Well-Being Before the Arab Spring: Objective vs. Subjective Measurements

A theory of well-being that ignores what people want cannot be sustained. On the other hand, a theory that ignores what actually happens in people's lives and focuses exclusively on what they think about their life is not tenable either.¹

— Daniel Kahneman

In 2010, both Egypt and Tunisia were achieving remarkable economic gains, with real GDP growth rates of 5.1 and 3.5 percent, respectively. These had been preceded by even higher growth rates, reaching up to 6 and 7 percent, respectively, in the second half of the 2000s. Both countries were applauded by international organizations such as the World Bank (WB) and the International Monetary Fund (IMF) for their achievements in the period preceding the uprisings. Tunisia was singled out as "the best student…in the region."² Therefore, the uprisings of late 2010 and early 2011 in both countries might seem contradictory — if we limit our analysis to macroeconomic indicators. But at the very moment these variables were being applauded by international organizations, around 28.5 percent of Egyptians and 21 percent of Tunisians were dissatisfied with the standards of living they had to endure.³ In fact, numerous surveys reveal a similar picture: resentment and dissatisfaction with the quality of life and a feeling of deteriorating living conditions.

Recent research in social psychology emphasizes the importance of including both objective and subjective measures in order to have a valid assessment of a society's well-being.⁴ By objective, I mean official statistics published by government agencies; by subjective, I mean people's perceptions of their well-being.⁵ While some might think that the Arab uprisings took almost everyone by surprise, to those who have studied subjective data, they were a manifestation of what was festering underneath the surface. Despite the appreciation both countries were receiving from various international organizations, their reports lacked any critical assessment of how people felt about their general quality of life. Numerous reports and data extracted from various survey sources (Gallup reports, Arab Barometer and World Values Survey) reveal resentment and frustration in both countries (especially among the youth) toward their economic and social conditions.

Recent research in economics, psychology and sociology has demonstrated that it is quite possible to have discrepancies between objective and subjective measures. In fact, research shows that, in spite of the fact that income distribution in countries such as Germany, France and Switzerland is quite similar, perceptions among their respective citizens vary widely.⁶ Further, people in the United States tend to hold a far more optimistic view when it comes to inequality within their country.⁷ Lastly, perceptions of inequality might be a more significant predictor of social policy than official statistics.⁸

This significance of integrating both objective and subjective data has also been on the radar of Nobel Prize-winning economists such as Joseph Stiglitz and Amartya Sen. Stiglitz, Sen and Jean-Paul Fitoussi⁹ published a revealing report — commissioned by former French President Nicolas Sarkozy — assessing what had gone wrong with our economic assessments following the 2008 financial crisis. They concluded that there is a dire need to reflect people's subjective well-being when assessing the quality of life within a given country. This was clearly not a priority for either the Tunisian or the Egyptian government. With relatively high and steady economic growth and decent inflows of foreign investment, both governments were confident they were on the right track — so much so that both the WB and IMF noted them as case studies of countries successfully managing globalization challenges.¹⁰ Table 1 below indicates GDP growth rates and FDI inflows during the period from 2000 to 2012 in both countries.

This research aims to draw from survey resources — World Values Survey, Arab Barometer, Gallup reports — in order to track and describe changes in perception that were taking place in both countries in the years preceding the revolution and compare these results with official macroeconomic indicators. Results show a stark divergence, highlighting the significance of incorporating subjective well-being measures in any sound analysis of prosperity.

This research is novel in several ways. Whereas most previous research focused on a combination of economic, political and social factors (unemployment, inflation, food insecurity, political oppression, corruption, etc.), this research integrates both objective and subjective measures of well-being. Second, it helps fill in a gap in research conducted using qualitative measures such as surveys. Third, it offers policy makers an integrated approach that might yield more accurate results.

