Subsidy reform and the transformation of social contracts: the cases of Egypt, Iran and Morocco

Vidican Auktor, Georgeta / Markus Loewe
External Publications (2022)

in: Social Sciences 11 (2), article 85, 1-22

Open access

After independence, subsidies have been a cornerstone of the social contracts in the Middle East and North Africa. Governments spent heavily to reduce poverty and strengthen their legitimacy. Yet, subsidies became financially unsustainable and donors pressed for reforms. This article assesses reform processes in Morocco, Egypt and Iran between 2010 and 2017, thus before sanctions against Iran were further tightened and before the COVID-19 pandemic. We show that even though the three countries had similar approaches to subsidisation, they have used distinct strategies to reduce subsidies and minimise social unrest—with the effect that their respective social contracts developed differently. Morocco tried to preserve its social contract as much as possible; it removed most subsidies, explained the need for reform, engaged in societal dialogue and implemented some compensatory measures, preserving most of its prevailing social contract. Egypt, in contrast, dismantled subsidy schemes more radically, without systematic information and consultation campaigns and offered limited compensation. By using repression and a narrative of collective security, the government transformed the social contract from a provision to a protection pact. Iran replaced subsidies with a more cost-efficient and egalitarian quasi-universal cash transfer scheme, paving the way to a more inclusive social contract. We conclude that the approach that governments used to reform subsidies transformed social contracts in fundamentally different ways and we hypothesize on the degree of intentionality of these differences.

About the authors

Loewe, Markus


Auktor (ehemals Vidican)

Further experts

Balasubramanian, Pooja

Social Economics 

Baumann, Max-Otto

Political Science 

Breuer, Anita

Political Scientist 

Burchi, Francesco

Development Economy 

Dick, Eva

Sociologist and Spatial Planner 

El-Haddad, Amirah


Haldenwang, Christian von

Political Science 

Houdret, Annabelle

Political Scientist 

Leininger, Julia

Political Scientist 

Morare, Ditebogo Modiegi

Political Science 

Nowack, Daniel

Political Science 

Roll, Michael


Ruppel, Samantha

Political Science 

Strupat, Christoph