July 03, 2005
Financial Aid, the IMF, and Historical Structures: The Case of the Bread Riots in Jordan
Some of the most fascinating aspects of financial aid-- in my opinion-- are the often implicit regulations that come along with it, and how it re-shapes and re-forms the societal structure of a developing country. This can be viewed particularly well in the majority of resource-poor MENA countries. By examining the history of financial aid in Jordan during the 1990s, for example, you can clearly see how the flow of financial aid was based as much on the political decisions of the Jordanian monarchy as it was on the country’s needs. What is even more intriguing is how this aid has changed the historical structure of Jordanian society and removed the bargaining power from the hands of the subaltern groups in the Kingdom and into the hands of the capitalist powerbrokers in Amman and Washington.
This change is best viewed through the two bread riots that erupted in Southern Jordan in 1989 and 1996. Both riots were almost identical in nature, yet the monarchy’s response to each crisis was unique. The changes in the response of the monarchy towards the bread riots are best explained by how different social forces are incorporated or excluded in the global neo-liberal historic bloc, and the way historical structures are shaped, satisfied or frustrated in the process of this hegemonic formation.
The ability of the Jordanian monarchy to remain in power following the country’s independence is astounding, particularly given that the region has witnessed a number of other governments in the region falling to revolutions of nationalism, Islamism, and socialism. The Hashemite monarchy’s stronghold can be attributed to its alternating usage of strategic co-optation and coercive force to internalize and resist the opposition. Despite its resource-poor economy, the Jordanian government was able to finance large public spending with help from the regional Arab oil economy through petro-dollar aid and labour remittances. Access to these external financial resources was a critical aspect of the Hashemite regime’s security. During this period, Jordan established itself as a semi-rentier state that could afford the political costs of suppressing dissent through its neo-patrimonial ties: the Jordanian state became a central supplier of employment and social welfare programs, and was able to finance subsidies on basic consumer goods.
With the fall in oil prices and the beginning of the 1980s oil recession, however, petrodollar aid to the Kingdom dried up, and unemployment fell far beyond the absorptive capacity of Jordan’s large public sector (Rivlin & Even 2004: 22). Regardless of these shocks, Jordan remained politically unwilling to reduce spending or impose austerity measures, and continued to borrow increasing amounts of money from foreign lenders. It was not until the spring of 1989 that the regime finally agreed to a five-year plan with the IMF for ‘economic adjustment and stabilization’. In order to reduce public expenditure, the IMF pressured the government to immediately cut subsidies on consumer goods, a policy that broke the implicit social contract between state and society.
The public reacted to the cuts with riots that erupted in the southern cities of Jordan, killing eight people and injuring around 100 (Rivlin & Even 2004: 38). The riots eventually spread to other regions in the country, and turned into violent protests against the government in the form of attacks on banks and government institutions. In response, King Hussein immediately fired the government and announced plans for political liberalization in return for the public’s acceptance of economic liberalization (Hinnebusch 2003: 9).
Political liberalization was not intended as a move towards ‘democracy’ by any means; rather, its purpose was to strengthen the business elite, while also creating more potential partners in the form of the powerful Islamic opposition by incorporating their political party within his government (Fandi et al. 2004: 115). As one of the key advisors to King Hussein remarked: “liberalization was intended to invite more guests into the living room for ‘coffee talk,’ with a few welcome to stay for dinner. None were to be invited into the kitchen, though, and certainly none were welcome in the rest of the house” (quoted in Lucas 2003: 139).
Events took a similar turn in August 1996, when a $100 jump in the international price of wheat left the government with little choice but to remove further subsidies if it wanted to preserve its access to external financial resources from the IMF (Greenwood 2003: 261). Almost immediately, violent demonstrations took place in the southern region of the Kingdom. Just like the riots of 1989, the demonstrators attacked public property, private banks, and expensive vehicles (Rivlin & Even 2004: 40). This time, however, the government offered no concessions; King Hussein went on television threatening to use an “iron fist” and any other means necessary to quell the disturbances (Ryan 1998: 61).
