The Politics of Globalization in the MENA by Clement Henry and Robert Springborg Chapter 1 - Introduction [ Introduction | The MENA's Special Colonial Legacy | The Dialectics of Globalization | Capitalist legacies | Toward an international leveling of regional differences? | Country Responses to the Washington Consensus | References | back to Table of Contents]
Some readers may have memories of postwar Alexandria and Cairo or will have read Darrell's Alexandria Quartet -- the tales of a cosmopolitan and sophisticated elite. Egypt appeared in the mid-1940s to be as economically developed as wartorn Greece and equally ready to catch up with the rest of Europe. To the north, Turkey was targeted like Greece by the Truman Doctrine for special assistance, and then membership in NATO fortified Turkish ambitions to be part of Europe. To the west, in the Arab Maghrib, Algiers was at least as prosperous as the rest of France, and Casablanca, though not legally incorporated into the metropole, was home to big French industrial interests poised to transform the picturesque Moroccan protectorate into Europe's California. To the east, in the Mashriq, a newly independent and polyglot Lebanon was fast becoming the West's principal commercial gateway to Iran, Iraq, and the Gulf. Riding on the postwar oil boom in these states, Lebanon would become the Middle East's Switzerland in the 1950s and 1960s and apparently exemplify an easy "modernization without revolution." (Salem 1973) Beneath snow-covered mountains on the unspoiled shores of a clear and relatively unpolluted Mediterranean Sea, Beirut was as pretty as Geneva in those days, at least in the richer parts of the city, and rather more lively. Of all the new states in the region, however, Iraq had the most promising prospects for balanced development. It was endowed with the world's second largest oil reserves, the most water of any country in the Middle East and North Africa (MENA) including Turkey, some of the richest alluvial soils, a strong British educational system, and a relatively large, skilled workforce. Further east, Iran had thrice the population and a diversified economy with oil reserves only slightly less plentiful than Iraq’s and very substantial natural gas deposits as well. Captivated by the cash flows, the young shah would eventually dream of making his country into the world's third or fourth strongest military power.
The following half-century of political and economic development dashed any rosy expectations about the region’s development. The only countries in the MENA that have reached Greek levels of individual prosperity and welfare are little states that did not even exist in the immediate postwar period. Israel and the Greek part of Cyprus, coupled with Singapore and Hong Kong, rank just above Greece on the United Nations' Human Development Index of 1997; they are eventually followed by the oil principalities of Kuwait, Bahrain, Qatar, and the United Arab Emirates. Their populations, including expatriates, comprise about 3 per cent of the region's 400 million inhabitants. They enjoy "high human development" as do Barbados, South Korea, and Slovenia. But other oil- rich states such as Iran, Libya, Oman, and Saudi Arabia are mired in the ranks of "medium human development" alongside most of the MENA’s less mineral-rich Mediterranean countries. On the periphery, the Sudan and Yemen are at the "low" end associated with the Indian subcontinent and Sub-Saharan Africa.
(Table 1:The Human Development Index 1997)
Table 1 also shows that most of them score lower on the Human Development Index than their adjusted per capita income (calibrated in PPP dollars) would predict. HDI includes education, literacy, and life expectancy as well as per capita income, and most MENA countries rate relatively low for their income on these other variables. If enrolments in primary and secondary school today contribute to future economic growth, the worst may be yet to come. Other growth factors are further causes for concern. The MENA's current situation may deteriorate in the coming decade because investment flows into the region have stagnated, and internal sources of capital tied to oil prices have diminished since the early 1980s. In recent years the region has failed to keep pace with economic development not only in East Asia, but in much of the rest of Asia, as well as in Latin America. Table 1-2 presents the regional comparisons (also see Figure 1-1) over three past decades, together with some country data (Figure 1-2). Many individual MENA countries performed more poorly in 1975-1985 than in previous decades, whether or not they were affluent oil producers. If current trends continue into the twenty-first century, much of the MENA region will slide toward the bottom of world development tables, with presumably devastating consequences for political stability.
This book will assess the prospects for reversing these tendencies and accelerating economic development in light of the major regional and international changes currently influencing the region. The end of the Cold War, the new international economic and political order, the increasing attention of Europe to its "Mexico," and the Arab-Israeli peace, however precarious, are having a major impact upon the region's domestic political economies. All of its regimes are faced with the challenges and opportunities of globalization, yet they also share a defensive legacy engrained by over two centuries of interaction with major European powers, joined in the past half century by the United States. Many Middle Easterners view the globalization of finance and business as a threat to their national, religious, or cultural identities comparable to that of an earlier period of globalization prior to 1914, when the foreign intrusions were associated with European imperialisms.
A complex of political and economic factors is responsible for this region's comparative lack of economic success. Overgrown and inefficient states constitute the primary factor at the national level. The size of many of those states and their relative involvement in and control over economies are virtually the equivalents of communist states prior to the collapse of the USSR. Despite preponderant positions within their political economies, those states lack the necessary capacity and will to promote sustained and rapid economic growth. Insufficient capacity results from the well known deficiencies of state management in command economies, while the lack of will results from political taking precedence over economic calculations.
Yet the size and nature of Middle Eastern states cannot be understood without reference to the regional, global, and economic contexts which facilitated their creation and within which they presently operate. Just as the global Cold War produced "national security states," so has protracted conflict in the MENA region caused and justified the emergence of states with overdeveloped coercive capacities. Hobbesian "war of all against all" regional and global environments have also exacerbated the estrangement of state from society, for they have been conducive to legitimation through symbolic manipulation, as well as to scapegoating and rent seeking, while simultaneously encouraging misallocation of human and physical resources. Furthermore, exogenous revenues, or rents, have accrued to states, thereby permitting their relative economic autonomy from society. Oil rents have been especially critical to the formation of welfare states in the Gulf. State legitimation has been sought through allocation rather than through the more interactive, demanding, and risky approach of extraction coupled with accountability and performance. Economic structural adjustment and political reform, therefore, are conditioned by volatile oil markets and the improvement of the regional security environment, both of which in turn are largely subject to extra-regional interventions.
