RIES STUDY of Economy & Society
종합경제사회연구원 Research Institute of the East-West Economy & Society
The Changes of the International Economic Order and the Middle East after the Gulf War
By Prof. Dr. Seong Min Hong
1. Historical Background Of The Economic System
2. Theoretical Framework On The World Economic System
3. New Economic Order And A Big Three Economic Power After The Gulf War
1. The Middle East After The Gulf War
2. Changes Of A New Economic Order After Israel-plo Peace Talk
3. Potentials For Economic Development In The Middle East
This paper was read at the 10th Annual Conference of JAMES on May 14-15, 1994 , Takushoku University,Tokyo, Japan.
The world is facing with the challenges and opportunities of transition from statist political systems to societies that are more pluralist politically and market-oriented economically. Nowadays the problem of world economy is not that between one or many nations but of the whole world. Not only the general problem of economy including human welfare but also the problem of nature as resources and envirnment is a world-wide problem for all human beings to solve. These problems including 'limit of growth', already affect conspicuously the domestic economy of developing and advanced countries. A changing political atmosphere in Northeast Asia and economic need prompted the former adversaries to bury the past and join hands. The collapse of communism in the Soviet Union and Eastern Europe coupled with the Korean Government's 'Northern Policy' in 1988 sharply changed the political and economic structure in Asia. As the world ecoconomy become to globalize, the regional 'economic bloc' is expanding and strengthening all over the world. At any rate, the Gulf Crisis was a turning point in these international economic order.
For more than four decades, the Gulf region has witnessed superpower competition, regional rivarly, conflict, and chronic political instability. The region holds most of the world's oil and a considerable part of its natural gas reserves. It is also strategically located in close proximity to the former Soviet Union that now the emerging Muslim nations of Central Asia, the Indian subcontinent, and the Arab heartland. If the 1980s were the decade of political and economic transition, the 1990s will be the decade of a consolidated and fundamental change. The Gulf War, and the response toit, were historic watersheds in intra-Arab, the Gulf, and international politics. As with other historic events, the Gulf War and its aftermath led to much talk about a 'New World Order'. Yet the outlines of this new order are not clear. It is quite clear that challenges to Gulf security and the policies needed to deal with them will be significantly different from those of the past. Despite opportunities for a new order in the Gulf, many old causes of instability and barriers to developing cooperation and lasting security arrangements persist.
This paper, therefore, is designed to study the changes of the world's economic order and the Middle East in the turbulent age, and its potentials for economic development after the Gulf War. I, furthermore, will examine for the theoretical background of the world economic system, appearance of a new big three economic power and economic bloc, the changes of economic order in the Middle East, and its potentials for economic development after the Gulf War and Israel-PLO peace talk.
1. Historical Background of the Economic System
It is a well-known fact that the existence of the world-system has been started since the beginning of the sixteenth century as a concrete spatio-temporal entity. Another new field of study is the changing pattern at the center of the world-system, i.e., the alternation of periods of hegemony and of competition among core powers. Since both patterns at the center have repeated themselves since the sixteenth century, it is natural to wonder whether we are faced with a cyclical phenomenon. According to Nicole Bousquet's view, it is an old old notion that civilizations, empires, and hegemomonic powers are bound to the fatality of a life cycle from birth and growth to decay and death(Terence K. Hopkins and Immanuel Wallerstein, 1980: 46). In this section, first of all, I will deal with the historical background of the world economy system.
The world economy is that part of the world social system that is organizd mainly through exchange, or that involves the things exchanged - that is, exchangeables or commodities. The prices or exchange ratios at which things are exchanged; the production, consumption, and stocks of commodities; the allocation of human activity to economic matters such as the production, consumption, and exchange of exchangeable; grants or one-way transfers of exchangeables also come into the picture. The distributional structure of wealth and income is also important - that is, who and how many have assets or income of different sizes ? The economy interacts with the 'polity' - that is, political structures and institutions - in a great many ways, through taxation, subsidies, government regulations, laws, and so on. It also interacts with the cluster of rather vague social phenomena, which called the 'integry' - institutions like churches, monasteries, religious organizations, families, and clubs. Perhaps one should also include the armed forces and war in the integrative structure, for these are a combination of integrative and disintegrative factors and on the whole are not governed by economic considerations(Kenneth E.Boulding, 1985: 89). Figure 2.1 schematically illustrates the sequential nature of the phases within the capitalist enterprise.
Economic development is the process of getting richer. This also makes it much harder to educate the children, and as the
human learning process is the key to economic development, this may be the greatest handicap. Nevertheless, economic
development has taken place over a considerable part of the world, especially in about the last 300 years, and may well have
accelerated in the twentieth century in spite of the world wars, the Great Depression, and the division of the world into
centrally planned and market economies. Economic development often begins with an improvement in the productivity of
agriculture. This can lead to better nutrition and a healthier and more active labor force, and it may release workers from
agriculture to do other things - for instance, manufacturing and construction. With the enormous rise in human knowledge and
know-how in the last 200 or 300 years, however, natural resources such as land, mines, oil wells, and water became less
and less important as a source of riches and in explaining the distribution of riches around the world, and human knowledge
and know-how became overwhelmingly important. This is mainly the result of the development of the system of world trade
involving exchange and the transport of commodities of all kinds, including natural resources, and products all around the
Figure 2.1 Phsaes of Business Activity within the Capitalist Enterprise @@@@@@@@@@@@@@@
Source: Terence K. Hopkins and Immanual Wallerstein, 1980, Process of the World-System, P.85.
