Women Can Help Move Mideast Beyond The Oil Economy

Throughout the Middle East, the plunge in oil prices is creating economic shock waves. And with international sanctions on Iran being lifted, Gulf stock markets are not convinced that the economic situation will improve any time soon. The Middle East must start to contemplate life beyond oil; and that will require an economic model which, as in the West, depends on technologically-driven economic growth.

It's clear that the Middle East has a long way to travel. The Global Creativity Index, which ranks economies according to technology, talent and tolerance, places Iran 57th, Syria 75th, Saudi Arabia 83rd, Kuwait 86th, and Iraq last at 139th. These rankings belie the region's long pedigree when it comes to inventiveness. From the birth of farming and the invention of the first manufacturing technologies to the development of towns and cities and the emergence of the written word, the Middle East was (along with China and Pakistan) at the very center of the action - and for millenia.

The question is this: Does the region have what it takes to become a technological leader in the modern day?

The Saudis certainly have a plan. The new leadership is looking to introduce a whole raft of market reforms, including reducing subsidies and privatizing state-owned businesses. With two-thirds of Saudi workers employed by the state, this has the potential to transform Saudi Arabia into the new China in terms of economic growth.

For markets to flourish, and as the Peruvian economist Hernando de Soto has recently argued, private property rights will need to move center stage. Not only are they necessary for economic growth, they are also necessary for long-term political stability in the region. It was, after all, the widespread trampling of the property rights of the "common man" that helped to fuel the Arab Spring.

History suggests, however, that the Middle East will need more than markets if it is to compete in the modern technological race. It took two additional factors for the West to push ahead of the rest of the world a little more than two centuries ago: the Enlightenment and the empowerment of women. While they may manage to adopt some market reforms, not all Arab states will find these two additional ingredients easy to copy.

The Enlightenment took place in Europe from the late 17th century and heralded a new more scientific, rational and self- interested way of looking at the world. But it was not only an intellectual movement - it was, as the economic historian Joel Mokyr has written, absolutely vital for the economy. Only when people hold a scientific view of the world does material progress become possible. Without it, we look to magic, fate and heavenly forces to solve our problems. Fasting, praying and concerns about the afterlife substitute for activities that lead to material improvement and progress. With the Enlightenment, a whole new spirit of openness to new ideas, empirical testing and tolerance developed in 18th- and 19th-century Europe.

The Enlightenment created the supply-side foundations for the rise of the West. But to affect the economy at the ground level, it was also necessary that businesses had an incentive to use science and technology in the production processes. According to the economic historian Robert C. Allen, what was special about Britain, the home of the Industrial Revolution, was that wages were high relative to the fuel (and other) costs of machines which embodied new technologies. This made industrialization profitable.

Expensive labor didn't come from nowhere. It was a consequence of a radically changing society, one in which women were increasingly able to avoid early marriage, where they had freedom to work and, as a result, were able to marry later in life, giving rise to small nuclear families. This new family structure prevented wages from being pushed down to subsistence levels by high fertility, stimulating capital-intensive production and making saving and education more affordable. Gender equality was, in other words, central to the story of how the West managed to trump the rest of the world in the technological leadership race.

Here, the Gender Inequality Index (from the U.N.'s Human Development Report) makes for sobering reading. While the OECD scores 0.23, and East Asia and the Pacific are not too far behind at 0.328, the Arab States score 0.537. The only worst performer is Sub-Saharan Africa with a score of 0.575 And while Iran, with a score of 0.515, performs slightly better than the region as a whole, it is well behind Saudi Arabia.

For the Middle East to adjust to life after oil, it will take more than market reforms. The state and religion will need to allow for greater freedom and tolerance. And the situation facing women will a require radical transformation.

© 2016 Bloomberg L.P.

(Victoria Bateman is a fellow and lecturer in economics at Gonville and Caius College, Cambridge University.)