The MENA's Special Colonial Legacy [back to introduction | Table of Contents]
It is not so much Islam that defines the MENA -- or Arab culture its heartland -- as the tradition of external intervention in the region. The Middle East and North Africa is defined here as extending from Morocco to Turkey along the southern and eastern shores of the Mediterranean and as far east as Iran and south to the Sudan, Saudi Arabia and Yemen. It is the non-European parts of the old Ottoman Empire, plus its respective western, southern, and eastern peripheries in Morocco, Arabia, and Iran. [we should have a nice map here which frames the MENA and the Great Powers from UK to Russia] Leon Carl Brown has succinctly captured its distinctive characteristic:
For roughly the last two centuries the Middle East has been more consistently and more thoroughly ensnarled in great power politics than any other part of the non-Western world. This distinctive political experience continuing from generation to generation has left its mark on Middle Eastern political attitudes and actions. Other parts of the world have been at one time or another more severely buffeted by an imperial power, but no area has remained so unremittingly caught up in multilateral great power politics (Brown 1984:3). The encounters were not generally happy ones in the earlier era of financial globalization lasting until 1914. The region was too strategically situated to be ignored, yet the great powers generally prevented their rivals from definitive conquests while fighting each other for influence, thereby exacerbating internal divisions within the various states or former provinces of the Ottoman Empire. With the discovery of oil in Iran in 1908, then in Bahrain and Iraq in the 1920s and Kuwait and Saudi Arabia in 1938, the region acquired a new strategic importance for international superpowers. Already in World War I the British had coined the term Middle East for their Cairo regional command post. Outmaneuvering their French ally's military and diplomatic administrative bureaux of the "Proche Orient, " they politically and symbolically redefined the region in a way that anticipated the world's energy needs. Oil discoveries, coupled with new transport and communications technologies, spread the stakes of great power contestation out from the Near East to the Middle East, and eventually to North Africa as well. In World War II Winston Churchill understood the entire region to be Europe's "soft underbelly," and the Americans invaded French North Africa first, in 1943, before hitting the beaches of Sicily and eventually Anzio, Italy.
Rarely was the external influence on the region reflected in responsible local governance and institutions because the outsiders deprived one another of the colonial hegemony that Europeans enjoyed elsewhere -- the Spanish and Portuguese in Latin America, the British in India, and the Dutch in Indonesia. The stakes of conquest were higher in the MENA than elsewhere because it was closer to the European heartland of the Great Powers. Where one power did prevail, the impact upon the local society was often more savage than elsewhere. Proximity to Europe attracted a more vicious and destabilizing settler colonialism than in other parts of the non-Western world, apart from the Americas where native populations were also obliterated. The French decimated the Muslim populations of Algeria in the mid-nineteenth century, and the Italians followed suit in Libya after World War I. British protection of its sea lanes was more benign but concerned only a very small fraction of the MENA's population: Aden, Kuwait, Qatar, and other trucial states which comprise the United Arab Emirates today. Britain's control over other parts of the region was either transitory (Palestine 1918-1948) or veiled in various ways (Egypt 1882 -1954, Iraq 1918 -1958, Iran 1921-1953). French rule over Algeria (1830-1962), Tunisia (1881-1956), and Morocco (1912-1956) was more durable and transparent, but its control of Lebanon and Syria lasted a bare quarter of a century (1920-1946). Italy stayed longer in Libya (1911-1943) but was then displaced by the British until 1951. The United States perhaps never quite crossed the line between technical asssistance and real control over Saudi Arabia, but Aramco, a company registered in Delaware, ran its oil fields until 1990, and the US government helped to establish much of its accompanying state infrastructure.
Most of the MENA states, in short, were penetrated by a variety of outside parties vying for commercial, cultural, or strategic influence and establishing beachheads in the various local communities. One widespread effect of these rivalries was to put indigenous business elites at risk. Selective foreign "protection" of local minorities, including grants of foreign citizenship, strengthened them against their local governments and business competitors but ultimately left them vulnerable to retaliation by popular majorities. Another impact was increased sectarianism. Lebanon illustrated how confessional differences, recognized for limited purposes by the Ottoman millet system, were exacerbated by alliances with external powers -- the Maronites with the French, the Greek Orthodox with the Russians, the Druze with the British. With the formal freeing of much of the region after the Second World War, regional powers, including Iran, Israel, and Turkey as well as Arab states, supplemented traditional interventions of the great powers vying for influence over their smaller neighbors. The United States, eager to check advances by the Soviet Union, also vigorously joined the fray and learned to outbid its British and French allies. More external and regional influence peddling and subversion further compounded the divisions of weak states such as Lebanon, the Sudan, and Yemen and provoked others, such as Iraq and Syria, into becoming police states. The rise of transnational Arab and Islamic movements in turn amplified regional and local conflicts.
Whereas colonial rule in the non-Western world usually had a beginning, a long period of insulation from the outside world, and a conclusion, MENA elites inherited a different legacy and still fear the subversion of foreign powers and interference from their neighbors. Many of their states are vulnerable to influence peddling. Despite the trappings of national planning, economic policy readily degenerates into competitions for commissions or other short-term gains from transitory alliances, even in once proud states like Algeria. The MENA's special legacy of external intervention has impeded the internal development of public accountability. Only the Turks, Algerians, Tunisians, Moroccans, and Israelis can claim to have really won their independence and achieved a degree of national closure, either at the expense of settler or other minorities or, in the case of Israel, the national majority of Palestinians. Others gained closure at the expense of their local business elites rather than the colonizer. Military coups toppled newly independent regimes and then proceeded to restructure their respective political economies.
Indeed the creation of Israel in 1948 contributed to the militarization of the surrounding states of Syria, Jordan, and Egypt, just as the advent of the Cold War reinforced the Northern Tier of Turkey, Iraq, and Iran. Part of the reason why the economies of the region appear to be so retarded, despite their tremendous mineral resources and proximity to European markets, is their excessive military expenditures over the past half century. The MENA has consistently overspent the rest of the developing world on arms imports. Its strategic location attracted external powers into a variety of formal and informal military alliances, and the easy availability of weapons may have in turn encouraged arms races exacerbating a variety of local and regional conflicts. The MENA's oil resources not only made the region more strategically central to external powers but largely financed their arms transfers.
Consistent with the international model prevailing in the 1960s, most of the MENA states practiced autocentric development and import substituting industrialization (ISI). Their statist experiments generally resulted in heavier, more bloated bureaucracies than those of other third world countries and more wasteful projects because they were subsidized either by oil rents or other strategic rents from the outside powers. They overlay larger military complexes and inflated officers corps which were also heavily subsidized. When, shocked by the 1982 international debt crisis, the prevailing international consensus changed in the Thatcher-Reagan years to favor market economies and export-oriented development, the MENA states were slower than others to readjust their economic strategies and structures. Shielded directly or indirectly by the region's oil revenues and strategic rents, they took longer than their East Asian or Latin American counterparts to engage in the various forms of structural adjustment advocated by international financial institutions. The reasons were partly economic: adjustment would be more difficult, the greater the distortions left over from those halcyon ISI times. But the will to change on rational economic grounds also had to be reconciled with political rationality and its hypothetical imperatives for staying in power.