The great expansion and unification of the world economy began around 1860 with the application of science to the production of goods, starting off with the chemical industry, beginning with aniline dyes and going on to an enormous range of substances unknown to the world before. Then the 1880s began the electrical industry, which produced an enormous transformation of human comfort and productivity, both in the home and in the workplace, because of the remarkable subdibidability of electrical energy, seen today perhaps in the extreme form in small solar-powered calculators. In the twentieth century the biological sciences have produced an enormous increase in agricultural productivity, with such innovations as hybrid corn, and now an enormous potential is opening up for genetic engineering. This has enabled world food production to keep up roughly with the population explosion, although there are now signs that this is no longer happening, especially in Africa. The development of the steel industry and metallurgy also owes a great deal to the application of science, which helped to give us skycrapers and steamships in the nineteenth centry. This whole developmental process is essentially an evolutionary system with many parallels to biological, with mutation in the form of human learning, new knowledge and know-how, invention, and discovery(ibid.: 99-100).
A thousand years ago, of course, there was no world economy any more than there was a single world social system. The world was divided into large numbers of economies with very little contact with each other. The American continents had no contact whatever with the Old World. Even within the American continents, the Aztecs, as far as we know, had no contact with the Incas. Europe had virtually no contact with Asia or with Africa below the Sahara. It was a few rather slow improvements in ocean transportation and in navigation that opened up the world as a single unit for the human race. The development of the rudder, whereby ships could be steered on an accurate course, and improvements in sails seem to have been the key factors. This may have begun with the Ming voyage from China to Africa in the early fifteenth centry. Then came Vasco da Gama and the rounding of the Cape, partly the result of the Turkish capture of Constantinople cutting off trade from the Mediterranean eastward. It is ironic how the military victory of the Turks seems to have led to their economic and scientific stagnation, and by reponse almost to the enormous expansion of Europe all over the world. Then, of course, came Columbus. After that came the expansion of Europe into the Americas, and also into China and Japan by way of the Jesuits. Marco Polo had pioneered this earlier and went to China. Trade followed the flag and mostly the flag followed trade, with the expansion of the British Empire in India, the Dutch in Indonesia, and so on. Both the United States and Russia expanded over land to the Pacific in the nineteenth century. Since the end of World War II, we have seen an extraordinary explosion in world trade, surprisingly little recognized, with the total volume increasing some six times(ibid.: 100).
Economically, however, there are still two worlds rather than one, even though within each of these two worlds there are great differences. There is the communist world composed of Russia, the Eastern European countries, China, Vietnam, Cuba, and - somewhat unwillingly - Afghanistan and North Korea ; and the capitalist world, which is the rest of it. Within the capitalist world there are even wider differences. Some say that there is no such thing as capitalism. According to their views, it is only a name for an enromous diversity of systems. It changes all the time in a constant process of evolution. It is not clear when capitalism began. But it is possible for us that the Russian Revolution of 1917 is able to do a little better at putting a beginning date on communism. Some of the institutions of capitalism, however, go back a long way into ancient civilizations. Property and trade, money, banking, bills of exchange, foreign exchanges, business - these all have antecedents in the ancient world. The Roman Empire was certainly not a centrally planned economy, even though it had a large public sector. Feudalism in a sense represented something of a retreat from a market economy, with serfdom and status obligations, and a great deal of barter and exchange in kind, but the feudal system certainly never abandoned money, and trade went on at fair and even internationally. The invention of double - entry bookkeeping and more accurate accounting goes back to twelfth - and thirteenth - century Italy. It is something of a landmark, with the provision of more accurate measure of profit. Debt is certainly an ancient institution. Partnerships are equally ancient. The corporation and institutimn of stockholders is a little more modern. Organized stock exchanges go back to the sixteenth century in Europe. Limited liability is an invention of the nineteenth century, but the multinational corporation certainly goes back to the East India Company, although it has become much more important in the twentieth century. Nevertheless, today there is a sharp distinction between the centrally planned and the market economies(ibid.: 101-102).
In general, the military have made poor rulers from the point of view of a successful economy, perhaps because war is a profoundly uneconomic enterprise and the military ideology stress absolute values, like victory, rather than the relative values and the careful balancing of gain by loss that is characteristic of economic behavior and economic organization. Military power is essentially a negative - sum process in which what one party gains is always less than what the other party loses. Economic power, by contrast, is a positive-sum process in which, typically, everybody gains, and even when some lose, those who gain gain much more than those who lose lose . Thus it seems that military government, or militaristic government tends toward economic failure. The impacts of politics in economic life can hardly be demonstrated more dramatically. It is clear that the world as an economic system is closely related to the world as a political system. Nowadays economic power which deals with equally important factors such as political power makes a great role in the world order. In these days, therefore, it is a new era that the political - economy is urgently needed.
