Edition 19 Volume 1 - December 05, 2003
Globalization and the Middle East
• Global gearbox, local transmission -
byPeter Lagerquist
Palestinians did indeed try to globalize during Oslo, and in this precedent lies a revealing tale.
• The economic pain of conflict -
byIrfan Husain
Internal violence and the threat of regional conflict drive away capital faster than the plague.
• Helping the rich, not the poor -
an interview withMichael Philip Cracknell
Behind the statistics, very often the condition of poor people gets worse.
• We need South-South integration -
byRiad al Khouri
EU partnership agreements with the Middle East call for governance reforms as well as economic ones.
Global gearbox, local transmission
by Peter Lagerquist Among the most oft-dissected features of the Oslo process between Palestinians and Israelis was the globalizing rhetoric with which its main protagonists sought to recontextualize the conflict. Promoted by the United States and the European Union and encapsulated in former Israeli Prime Minister Shimon Peres’ vision of a “New Middle East,” it proffered that economic integration would not only underpin political accommodation in the region, but in itself constitute a necessary response to new global economic realities. This blurred developmentalist narrative has since been eclipsed by other political realities, but after September 11, its echoes reemerged in the form of new governance agendas advanced by the United States and the international community, both in the wider Arab region and the Palestinian territories. These agendas draw on the now-popularized notion that at the heart of the region's troubles is its failure to come to terms with such global realities. Unfortunately, they have drawn few lessons from Oslo and the political iniquities that its globalizing agendas at times not only glossed but reinvested.
Among the most influential perpetuators of such omissions has been New York Times pundit Thomas Friedman, who after September 11 could accordingly lace "a serious and respectful dialogue with the Muslim world and its political leaders about why many of its people are falling behind,” with the following comment: “if Palestinians had said: ‘We are going to oppose the Israeli occupation, with nonviolent resistance, as if we had no other options, and we are going to build a Palestinian society, schools and economy, as if we had no occupation’ they would have had a quality state a long time ago. Instead they have let the occupation define their whole movement and become Yasir Arafat’s excuse for not building jobs and democracy.”
The underlying narrative, that the current Intifada was a reaction to Arafat's misrule, and thus launched in order to divert attention from it, has belatedly found favor with Israeli media commentators, and since been echoed widely in post-9/11 diagnoses of Arab "inabilities to cope" with "globalization" and "modernity". But under the tutelage of institutions such as the World Bank, the Palestinians did indeed try to globalize during Oslo, and in this precedent lies the revealing tale of globalizing imperatives transmitted through a local reality of occupation.
One of a few upshots of the New Middle East vision that accompanied Oslo was an industrial estates program aimed at reintegrating Palestinian labor into the Israeli economy following the institutionalization of Israeli closures on the occupied territories. Similar estates had already been implemented in Gaza during the first Intifada, as part of an Israeli counterinsurgency policy that deployed a limited “development” to contain rising local desperation. In seeking to build support for the Oslo process, the program’s sponsors, including the World Bank and USAID, expressed similar concerns. Yet while responding to a particular, local and historically-structured reality, the program was marketed and modeled on a universal Export Processing Zone template, which, to date replicated in over 600 locales, has become a marked feature of the developing world’s response (as recommended by international financial institutions) to the demands of globalization.
In the Palestinian territories, these globalizing imperatives eased into Israeli prerogatives, structured by interim economic accords that turned Israel officials into the gatekeepers of the local economy through a restrictive and discriminatory set of quota and border controls. When combined with Israeli restrictions on Palestinian movement inside the territories, these obstructions raised Palestinian transaction costs to prohibitive levels on the magnitude of 20-30 percent of production values, dwarfing any funds that the Palestinian Authority diverted from the local economy. Israelis either serving in public positions or with connections to their security establishment meanwhile took their own share, making small careers out of the rent-seeking enabled by their "clearing" of obstructions for captive Palestinian clients. Such facilitation notably greased the implementation of the first pilot industrial estate in Karni, Gaza, packaged finally in an Israeli “security solution” for its site, and sold to the estate’s Palestinian operator by the former military governors of the occupied territories, according to Israeli army specifications.