Virtually all of these regimes suffer deficits of legitimacy (Hudson 1977, Ayubi 1995) and buy support through extensive networks of political patronage. These permeate their respective economies through the administration, the banking system, and many "private" enterprises. In these patrimonial regimes private property is not secure from the whims of arbitrary rulers. Many regimes have yet to abandon allocation for alternative strategies of political legitimation, and hence must continue to generate rents that accrue to the state. State-society interaction continues to consist of heavy police control coupled with various forms of patronage to keep the police and other administrations loyal. Some of the MENA's regimes carefully mask their repression with information blackouts that further limit their possibilities for economic adjustment. Indeed their information shyness is becoming a major impediment to attracting capital in global markets. One measure of a regime's political capacity in the 21st century is its transparency and openness to new flows of information. On this as on other measures such as the ability to tax its citizens, the MENA regimes display significant variations but tend to be lower in their political capacities than successful regimes in other regions. Yet higher taxes may stretch a regime's coercive capabilities, and more publicity may embarrass and undermine its patronage networks.
In view of the MENA's historic legacy, it is hardly surprising that international financial institutions and foreign donors evoke defensive reactions. IMF observation teams and World Bank missions are all too reminiscent of the European financiers who helped informally to colonize much of the region nineteenth century. The USAID mission in Cairo elicits comparisons with the more successful British advisors a century ago in the ministries of finance and public works. The British engineered a fiscal surplus by boosting agricultural productivity so that Egypt could pay off its foreign debt and finance Britain's reconquest of the Sudan. The Americans also have a weighty presence but seem less able to promote much productivity. Symptomatically an Egyptian journalist's book about his country's negotiations with the IMF pictured Superman on the cover with a big "IMF" in red letters on his blue uniform (Hilal 1987). Even Cromer, who represented British bondholders before becoming Britain's High Commissioner to Egypt (1882?-1908), had never been as powerful. While some of the MENA governments have officially welcomed "globalization," their practices reflect ingrained suspicions of foreign advisers and their prescriptions for reform -- "iron and arsenic to all, whatever the illness," as an Egyptian minister once complained (Hilal 1987:171)
Hardly super(wo)men, even if these economists are familiar with the internal politics of the countries they target, the international promoters of economic reform must appear to be apolitical lest they offend the board members of their international institutions. They can tailor their advice in technical economic terms but cannot translate it into political strategies for their host governments. The "Washington Consensus" promoted by the international institutions and Western donor agencies is a flexible set of guidelines for opening up political economies and integrating them into global markets. As John Williamson, who coined the term, explains, it simply embodies "the common core of wisdom embraced by all serious economists" and leaves open many controversial questions, including even the size of government and the model of the market economy to be sought, whether "Anglo-Saxon laissez-faire, the European social market economy, or Japanese-style responsiblity of the corporation to multiple shareholders" (1994:18) . Yet prescriptions which may be standard economics to academics also carry immediate political implications for power holders. The ten commandments call for a liberalization and opening up of the domestic economy that spells imperialism and political as well as economic hardship for many local policymakers.
(Ten commandments here: these ten commandments can be put in a bullet near the first mention of the WC above) (Williamson 1994:26-28). States are advised:
- to reduce the budget deficit to no more than 2 per cent of GDP.
- to accord budgetary priority to primary health, education, and infrastructure investments.
- to broaden the tax base, including interest income on assets held abroad, and cut the marginal rates of taxation
- to liberalize the financial system, at least abolishing preferential interest rates and maintaining a moderately positive real interest rate
- to adjust the exchange rate to encourage nontraditional exports
- to liberalize trade, rapidly replacing qualitative restrictions with tariffs and progressively reducing the tariffs to 10 percent (or at most around 20 percent)
- to remove all barriers to foreign direct investment and enable foreign and domestic firms to compete on equal terms
- to privatize state enterprises
- to abolish regulations impeding the entry of new firms or restricting competition and insure that all regulations of a given industry are justified.
- to secure private property rights without excessive costs, for the informal as well as formal sectors.)
The Dialectics of Globalization [back to introduction | Table of Contents]
Incumbent regimes are being squeezed into a dialectics of globalization which may be viewed as a continuation of the colonial dialectic played out by earlier generations of indigenous elites. Just as colonialism gave rise to movements of national liberation assimilating western forms of political organization to struggle against western domination, so the dialectics of globalisation may integrate countries in the region into the world economy while also emancipating them. To do so in the new context is to assimilate, negate, and through the hard work of negation to supercede the Washington consensus rooted in Anglo-American capitalism--perhaps by "Islamizing" it. Dialectic here is understood to comprise sets of ideas and attitudes defining elite-mass relationships rather than material forces, though economic interests obviously play a part. In a dialectic of emancipation (modeled after Hegel's master-slave relationship) ideas may -- but not necessarily -- gain ever wider social audiences, achieving what Gramsci called hegemony. In colonial situations a nationalist elite may mobilize the entire nation, transforming a population defined by colonial borders into a people experiencing civil society.
Schematically the colonial dialectic describes three basic stances (or Hegelian "moments") of a native elite toward the colonizer's political culture. The first stance is that of acceptance associated with efforts to be assimilated into the new elite. But emulating alien values may in turn engender a backlash by those excluded from it. This negative moment of a counter-elite asserts its claim to hegemony in the name of indigenous values. Under continued colonial pressure, however, new divisions within this elite may lead to the emergence of an alternative elite that is no longer content to articulate the traditional values of an imagined past. The third moment may more effectively combat the imposition of alien rule by assimilating its positive elements, such as skills and values derived from a western education, and using them to overcome foreign domination. This deeper assimilation of the colonizer's values plays upon the contradictions of colonialism so as to undermine its authority and achieve independence.
Much of the MENA fell under the influence of western powers without experiencing the full effects of colonial rule. It was in French North Africa that the colonial dialectic was most fully articulated because the colonial presence was more intrusive and protracted than elsewhere. The schema is best illustrated in Tunisia, where French rule lasted long enough to provoke not only emulation and negation but a nationalist synthesis, yet was not so overpowering that it altogether undermined the authority of any indigenous elite, as in Algeria. Generations of educated Tunisians chronologically expressed the logic of the three dialectical moments. Before 1914 aristocratic Young Tunisians emulated French modernity and sought liberal reforms within the system. After World War I a predominantly urban Destour (Constitution) Party rejected the French Protectorate on traditional and legalistic grounds. Then the Neo-Destour, its successor party, with roots in peasant villages, employed modern political methods to organize the entire country against the French occupation. At independence, in 1956, Tunisia had the most deeply rooted nationalist party and trade union federation of any Arab country.