2. Theoretical Framework on the World Economic System
After World War II, the world system has been experienced a great three changes, namely (1) Cold War era, (2) D?ent era, (3) Open Door era. Nowadays the world is facing with hegemony struggle of advanced countries which occupied all networks of new technology in open door era. Although they are very slight, it seems that the world goes through another war as like World War III. According to world-system theory, a capitalist world-economy and a system of competitive nation-states began to emerge in the sixteenth century. Since then this system of political-economy has had relatively stable general features and and has constituted the basic framework in which the events of the modern era have unfolded. In each period since the sixteenth century, a particular pattern of international exploitation and nation state conflict has reproduced itself. The pricipal 'player' in this international drama has changed, the techniques of exploitation have differed in their details, the level of technology has risen, and economic production has increased tremendously. In many respects the world appears to have been transformed in the last five centuries, yet the basic economic and political process and relationships of the past centuries are strikingly similar in their fundamentals to those of our own century.
The earlier generation of long cycle analysts, from Kondratieff through Schumpeter and the secular stagnationists of the 1940s, largely failed to elaborate a coherent(much less a unified) theoretical foundation for their interpretations of long cycles. This weakness has plagued the more recent work as well. The analytic problems of long cycle analysis are complex, and it does not yet appear that the recent work has begun to solve some of the most vexing questions which previously plagued long cycle theorists: Why should long cycles recur? Why should they last roughly fifty years? What determines their amplitude? What is the connection between the sources of stagnation in one cycle and the innovations or events which stimulate recovery and a new burst of accumulation in the next?(Terence K. Hopkins and Immanuel Wallerstein: 10). The recent long cycle literature has already grown remarkably long. That some of the ideas advanced may help the study of the world-system - both stages of accumulation and long economic cycles-, but they remain little more than guidelines for further investigation. The complexity of and the enormity of the theoretical, historical, and empirical problems, however, have to be solved for further study. In relation to this, I'd like to introduce their views briefly as follows(ibid.: 33-34).
First, Some analyses, like Schumpeter's, begin from the vantage point of individual capitalist(or entrepreneur). This starting point provides no logical reason for one to expect a bunching of investment. That forces one to assume, as does Schumpeter, that the source of long cycles is autonomous or exogenous events like "epoch-making innovations."
Second, Some analyses, particularly Kondratieff's original investigations and the recent explorations by Forrester et al., have suffered from the opposite weakness. They have built from a relatively mechanical model of endogenously generated investment cycles without any social content to those analyses. Their analyses provide no indication either of how infrastructural investment relates to the general institutional characteristics of respective stages of development or of how specific social and political struggles would (or would not) affect the trajectory of the long cycle dynamic.
Third, Some mainstream economists, working within a framework which presumes the probability of equilibrieum growth in capitalist economies, have been content to settle for very partial theories of the determinants of long economic cycles. Rostow(1978) places great emphasis on the movements of relative commodity prices, for example, while Dupriez(1947, 1978) places similar emphasis on the dynamics of credit markets.
Fourth, Scumpeter, Baran and Sweezy, and Mandel have stressed the exogeneity of the sources of stimuli to restored capital accumulation; all emphasize, in one way or another, the critical importance of exogenous technical innovations.
Fifth, Wallerstein and others have focused on the structure of the world-economy as an entry point to hypotheses about long economic cycles. Their analyses complement mone in many ways, but there seem to be two important differences which deserve mention
In the world-system view of modern history, a central economic relationship exists between the core and the periphery. Peripheral societies specialize in the production and export of labor-intensive, low-technology goods desired by the core and the semi-periphery. In return, the core produces capital-intensive, high-technology goods, some of which it exports to the periphery and the semi-periphery. The semi-periphery exports peripheral-like goods to the core and core-like goods to the periphery. In return, it receives goods produced with labor-intensive, low-technology methods from the periphery and capital-intensive, high-technology methods from the core(see Figure 2.2). Period of full hegemony, however, have been both rare and fairly short in modern history. Wallerstein believes that there have been three such periods: (1) 1620-1650/1672(United Provinces of Holland), (2) 1815- 1850/1873(Great Britain), and(3) 1945 - 1967(United States). Thus, world-system theory portrays the history of the modern era as a series of cycles of 'ascending' and 'declining' hegemony, with brief periods of full hegemony in each cycle(Thomas Richard Shannon, 1989: 121).
As we have seen in the above, countries have not always stayed in the same zones of the world-system. Some have
ascended out of the periphery or semi-periphery to a higher status. A few core states have descended into the
semi-periphery(see Table 2.1). This recognition that ascent occurs, even from the periphery, is one of the major ways in
which world-system theory differs from the dependency approach. Most of those employing that perspective do not expect
countries in the periphery to overcome exploitation and dependent development within the existing system of
political-economy imposed by the core(ibid:130).