 

THE ECONOMIC CONTEXT OF TUNISIA AND EGYPT

 

Despite the vast difference in the size of their populations, Tunisia and Egypt experienced relatively similar economic problems. Egypt's population has recently surpassed 100 million; Tunisia's is just above 11 million. Both countries embarked on similar nationalist agendas after gaining independence from their respective British and French occupiers in the early and mid-1950s. This was evident in their centrally planned economies with huge investments in the public sector — health and education — and relatively generous social policies aimed at income redistribution.¹¹

As Tunisia's oil resources began to be depleted by the mid-1980s, in parallel with sluggish demand from Europe and therefore a reduction in exports, the government sought solutions from the IMF. The country then embarked on some liberalization programs to balance its budget — by cutting down on food subsidies, for example.¹² This decision was met with severe resistance from the population; many people were killed during the infamous riots of 1984. The state later retreated in order to curb people's frustrations.

Broadly speaking, Tunisia suffers from gross regional inequality, with a huge geographical divide favoring the prosperous northern and eastern areas over the impoverished inland and westerns regions.¹³ The west and midwest were being deprived of the economic benefits allocated to their prosperous neighbors, who were highly dependent on tourism and usually receive the most foreign investment.¹⁴ Strikingly enough, they highlight that by 2010, around 90 percent of newly created jobs were being generated in the major coastal areas, with 95 percent of FDI being concentrated there. However, this is not to say that the western areas received no government assistance. In fact, evidence shows that they did get economic support, though "an unequal share of the development process."¹⁵

Unfortunately, neoliberal practices adopted in Tunisia exacerbated this regional divide, constantly favoring the north and east and leaving other parts impoverished.¹⁶ In fact, a general overview of poverty rates and unemployment levels reveals some striking results. On the eve of the uprising, poverty rates in the midwest were more than three times as high as in the northeast; the poverty rate was 9.1 percent in Grand Tunis compared to 32.3 percent in the midwest.¹⁷ In addition, unemployment rates across different regions were relatively high, ranging from 9 up to 23 percent, with the southwest, southeast, midwest and Sidi Bouzid scoring the highest rates. The figures are even more disturbing once we compare unemployment with education levels. The sector with the most unemployment is young people with higher education rates, up to 40.2 percent in Sidi Bouzid, where the initial spark of the Tunisian revolution took place.¹⁸ This divide is also reflected in Gini indices, with between-inequality increasing from 1990 to 2000 while within-inequality decreased slightly.¹⁹

Finally, corruption has also taken a huge toll on the Tunisian economy. Gelvin²⁰ indicates that neoliberal practices exacerbated crony capitalism in its worst forms, with the ruling family deeply involved in the business sphere, favoring their relatives and acquaintances with privatization buyouts and other practices. However, it is worth noting that, despite the challenges of neglect and corruption, the Tunisian economy achieved the remarkable growth rate of nearly 5 percent over the last four decades.²¹

Egypt faced similar economic challenges. By the late 1970s, a decrease in oil prices (and therefore in revenues from oil exports) accompanied by a reduction in workers' remittances from the Gulf countries forced the country to negotiate with the IMF. In fact, Gelvin²² indicates that Egypt was able to receive a credit line of $450 million along with a postponement of $12 billion of foreign debt in return for implementing some austerity measures. Cuts in subsidies for basic foodstuffs led to the infamous bread riots of 1977, which were ended through the deployment of the army. As in Tunisia, the state later backtracked and restored the subsidies.

Egypt depends heavily on four sources for its foreign reserves: tourism, Suez Canal revenues, workers' remittances, and trade with Europe. Despite the country's massive potential, its huge population has always meant exponentially increasing demand for education, healthcare, housing and, of course, jobs! Around 40 million Egyptians live on less than $2 a day. Youth unemployment soared to almost 43 percent before the 2011 uprising, the highest number being those with college degrees.²³

Egypt has witnessed two liberalization periods in the last 20 years. The first occurred in the early 1990s, and the second in 2004 with the appointment of the cabinet of ministers. Following the economic and structural-adjustment policies of the WB and IMF in 1991, Egypt began loosening controls on markets, privatizing companies and divesting itself from crucial sectors such as agriculture and housing. The results were devastating. First, per capita social expenditure as a percentage of GDP declined from 34 percent in 1982 to 20 percent in 1990 and to 16 percent in the first half of the 2000s.²⁴ Second, a large number of firms privatized throughout the 1990s²⁵ with grave consequences for their workers. In fact, the wages and benefits of millions of workers were held back.²⁶ Some analysts estimated the number of workers laid off due to privatization to be in the range of 500,000-800,000.

