To Beat ISIS, Focus on Economic Reforms

The following is a guest post by Nathan Field, an entrepreneur and commentator on Middle Eastern politics. While Western governments weigh which military actions to take against ISIS, Field looks at the long-term economic reforms that could introduce greater employment, development and therefore stability to Arab countries, and weaken the appeal of extremist ideologies. 

Saudi construction workers

The ultimate outcome of the military struggle against the Islamic State in Iraq and Syria is certain. ISIS will land some blows but has too many enemies. Eventually, it will lose a war of attrition. The territory it controls in those countries will be reclaimed.   

The bigger, long-term challenge is the spread of Islamic State’s ideology in the broader Middle East, as opposed to the presence of the group in Syria and Iraq. This ideology of extreme utopian populism is caused at a most fundamental level by the socioeconomic stratification of Middle Eastern societies, a problem that is aggravated by the weakness of Arab economies in the global marketplace.

This has created a division between roughly the top 20% of societies, which is in a position to thrive and obtain status, and the vast majority that can mostly only hope to achieve the same. While such gaps have always existed, they are now being amplified by the explosion of the internet, social media and smartphones. For a growing number of young men, Islamic State’s utopianism offers a sense of purpose, meaning and masculinity that they don’t believe they can obtain by playing according to the conventional rules of society.

Economic reform, therefore, will be the key to undermining the group’s broader ideological appeal throughout the Muslim world-- with one major caveat. To succeed, it must not be a mere intensification of the neoliberal reforms that have transformed Arab economies since the 1980s. Those efforts generated unprecedented macro-economic growth, but failed to distribute the gains to different segments of society in a socially optimal way. Socioeconomic stratification increased, and that has directly contributed to the ongoing surge of radicalism.   

Beating the ISIS ideology will require new economic reforms that retain the good elements of Neoliberalism, ie the profit motive, but are more likely to channel more (or most) of the gains to the bottom 80%. I suggest five ways this is possible. For the purpose of clarity, this post is primarily focusing on Saudi Arabia and Egypt, the source of several thousand recruits for Islamist extremist groups in Syria.

Making the Diagnosis: What are the “causes” of the ISIS Ideology?

Proper diagnosis of the cause is the key to solving any problem. At the most fundamental level, the appeal of Islamic extremism is related to economics. This is because the baseline needs and concerns of individuals in all societies are economic. Does a critical mass of people in a given country or region have a reasonable chance to get a job, which gives them the ability to attract a mate, raise a family, and live a purposeful life?

Political and religious views become more extreme or moderate depending on whether these baseline needs are met. Islam has not changed. What has changed is that over a period of 30 or 40 years, an increasing number of people have interpreted their religion more literally in response to their personal environment. Political instability and the lack of democracy is a reflection, not a cause, of the underlying baseline needs deficit. Until the economic equation changes, politics cannot be stable.

Three points to ponder:

First, from the information that is available, Saudi and Egyptian recruits for the Islamic State are virtually all coming from the lower socio-economic 80% of society.  Many commentators are misunderstanding this because of a focus on superficial symbols of economic status, such as university attendance, which are no longer indicative of much in a 2015 world where more people than not attend universities. For example, Saudi Arabia is sending a shocking 78% of its high school graduates to university – one of the highest rates in the world.

Peter Bergen of CNN argued against the Obama administration’s assumption that economics is a cause, by pointing to a lead ISIS terrorist who had received a degree in Computer Science from a British university. Yet what about the fact that this individual could not find a job with his degree? The more important question for those trying to understand the appeal of ISIS, is whether a person could get a job after university, not whether they went in the first place.

Second, if the rise of ISIS is a surprise to some US policy makers, its appearance is consistent with the trajectory of global history in the industrial era. The group is a 21st century Middle Eastern version of the forces behind National Socialism and Communism -- violent, utopian reform movements that gain traction in times of deep economic turmoil and class insecurity. Demand for violent reform options always grows over time as the more moderate options fail to achieve results. That was exactly the situation in Europe with Communism and Nazism, which could only attract a critical mass of followers for its “blow up the system” approach to reform in the 1920s, even if its underlying ideas had been in circulation for several decades. ISIS can point to similar failures of moderation in Arab politics today, which fuel its appeal.