FIGURE 2.2 Relationships in the Capitalist World-Economy
Nicole Bousquet insists that a cyclical phenomenon takes place in a broader context, the world-economy, the idea that it is a
cycle can be understood in at least two ways: either the changes of politico-economic pattern at the center stem from the
internal dynamic of a single core power, or they somehow are the manifestation of cyclical activity encompassing the whole
of the center. The idea that changes at the center could be cyclical is extremely attractive from a world-system perspective,
for these changes appear essential to the very survival of the system through history. For the moment it is preferable to plot
the conjuncture since the sixteenth century on the basis of secular trends from the beginning of the sixteenth century to the
end of the eighteenth, and of Kondratieff cycles from then on. This is not totally artificial since there is a possibility that the
secular trends of the first centuries of the world-economy gave way to Kondratieff cycles at the end of the eighteenth
century. Nicole Bousquet thus proposes the following sketch of the conjuncture(Terence K. Hopkins and Immanuel
It is at the end of a long A-phase, the sixteenth century, that Holland acceeds to an hegemonic position within the world-economy. She looses this status toward the end of the seventeenth century, that is, in the course of a secular trend of stagnation. Britain rises to hegemony at the end of the eighteenth century and the first two decades of the nineteenth century, that is at the end of a secular trend of growth. She looses, if not hegemony, at least supremacy in the realm of production in the last quarter of the nineteenth century, that is during the B-phase of a Kondratieff cycle according to some, or in the first decades of the twentieth century that is during the A-phase of a Kondratieff cycle according to others. The United States became the hegemonic power within the world-economy in the era of prosperity following the Second World War. Finally U.S. hegemony has been faltering since the beginning of the 1970s, that is, during what many acknowledge to be the B-phase of a Kondratieff cycle. So as we can see there appears to be a relationship between the rise to hegemony and an A-phase on the one hand, and a B-phase and the return to a situation of competition on the other.
Paul Kennedy insisted in his book, The Rise and Fall of the Great Powers that nations tend to stabilize at natural positions
directly related to their population and economic resources. Great Britain, following the colonial era, settled into a natural
power position consonant with its share of world GNP: about 4%. By the same criterion the United States for some years
will yield power based on at least 16 to 18% of world GNP - well ahead of any other single nation, and expanding with
international economic growth. Japan, a great power before World War II, is producing about one-tenth of global out-put,
or slightly more than before the war(Alfred Balk, 1990: 65). In the postwar era Japan's image of itself as a small, strategically
naked and economically fragile island nation gradually changed as it became a respected member of the world community.
Japan's inclusion in 1975 as a founding member of G-7(the Group of Seven) leading in industrialized nations helped
transform the Japanese public's perception of its own country. A decade later Japan's self-image as an economic power was
supplanted by the immage of Japan as an economic superpower, as Japan suddenly found itself the world's largest creditor
nation. And now polycentric world, the perception of Japan as a global power should become even more widespread.
2. New Economic Order and A Big Three Economic Power after the Gulf War
The Gulf War may have marked the return of American unipower system, but it also demonstrated the need for the United States to exert its leadership as part of a coalition. The Gulf War was but one example of the types of threats the world will confront in the future. Even a confident United States will not always be able to cope with a diversity of threats alone. The United States will be, at least for the foreseeable future, subject to financial limitations. It will also have to pay more attention to a wider range of issues that now qualify as security matters - its economy, the environment, human right and drugs. These issues will pose problems for the traditional pattern of U.S. hegemonic leadership, because they require collective leadership and policy coordination. Japan's supportive leadership, therefore, should not be viewed as simply following the United States, neither should it be regarded as financial underwriting for U.S. military actions. It should instead be seen as providing collective goods indispensable in an age of collective leadership. Japan's major task will be to stimulate U.S. interest in the open global trading system(Yoichi Funabashi, 1992: 68).
Basic elements of the New World Order were coming into focus 20 years ago, with the emergence of a 'tripola world' as economic power diffused within US domains. The US remains the dominant military power, but its economic superiority, though still manifest, has declined. The collapse of Soviet tyranny adds several new dimensions. First, new pretexts are needed for Third World intervention, a serious challenge for the educated classes. Second, there are now prospects for the 'Latin Americanization' of much of the former Soviet empire, that is, for its reversion to a quasi-colonial status, providing resources, cheap labour, markets, investment opportunities, and other standard Third World amenities. A third imported consequence is that the US is more free than before to use force, the Soviet deterrent having disappeared. In the New World Order, the Third World domains must still be controlled, somtimes by force. This task has been the responsibility of the US, but with its relative economic decline, the burden becomes harder to shoulder(Haim Bresheeth and Nira Yuval-Davis, 1991: 26-27).