Tunisia was the exception. When, as in much of the Middle East, the "colonial" domination was veiled in technical and military relationships with outside powers, the colonial dialectic could not be completed for lack of a unifying target of opposition or incentive for emancipation. Even in Tunisia, the synthesis led to new tensions and contradictions after independence. Habib Bourguiba's successful movement eventually engendered resistance from social sectors and actors who felt excluded. Once in power, the third generation of nationalists became vulnerable to attack by new generations of rejectionists who could point to the internal contradictions between the incumbent elite's ostensible Western liberal values and the regime's authoritarian practices. But Tunisia's Islamist opposition, progressive by Arab standards, is a legacy of Tunisian modernization: Rashid Ghannoushi can be seen as Bourguiba's "illegitimate offspring." (Zghal 1991:205) Tunisia's special advantages deserve further scrutiny.
The critical factors for Tunisia's success were the duration of the colonial situation (1881-1956) and the capacity of political elites to forge durable linkages with mass constituencies before independence. Colonial conflict was sufficiently protracted and its education benefits sufficiently extensive to enable a modern educated provincial elite (sons of peasant freeholders) to displace the traditional urban elite of absentee landlords, merchants, and religious figures. The new nationalist elite succeeded in mobilizing broad popular support because the continued French presence offered a convenient focus for mobilization and coalition building. The timing was critical. It took three generations of nationalist struggle for the educated sons of the provincial elite to acquire sufficient weight to displace and absorb the other educated children of the traditional urban elite in the new middle classes (Henri de Montety 1940, 1973). Their Moroccan equivalents would not have time to achieve such social and political prominence before independence. Other new middle classes, defined as being not only educated but of predominantly provincial origins outside the old elite strata, did not achieve political hegemony before independence. In the rest of the Middle East and North Africa only Algeria, Aden, Egypt, Palestine, and Sudan experienced comparable periods of European (or Israeli) colonization. The colonial situation was too veiled in Egypt, however, and too prone to settler violence in Algeria and Palestine for their respective new middle classes to achieve hegemony. If they were to achieve it there or elsewhere in the MENA, it would be after independence under less auspicious circumstances. In Palestine, however, the Jewish settlers, detached from Europe yet still mostly European, telescoped their nationalism into a third-moment victory over Britain within a generation.
Pervasive western influence, first exercised through the Ottoman Empire and then more directly by means of mandates from the League of Nations, usually strengthened the hold of urban absentee landowner-merchants over the countryside. Turkey was the prime exception. Ottoman bureaucracy contained them, and an Anatolian third-moment elite then displaced traditional authorities and achieved independence through a successful war of national liberation in 1922. Usually, however, the emergent new elites benefiting from western education did not have time to displace the old urban ones before independence: in Syria, Lebanon, and Iraq, the prime "nationalists" and beneficiaries of independence were the urban landowners; in Iraq they included urbanized tribal leaders. Despite a lengthier history of Western intrusion, Egyptian nationalism was also dominated by its landowners until divisions in the Wafd presaged the end of the monarchy in 1952.
Except in the Levant, the colonial powers tended to establish monarchies if they were not already in place. In the Persian Gulf the British protected ruling families and even imported the Hashemites from Mecca for Jordan and Iraq. They disposed of Italy's former colony by uniting Libya under a new monarchy in 1951. Except in Saudi Arabia, which did not experience traditional colonialism, monarchy was the sign of a colonial dialectic that had not run its full course. Had the French stayed a generation longer in Morocco, they would doubtless have discredited the venerable Sharifian monarchy by overuse against rising social forces rather than raising its prestige, accidentally, by exiling the sultan to Madagascar in 1953. Had they left Tunis for good during World War II, conversely, Moncef bey might have kept his throne with good chances of preventing Bourguiba from founding a republic. The British and subsequently the Americans also strengthened Pahlevi Iran without ever turning it into a formal protectorate. There as elsewhere, the monarchies had trouble coping with the new middle classes nurtured in western education. Despite his White Revolution the shah was unable to mobilize support from the countryside to offset them. In Morocco, by contrast, the monarchy came to dominate both the old urban merchants and the new middle classes after independence by manipulating provincial notables to its advantage (Leveau 1985, Hammoudi 1998).
Israel, Tunisia, and Turkey were the only countries where a third moment elite consolidated itself with independence. Afterwards it would be more difficult for new middle classes, the normal carriers of civil society, to forge durable linkages with other social sectors, whether among peasants, workers, or students. In Iran a genuine revolution was needed to expel the monarchy, but much of the new middle classes then fell victim to the victorious coalition of merchants and religious leaders. Elsewhere they invariably achieved power by plotting within their respective military establishments. Nasser of course led the way in Egypt, followed by a series of coups and counter-coups in Iraq and Syria until their respective Baath parties consolidated power in 1968 and 1970, respectively. The officers in turn suppressed the civilian politicians and intellectuals who might have deepened their respective civil societies by creating new associations and discursive spaces. The degree of oppression or liberality of their respective regimes was a function of the potential oppositions they faced. The extent of their economic intervention and financial repression also reflected the strength of their respective merchants and landowners and the degree to which they had coalesced as a class of local capitalists. Thus intervention was heaviest in Egypt, Iraq, Syria, and Algeria, where it is often forgotten that the more protracted colonial situation had given rise to a more concentrated Algerian as well as French settler landowning elite than in neighboring Morocco. The economic hand of the military was lighter in Libya, the Sudan and Yemen, where capitalism was less developed.
The new dialectics of globalization feed upon an unachieved colonial dialectic. Its thesis is the Washington Consensus, shared by "serious" economists irrespective of nationality and vigorously, if selectively, imitated by certain of the local business and political elites as well. It seems hardly coincidental that the countries, which had consolidated third moment elites at independence --Israel, Tunisia, and Turkey -- moved the most eagerly to adopt the Washington Consensus. Reform teams of technocrats, supported at least initially by their political leaderships, also made some progress implementing various structural reforms in Algeria, Egypt, Jordan, and Morocco. The Washington Consensus, however, has also engendered significant backlash in these and other countries. The "globalisers" almost inevitably provoke "moralizers," who seek solutions in cultural authenticity, affirming a religious or ethnic identity, or in at least reaffirming traditional nationalism. Since Libya's Muammar Qadhafi began speaking of a "Third Way" in the 1970s, the siren call of a distinctive, unique, culturally authentic model has gained considerable appeal, and writings on Islamic economics have proliferated in the region.
