• The economic pain of conflict - by  Irfan Husain

• Helping the rich, not the poor - an interview with  Michael Philip Cracknell

• We need South-South integration - by  Riad al Khouri

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.”

Peter Lagerquist is a journalist and researcher based in Israel and the Palestinian territories. Some of the material for this article is drawn from his paper "Privatizing the Occupation: the Political Economy of an Oslo Development Project" which appeared in the Winter 2024 issue of the Journal of Palestine Studies.

At 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 2024. 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. He now divides his time between England and Pakistan.

BI: 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 2024]. 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.orgMichael Philip Cracknell, a London-born long-time resident of Tunisia, is co-director of Enda Inter-Arabe, a micro-credit organization based in Tunis.