It may not be incidental that one of the few instances of “globalized development” to spring from Oslo’s imaginaries thus came to mean mainly that, as during the first Intifada, Palestinians became tightly monitored guests in their own economy. While this may not have been the intention of the program’s sponsors, it folded naturally into a globalizing rhetoric which, to use Friedman’s words, can pursue development “as if there was no occupation.” Those who would subscribe to such notions should be reminded that in Palestine, as elsewhere, global economic gears may churn, but the transmission is local and political.-Published 4/12/03©bitterlemons-international.org
Peter Lagerquist is a writer and occasional political consultant. He has written about the Israeli-Palestinian conflict for Le Monde Diplomatique, the Journal of Palestine Studies, the Guardian and the New York Times, among other publications.
The economic pain of conflict
by Irfan HusainAt the height of the eyeball-to-eyeball confrontation between India and Pakistan last year, there were worldwide fears of a nuclear holocaust in South Asia. American and British diplomats from Colin Powell downwards shuttled between New Delhi and Islamabad for weeks to defuse the tension. When, after months of facing the Pakistan army, Indian forces were ordered to stand down, the world heaved a sigh of relief and praised the efforts of western powers.
But it later transpired that the real peacemakers had been multinational corporations that informed their Indian partners that they would move their staff and their operations elsewhere if the threat of war was not lifted. According to an article by the New York Times columnist Thomas Friedman, when the State Department issued a travel advisory urging American citizens to leave, India was presented with the real threat of losing much of its software business, which had earned it $60 billion that year in designing and writing software as well as in its back-room operations for major corporations like General Electric. The Confederation of Indian Industry explained the new facts of life to the ageing Indian politicians in New Delhi, who then pulled the Subcontinent back from the brink.
Is there a lesson here for the Middle East? Clearly, globalization could bring immense benefits to a region preoccupied with war, ancient enmities and recent violence. Regional cooperation based on Israel’s cutting edge technology, relatively cheap Palestinian labor and a huge Arab market would have made the Middle East a formidable player in the world economy. Instead of being net importers of goods and technology, the region could have been counted among economic powerhouses like China, the European Union and the USA. And if this sounds farfetched, consider the stunning progress countries in the Far East have made in the last couple of decades.
Based on Pakistan’s experience, the lesson is clear: internal violence and the threat of regional conflict drive away capital faster than the plague. Today, despite the large infusion of dollars into Pakistan since 9/11, there is hardly any fresh foreign or local investment being made. While money is being invested in real estate, the stock exchange and the service sector, nobody is thinking of putting a single rupee into industry. This vote of no confidence in the country’s future means very few new jobs are being created, and millions of unemployed young men without a stake in the system can easily be recruited as foot-soldiers for the jihad.
The situation is somewhat similar in the West Bank and Gaza. According to a new United Nations report, the majority of Palestinians have been reduced to surviving on one meal a day, and malnutrition is approaching Sub Saharan levels. Clearly, unless there is economic activity and job creation, more and more desperate young people will join the intifada.
Circumstances in the Middle East prevent the forces of globalization from focusing minds as happened in New Delhi last year. Israel is the recipient of huge inflows of public and private assistance from the United States, and this multi-billion dollar annual infusion permits it to a considerable extent to insulate its economy from the real pain caused by conflict. To a much smaller degree, the inflow of cash from public and private Arab sources as well as the EU and the UN has kept the Palestinians from starving. Without these two external props, there is little doubt both parties would have sorted out their differences long ago, one way or another.
Tourism is one aspect of globalization that has transformed economies overnight. But instead of seeing its share increasing, recent events in the Middle East have caused a severe downturn in the industry. In Israel, the number of tourists has dropped to below 30 percent of the high point achieved in 2000. Currently only the very brave and the foolish would venture to the West Bank.
In Israel today, all the major indicators reflect the severe strains the economy is under: GDP per capita is down; unemployment is up; and apart from the stock exchange, there is little fresh direct foreign investment coming in. These are all the high costs of conflict, and unless Israel wishes to continue on this downward path, even its American cash cushion will not be able to insulate its economy forever.
But once this conflict is resolved, globalization has much to offer the region with its huge mineral wealth, its sizeable number of educated workers, Israeli managerial and technical skills and the relatively well-off Arab market. China is another example of a country taking advantage of new economic forces to build its economy while putting regional disputes on the back burner. Despite its long-standing territorial dispute with India, it is trading and talking with its erstwhile foe to their mutual benefit.
The new bottom line is that globalization and conflict just do not mix. In other words, small countries can fight or they can prosper, but they can’t do both things simultaneously.- Published 4/12/03©bitterlemons-international.org
Irfan Husain writes two columns a week for Dawn, Pakistan's widest circulating and most influential daily. After a career in the civil service spanning 30 years, he was president of a university in Pakistan for five years.