An important aspect of the conflict and, indeed, of the New World Order, is the role of technology. While the US has sold billions of dollars of armaments to the Gulf countries, the really efficient, lethal armaments, such as laser-guided(surgical-strike) bombs, were kept from the hordes, just in case. The role of technology in the Gulf War is central, and operates on a number of levels, all related to the ideological argument behind the NEW. In the struggle between North and South, a modern version of the Occident versus Orient struggle, techonology has always been a tool both offered to the North, a tool both offered to the other side selectively and at great cost, and denied it, when the interests of the North demand this. The technology of armaments and of the modern infrastructure is one of the main agents creating dependency in the developing world, and of deskilling its population. The Crisis in the Gulf was unique in the degree of live reporting allowed by the new technology, exclusively controlled by the North. This capacity for immediate reaction and audience control has resulted in a dual success(ibid.: 251-252).
This was a war between the imperialist superpowers and a small Third World country which is trying to weaken its ties of dependency. The collapse of the Second World, at least in Eastern Europe, has emphasized two important issues. As a result, an important phenomenon in the periphery has either vanished or has become extremly difficult of realization, namely the possibility of a national bourgeoisie embarking on an independent development. It would appear that the dominant international division of labour was strengtened, since it succeeded in pushing to power in the Third World the merchant-comprador class, a fact which produced greater hegemony over this world order.
This development offered to this world order a form of political instance, i.e. a clear political alliance between ruling classes of the centre and peripheries. The most clear evidence for this is the alliance that developed during the 1991 massacre of Iraq between Arab merchant-comprador ruling classes and the ruling classes in the centre. This development needs a class alliance to protect it. Such an alliance is currently being established, led by the imperialist capitalist centre and followed by the ruling commercial-comprador classes in the periphery. This order is now ready to utilize military means against any progressive or revolutionary force in the world, and against any national bourgeisie if it tries to control its national wealth or asks for a larger share of this wealth, even if this takes place within the confirms of the world order itself. The 1991 imperialist massacre in Iraq should be placed within this existing balance of power.
After the Gulf War, the world is sailing precariously into very uncharted water with the collapse of communism in Eastern
Europe, the end of the Cold War, reunification of the Germanys, and the Gulf Crisis. The world has been experiencing three
historic transformations. One is the change in the global security situation triggered by the end of the Cold War, German
unification, and radical political and economic changes in Eastern Europe. Second, although the Middle East crisis is a
reminder that can't forget security issues, it is clear that the relative importance of security matters is dealing as compared
with economic issues. The status of countries will be determined in the future much more by their economic capacities than
by their military prowess. That dramatically enhances the role of Japan and an economically united Europe and sharply
reduces the role of the Soviet Unioin. The third transformation is the change in the underlying economic capabilities that the
payments at the time of the Gulf crisis also reflect. By the end of this decade, and maybe sooner, a truly Tripolar World
Economic Structure will emerge, with a sharing of burdens and responsibilities among a Unified Europe(EU), Japan, and
the United States. America will no longer dominate. A United Europe will become the world's largest market and biggest
creditor nation and a leader in many key technology. The Big Three of economics, therefore, will displace the Big Two of
nuclear power(Challenge, 1990: 17). In relation to this, the most important thing of all is the Bloc Economy that the Big
Three ever had. European countries formed a single EU market, United States is now forming NAFTA with Canada and
Mexico, and Japan, even if very hard to organize, is planning East Asia or Pacific Economic Community(APEC) in order to
coping with regional protectionism of the world trade. In the near future, therefore, Bloc Economy will make a great role in
the world trade with the Big Three.
1. The Middle East after the Gulf War
For more than four decades, the Gulf region has witnessed superpower competition, regional rivarly, conflict, and chronic political instability. The region holds most of the world's oil and a considerable part of its natural gas reserves. It is also strategically located in close proximity to the former Soviet Union that now the emerging Muslim nations of Central Asia, the Indian subcontinent, and the Arab heartland. Moreover, the region is a dividing line between the Arab and Iranian, as well as the shi'a and sunni, worlds. And the Gulf oil resources have been an especially significant factor in inter-Arab rivalry as those Arab countries with few resources and large populations have sought to control them. If the 1980s were the decade of political and economic transition, the 1990s will be the decade of consolidation and fundamental change. The dynamics set in motion by the 1979 Iranian revolution and the 1980-1988 Iran-Iraq War, most notably the necessity felt by the Gulf Arabs and the West to check the spread of the Iranian revolution ,greatly contributed to the development of the Saddam Hussein phenomenon. This cycle of revolution, war, and containment finally culminated in Iraq's invasion of Kuwait on August 2, 1990(Shireen T. Hunter, 1992: 155).
The Gulf War, and the response to it, were historic watersheds in intra-Arab, the Gulf, and international politics. They coincided with, and were made possible by, an even greater historic watershed, namely the end of the cold war and the collapse of the socialist bloc. As with other historic events, the Gulf War and its aftermath led to much talk about a 'New World Order'. Yet the outlines of this new order are not clear. It is quite clear that challenges to Gulf security and the policies needed to deal with them will be significantly different from those of the past. Despite opportunities for a new order in the Gulf, many old causes of instability and barriers to developing cooperation and lasting security arrangements persist.