Much like second-moment responses to colonial situations, however, moralism remains abstract and ineffective unless it can contest the global economy on its own grounds. Most of the "moralizers" seem unable to devise effective alternative economic policies. Moralism takes the form either of Arab nationalism and statism --exercises in collective nostalgia for the 1960s and 1970s -- or of Islamic revivalism. On the nationalist track, Arab economists have unsuccessfully promoted a free trade zone as a counterweight to being integrated piecemeal into the international economy (Bolbol 1999). Mainstream Islamism, on the other hand, seems to be an essentially culturalist response to globalization, with little to say about economics. The moralizers, whether in government or opposed to it, can put globalisers on the defensive, but they rarely promote alternative policies. In recent years, moreover, many of the regimes on the Arab side of the Mediterranean have constricted the political space in which more moral yet realistic, synthetic responses to globalization might be articulated. In fact the region's hesitating moves toward greater political liberalization in the 1980s were sharply reversed in most MENA countries in the 1990s. Tunisia, followed in turn by Algeria, Egypt, Saudi Arabia, Turkey, and Jordan, severely restricted the discursive, political, and physical movements of their Islamist oppositions. There could be little overt, public debate between globalisers and their opponents inside and outside their respective governments, and efforts to incorporate mainstream Islamist oppositions into the political process ceased, except perhaps in Jordan. Tunisia perfected the art of running a contemporary police state by claiming to be democratic while preemptively harrassing, imprisoning and routinely torturing its opponents and their families (Beau and Tuquoi 1999).
Indeed, the political conditions prevailing in most Arab states since the American-led liberation of Kuwait resemble those of a colonial situation-with the Islamists now playing the role of the erstwhile nationalists. It is an odd reversal of roles, a further unfolding of a nationalist dialectic. In colonial situations Islam provided the implicit, underlying mobilizing structures of western-inspired nationalism (articulated in Tunisia, for instance, through the modern Quranic schools), whereas today nationalism acquires an overtly Islamist form. Incumbent rulers, however, are both Muslim and indigenous nationals. They all seek legitimacy as Muslim rulers, even in radical republics like Syria or Iraq. Most of them therefore feel obliged to tolerate limited public Muslim spaces, such as Friday prayers and shari'ah courts. The Friday rhetoric may be strictly controlled, and judiciaries are hardly independent in most of these countries.
The practice of Islam, however, is no longer confined as in colonial times to issues of personal status. In many Arab and other Muslim countries Islamic financial institutions have also taken root since 1975. The new financial practices are innovative, opening a new field in which to articulate a dialectics of globalization. In Islamic banking, indeed, moralizing and practical economic activity go hand in hand, suggesting the possibility of a new synthesis negating the negation of the Washington Consensus. For such a prospect to materialize, the new financial institutions would have to compete successfully, at least in their own countries, with conventional institutions based on western models. They could thus "Islamize" the Anglo-American capitalism that underlies the Washington Consensus - by assimilating modern financial techniques more effectively than their local competitors.
The working hypotheses of this book are that politics drives economic development and that the principal obstacles to development in the region have been political rather than economic or cultural in nature. Political rather than economic factors have been the primary cause of the rate and method by which countries of the region have been incorporated into the globalized economy within the framework of the Washington Consensus. Those political factors result from strategies of incumbent elites seeking to retain power--strategies which bear remarkable similarity to those of the "defensive modernizers" of the nineteenth and early twentieth centuries, faced with similar challenges and opportunities of financial globalization prior to 1914. These strategies of "controlled openings" tend to segment the political economy, so that the degree to which various sectors of the economy are globally integrated varies widely. Further differentiation sustains the globalization dialectic, deepening the objective grounds for dividing populations and their elites into globalists and moralists while possibly opening up opportunities for potential synthesizers.
The new dialectic begins where the old one left off. The colonial dialectic gave rise to independent states of three different types, which roughly corresponded to the dialectical depth of their nationalist responses to colonial penetration: Praetorian republics (Algeria, Egypt, Iraq, Libya, Palestine, Syria, Sudan, Tunisia, and Yemen), monarchies (Bahrain, Jordan, Kuwait, Morocco, Oman, Qatar, Saudi Arabia, and the United Arab Emirates), and democracies (Iran, Israel, Lebanon, and Turkey). The monarchies preserved their traditional elites and capitalist legacies. The praetorian republics tended to reject theirs and tried to build new political economies, although there were significant differences between Algeria and Iraq at one extreme and Egypt at the other. The democracies, with the exception of Iran, were more selective in their treatment of local capitalists and landowners. In general the regimes which left their capitalist legacies intact were technically better able in the 1980s to cope with the new challenges of globalization; the monarchies of Jordan and Morocco adapted more quickly to the new world order than the more rejectionist praetorian republics. They were generally better able than these republics to harnass the structural power of private capital to their political needs. The praetorian republics and democracies varied considerably in their treatment of earlier generations of agrarian, commercial, and industrial capitalists, but they are all under international as well as local pressure to come to terms with the Washington Consensus.
The response formulated by each of these states has depended in part upon its capitalist legacy as well as the previous encounter with colonialism and the type of political system that emerged from that encounter. The significance of the legacy varies, depending on the particular variety of capitalism introduced by the foreigners as well as the pattern of colonial emancipation. These varieties of capitalism deserve some discussion because they condition a state’s relationships with local capital and the "structural power" of local capital – an opportunity as well as threat to any newly independent regime in the era of globalization. In addition to the Anglo-American strain preferred by international financial institutions, there were French and German variants.
Capitalist legacies [back to introduction | Table of Contents]
The Europeans introduced relatively advanced forms of capitalism into most of the region by the end of the nineteenth century. The British model was predicated on laissez-faire and an efficient, competitive stock exchange, whereas the Germans preferred a private oligopoly of universal banks, and the French stressed greater state intervention in capital markets. Featuring a weaker private sector more dependent on administrative allocations of credit, the French model did not long survive the departure of its French colonial administrators in Algeria, Syria, or Tunisia and bore little relation to its successor model of state "socialism." Contending British and German models survive, however, wherever indigenous business classes enjoyed continuity and protection from nationalist revolutions and the confiscation of private property.
Anglo-American capitalism is characterized by laissez-faire, as Williamson observes (1994: 18), and most basically by open competitive capital markets centered on stock exchanges. Commercial banking carries a less significant functional load than in alternative capitalist systems. Banks still lend to small and medium enterprises, but they remain subservient to market forces. Even in Britain's highly concentrated commercial banking system retail banks wield little market power because the scope of their financial interventions is limited. Under the impact of financial globalization the compartments between retail banks and merchant banks are breaking down, and new conglomerates are challenging the traditional fragmentation and differentiation of financial markets in the United States as well. Financial markets remain highly competitive, however, driven by a multiplicity of actors and regulated so as to insure transparency and to prevent insider trading on stock exchanges so far as possible. Walter Bagehot's Lombard Street (1872?) captured its underling logic of competition and exploration. Britain was constantly seeking new outlets for its massive capital accumulation and hence required a decentralized system which rewarded entrepreneurship. Capital rich American followed suit.