Helping the rich, not the poor
an interview with Michael Philip CracknellBI: How does globalization affect your work in micro-finance in Tunisia?
Cracknell: We work in the poor suburbs of Tunis supporting micro-entrepreneurs, 90 percent of whom women. These micro-enterprises are all geared to the local market, which means that they are not really affected by globalization or what most people understand as globalization. If we are talking about opening up markets, then maybe [globalization] creates competition for some of those who produce things, but in fact two-thirds of our borrowers are in trade, so cheaper imports are good for them because they can increase their sales, for example, of clothes here in Tunisia.
BI: Can you provide a snapshot of the Tunisian economic situation?
Cracknell: Officially, unemployment in Tunisia is about 15 percent, but among youth--and this is not only in Tunis--the unemployment rate is much higher. We estimated at one time that about 50 percent of people under 25 in the areas where we work were unemployed, or had very unstable work.
We are trying to encourage micro-enterprise, which consolidates the jobs of the micro-entrepreneurs themselves, and also creates more jobs, about one and a half jobs by each successful micro-enterprise. We have one success story, for example, of a woman some 30-years-old who was previously employed in a textile factory. She took a loan from our micro-credit program and bought herself a very simple sewing machine and today, six years later, she has her own textile workshop and employs 21 people. Not everyone is so successful as Suad, but this shows what someone can do with managerial skills and determination.
BI: Are there fears about globalization in Tunisia?
Cracknell: I believe that Tunisia will be quite seriously affected when the market for the European Community is opened up in a couple of years time. Tunisian enterprises, in general, are currently trying to improve their performance in order to face the extra competition. This is likely to have quite a big impact on formal enterprises, but not so great an impact on the informal sector that we work with.
BI: Are there ways that you think that the process of building a global economy could be done more effectively to aid your constituency: women and the poor?
Cracknell: I personally am very skeptical about the capacity of current neo-liberal thinking to do anything whatsoever to help poor people. I am convinced that "globalization" as it is understood--the neo-liberal opening of markets, demolishing government role in society and so on--is only intended to help the rich and not at all to help the poor. For instance, when the World Bank and the International Monetary Fund impose their structural adjustment programs, the statistics improve, but behind those statistics, very often the condition of poor people gets a lot worse.
The Tunisian government, for example, has a very generous attitude towards poverty and about 15 percent of the Tunisian budget, one way or another, is devoted to social programs. Nevertheless, there are [external] pressures to reduce government expenditures and this is having an effect, for instance on the number of people who have access to free or virtually free health care. It is also leading to a reduction in subsidies on cereal products (the main food products for the poor are bread and couscous and pasta). The price of these essential goods is increasing and this is at least partially due to pressure from the World Bank and the IMF to decrease government expenditures.
BI: So knowing what you know, how would you develop the policy?
Cracknell: The trouble is that the web that has enmeshed all the countries of the world, not only the poor countries but the rich ones too, has been drawn so tightly now that it is very difficult to break out of it. I believe that there is a very big movement that began developing at the World Alternative Social Forum [in Porte Allegre 2001]. But while on the one hand, there are a very substantial number of people looking for alternatives to neo-liberalism, on the other hand, they are so diverse that it will be difficult for people to come up with coherent proposals and policies that hang together.
We now have this new initiative between Israelis and Palestinians to look for solutions to that problem, and maybe these alternative non-governmental proposals for economic development will also eventually become policy.
BI: Often globalization in the Middle East is addressed publicly on two levels, issues related to economics, and also those related to cultural hegemony and the fear that western culture is taking over. How is this manifested in Tunisia?
Cracknell: Although you do see kids who happen to be anti-American, you will never see them giving up their baseball caps or sneakers. Still, on the more profound cultural level, they are very attached to their cultural values, Arabic music and so on. I think that the people that we work with (although this doesn't apply so much to richer people) are so far managing to avoid the more profound cultural incursions from the West.
I believe that when people adhere to any extremist type of approach to life, it is very often because they are living in poverty and have been deprived of all the goodies Western society has to offer--all of which they see on their television sets. We hope that our work in micro-enterprise, allowing people to get "less poor," is one way of fighting extremism.-Published 4/12/03©bitterlemons-international.org
Michael Philip Cracknell, a London-born long-time resident of Tunisia, is co-director of Enda Inter-Arabe, a micro-credit organization based in Tunis.
