Subsidy Reform and the Transformation of Social Contracts: The Cases of Egypt, Iran and Morocco

Georgeta Vidican Auktor and Markus Loewe
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Georgeta Vidican Auktor: German Development Institute, Deutsches Institut für Entwicklungspolitik (DIE), Tulpenfeld 6, D-53113 Bonn, Germany
Markus Loewe: German Development Institute, Deutsches Institut für Entwicklungspolitik (DIE), Tulpenfeld 6, D-53113 Bonn, Germany

Social Sciences, 2022, vol. 11, issue 2, 1-22

Abstract: After independence, subsidies have been a cornerstone of the social contracts in the Middle East and North Africa. Governments spent heavily to reduce poverty and strengthen their legitimacy. Yet, subsidies became financially unsustainable and donors pressed for reforms. This article assesses reform processes in Morocco, Egypt and Iran between 2010 and 2017, thus before sanctions against Iran were further tightened and before the COVID-19 pandemic. We show that even though the three countries had similar approaches to subsidisation, they have used distinct strategies to reduce subsidies and minimise social unrest—with the effect that their respective social contracts developed differently. Morocco tried to preserve its social contract as much as possible; it removed most subsidies, explained the need for reform, engaged in societal dialogue and implemented some compensatory measures, preserving most of its prevailing social contract. Egypt, in contrast, dismantled subsidy schemes more radically, without systematic information and consultation campaigns and offered limited compensation. By using repression and a narrative of collective security, the government transformed the social contract from a provision to a protection pact. Iran replaced subsidies with a more cost-efficient and egalitarian quasi-universal cash transfer scheme, paving the way to a more inclusive social contract. We conclude that the approach that governments used to reform subsidies transformed social contracts in fundamentally different ways and we hypothesize on the degree of intentionality of these differences.

Keywords: subsidy reform; social contract; government legitimacy; Middle East and North Africa (MENA); Morocco; Egypt; Iran; protection; provision; political participation (search for similar items in EconPapers)
JEL-codes: A B N P Y80 Z00 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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