A second model, while not as ancient as Bagehot's, also stresses relatively autonomous private sector capitalist activity, but of universal banks, not individual investors. The German model, best articulated by Rudolph Hilferding (1910), is adapted to situations of capital scarcity. In late nineteenth Germany the largest and most capital hungry firms, typically in capital-intensive industries such as iron and steel, fell under the control of their creditor banks. The borrowing industries and creditors alike became more concentrated as smaller entities went bankrupt or were acquired by the larger ones, and the banks concentrated and merged to defend themselves against industrial mergers. Finally an oligopoly of about six large commercial banks based in Berlin at the turn of the century commanded much of German industry. These universal banks, investing heavily in industry, constituted a model adopted by new generations of foreign capitalists, notably in Egypt and Turkey (Henry 1996). In the German model a small number of bankers really do scale the commanding heights of the economy and allocate its finance capital as they see fit, in consultation with their government but fully equipped with bargaining resources. Here structural power works through people rather than markets: capital's threat not to invest--or to take flight--is its political leverage. A small group of commercial banker/financiers emulates or manipulates the Anglo-American model's impersonal market forces.
The third model is a traditional Napoleonic one of administrative intervention, expressing the French étatist tradition. While much of the economy, including the banks, may be privately owned, capital is allocated strategically more by technocrats who know best than by private financiers. The rationing of capital by state officials also, as in the German model, offers protection to capital-scarce economies. The banks, however, are less autonomous and exercise less control, for that matter, over stock markets. These capital markets are less developed than in the Anglo-American model. The structural power of capital is not as easily ascertained as in either the German model, with its small number of financial conglomerates, or the Anglo-American model, with its efficient market responses to new information. Market forces operate but they are subject to greater regulation by the technocrats. The best indicators of structural power are the degree of private ownership of the commercial banks and their financial health. Failing banks and ballooning bad loan portfolios (and precursor signs such as chronically low profitability) suggest either that the technocrats have excessively influenced credit allocation or that the banks are either unwilling or unable to conduct responsible credit analysis. Contemporary Japan would be an illustration. The structural power of capital is diminished by subsidized credit, and so also is the effectiveness of government to respond to business demands.
The model originally adopted by local capitalists, foreign as well as indigenous, did not always match that of the dominant foreign power because its domination was usually brief and rarely exclusive. French and Belgian enterprises prospered in Egypt under Cromer more than British enterprises, and the country remained open to other models as well. Even after Germany was excluded from the region following World War I, its capitalist model proved attractive to Egyptian nationalists, notably to Talat Harb, who founded Banque Misr in 1920. Neither the British nor even the French, more solidly rooted in the Maghrib, always converted local entrepreneurs to their preferred form of capitalism. That Morocco turns out to be "German," for instance, may be surprising in light of its French and Spanish colonial past. The dominant French capitalists had not only competed with their German counterparts for Morocco but had also themselves advanced to German universal banking by the time they seized Morocco in 1912, whereas an earlier generation of speculators had projected a traditional form of French capitalism into Tunisia not unlike "French" Algeria's. The French capitalists in Morocco operated through modern German-style universal banks like Paribas and developed stronger negotiating stances with their colonial government than their less dynamic counterparts in Algeria or Tunisia, who remained more dependent on the public authorities.
The German model also traveled to Turkey, for although they were only one of the principal managers of the Ottoman public finances in receivership before World War I, the Germans had invested more than its rivals in productive enterprises and offered a more attractive model for postwar Turkish entrepreneurs than British or French capitalism. Determined to build a Turkish private sector, Mustafa Kemal Ataturk and his top political economist, Celal Bayar, opted for the German model before their conversion to statism during the Depression years after 1931.
Metropolitan models of capitalism were assimilated to varying degree by indigenous business communities, and the depth of commitment depended upon the community's continuity and relationship with the host government. Many of them were minorities burned by their ties to foreign powers when nationalist forces gained power. A country like Iraq experienced sharp turnovers caused by an unstable history of coups and revolutions. Contemporary Iraq has virtually no business class but rather a collection of new people who are personally connected to the ruler. There is no capitalism because no accumulation is secure. Turkey's business minorities were also virtually obliterated, but much earlier, when the Turks expelled the Greeks from Anatolia in 1922. Subsequently a new Turkish business class grew up under Mustafa Kemal and survived Kemalism. It absorbed and sustained the German model.
Few of the MENA's business communities display as much continuity as Republican Turkey's. Their nationalist revolutions did not usually result in as much disruption of business elites as Turkey's had, but there has been less time for business to recover after independence in the Arab countries. Algeria represents even greater disruption than Turkey: an entire colonial economic, political, technical, and administrative elite departed on vacation rather than face independence in July 1962, and few ever returned. The transition to independence was more gradual in neighboring Tunisia, but there, too, the Europeans would be replaced by Tunisians most of whom owed their new economic fortunes more to their political activity and connections than to traditions of entrepreneurship. Syria also effected a more gradual transition than Algeria, but by the mid-1960s the old Aleppan and Damascene business families had succumbed to Ba'athist domination, subsequently loosened by President Asad's cautious "opening" of the economy in the early 1970s. Nasser's Free Officers also ridded Egypt of not only its European and khedivial business communities but of most native Egyptian capitalists as well, although ten years of state "socialism" (1961-1971) did not totally erase the country's capitalist traditions.
The country in the Arab world displaying the most continuous business history is Morocco. The French presence encouraged the expansion of an indigenous Fassi bourgeoisie into Casablanca and other new centers. French industrial interests were only very gradually Moroccanized in the second decade following independence, and the principal beneficiaries were the monarchy and a mainly Fassi entourage of business groups. They preserved the "German" model of capitalism that had evolved under the Protectorate. In Israel the victorious Labour regime preserved Jewish businesses, included those founded during the colonial period by the Histadrut, the Zionist labor federation, and heavily subsidized. Israel's original variant of state capitalism is not unlike the French model. In fact Israel may be the only remnant of the Ottoman Empire where, quite fortuitously, the French model survived. France's historic stronghold of Lebanon sustained a continuous entrepreneurial tradition, but it converted along the way to an Anglo-Saxon model reflecting postwar American as well as British presences in its booming economy of the 1960s.