A great book for understanding the appeal of ISIS today is German historian Joachim Fest’s biography of Hitler because of his focus on the role of status in explaining the motives of the original supporters of National Socialism:

Almost all came from numerically strong petty bourgeoisie that had long been prevented from rising socially; obtained positions of leadership during war only because of heavy officer casualties; had expected glorious post-war careers; Versailles had thrown them back socially, ended up teaching in grammar schools, standing behind store counters, grilled windows in government offices; lives that seemed utterly unworthy to them. Same impulse to evade normality that led Hitler to politics now brought them to Hitler.

There is little difference between the foot soldiers of ISIS, as seen in the Vice documentary The Islamic State and the true believers of National Socialism and Communism of the 1920s. Economic struggle and class conflict was the fundamental driver of those movements, just as a central tenet of US National security in the Cold War was economic reform to try to prevent their resurgence. With healthier baseline economic conditions, the “demand” for radical political solutions would disappear, or at least decline.

Third, while the Syrian Civil War is the immediate short-term cause for the appearance of ISIS, it is not the cause of populist utopian extremism, which was occurring in Egypt and Saudi Arabia long before the Arab Spring. In 2009, I co-authored a study on Salafi Satellite TV in Egypt, attempting to understand the sudden emergence of ultra-conservative Islamic TV stations that emerged in Egypt around 2007. These stations were widely believed to be the most watched programming of any kind in Egypt. We found their popularity was clearly linked to the liberalization of the economy, and that they were most watched by those on the lower end of the socio-economic spectrum. There is not a huge jump between the contents of these programs and what we see in ISIS today.  Salafis of the pre-Arab Spring Egypt period were “quietist” as a matter of pragmatism, not because of a permanent ideological belief in the utility of doing so. As one well-known Egyptian scholar of Islamism predicted to me in 2009 “Egyptian Salafists will eventually split: one group will move towards the Islamic centrism of al-Qaradawi and the political activism of the Ikhwan, while a second will embrace Salafi jihad.”

And if the Syrian Civil War has presented a natural cause for Islamists to rally around, especially when it is framed more nobly as “defending the Syrian people,” less honorable anti-Shia and ugly sectarian sentiment was a fundamental theme of Islamist media in the decade before the Arab Spring. So while some kind of settlement to the Syrian Civil War is desperately needed, extremist of the ISIS variety won’t go away just because that conflict ends.

 Growth is the Easy Part. The Dilemma is in the Distribution

The challenge with economic reform is not growth itself, but ensuring a socially optimal distribution of the benefits. What makes this difficult, however, is the natural human inequality of abilities. In any given country, and especially in the 2015 global economy, only roughly  20% of the people have the ability, the ambition, and the temperament to generate new growth either as entrepreneurs or as skilled employees. The gap between the two classes is even more pronounced in Arab countries such as Egypt and Saudi Arabia where cronyism, nepotism and familial connections play a stronger role in determining who is a position to succeed economically than in more developed countries.   

Egypt’s reform experience during the last decade perfectly illustrated this dilemma. The government followed the neo-liberal textbook and from 2005 through 2008 and achieved an impressive 7% annual GDP growth rate. It is an ironic fact that in the years just before President Mubarak was overthrown, the Egyptian economy was generating higher growth than at any other point in the country’s history. But the gains were disproportionately held by a very small segment of Egyptian society. That distribution is a natural, amoral, and inevitable result of free-market capitalism.

The Right Types of Economic Reforms

Here are five economic reforms that might strike the right balance between market-driven capitalism and socialist redistribution of wealth.

Promote Low(er) Tech Entrepreneurship

The State Department has correctly identified the promotion of entrepreneurship as key to generating long-term economic reform in the Middle East. However, it continues to operate under the assumption that entrepreneurship can only mean Silicon-Valley style tech companies, or the building of apps. This has the unintentional result of focusing reform efforts on those who are already generally in the top 20%.

What the Arab world needs is lots of jobs. The problem with tech companies or apps is that they are not labor intensive. Future economic reforms therefore should more strongly encourage people to think about starting companies in more traditional areas. In a 2012 Arabist post “The Virtues of a Low(er) Tech Future in Egypt,” I described this dilemma in greater detail and focused on several types of labor-intensive companies worth promoting because of their potential for greater impact for the 80%.

Try to Create Niche Industrial Sectors That Add New Value in the Global Economy

A significant obstacle to economic reform in the Middle East is the competitiveness of the world economy. Whereas countries like China and South Korea, roughly equal to Egypt economically in the 1940s and 1950s, created new opportunities for millions of people through the development of manufacturing, most Arab countries are purchasers of goods, not producers. Unless something new is created that people want to buy on the global market, new opportunities to shake up the economic power balances in Arab societies are limited.

