Book Launch: Locked Out of Development: Insiders and Outsiders in Arab Capitalism

The book argues against the received wisdom that neo-liberal reforms are the main culprit explaining slow growth, corruption and inequality across low- to mid-income Arab countries. It instead proposes that it is the uneven presence of the state – over-protecting some while neglecting others – that accounts for the region’s lopsided development and creates deep insider-outsider divides in Arab economies. On the labour market these divides run between protected public sector workers on one hand and precarious workers in the informal private sector on the other; among firms, the divides run between crony insider companies and small, unconnected firms in the informal economy. Uneven state intervention and insider-outsider divisions reinforce each other and together contribute to an equilibrium of weak productivity and skill formation, which in turn deepens insider-outsider divides.

While some of these features are generic to developing countries, others are regionally specific, including the relative importance and historical ambition of the state in the economy and, closely related, the relative size and rigidity of the insider coalitions created through government intervention. Insiders and outsiders exist everywhere, but the divisions are particularly stark, immovable and consequential in the Arab world. They undermine the negotiation of a more equitable social contract between state, business and labour.