The capital-rich, whether in Lebanon or the Gulf, tended to adopt the Anglo-Saxon model whereas the capital-poor entrepreneurs of Morocco and Turkey gravitated toward the German model, and the Israelis toward the more administrative, French model. But predatory states had deprived many countries of the region of their respective capitalist traditions. By default new entrepreneurs were locked into a "French" tradition of administrative favors. However, the capital-rich Gulf states were also promoting a third, Islamic way, which is quite compatible with Anglo-American capitalism. Launched in the mid-1970s, Islamic banking and finance offers possibilities for synthesizing moral demands with those of globalization.
To summarize, democracy of sorts in Lebanon kept its business elites and capitalist legacy more or less intact, switching after independence toward a less regulated Anglo-American model more in keeping with the country’s role as a trading and financial center for the Middle East. Led by third moment elites, Israel and Turkey were well positioned to maintain their respective legacies—French in Israel, German in Turkey. In Iran a second-moment elite also preserves its indigenous capitalist bazaar, albeit in tension with a strong statist tradition inherited from the shah and expanded after the revolution. The monarchies also preserved their legacies, but these differed. The German model serves poorer, capital-scarce monarchies better than richer ones for political as well as economic reasons. It facilitates palace control of heavy economic concentrations, whereas wealthier monarchies have more rents to pacify their more numerous and competitive local capitalists and tribal elites. The praetorian republics adopted state capitalism, but some were more willing than others to preserve a measure of structural power and its reflections in civil society. Residues of the Anglo-American model, for example, survive in Egypt and the Sudan, as do French traces in Syria. But whatever their domestic political constraints and capacities, extraregional factors push all of the regimes to engage with global capital.
Toward an international leveling of regional differences? [back to introduction | Table of Contents]
With the end of the Cold War the MENA may have lost some of its historic significance as a strategic lightning rod for the rest of the world. Not that great powers do not still vie for influence and play out their rivalries in the MENA, but some of the geopolitical attention and oil industry interest shifted north to Central Asia after the breakup of the Soviet Union. The MENA's strategic rents have diminished just as oil rents, which peaked in 1981, reached an alltime low in 1986 and, after failing to rebound much, threatened new lows (adjusted for inflation) in 1998.
Further constraints and opportunities result from MENA countries' global relationships. With increasing differentiation and specialization within the world capitalist system, policies presupposing an insulated national economy must give way to strategic calculations of relationships to global markets. Global political factors are similarly imposing themselves with ever greater urgency on the region's decision makers. The new trilateral competition between the major blocs of North America, Europe, and East Asia is not as fierce was U.S.--Soviet competition, but it imposes constraints and provides opportunities to which Middle Eastern elites have yet fully to respond. The choice of Washington or Strasbourg has already been given considerable thought by regional elites, whereas the Tokyo/Beijing alternative barely enters the discussion at present, but can be expected to do so in the future.
Major changes in international financial markets are having particularly challenging impacts upon the MENA. Most forms of public assistance and foreign aid remained flat or diminished in the 1990s, thus cutting into the region's competitive advantage of strategic situation. But while new private flows of foreign direct investment have swamped the developing world, they have pretty much bypassed the MENA, with the exceptions of Turkey and Israel. Much of the capital comes from multinational companies accelerating their crosscountry investments as they compete in global industries. Since "an estimated one-third of all merchandise trade is actually composed of shipments among the affiliates of a single company, as opposed to arms-length transactions among separate exporters and importers," (Sachs 1998:98) the MENA is losing its market shares of trade as well as investment to other regions. Indeed, "per capita exports have declined by 5 percent for the MENA region between 1990 and 1995, while they grew by 20 percent for the developing countries as a group..." (Alonso-Gamo et al 1997:7)
Another surging source of private capital is portfolio investment, reflecting major changes in the behavior of small savers and institutional investors in Western countries, notably the United States. Instead of placing their funds in commercial banks, savers have preferred mutual funds or shares of publicly traded companies. As portfolio managers packaged "emerging markets" into tradable mutual funds of foreign stocks, countries with established stock exchanges raked in sizable flows of portfolio investment. These flows have also bypassed most of the MENA and its underdeveloped stock exchanges but have encouraged a number of regimes in the region to reform their capital markets to attract this new source of foreign investment.
Regional developments are also prodding regimes to engage in economic reform. Partnership agreements with the European Union call for a full liberalization of non-agricultural trade by 2010, more or less reinforcing the ten commandments of the Washington consensus. An Arab-Israeli peace process threatens some of the vested interests of the Israeli, Jordanian, and Syrian political economies while promoting new interests. The 1993 Declaration of Principles agreed between the PLO and Israel, coupled with the 1994 peace treaty between Israel and Jordan, have resulted in rapidly shifting bilateral and multilateral relations. For the first time since the creation of Israel, tactical regional alliances cross the Arab--non-Arab divide. The projection of Israeli economic power into the region is becoming a reality to which Arab states are seeking in various ways to respond. Were the peace process to culminate in a normalization of relations between Israel and both Syria and Iraq, the region might lose much of its distinctiveness as a Hobbesian killing field and offer fewer excuses for inflated military expenditures and protected markets. The forced integration of Palestine into the Israeli economy might, however, trigger new resistances among the Palestinians and their neighbors as well. Forced integration could be seen as a microcosm of precisely the globalization that most regimes fear.
Chapter 2 will further address the extent to which global and regional changes may be leveling the differences between the MENA and other parts of the developing world caused by the MENA's special legacies of rents and foreign intervention. These global and regional changes not only constitute a new impetus for economic development, perhaps reversing recent trends, but also shape the context in which state actors make their political and economic calculations and formulate economic policies. The ebb and flow of relationships with the United States, the European Community, and the Tokyo/Beijing Axis may tilt them toward one or another of their respective models of capitalism, but capitalism also has indigenous roots in most MENA countries which must somehow adjust to the realities of globalization.
Country Responses to the Washington Consensus [back to introduction | Table of Contents]
Local capitalism can encourage or constrain regime choices, as do its political capacities, its allies, oppositions and patronage networks, the volumes of rents and other special resources available to it, the degree to which it is already integrated into the world economy, and, perhaps most importantly, the relative share of resources commanded by the state prior to the commencement of reform. Even as global development may be leveling regional differences, the region still incubates a variety of capitalisms within regimes which also display significant differences despite their generally "authoritarian" tendencies.
