage or hire if one runs such events.
I rather suspect that this comes from the “Arab Socialist” period where when public events or competitions were run, the State took upon itself to hire the winners and even many of the contestants. That is, the unconscious expectation based on past experience in the last century or so has been State patronage motivated competition with little sense that merely allowing access to a market (in this case the entertainment market) has its own value and that it is up to the participants to exploit, based on their own efforts, the occasion.
I should add that I have a suspicion that the “Arab Socialist” period habits run deeper to tap into old Islamic and pre-Islamic Med. Basin habits of Emiral or Sultanal (or Imperial) patronage of the Ulema and Fananine, which is to say (roughly) the intellectuals and artists.
What, in the end, is my point here?
Bloody hell if I know, but I would suggest an opportunity to reflect on the real socioeconomic climate in the region, on what one faces in terms of the back story to socio-economic change (that is the attitudes often hidden behind even sincerely held liberal [I mean liberal in the international and not North American sense] sentiments).
The blockage in underlying mentality is not something easily addressed, and easy to miss. Precisely the sort of blindness that has led American decision makers to assert (of course not entirely believing it, but nevertheless making lazy assumptions in their approach to the region in terms of promoting (correctly) liberalisation and private enterprise. Regard Iraq, the ignorant morons with the CPA-Iraq never ceased (even largely in private) saying they were confident of the entrepreneurial instinct of Iraqis (based in part on their contacts with the smooth talking English speakers, some of whom having made their fortunes through real entrepreneurial activity in the West and the Gulf), in utter ignorance of the real habits and mentality of a population that had only known quasi-parternalistic Arab Nationalist state “Socialism” (or earlier, quasi-Modern authoritarianism of the Ottomans).
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I should note that this is a pattern common to developing countries in historical context:
Italy in Middle Ages, at least until 15th century was the hotbed of European commerce. By late 17th century, it became an economic backwater choked by sclerotic symptombs. The path Italy took to get there to a large degree parallels what you describe regarding the Middle East today: the "commercial spirit" of the Italians was in fact usually based on clan-based and highly "informal" organizations, perhaps more resembling the modern Mafia than, well, Microsoft (maybe not the ideal example.). They were often bound by no law and often acted underhandedly. "Rule of law" was lacking, and indeed, that's why they had to resort to such informal economic organizations (and frequent underhanded business). The problem was risk--everything had to be built around the clan because you couldn't trust those who were not your kin. You had to behave unscrupulously at times because you couldn't trust others to behave ethically when nothing held them back.
And they got out when they could--by mid 17th century, the surviving merchant clans of Italy had turned themselves into landowning aristocrats, committed to maintaining the old ways (and their investments), not vernturing into new businesses (and attendant risks.). It offered them security--while we, as economists, might decry rent-seeking, they do have the attraction of being safe. Sure, the center of European economy was also shifting, from the Mediterranean to the Baltic, but I'd hardly chalk it up solely to the reasons completely independent from the problems of the Italian economy.
Fast forward a few more centuries, well, Italy in many ways, remained a basket case for centuries, politically and economically. People link this to the Medieval foundations or earlier--while I lack sufficient expertise on the modern Italy to say much about it, it does beg the thought.
Posted by: kao_hsien_chih at July 5, 2005 07:20 PM
Not sure how much an access to semi-popular English language books you have in Morocco, but one book you may enjoy is The Economist's Tale by Peter Griffith. It is about Sierra Leone, but many problems of "emerging markets" are common.
Posted by: kao_hsien_chih at July 5, 2005 07:23 PM