The phenomenon of recent changes in various regions of the world shows the inseparable nature of political and economic change as well as the politics of economics. Democracy is one of the few systems of government that is based on the idea of limits to governmental authority, especially in the economic arena. The most difficult question, however, remains the future of the Middle Eastern countries and overall Islamic world, including some of the former Soviet Republics(John D. Sullivan, 1992: 181). Progress in countries such as Indonesia and Pakistan argues in favor of the eventual development of democratic values compatible with Isalamic cultures. Historically, Christian and Confucian values adapted to the requirements of market economics and democracy within a secular state. Seen from a distance, Islam may seem to be a single value or cultural system. In reality, it is very diverse and continually changing.
One hope for the Islamic world is that the desire of people for basic human dignity, political freedoms, and civil liberties will help shape the culture of Islam just as it has other cultures over history. Only the Middle East and, to a lesser extent, the Islamic world in general seem to be exempt from the global drive toward greater political and economic liberty. Thus the effects of culture and religion no doubt play a major role as well. Equally important problem is the relative lack of a civil society made up of autonomous associations and movements unconnected to government. In such cases, it is much more difficult to challenge the right of a single group to rule. Courageous Arab democrats, like their counterparts in, for instance, Central Europe, are creating the civil society groups that provided the moral and ethical leadership essential for progress. Given the tendencies of those in power to maintain the existing systems, the most probable outcome is that change will occur first in those countries whose lack of oil resources forces more engagement with the international system. In short, authoritarian leaders in non-oil countries have fewer resources to prevent change.
Another important thing in the Middle East is that efforts to bring about an Arab-Israeli peace should be continued
vigorously. Although the Gulf has its own dynamics and characteristics, its history has illustrated that the region is extremely
vulnerable to the impact of developments in other parts of the Middle East, especially the Arab-Israeli conflict. During the
Gulf War, for example, the Arab-Israeli conflict was manipulated by Iraqi Saddam Husein. More importantly, the
Arab-Israeli conflict is a principal barrier to better relations between the West, especially the United States,and the peoples
of the region. This barrier prevents the U.S. from playing a great role in the Middle East.
2. Changes of A New Economic Order after Israel-PLO Peace Talk
The Middle East has been facing with its new era in accordance with the 'Peace Talk of the Middle East' on Sept. 13, 1993. Israel and Palestinians that maimtained hostile relation over 45 years signed the bilateral Palestinian autonomy plan after all. With the peace talk between Israel and PLO, Iraq's status was weakened very hard in the Middle East and the world. Relatively U.S. could secure the hegemony and catch a good opportunity that enabled her to manage the other Arab states in a better position. After the peace talk between Egypt and Israel in 1978, there was no real country who can act as a spokesman of Palestinians except Iraq. Untill now, the background of Iraq's survival that was beaten miserably at the time of the Gulf War, is Iraq's will to remain for the Arabs against Arab-Israeli conflict. This situation made Iraq an opportunity that can be supported by Jordan, Yemen, Libya and PLO in the Gulf War, 1991. As a result of this action, the neighbour Arab countries, especially GCC countries in the Gulf turned away their face from PLO, and PLO suffered severely from economic difficulty with an account of U.N.'s economic sanctions against Iraq. Now this situation, however, is changed with the peace talk between Israel and PLO. The existence of Egypt and Iraq in the Palestinian porblem is no longer direct helper to solve the PLO problem, because PLO, an apple of discord of the Middle East, joined hands with Israel that has been the conflicting country concerned, and got out of the reconciliation table directly. Iarq and Egypt, therefore, lost their specified duty as acting as a spokesman of the Arabs and now are in the face of a new era for transformation that they can remain the leading nation among the Arabs.
It is expected that the economic order in the Middle East bring out various changes in accordance with the Israel-PLO peace talk. Sufferig from serious economic difficulties owing to U.N.'s economic sanctions against Iraq after the Gulf War, Palestinians, a core of the conflict in the Middle East, namely PLO slected an utilitarian line and turned her back to Iraq. Jordan, the former Iraqi friend also will find a way with PLO and furthermore Israel watching for a chance. Considering the changed situations of Saudi Arabia and neighbour Arab countries, Yemen that suffered from serious financial embarrassment after unificatin in 1990, is willing to reestablish friendly relation with neighbour Arab countries including Israel. These caused increased Iraq's isolation of political and economic concern in the Middle East, and relatively Israeli status may rise. Moreover if this situation were prolonged, Iraq would be eager to close her hand with US and try to solve the economic difficuties including economic rehabilitation, because Iraq suffered from severe financial embarrassment aftermath economic sanctions. US was pressed with time table at the time of the Gulf war, however, Iraq is pressing with time table now. As for time affairs in the Middle East, US is in a better position rather than Iraq as time flies. Current issues of the Middle East including removal of economic sanctions against Iraq in the international oil market will depend on US attitute that act as a U.N.'s spokesman. US, therefore, will take advantage of any current available means in the negotiations with Iraq.