It is very difficult to create value-adding niches at the global level in 2015. But out-sourcing happens constantly and there is no reason to think that work will cease flowing to places where the cost of labor is cheaper. Countries looking for an economic boost have seized on niche services and made them cornerstones of their economies. The textbook case is the Philippines’ call-center industry. In 1997 there was not a single person in that country employed in a call center. By 2012 it had surpassed India as the world leader, producing $11 billion in annual revenue and employing 638,000 people.

Saudi Arabia is attempting to do something similar by leveraging its oil resources to become a player in the automotive industry. Its goal is to manufacture up to 500,000 cars per year by 2025. If the program is even a partial success, hundreds of thousands of very good jobs for Saudis will be created.

Finding new gaps and trying to start new industries is a worthwhile endeavor. Even if the attempt is unsuccessful, the skills gained are useful to other areas of the economy.

Labor Market Reform

Labor market reform in Saudi Arabia is critical to undermining ISIS. Since 2011, the government has undergone a series of reforms to the labor market, which are shifting the balance of power between workers and employers more in favor of workers. I cover this trend in great detail in a 2014 piece for the Saudi-US Trade Group. The beneficiaries of these reforms are almost entirely Saudis from the 80%, precisely the group most vulnerable to the appeal of radical utopianism.

Promotion of Blue Collar Jobs

In Saudi Arabia there is significant potential for new Saudi employment in blue-collar sectors such as manufacturing, construction and maintenance. For example, just 6% of workers in the construction sector are Saudi nationals, making it one of the least localized sectors of the economy. This also means it is the sector with the highest number of available, already existing jobs. 

Some dismiss this argument out of hand, saying that Saudis just will not work those jobs. But, the grandfathers of the Kingdom’s younger generation worked with their hands, so there is no long-term cultural aversion to “hard work.” The issue is primarily one of status; if wages rise, so will interest in these types of jobs. According to Table 51 of the Ministry of Labor annual report for 2013, construction brings in the lowest average salaries for Saudi males, at just $937 per month. However, since this type of work is often for publicly-funded government projects, higher wages can be written into bids without affecting the bottom line of private sector firms.  

Furthermore, there are enough examples of successful industrial or manufacturing projects staffed by Saudi labor to refute the myth that Saudis will not or cannot work in this field (see Mr. Amr Khashoggi’s comments about the situation in his firm during the May 2014 SUSTG webinar on Saudi Labor reform). If we look at countries such as Germany or the U.S. where mechanics, construction workers, plumbers, etc., all make attractive wages and have a certain “masculine” status within their communities, there is no reason this can’t happen over time in Saudi Arabia. Making it possible would be beneficial in undermining ISIS’s appeal.

Increase Vocational Training

It is hard to find fault with the way Saudi Arabia is spending so much money on education, but as Dr. Habibi of Brandeis University points out is it quite possibly training too many university graduates. He notes that the Kingdom has increased the number of universities from 15 in 2005 to 34 in 2015 and enrollment has risen from 604,000 to 1.5 million during the same period. The reality is that the vast increase in graduates does not match the actual needs of the economy and significant numbers of these new graduates are not going to find jobs (to be clear this is a problem everywhere). This may have the ironic effect of increasing, not decreasing, support for radicalism. After all, the most vulnerable to its appeal are not usually the poor, but those educated enough to know what is out there, which only increases their disappointment when their expectations of higher status are not met. This explains why so many members of Islamist extremist movements have attended universities. 

One remedy for this is a massive increase in vocational training because the direct economic need for those skills already exists. There are some programs but not nearly enough. Better-trained Saudi workers would support the previous four policies of this section. If every year Saudi Arabia produced, say, 5,000new vocational graduates into an environment where there is enough blue-collar work to support them all at wages where they can raise a family, it would be a major challenge to the ideology of ISIS. 

Conclusion

I fear that ISIS-style utopian extremism may be just beginning to spread in the Middle East. It would be consistent with the decades-long slow path to radicalism that we saw in Europe in the late 19th and 20th centuries. Unless meaningful changes are made in the socio-economic distribution of economic status in the Arab world, the popularity of groups like ISIS will not wane. In fact, it will likely grow stronger. Yet because of the nature of the global economy, it is difficult to see how major reforms can be made. The only hope is through new thinking about the types of economic reforms that will put a larger share of the 80% in a position to succeed.

Nathan Field is the co-founder of Industry Arabic and a commentator on Middle Eastern politics. Contact him at nrfield2413@aol.com