Source: Al Ghad
Where are the Fruits of Jordan's Economic Growth?If the Jordanian economy has indeed achieved growth and its macroeconomic indicators are as healthy as they appear, then where are the fruits of this growth? Why, despite the rosiness of the image presented by official government figures, is there grumbling from numerous corners?
The answer is easy. In order for this growth to benefit different regions and classes, it must be evenly distributed to create job opportunities. But the actual growth achieved so far has not accomplished this.
Comparing the track of profits and wages is particularly revealing in looking at growth in Jordan. Corporate profits have made up a rising percentage of overall growth for the past five years, whereas the proportion of wages has declined from about 18 percent in 1990 to around 14 percent in 2009. Thus, Jordan’s growth has exacerbated the current economic gap by compounding the concentration of wealth.
Job creation has been mainly limited to the service and construction sectors, resulting in low wages and productivity. New jobs have not been distributed widely enough to meet the hopes that naturally arise from such growth. Productivity has also declined over the past few years.
Moreover, the quasi-monopolistic structure of the market grants significant power to those who control key sectors, while increasing profit margins and keeping the market under the control of these elites by making it difficult for newcomers to enter the market. There are no effective measures to dismantle these monopolies.
The unequal distribution of the benefits of growth is also tied to the tax system, which does not help redistribute income. Income tax represents a small percentage of state revenues and therefore does not foster social justice in terms of securing adequate resources to education and health. Indeed disparities between the center and periphery have been widening not only in terms of income, but also in terms of the services provided and quality of education. Serious thinking is needed to come up with a more just tax system, one that is subject to greater accountability.
Jordan's “good governance” indicators are not encouraging. The country scores low on indexes measuring the rule of law and the facilitation of investment and market access. Thus the country’s solution is rooted in the need for real reform to bolster the state's legislative and regulatory capabilities.
In its strengthened role, the state and its institutions will be able to encourage private investment through new incentives, focus on improving productivity, review the current tax system with an eye toward implementing a progressive tax system, and dismantle the existing monopolies.
There will be initial resistance to all of these measures, especially from those who benefit from the current system. But this would mark the beginning of a new economic policy that could create a different kind of growth, one that addresses the social and political changes sweeping Jordan and the region.