There are now three economic blocs among the Arab nations in the Middle East. These are compoed of Gulf Cooperation Council(GCC) which was established in 1981, Arab Cooperation Council(ACC) which was established in 1989, and Arab Maghreb Union(AMU) which was established at the same year of ACC. As the Arab's economic Blocs maintain a political character, however, economic cooperatin is greatly influenced by the political impacts. For example, Jordan and Yemen, an ACC country, supported Iraq at the time of the Gulf war, and even though ACC country, Egypt is the only country which lined up the side of multinational army on account of political interest. As Libya, an AMU country and Iran, a non-Arab state and a poltical enemies, had supported Iraq at that time, the Arab nations in the Middle East showed a great disruption. After the Gulf war, this situation had been more or less maintained in the region.
If the new economic order in the Middle East were hurried up by the US-EC-GCC Axis, Iraq, Lybia and other radical Arab countries could stimulate neighbour Arab countries at the back of the Palestinian Problem and Arab unity. Moerover Iran, even though not an Arab country, could support Iraq in order to protect the joint interest among the OPEC member countries and its impact could bring another complex problems. As these three countries - Iraq, Iran and Libya - are the radical countries urging high-price policy inside OPEC, it is possible for them to consociate economically concerning oil policy. Being able to change economic situation in the Middle East carrying on their back USSR, even though the former USSR lost her power, re-arrangement of economic order could not be esaily realized in the Middle East.
The circumstances of the Middle East, however, was changed in the process of Israel-PLO peace talk. Signning of Israel-PLO peace talk, Iraq's isolation accelerated in the world as well as in the Arab world itself. At the same time, Iran caught a new opportunity easily to become a new powerful state in the Gulf region. Moreover, if the peace talk were proceeded favourably, it seems that Israeli status would rise up considerably in the Middle East and re-arrangement of a new economic order would develop more complex features. A new economic order in the Middle East, therefore, will be differentiated in accordance with the speed of negotiations between Israel and PLO, and the role of US, the Gulf oil states, especially Saudi Arabia and Iran will act as a great factor in the process of re-arrangement of a new economic order in the Middle East.
By the way, the economic circumstance of oil producing countries in the Gulf region became severely worsened since the
Gulf war and economic aid for non-oil producing countries in the region nearly stopped. Thus economic cooperation in the
region will be realized by the states in line with interest concern and strengthened by their economic relations in pursuit of
economic interest rather than by political standing. It seems that a new economic order in the Middle East will be developed
by US, OPEC's oil countries in the Gulf region, and Israel, in pursuit of economic interest concern under the US assistance
that occupied her hegemony in the region. If internal conflict inside both Israel and PLO break out seriously in the Palestinian
region and neighbour countries that is radical countries composed of Iraq, Iran, and Libya favour it among OPEC countries,
economic order in the Middle East would be faced with another stage and disintegrated. There are now four economic blocs
which are composed of GCC, ACC and AMU in the Arab region, and ECO that are non-Arab economic bloc in the
Middle East. Considering economic cooperation in the Middle East, it seems that these four economic blocs rearrange by
reason of economic interest concern. In the process of it, US influence will greatly act as a main partner and Iraq's
pro-American reconcilatory attitute will be accelerated. As for Iraq, she is eager to remove the U.N.'s economic sanctions in
order to rehabilitate her economy and to secure oil sovereignty inside OPEC.
3. Potentials for Economic Development in the Middle East
The potential for economic development in this region, if there would be peaceful time, will be more higher than the last decade. Peace in the Middle East may provide the momentum for economic development. The potential for such development lies in the area's natural resources and plentiful manpower. Manpower is not confined to Israel - one and half million Egyptian teachers, engineers, scientists and managers are presently employed in the Gulf states, and numerous Palestinians are studying at universities in neighboring Arab countries. Potential market exist and both foriegn and local capital are available. Many observers perceive the potential of this region for large-scale economic and commercial growth and development. At present, however, they are deterred from embarking upon concrete ventures by political uncertainty and military risks.
The arms race in the Middle East has undoubtedly aggravated economic conditions in some countries. It has intensified
strains on human resources, and is reflected in huge bugetary deficits, as well as increased rates of taxation in some countries,
which adversely affect productivity and resource allocation. Table 3.1 shows a defense expenditures as a percentage of
GNP, 1954 to 1984 in four countries among the Middle Eastern countries. Recent history has shown that decling oil
revenues have far less effect on arms acquisition than any other budget categories. The already visible trend toward
unconventional weapons, particularly chemical weapons and surface-to-surface missiles, might accelerate. The end of the
Iraq-Kuwait crisis will not end the arms race in the Gulf; in fact, the crisis itself will be a major determinant in procurement
decisions. It is also clear that the post-crisis world in the Gulf will be more complicated than either the pre-crisis or the crisis
world. Iraq's choice of aggression may prove its downfall-in any event its power will be limited and probably rolled back.