What is striking about the government crackdown, however, was that the Islamist opposition was treated almost benignly. In his televised speech, King Hussein claimed that the Islamist opposition had behaved responsibly, despite the fact that they had been blatantly opposed to the price hikes before the bread subsidy was even lifted. This concept of incorporating the opposition demonstrates Antonio Gramsci’s idea of the need for the hegemonic group to move beyond its own corporate interests and to represent their ideology as being in the universal interest of everyone-- even the Islamist opposition.
Another attempt to incorporate Islam within the neo-liberal historic bloc is evident in the Jordanian private sector’s heavy investment in Islamic commercial banks; the Jordan Islamic Bank for Finance and Investment alone attracts close to 10% of the deposits of Jordan’s private sector elite (Henry & Springborg 2001: 189). Singh (2002) notes that “the regime, via repression and co-optation, had successfully crippled the Jordanian left’s ability to effectively mobilize its traditional constituencies” (Singh 2002: 76).
Between 1989 and 1996, the State (which included both the business elites as well as the monarchy) exploited IMF-led neo-liberalism to strengthen their hegemony over the subaltern classes within Jordanian society. For instance, in the second half of the 1990s, to reduce the government’s budget deficit, the regime carefully selected public enterprises for sale to “strategic investors.” Greenwood (2003) notes, however, that the term ‘strategic investors’ refers to “extremely wealthy Jordanians who enjoy social and political ties to the Palace” (Greenwood 2003: 262). Thus, unless the companies were sold off to foreign investors, the government often raised the minimum bids on economic enterprises to the point where only elite clients of the monarchy were able to participate in the bidding process.
The hegemonic importance of the IMF in restructuring states cannot be overstated (Peters 2005: 19). Through its use of mechanisms such as conditionality, consent building, as well as the co-optation of opposition through new discourses, it promotes the production and reproduction of neo-liberal hegemony within nation states, thereby structurally displacing their sovereignty. The result has seen both “a disarticulation of state structures and a reinforcement of those discipline-and-control functions of the state necessary for the functioning of transnational capital, wherever it seeks to operate” (Green 2002: 46).
Any critical assessment of global capitalism should begin by acknowledging the power the US exerts in shaping and putting forth a neo-liberal agenda. For instance, Jordan immediately felt the repercussions of its pro-Iraqi stance during the Gulf War: foreign aid was cut off and the Jordanian port of Aqaba was blockaded by US-led frigates to prevent supplies from reaching Iraq via the Iraq-Jordan border, inflicting heavy damage on the Jordanian economy (Andoni & Schwedler 1999). Jordan soon enough realigned its position to suit Washington, and aid resumed its regular course.
Further, the US used the mechanism of consent-building to pressure Jordan into a peace treaty with Israel in 1994. Despite public criticism from both the Islamist opposition as well as other subaltern groups within society, Jordan signed the treaty. This redeemed Jordan in the eyes of Washington, and it was instantly re-invited back into the neo-liberal world order. The US “declared Jordan a non-NATO strategic ally, wrote off $900 million of its debt, and raised aid levels progressively…to the point where Jordan became in less than a decade the fourth largest recipient of US economic and military assistance in the world-- $1 billion over three years” (Kassay 2002: 55).
Jordan had thus realigned itself and had signed on as an enthusiastic participant in the neo-liberal world order (Ryan 1998). The day after lifting the 1996 subsidies, an IMF donor meeting in Paris promised more than $1 billion over the next three years, and Japan began negotiating a $90 million soft loan to finance Jordan’s budget deficit (Andoni & Schwedler 1999: 41). The acceptance of Jordan’s elite class of the norms of this new world order earned it the praise and support of the IMF and other financial institutions. In fact, merely three days following the violent riots, the IMF issued a statement claiming that Jordan “continued to make impressive progress.” At the time, however, Jordan was as vulnerable as ever: 26 per cent of the Jordanian population suffered from absolute poverty, unemployment was at 25 percent of the population, and real wages continued to fall as public sector jobs were cut (Bouillon 2002).
