The Economics of Jordan’s Political Crisis

Article Summary
Jordan’s budget woes are a major reason for the current political instability, writes Mourad Batal al-Shishani. While the country tries to phase out costly fuel subsidies to avoid a larger deficit, tensions rise as higher costs threaten to push more citizens into poverty. 

Since mid-November, Jordan has witnessed protests that went beyond what is known as “political consensus,” where slogans reached the head of state for the first time, after fuel subsidies were lifted.

This pushes us to redefine the relationship between the citizen and the state or the regime, or in other words, to formulate “a new social contract,” particularly that the regional circumstances of the Arab Spring are imposing a new reality. This reality is different from any other crises that Jordan experienced over the past three decades.

In addition to the regional reality, there are basic data in Jordan that also impose this social contract, such as the average age, the gap between the elites and the people and rotating the elites ... etc. However, the economic dimension is linked to shifting the role of the state and the transition from a rentier state to a modern state, based on the open economy, since the beginning of the third millennium.

The process of shifting the state’s role and adopting more open economic policies has shaken the economic foundations of the majority of the Jordanian society, which constitutes the backbone of the state in its administrative concept. This is reflected in the huge gap in incomes, lifestyles and access to basic services. It is important to note that a number of national institutions providing these services were privatized, which stimulated resentment.

The institutions that were established to complete this transition have contributed to the additional burden on state coffers and most of them were identified as the main source of income inequality between their employees and public employees. These institutions are known as “independent institutions.”

Based on "The Actual Expenditure of the Jordanian Government Budget on Education, Health and Employment, An Evaluative Study: 2000-10," written in 2011 by The National Center for Human Rights in Jordan, we note that 83% of  the government spending between 2000 and 2010 was disbursed as follows: 21% on health care, education and employment; 22% on security and defense; 15% on salaries; 10% on retirement; 8% on debt service; 4% on fuel subsides and 3% on independent institutions. 

Expenditures in numbers

Figures show that security and defense expenditures (except for the unknown expenditures of the intelligence services, which are not included in the official budget) are almost equal to the spending on health, education and employment. Moreover, fuel subsidies — the source of tension at present — are 1% higher than the spending on independent institutions. This shows that the process of stimulating the economy to facilitate the transition to the market economy does not work that way.

Jordanian Prime Minister Abdullah Ensour defended the government's decision to lift subsidies on oil derivatives, saying that the new rules will provide the state with 30 million dinars [$42.4 million] by the end of this year, adding that the budget deficit reached 5.5 billion dinars [$7.7 billion].

The government said it would compensate families whose income does not exceed 10,000 dinars [$14,130] per year with 420 dinars [$592] throughout the year, a cost of about 300 million dinars [$423,909,000].

According to the above-mentioned study, the Jordanian citizen's share of public spending on health has increased from 44 dinars [$62] in 2000 to 142 [$201] in 2010.  This number has doubled since 2008, but it ranged between 55 [$77] and 70 [$99] dinars from 2003 to 2007. Meanwhile, the per capita education share has increased from 63 dinars [$89] in 2000 to 111 dinars [$157] in 2010. The per capita share of spending on labor was 9 dinars [$13] in 2000 (fell to 3 dinars [$4] in 2001), reaching 19 dinars [$27] in 2010. However, it kept rising and falling. For example, in 2008 and 2009, the per capita share was 22 [$31], but it fell to 19 dinars [$27] in 2010.

Spending on security services, apart from intelligence, increased from 109 dinars [$154] in 2000 to 299 dinars [$422] in 2010. According to the mentioned report, prices in Jordan have increased by 49%, an annual rate of 4.9 % between 2000 and 2010, which means that "spending on the right to education, health and employment was nominal, not quite qualitative," given that [this kind of spending] is affected by price increases and population growth.

Wobbling spending

It is also noted that government spending on key sectors is wobbling without reflecting the evolution in the development of the health and education sectors. Further proof of the state’s recession are changing consumption patterns. The fact is that people are resorting to private schools in major cities and the absence of spending aimed at stimulating the economy through infrastructure improvement in a bid to liberalize the economy.

In postal services, for example, it is noted that the countries that have better mail services have made the largest eBay operations. Such an idea might stimulate the economy and address the growing problem of unemployment. However, we have not seen any serious attempts aimed at developing the Jordanian postal services despite the improvement in the service. This also applies to training and preparing individuals in the peripheries for an open economic market.

Reports indicate that the lifting of subsidies on goods is expected to lead to a cumulative increase in the poverty rate by 3.4%, thus increasing the problematic disparity between the center and the peripheral areas, as the poverty rate is naturally higher in these places. Consequently, this will fuel political and economic tension.

The government could have provided a longer schedule for the liberation of oil derivatives, being an irreplaceable option. In return, it could work on stimulating the economy by establishing an economic structure.

However, it is necessary to note that other political factors play a key role in the current Jordanian crisis, particularly the age gap between the elites and the young (whose average age is 21 years).

In fact, the youth find it hard to relinquish their fundamental freedoms and do not accept the concept of the custodian state in light of the technological development and the free flow of information, knowing that this coincided with an economic marginalization. This political dimension is also essential to understanding the Jordanian crisis. 

Found in: fuel subsidy, protests, food, economic

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