The post-2004 period saw the accumulation of feelings of frustration and resentment across a wide spectrum of Egyptian society. The appointed neoliberal government of that time was happy to cut red tape and boost Egypt's potential by encouraging privatization and attracting more foreign investment. Despite overall improvements in several macroeconomic indicators (most famously, GDP growth rate and FDI inflows), unemployment remained a major obstacle to any substantial economic development, especially among college graduates.²⁷

As in Tunisia, corruption in Egypt exists at almost every level, and the cabinet of ministers appointed in 2004 seems to have exacerbated this phenomenon. As Lesch²⁸ states,

They [ministers] sold significant portions of the public sector for their personal benefit and decreased public investment in agriculture, land reclamation, housing, education and health. In turn, they promoted private investment in rarely successful export-oriented agriculture, [and] the construction of gated communities for the elite….

Despite official income inequality being generally low, feelings of relative deprivation and unfairness were festering underneath. Moreover, there exists a sharp critique when it comes to the Gini coefficient. For example, Alvaredo and Piketty²⁹ explain that data extracted from household surveys (whether income or expenditures) tend largely to underestimate the extent of inequalities. Second, Milanovic³⁰ adds that elite classes in many cases tend to refuse to be interviewed or sometimes understate their actual incomes. Third, as Palma³¹ explains, "the most commonly used statistics for inequality [the Gini coefficient] is one that is best at reflecting distributional changes where changes are least likely to occur!" Finally, the Gini coefficient does not take into account wealth inequality, which is typically known to be more severe.³² This last factor is quite substantial; some recent reports indicate that the top 10 percent in Egypt owns more than 70 percent of the country's total wealth, up from 65 in 2007.³³

In sum, a combination of factors aggravated economic challenges in Egypt over the last two decades. Liberalization programs advocating privatization and neoliberal practices accompanied by ever-decreasing investment in vital sectors led to economic benefits largely concentrated among the elite, but soaring unemployment rates among young college graduates.

Broadly speaking, improvements in both the Tunisian and Egyptian economies did not produce the "trickle-down" mechanism long advocated by neoliberals. Benefits were largely concentrated in specific regions and among certain social classes. Thus, one can say that, despite progress reflected in objective measures (official metrics and indicators), subjective measures were lagging and even deteriorating.

 

WHAT INFLUENCES PERCEPTIONS?

 

The fields of sociology and social psychology have long addressed the issue of perceptions in an attempt to explain individual differences. Darby and Branscombe³⁴ highlight why people perceive income inequality differently. First, groups use different reference points. As Milanovic³⁵ says, "When people observe each other and interact, it is no longer simply a national yardstick that they have in mind when they compare their income with the income of others, but an international or global one." Second, the exact meaning of a certain phenomenon might generate different connotations. Moreover, failure to identify one's position within the income distribution leads to an underestimation of inequalities, a flaw that has long been recognized by sociologists.³⁶

Therefore, it is important when measuring well-being to take into account relativity rather than absoluteness. In addition, it is crucial to recognize that people base their expectations on these perceptions. Hirschman and Rotschild³⁷ elucidated this phenomenon with the famous tunnel effect: people's current status depends not only on their current condition (income, welfare or other indicators), but also on their future expectations. Improvements in the overall condition of others means higher expectations, while difficulties encountered by others translates into lower ones. In the case of income inequality, people base their perceptions on what economists call the "relative income hypothesis" and sociologists call "relative deprivation."³⁸ People base their judgments on how they feel relative to others and not in absolute terms.

Another famous explanation for divergence between perceived notions and actual events is illustrated by James Davies.³⁹ He analyzed the outbreak of several revolutions, such as the Russian (1917) and the Egyptian (1952), by what he called the J-Curve. He indicates that "revolutions are most likely to occur when a prolonged period of objective economic and social development is followed by a short period of sharp reversal."⁴⁰ Whereas the effect in the theory of social conflict proposed by Hirschman and Rothschild⁴¹ comes about with the passage of time with no specific stimuli, the J-Curve hypothesizes that a sudden downturn tends to increase the gap between what people want (future expectations) and what they actually get. The intolerable gap leads to the outbreak of revolutions. I will illustrate in the next section how this materialized on the ground in both Tunisia and Egypt.