Monarchies seem to have been more friendly to capitalism than other forms of autocracy and also appear, with some exceptions, to be less information-shy than the praetorian republics. Countries endowed with strong capitalist traditions seem more easily to be adapting to the new international order than those with weak or interrupted traditions of capitalism. So also do countries which have avoided the pitfalls of state socialism. Those states by contrast that control relatively high proportions of total societal resources appear to more reluctant to undertake reforms that would cause a rapid reduction in levels of state appropriation. Patronage networks are likely to constrain economic reform the most in countries with weak capitalist traditions, but they are also likely to be more obstructive in countries endowed with Anglo-Saxon than with German (or French) structures. How these local conditions interact with regional and global changes will be further elaborated in chapter 3. The structures of the local commercial banking system will be analyzed since they reflect the nature of the economy and the structural power and form of local capital. Each local financial system is also among the most vulnerable of a country's economic sectors to the forces of globalization and offers ready indicators of its degree of integration into the world economy.
The respones of the MENA countries to the ten commandments have ranged from eager acceptance, to vociferous rejection, to covert compliance with some of them. As mentioned earlier, Israel, Jordan, Morocco, Tunisia, and Turkey were the first to embark on structural adjustment programs, and their official rhetoric favors free market economies. They were also first to sign on to partnership agreements with the European Union, just as they also led the way with Egypt and Saudi Arabia for the Arab-Israeli economic summits promoted by the United States until 1997. Although civil war delayed Lebanon's entry into the club of World Bank borrowers, this country also accepts free market principles and has never diverged markedly from them. But however much "sold" on the Washington Consensus, each regime's economic strategy is defensive, reflecting its needs for political survival more than commitment to any economic model. No MENA government has implemented all ten commandments of the Washington Consensus, and very few have seriously attempted to implement any of the final four, much less to tax the foreign unearned income of their respective elites (part of #3).
Still, the relatively open approaches of the early adjusters to the challenges of globalization stand in contrast to the more recalcitrant responses of the Arab oil exporting states of the Gulf, as well as Algeria, Egypt, Syria, Yemen. This second group of regimes managed to delay reforms longer and to implement them more selectively than the apparently eager globalizers. They in turn deserve to be distinguished, however, from a third set of MENA countries consisting of "outsiders," the allegedly "rogue states" of Iran, Iraq, Libya, and the Sudan. Those states have been partially or almost totally excluded from economic interaction with the global economy, either as a consequence of their own choice or as a result of isolation being imposed upon them. They highlight the lingering significance of extra-regional influences on the political economies of the region. The fact of being an "outsider" raises questions about the capacity of external powers to punish and control states of the region. In attempting to outlaw some of these countries, the United States appears instead to be provoking opposition from other outside powers, thereby sustaining the region's tradition of great power intervention and rivalry.
Two of the four (Iran and Sudan) are self-proclaimed exemplars of Muslim economies and therefore provide a basis for some comparative evaluation with the performance of the ostensibly secular economies. However, "Islamic enclaves" exist within the economies of some of the early adjusting and recalcitrant states as well. The performance of those enclave economies will also be examined (with balance sheet data and income statements comparing performances of Islamic with conventional banks) in order to provide a larger empirical base for generalizations about Muslim economies and their potential contribution to the globalization dialectic. The distinctive contribution of Islamic banking may be to forge Islamic moralism and economics into a common discourse. Experiences may be aired more freely in Algeria, Egypt, Jordan, and the GCC states, or Malaysia for that matter, than in officially Islamic economies.
Despite its defensive legacy and lingering great power presences, the MENA is hosting old and new forms of capitalism. This book will assess the potential of the respective forms of capitalism to sustain economic growth in light of existing political constraints and to offer insights into how these constraints might change. Some praetorian republics destroyed their capitalist legacies, so while they are free of political constraints on their decision making, they have little capacity to translate nominal into real reforms. Chapter 4 will examine the dilemmas of adjustment faced by the praetorian republics that have gone furthest in crushing their civil societies and expunging their capitalists, with the primary exemplar country being Algeria.
It will be seen that the Achilles heel of many of the regimes trying to emulate the Anglo-Saxon model or to devise a new Islamic one is the free flow of information required by competitive capital markets. The model really presupposes a degree of political liberalization that could endanger many of the region's political regimes as they are presently constituted. Being information-shy, they may prefer a capitalist model that is less open and more under the control of banks which respect confidentiality. The German model also carries political risks, however. To the extent that the universal banks acquire real autonomy and independently deploy finance capital to the private sector, they may sweep aside a regime's crucial patronage networks rather than be part of them. Many of the region's regimes as they are presently constituted could not coexist with an independent business class demanding accountability because they are patrimonial in nature, infiltrating most businesses with their business of politics. Any viable Islamic model of capitalism would probably compound the political risks of the other two models. Even more than the Anglo-Saxon model, the Islamic model requires transparency and hence political liberalization. It might also mobilize its finance capital to take over or ravage the patronage networks of incumbent rulers.
The special affinities and contradictions between these regimes and the capitalist models they are emulating will be the subject of chapters 5 through 7, in which the French, German, and new Saudi-Islamic as well as Anglo-American models gestating in the region will be analyzed in the context of the political systems in which they exist. Chapter 5 will explore the evolving French model in the less authoritarian of the praetorian republics, focussing primarily on Egypt but also including Tunisia and the Palestine Authority. Chapter 6 will investigate how the monarchies have sought differentially to seek both economic and political benefits from their respective capitalist models, with Morocco serving as the exemplar of the poorer and Saudi Arabia of the wealthier monarchies. In Chapter 7 the mix of financial models that exist in the democracies--Anglo-American, French, German and Islamic--will be reviewed within the context of the politics of identity that preoccupy those political systems. It is not possible to predict whether any given regime will change or will instead simply alter the model to fit its political needs at the expense of economic growth. But the longer the region stagnates, the more likely it may be that the Islamic model, a largely offshore and transnational phenomenon at present, will develop its markets in a number of countries and eventually challenge their regimes.
Can transformations be incremental, with incumbent political elites retaining power, or does the development of capitalism require rapid, even revolutionary change in which incumbent elites are swept aside by representatives of the new order? In Jordan and Morocco reasonably successful, incremental economic liberalization has been coupled with similarly gradual political liberalization, suggesting that structural adjustments of the economy and polity may proceed in tandem and under incumbent leadership. On the other hand, stalled economic and political transition in Algeria, coupled with insurgency, suggests that the breakthrough to a new order can be sudden and dramatic. In all but the most peripheral of the region's countries, however, the process of change will not be determined unilaterally by contest among domestic forces, for within the developing world, the MENA region still remains the most enmeshed in the geo-strategic considerations of the globe's major actors. Our final chapter will attempt to assess the cost and benefits of different responses to the challenges and opportunities posed by globalization.
References [back to introduction | Table of Contents]
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