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Where Is the Burning Man Heading?

As the Middle East and the world mark a year to the Arab Spring, reflections are divided. Some argue that the Arab Spring and its achievements belong with the pantheon of global revolutionary movements, such as the collapse of the Soviet Union and the reunification of Germany. Others, on the other hand, argue that it was more of an outlier and that something in the Arab DNA makes an Arab popular uprising an exceptional case.

There is evidence supporting both positions. Last year's events indeed empowered the Arab citizen and provided her with new universal human rights. At the same time, new governments try to implement new democratic practices within a long tradition of religious, centralized regimes.

Both perspectives cannot ignore the economic climate that had triggered the Arab Spring movement in its current form and timing, and the prospects for economic success and growth in the post-uprisings Middle East.

Reflecting on the last two decades, it seems that since the global recession of the '80s and the decline in oil prices, it was external parties and powers that managed to deal with economic failures in the Arab society and structural problems such as structured and hidden unemployment. The First Gulf War, writing off Egyptian debts to Europe and the U.S., Syria's control of Lebanon and its economy, Oil-for-Food program and increase in Iraq's trade with its partners Egypt, Syria and Lebanon, and American guarantees to the region as part of its Second Iraq War efforts -- all supported Middle East economies in times of crisis.

Yet, this ad-hoc strategy has started to fail in recent years. Higher energy and food prices, low employment and wages, and the closure of Europe and the Gulf to skilled workers from the Middle East gave the youth no choice. The streets are burning.

Although it is too early to judge the long-term economic consequences of last year's riots, the immediate results are not favorable. Inward investment fell sharply. Egypt, which was a major recipient of FDI among emerging markets (US$ 9.4 Billion in 2008) during the second half of the past decade, has suffered dramatically as a result of the global financial crisis and last year's revolution. Tourism, one of the region's leading industries, continues to decline. In Tunisia, an Arab Spring's pioneer, for example, tourism fell 50% since last year. The rise of Islamism in many of these countries questions the future of open tourism in the region. The political uncertainty and the practical results of many of the recent elections do not create the necessary stability, which many of global investors and travelers are looking for. Finally, and most importantly, energy and food prices continue to rise, which encourages the Street to continue to strike. This is a vicious cycle.

The new regimes in the Middle East, driven by old and new strong Islamist political parties, face an unprecedented challenge. They need to bring years of economic regression to an end. Political stability will be crucial in order to execute the necessary reforms in order to reduce inflation, increase work force participation, reduce governments' spending, and revive the private sector in the region.

Egypt, for example, still confronts a tension between the new political elite and the military. Any attempt of the Muslim Brotherhood that won 47% of the parliamentary seats to impose new rules on the powerful Egyptian military can trigger a political coup. At the same time, any attempt of the military to get involved in political decisions would encourage the government to constitutionally limit the military's authority and powers. The importance of this fine balance is not only for political purposes, but also for the ability of the current regime to focus on its economic targets and gain the political backing to implement bold structural and economic reforms.

The story of the Arab Spring is still unfolding. Syria is till burning, and from time to time local events question the ability of several Gulf States to find the right balance between the various minorities among them. Those who try to predict the centers of political or economic instability of 2012 globally should not dismiss the region. The real story is ahead of us.

This post originally appeared in Economonitor.

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