 

WHAT THE INDICATORS TELL US

 

Despite the wide availability of macroeconomic indicators, survey data addressing people's perceptions are not similarly available. I use data here from three sources: the World Values Survey (WVS), the Arab Barometer (AB) and Gallup Reports.⁴² Data are far more available for Egypt than for Tunisia. Further, Gallup Reports is the only source that provides data for both countries before and after their respective revolutions. The Arab Barometer only provides data for both countries after their revolutions though at two different time points: 2011 and 2013. Finally, the World Values Survey offers data before and after the revolution in Egypt only; in Tunisia, the only available data were gathered in late 2013.

 

Divergence of Measurements

 

As indicated earlier, both countries were achieving remarkable economic growth, reflected in their GDP per capita prior to the uprisings in late 2010 and early 2011. By contrast, the percentage of people "thriving" plummeted during the same time, as indicated in both Figures 1 and 2. Typically, Gallup categorizes people as "thriving," "suffering" or "struggling" based on the Cantril Self-Anchoring ladder.⁴³ This scale assesses well-being ranges from zero at the bottom to 10, with the top figures reflecting the best possible life for the respondent, both currently and in five years' time, while the lowest figures indicate the worst possible life.

In both cases, the message is quite clear. Despite vivid improvements in GDP per capita as indicated by the incline of the darker line, subjective data reveal a plummeting trend illustrated by the lighter line. It is worth noting here that this lighter line only reflects deterioration among the "thriving" cluster within society — not the "struggling" or "suffering" sectors that would probably have shown an even more dramatic difference. In sum, deteriorating perceptions indicate a negative attitude for people towards their immediate situation as well as their expectations for five years to come.

This pessimism is further supported by data from WVS for Egypt. Looking at people's satisfaction with their lives as a whole as well as their financial situation for the years 2001, 2008 and 2011, we can observe the following. In general, feelings of dissatisfaction have increased, while feelings of satisfaction dropped. This echoes a message from previous Gallup reports. Deteriorating economic conditions, rising inflation, high unemployment rates and rising inequality might all have contributed to increasing feelings of dissatisfaction.

People's dissatisfaction with life (and their financial situation) largely dropped after 2001, indicating some perceived improvements in their satisfaction levels. However, these also dropped after 2011. One possible explanation is that, on the one hand, there was a clear improvement in various macroeconomic indicators (GDP growth rate, FDI, etc.) that probably raised expectations about the future and about people's economic situation, in general. While these improvements were not really felt on the individual level, satisfaction levels also dropped. We can observe some clear spikes in both satisfaction and dissatisfaction in the early years (a more polarized situation) compared to a smoother and more homogenous situation later. In fact, Hussein and Heshmat⁴⁴ explain that declining levels of happiness and satisfaction among Egyptians during the late 2000s remains a major challenge for the government.

A final aspect in the WVS data is related to perceptions of income inequality. The question asks whether income should be made more equal or whether larger differences in incomes are needed as incentives. The results illustrated in Figure 3 are very telling. First, we see an evident increase in the feeling that incomes should be more equal across the years. There is almost a tenfold increase from 2001 to 2012, reflecting how starkly people's perceptions changed. In fact, Verme⁴⁵ emphasizes that, from 2000 to 2009, both income and expenditure data reveal a similar story: a decline in the standard of living, which might explain the change in Egyptians' views. In addition, this period witnessed huge increases in prices for both energy and food, making people more concerned with their immediate financial situation. Ironically enough, he also adds that, during the same period, different inequality indices (including the Gini coefficient) show that inequality did not increase. This goes back to the very early notion of how statistical measures and people's perceptions did not move in tandem in the case of Egypt. In addition, emphasis on economic growth is further supported by additional data from WVS emphasizing that people's major concern in 2008 was "fighting rising prices" and that the main aim of the country should be to "maintain a high level of economic growth." Both indicators therefore clearly indicate people's concern with their immediate financial situation and their emphasis on economic growth as the most important goal for their country.

