The events unfolding in Egypt have lessons for many Western countries and even Asia’s dynamically emerging economies.  Sure, the situations are quite different, but our societies are splintering too.

So what can the West learn from the Egyptian situation? 

First of all, when young people have no jobs, and no hope for their future, they become frustrated.  And there are plenty of frustrated youth in Western countries, especially among migrant groups like the young Arabs in France, Turks in Germany, Pakistanis in the UK, and the African and Hispanic Americans. 

When the man in the street sees massive levels of corruption, disrespect and arrogance from their leaders and elites, he becomes angry.  We should not underestimate the anger building up in our societies following the global financial crisis.

Thanks to mobile telephony, Internet, Facebook and Twitter, people can communicate their feelings easily and quickly to each other and the outside world.  This technology can thus be a means of mass mobilization.  And when there is a source of inspiration (the events in Tunisia clearly inspired the Egyptians), people can forget the threats and fears that suppressed their freedom of expression.  Social revolutions often occur more rapidly and surprisingly than we could imagine.

Even before the global financial crisis erupted, the gap between rich and poor had grown in more than three-quarters of OECD countries over the previous two decades.  According to the OECD, economic growth of recent decades has benefitted the rich more than the poor. In some countries, such as Canada, Finland, Germany, Italy, Norway and the United States, the gap also increased between the rich and the middle-class.  A key driver of income inequality has been the number of low-skilled and poorly educated who are out of work.

The Asian Development Bank has also documented the rising inequality in most of its emerging and developing countries over the past decade.  Inequality in Asia, like everywhere, is multidimensional.  There is inequality across regions (coastal versus inland) and between sectors (agriculture versus manufacturing).  And inequality shows up not only in terms of income, but also health status, education levels and access to energy and water. 

In Asia, inequality is the product of unequal opportunities and biased policies – and quite frankly outright corruption.  In addition, technological change increases the demand for skilled workers relative to unskilled workers.  And in recent times, we have seen what this can do in the political violence in Thailand, and industrial disputes at Foxconn and Honda factories in China.  In fact, social protests occur all the time in China in response to land grabs, unpaid wages and the like.  One day these scattered protests could hook up, and cause an explosion. 

The ILO has also documented the almost grotesque pay increases in executive managers' pay.  By 2007, the average executive manager in the 15 largest firms earned more than 500 times the average US employee, compared with 300 times in 2003.  Similar developments have occurred in countries like Australia, Germany, Hong Kong, the Netherlands and South Africa.

The global social climate has greatly deteriorated according to a more recent ILO report.  Survey data point to an unprecedented global decline in life satisfaction, especially in Western, and Central and Eastern Europe.  Confidence in government has also declined.  Perceptions that policies are fair or lead to a better future have also fallen.  Among Western European countries, there is a perception opf growing political extremism and social discontent.  Perceptions of unfairness have increased in Latin America and remain high in Asia. 

The current global financial crisis has only deepened the sentiment of social injustice.  Profits were privatized as the golden boys and fat cats of Wall Street and London's City made massive profits on the way up.  And then the losses were socialized as governments had to bail out these reckless banks and other financial institutions.  Socializing the losses means of course that the little guy like you and me are footing the bill through higher taxes.

As the crisis unleashed its damage on the economy, unemployment rose dramatically.  In the US, the statistics say that unemployment is about 10 per cent.  But when you count people who would prefer to work full-time rather than part-time, and those that have just given up looking for a job, it is more like 20 per cent.  And again, it is the little guy who is hit, especially construction workers.  Even when a richer guy loses his job, he has money in the bank to tide him over. 

The full effects of the crisis are still showing up.  Now foreclosures are running at full speed.  This means that we are being thrown out of our houses because we can no longer afford to repay our loans because we are unemployed.

Looking ahead, economic growth will be weak for some time.  The US economy is growing now, but it is not creating new jobs, even though companies are sitting on piles of accumulated profits.  If this carries on for a long while, we could see a lost generation of youth who couldn’t get a decent job.  That’s what happened in Japan after two decades of crisis.  A lot of Japanese youths are lost.  Since many of them can’t find decent career jobs, they live with their parents and play video games.  At best, many accept a job at Starbucks or McDonalds.   

The massive sums of public money that were spent on bailing out the financial sector, and keeping the economy afloat, are now bankrupting our governments.  Some European countries have “sovereign debt crises”.  Japan has just seen its public debt degraded.  And many say that the US will be the next one to go.

To get their budgets under control, governments are now chopping expenditures.  Again, it is the little guy who needs social assistance and public education who will suffer most as these programs get wound back.  Students and trade unions have been protesting in Europe. 

In the same way that the Arab masses are angry at their elites, working class people in Western countries are angry too.  Western governments and their elites need to wake up, and take their social injustices more seriously.  Many isolated incidents of social uprising and protest have already occurred.  

The ILO reports on documented cases of social unrest related to the financial and economic crisis in at least 25 countries.  These cases have taken the form of protest against governments’ crisis responses and austerity measures aimed at repairing government balance sheets, protest against employers, and violent clashes between the government and protesters.  As governments try to contain the fallout from the crisis, the social contract between State and citizen is being put to the test.

Financial crises are making our societies more fragile than many imagine.  This will clearly drive protectionist pressures.  Even with the Republicans back in Congress, Obama will have difficulty getting the Korea-US Free Trade Agreement passed.  Extreme right wing political movements could prosper like the Tea Party movement.  If social unrest does really mount, there will be restrictions on our liberties to keep things under control.

We can’t take for granted our open and democratic societies, and globalized economies.  We have to get serious about improving social justice.  Creating jobs and improving income equality are the keys.      

References:

Growing Unequal? Income Distribution and Poverty in OECD Countries, OECD.  2008

http://www.oecd.org/document/53/0,3746,en_2649_37419_41460917_1_1_1_37419,00.html#NEWS   

Asian Development Bank.  Key Indicators 2007 Special Chapter, “Inequality in Asia”. 

http://www.adb.org/Documents/books/key_indicators/2007/pdf/Inequality-in-Asia-Highlights.pdf

World of Work Report 2008, International Labour Organisation, International Institute for Labour Studies. 

http://www.ilo.org/public/english/bureau/inst/publications/discussion/dp19008.pdf

Executive compensation: Trends and policy issues.  By Franz Christian Ebert, Raymond Torres, Konstantinos Papadakis.  International Institute for Labour Studies.  Geneva. 

http://www.ilo.org/public/english/bureau/inst/publications/discussion/dp19008.pdf

World of Work 2010.  From one crisis to the next?  International Institute for Labour Studies.  International Labour Organisation.

http://www.ilo.org/public/english/bureau/inst/download/wow2010.pdf