This article situates recent political turbulence in the Middle East within the long-term failure of the Arab development model that is based on economic controls and welfare concessions. After having sustained generous welfare entitlements for several decades, this development model is coming under increasing strains in the face of a growing and increasingly educated youth population, falling public spending, and an inflexible economic structure. Underpinning this failure is a weak and dependent private sector that survives largely through privileges rather than competition. This failure is most evident in the region’s labor-abundant economies, where privileges are concentrated amongst connected firms but employment is concentrated amongst small, informal sector firms operating at the margins of the economy. I argue that there is a deep trade-off between employment and autonomy; sustainable employment generation is not possible without giving greater autonomy to the private sector and releasing competitive space for its operation. However, private sector development is not simply a question of technocratic policy reform. In a context where economic controls generate rents for insiders and are used to sustain elite coalitions, development has to be conceived as part of a broader political concession.