Jordan and the Middle-Income Growth Trap: Arab Springs and Institutional Changes

Although Jordan reached middle-income status more than three decades ago, the country has not made the additional leap, like most developing countries in the Middle East, to become a high-income economy. In this paper, we argue that institutions, namely formal rules (constitution, judiciary, political system) as well as “personality-based” informal rules (tribalism, wasta) might explain the middle-income growth trap. More precisely, we highlight that informal institutions, as well as the distorted use of formal institutions, are a by-product of the process of state formation. They play a part in the preservation of personal/anonymous relationships between the state and society and in the persistence of the rentier system. Jordanian Spring events reveal that a demand for reforming the power structure prevails over the overthrow of the Monarchy. Finally, to assess the undergoing transition process in Jordan, we resort to the social orders conceptual framework (North et al. (2009, 2012)) with an emphasis on impersonality (Wallis (2011)). The “Arab Springs” events have put pressure on the power structure to advance the rule of law (impersonal relationships among elites), and on the Monarchy in Jordan to create a “perpetual” state.