Strategy Note /

Jobs matter more than votes: ESG pointers from Tunisia and Lebanon

  • Tunisia is often held up as the most progressive 'Arab Spring revolution' because of the resulting inclusive democracy

  • But as the current round of riots shows, jobs and security matter more than votes and political representation for many

  • For EM political elites, job creation is key. For foreign investors, 'bottom of the pyramid' should drive ESG investing

Jobs matter more than votes: ESG pointers from Tunisia and Lebanon
Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Tellimer Research
18 January 2021
Published byTellimer Research

As the world says goodbye to Trump but not the populist politics that brought him to power, we consider how one of the key drivers of that populism looks across emerging and frontier markets: unemployment, which is acute in Brazil and South Africa in large EM and in LatAm, and Morocco, the Philippines and Turkey in small EM.

Most would agree that economic stress, and specifically unemployment, breeds populism, and in extreme cases, radicalisation and insecurity. It is the EM echo of the message from Bill Clinton's 1992 election strategist James Carville, "It's the economy stupid!".

The latest riots in Tunisia and the continued descent into economic chaos in Lebanon remind elites across the Middle East, Africa and wider EM that jobs and security matter more than votes. In this context, we compare unemployment rates across EM.

The following countries have over 10% unemployment, on IMF estimates:

  • Asia: Philippines

  • Middle East: Iran, Iraq, Jordan

  • Africa: Mauritius, Morocco, South Africa, Tunisia

  • LatAm: Argentina, Brazil, Chile, Colombia, Peru

  • Wider Europe: Georgia, Turkey, Ukraine

Political revolutions usually require more than economic discontent – eg a split within the domestic political elite, a loss of international geopolitical supporters – but EM political elites, whether their legitimacy is grounded by control of the military, the land, the economy or the electorate, cannot forever ignore a lack of job creation.

For foreign investors in EM, beyond informing an assessment of political risk, the critical importance of jobs suggests a focus on 'bottom of the pyramid' (BOP) investing under the umbrella of ESG (environmental, social, and governance) investing is warranted. BOP focuses on the impact on the poorest, and usually the largest, segment of society because that segment's development is key for the sustainability of the entire socio-economic structure.

Unemployment in emerging and frontier

Job creation key to counter populism and radicalisation risk

Tunisia and Lebanon

Scheduled elections and the inclusion of both the ancien regime and the moderate Islamists have arguably progressed Tunisia much closer to a model of representative democracy than 'Arab Spring' peers such as Algeria, Egypt or Morocco in North Africa. But the recurrence of impotent, compromised coalitions in the Tunisian parliament has resulted in half-hearted economic reform and continuing high unemployment and income disparity between the relatively affluent coastal region and much poorer inland areas. According to ILO estimates, unemployment was 13% in 2010, the year prior to the revolution, when the rate spiked to 18%; it is now 16%.

The confessional-based system of political representation in Lebanon has bound the country's diverse ethnic communities to the nation state but institutionalised interest group capture of government policy throttled economic reform and is now impeding the technocratic steps needed to address the current sovereign debt, currency and economic crises. According to ILO estimates, unemployment has remained in the range of 6% over the past decade, but a local consultancy (InfoPro) estimated the rate was above 30% in 2020.

Related reading

Domestic politics in EM after Covid-19: Authoritarianism and inequality (May 2020)

LatAm protest dominoes (November 2019)

Tunisia: Fractious politics gets in the way again (July 2020)

Lebanon: PM walks away, following investors (October 2019)