Another point worth mentioning here is that, while GDP per capita grew by 22 percent during the same period, microdata show that household income and expenditures increased by only 7 percent, explaining some of the discrepancy observed between the general macroeconomic condition and people's own conditions and subsequent perceptions of their financial situation.⁴⁶ In fact, as Verme⁴⁷ explains, large benefits from growth in GDP were mostly "retained by institutions," while, despite increases in wealth in both public and private sectors, the typical household did not feel this increase in their daily lives. Consequently, feelings of relative deprivation, and maybe frustration, were widespread, as reflected in people's dissatisfaction with their financial status and their views on income inequality. There was a clear increase in the demand for incomes to be more equal. Unfortunately, data for Tunisia are only available for the year 2012, but they do not reflect a very pessimistic view. A larger portion of the population argues for greater income differences as incentives. However, given the lack of a temporal dimension, it is impossible to assess whether this is considered to be an improvement or a disappointment compared to previous years. In addition, as indicated earlier, most of the measured inequality in Tunisia seems to arise from inequality between different regions, while inequality within a region has, in fact, decreased.⁴⁸ This might explain the rather optimistic view Tunisians had towards inequality.

Did Governments Learn from Experiences?

As indicated earlier, data are available through the Arab Barometer only for 2011 and 2013 — after both revolutions. However, they still provide some insights into how immediate perceptions differed from those collected two years later. In this regard, I will be looking at five different aspects: 1) how people evaluate the current economic situation in their country, 2) what people expect the economic situation to be in 3-5 years, 3) how people evaluate the performance of the government in creating employment opportunities, 4) how people evaluate the performance of the government in narrowing the gap between rich and poor, and 5) what people consider the most important challenge in the Arab World.

Broadly speaking, people's moods became quite pessimistic between 2011 and 2013. A growing segment in both countries described the economic situation in 2013 as "very bad" (in Egypt 56 percent up from 29 percent in 2011, and in Tunisia 53 percent, up from 25 percent in 2011) compared to "bad" in earlier years. This merely reflects the fact that people's aspirations for significant economic improvements did not materialize as time passed. Therefore, their frustration with their economic situation grew.

Further, as indicated at the beginning, a major culprit in both revolutions was staggering unemployment rates, especially for the youth. People of both countries had high hopes that their respective governments would be able to generate sufficient jobs to absorb high unemployment rates. However, a growing segment of the populations in both countries evaluated government performance in creating employment opportunities in 2011 as "bad" and in 2013 as "very bad" (Figure 4). A similar trend is revealed when respondents are asked about the government's role in narrowing the gap between rich and poor.

One of the most striking results is illustrated in answers related to the most important challenge in the Arab world: an overwhelming number (almost 90 percent in both countries) classified the economic situation as the most important challenge in 2013, up from 40 percent in 2011. Financial and administrative corruption came in second, at almost 10 percent; the remaining challenges almost faded away in 2013 (Figure 5). This concurrence on economic conditions is supported by evidence from WVS data, suggesting that both governments have yet to pay attention to deteriorating rates of satisfaction, and that both might be ripe for another "Spring."

CONCLUSION

Broadly speaking, both Tunisia and Egypt witnessed favorable macroeconomic conditions in the last two to three decades. However, these improvements did not "trickle down" as promised by neoliberal economists and government officials of both countries. At the same time, growing feelings of frustration and deteriorating living conditions were building up for huge segments of both societies until they exploded in the form of mass uprisings. In general, available survey data indicate declining satisfaction levels, particularly relating to economic conditions. This highlights a vast divergence between objective and subjective measures of well-being.

The events culminating in the Arab Spring indicate the significance of assessing both subjective and objective data. Ample research has shown that in numerous cases the two tend to diverge, and that sometimes subjective data might be a better predictor for assessing well-being. When implementing social and economic policies, governments need to take seriously how people perceive various issues in order to be able to produce more effective policies. It will not be enough to focus exclusively on official data.