The above figures point to the problems arising out of the Jordanian economy’s incorporation into the neo-liberal historic bloc. Through means of coercion, persuasion, bribery, and the impersonal functioning of economic mechanisms and institutions, the US-led neo-liberal hegemony has drastically limited the government’s capacity to conduct autonomous social policies for the protection of their populations, and has thus muted resistance of the subaltern Jordanian classes. Robert Cox (1996) rightly observes that the state system in the new world order is “coming to act more as a support to the opening of the world to global finance and global production, less as a means of defense of the welfare of local populations” (Cox 1996: 516).
For the complete version of this paper (including references), contact ridemycamel at aqoul.com
I suppose it is poor form to call a fellow author on a blog a purveyor of useless posturing economically illiterate leftist tripe, but I have never been much for form in such circumstances.
Posted by: Lounsbury at July 4, 2005 06:38 AM
It's a shame, because for someone who has so much more knowledge about issues in the Middle East than myself, you sure offer shitty criticism.
I was hoping someone like you would provide some constructive criticism rather than extremely self-righteous comments straight off the bat.
Posted by: ridemycamel at July 4, 2005 11:12 AM
Quite right, it's a fair cop. I acknowledge a weak and rather crappy comment.
I offer the weak excuse of lack of coffee.
Posted by: Lounsbury at July 4, 2005 12:35 PM
Just out of curiosity, and not in relation to this entry in particular, but is there any leftist thought that you think is non-twaddle? Examples would be appreciated; I'd be especially interested in hearing specific examples of what you see as constructive approaches to IP issues.
Posted by: evaluna at July 4, 2005 03:18 PM
Depends on what you mean by Leftist.
If one means anti-market, no there isn't any I don't consider non-twaddle. Leftist things that do not touch on markets I really don't care one way or the other I suppose.
If one means not anti-market but critically constructed (i.e. attacking the rightest fools who assert markets can solve all, blah blah, the photo negative of the Left ideo-idiots) to address issues re market failure, why yes.
Indeed, I find many environmental economics critiques constructive. I simply have zero respect for economic iliteracy in commenting on issues of economic importance. Leads to dangerous misconceptions.
Re intellectual property, not sure where you are going on this.
Posted by: The Lounsbury at July 4, 2005 03:53 PM
OK, just to pick an example you brought up, how might AIDS drug manufacturers and/or the South African government handled things more constructively? (Besides the S. African government's failure to fully acknowledge that HIV causes AIDS, etc., of course.)
(And yes, I'm well aware of the R&D costs incurred by Big Pharma; at my old job, my primary client for a couple of years was GigantoPharma, and I spent 2 days down at company HQ being indoctrinated on how expensive R&D is and how much Big Pharma does to improve the planet, etc.)
Posted by: evaluna at July 4, 2005 11:34 PM
That requires an essay.
Rather clearly to me the Pharma companies should have stepped back and looked at the cost of their position in term of losses to themselves. Reputational loss was huge. It was a loser, a lawyer driven fiasco.
Overall re Pharma property rights, this is a complex question which requires more information and thought than I can give a comment.
I am not certain that Big Pharma R&D costs are really being "protected" by the current regime. The Economist had an interesting special on this two weeks ago.
Posted by: The Lounsbury at July 5, 2005 06:02 AM
Well, in your plentiful spare time, then.
Posted by: evaluna at July 5, 2005 07:56 AM
Or any other example of your choice, of course, if I may transfer a belated Monthly Reader Request to this forum (which you will poroabbly ignore as usual, but still).
Posted by: evaluna at July 5, 2005 07:57 AM
I ignore your requests because you frame them in such big pictures frames that my poor and impoverished self can't grapple with them.
More precision, if you will.
Posted by: The Lounsbury at July 5, 2005 11:12 AM
I frame things expansively because I am trying to give you the widest possible latitude to respond however it strikes your expansive fancy.
OK, then, somewhat more narrowly...what policy/policies might Big Pharma have adopted (or might still adopt) in developing countries that would strike a reasonable balance between protecting revenues and/or intellectual property rights, while not in effect keeping overly large population segments from receiving lifesaving drugs? Please illustrate however your whims allow.
Posted by: Eva Luna at July 5, 2005 02:40 PM