We need South-South integration
by Riad al KhouriYes, Virginia, there is a conspiracy: in our grandparents’ generation it centered on the Sykes-Picot agreement and its successors; nowadays, the intimations of dark villainy that upset some in the Middle East are summed up in the term globalization. Then as now, rich and powerful foreign countries dictate the rules under which business is done in the region.
So what else is new? The answer is that the originality of the current phase of capitalism lies in the internationalization of production partly made possible by the information and communication revolution. Will this aspect of globalization somehow be stopped or reversed? Not a chance: no matter what happens politically and otherwise in Iraq, Palestine, Lebanon, Sudan or, for that matter, the Antarctic ice shelves, internationalized production--an important aspect of globalization--is here to stay.
My message to the people of the region is therefore to join the globalization bandwagon--not try to stop it. The challenges facing Middle East economies from globalization require capitalizing on a system where demand from the North is increasingly being met through subcontracting arrangements, with large foreign distributors relying on small local suppliers. In this model, the strategy for Middle East firms involves economies achieved through clusters, improvement in the information and communication technology infrastructure, and better marketing. Low wages will no longer be a competitive advantage.
An interesting example in this respect is the growth and efficiency that small and medium enterprises in the region have shown in some sectors. Traveling around the Middle East for the past few years, I have seen more and more successful exporters of clothing enter the global loop, with food processing firms not far behind. In the services sector, transport and tourism are areas where Middle East producers--many of them on the smaller side--are doing better at exploiting their competitive advantages under the rules of the new global game.
Not that the news is all good. Globalization’s negative impact in the region as elsewhere includes volatility of capital flows, rampant consumerism, environmental impacts, and death of infant industries. There is also a cost to labor that is losing rights because of the new system of global production relying on temporary jobs.
To maximize the positive impact of globalization, regional integration must proceed as fast as possible. Middle East integration is beneficial, long overdue, and inevitable under globalization. There will be more advantages for the region to speed up South-South integration ahead of integration with the European Union, creating a larger market and raising competitiveness and productivity in the face of coming competition from both North and South.
This will require movement on political fronts, which becomes easier if an effort is made on improving governance and diffusing development so that fruits of globalization are more equitably shared.
The latter point--on governance--is perhaps the newest in the list of reforms being presented to the people of the region. Articulating a new dimension of globalization for the Middle East, the economies of the region were in the 1990s asked to remove trade barriers, plug fiscal and external deficits, stabilize macro-economic indicators, reform various sectors, and privatize public enterprises. Some of these steps having been taken, Middle East states are now being called on to move from revamping economic policies to straightforward political reform.
The transformation of Middle East regimes into more-or-less liberal constitutional democracies involves imposing principles of participation, the rule of law, transparency, and accountability. There is now a variety of programs in the region to expand access to justice, improve legislative processes, make electoral systems more effective, render public institutions more accountable and widen access to information about good governance, including lessons learned from other regions.
This process implies expanding the scope of globalization, defined as the elimination of various barriers to international trade, to include bringing down restrictions caused by domestic government practices. In that spirit, growing numbers of intermediaries conveying experiences and lessons in economic and political liberalization from international institutions and a variety of bilateral development programs are invading the region. In particular, EU partnership agreements with Southern Mediterranean Middle East states call on them to engage in governance reforms, as well as economic ones.
Contributions to this process are being made by publishing information on websites, commissioning original research from think tanks and individuals, and organizing conferences in which information is widely shared. The hope is that such publicity will induce changes that could transform regimes by transforming mentalities and practices.
Though this is a tall order, I’m not unsympathetic, and many of my fellow western-educated Middle East technocrats trained in economics and related subjects also want the region to get serious about governance reform. Otherwise, the tension between economic globalization on the one hand and local backwardness on the other will lead to yet more regional unrest.
Ending this essay as I began it with a reference to Sykes-Picot, that accord was described by George Antonius, writing long before the globalization era, as the product of greed at its worst, that is to say of “greed allied to suspicion and so leading to stupidity.” It would be a pity if historians writing about the globalization of the Middle East in the early 21st century were to note that same quote carved on the tombstone of an unreformed regional polity.-Published 4/12/03©bitterlemons-international.org
Riad al Khouri is visiting scholar, Carnegie Middle East Center, Beirut, and senior fellow, William Davidson Institute, the University of Michigan, Ann Arbor.
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