Saudi Arabia and the GCC will increasingly seek to form a third bloc in the region, though their military clout will be limited
to air and naval forces. Iran will remain regionally isolated and in search of arms supplies for some time(Charles F. Doran
and Stephen W. Buck, 1991: 82). The potential for growth and development under conditions of peace and cooperation
would be possible if political stability and peace is realized in this region. Within ten years of peace, the GNP of Israel could
be about 22% higher than in the absense of peace. Similar developments could have taken place in the Arab states bordering
upon Israel: Egypt, Syria, Jordan and Lebanon. Had peaceful relations been established in 1982, the total GNP of these four
countries could have been 24%, or $20 billion, higher after ten years. The standard of living and per capita consumption,
and, of course, levels of investment would also have risen by similar percentages.
Table 3.1 Defense Expenditures as a Percentage of GNP, 1954 to 1984 @@@@@@@@@@@@@@@@@
Source: Gideon Fishelson,1989,Economic Cooperation in the Middle East,P.27.
In relation to this, Haim Ben-Shahar noted that accelerated growth under conditions of peace is due to the following
factors(Gideon Fishelson, 1989: 5). (1) Defense expenditures would be lower, releasing more resources for investment and
growth. Manpower employed by the military establichment, too, would be released for productive employment, (2) Under
conditions of peace, more foreign capital for investment would be attracted to the region so the cost of capital would be
reduced, (3) Development of intraregional trade would increase economic efficiency and creat additional sources of
employment and opportunities for growth, (4) Cooperation in economic projects, particularly in the development of the
region's infrastructure, would also contribute to economic growth, (5) All these factors would contribute to an improvement
in educaton levels achieved, in professional expertise, and in productivity. Finally the organizations of regional economic
cooperation in the Middle East, i.e. GCC, ACC, AMU, and ECO will play an important role for economic development and
cooperation in this region.
After the Gulf War, the world is sailing precariously into very uncharted water with the collapse of communism in Eastern Europe, the end of the Cold War, reunification of the Germanys, and the Gulf Crisis. The world has been experiencing three historic transformations. One is the change in the global security situation triggered by the end of the Cold War, German unification, and radical political and economic changes in Eastern Europe. Second, although the Middle East crisis is a reminder that can't forget security issues, it is clear that the relative importance of security matters is dealing as compared with economic issues.
The status of countries will be determined in the future much more by their economic capacities than by their military prowess. That dramatically enhances the role of Japan and an economically United Europe and sharply reduces the role of the Soviet Unioin. The third transformation is the change in the underlying economic capabilities that the payments at the time of the Gulf Crisis also reflect. By the end of this decade, and maybe sooner, a truly Tripolar World Economic Structure will emerge, with a sharing of burdens and responsibilities among a unified Europe(EU), Japan, and the United States(NAFTA). America will no longer dominate. A United Europe will become the world's largest market and biggest creditor nation and a leader in many key technology. The Big Three of economics, therefore, will displace the Big Two of nuclear power. In relation to this, the most important thing of all is the Bloc Economy that the Big Three ever had. European countries formed a single EU market, United States is now forming NAFTA with Canada and Mexico, and Japan, even if very hard to organize, is planning East Asia or Pacific Economic Community(APEC) in order to coping with regional protectionism of the world trade. In the near future, therefore, Bloc Economy will make a great role in the world trade with the Big Three.
The circumstances of the Middle East was changed in the process of Israel-PLO peace talk. Signning of Israel-PLO peace talk, Iraq's isolation accelerated in the world as well as in the Arab world itself. At the same time, Iran caught a new opportunity easily to become a new powerful state in the Gulf region. Moreover, if the peace talk were proceeded favourably, it seems that Israeli status would rise up considerably in the Middle East and re-arrangement of a new economic order would develop more complex features. A new economic order in the Middle East, therefore, will be differentiated in accordance with the speed of negotiations between Israel and PLO, and the role of US, the Gulf oil states, especially Saudi Arabia and Iran will act as a great factor in the process of re-arrangement of a new economic order in the Middle East.
Meanwhile the economic circumstance of oil producing countries in the Gulf region became severely worsened since the Gulf war and economic aid for non-oil producing countries in the region nearly stopped. Thus economic cooperation in the region will be realized by the states in line with interest concern and strengthened by their economic relations in pursuit of economic interest rather than by political standing. It seems that a new economic order in the Middle East will be developed by US, OPEC's oil countries in the Gulf region, and Israel, in pursuit of economic interest concern under the US assistance that occupied her hegemony in the region. If internal conflict inside both Israel and PLO break out seriously in the Palestinian region and neighbour countries that is radical countries composed of Iraq, Iran, and Libya favour it among OPEC countries, economic order in the Middle East would be faced with another stage and disintegrated. There are now four economic blocs which are composed of GCC, ACC and AMU in the Arab region, and ECO that are non-Arab economic bloc in the Middle East. Considering economic cooperation in the Middle East, it seems that these four economic blocs rearrange by reason of economic interest concern. In the process of it, US influence will greatly act as a main partner and Iraq's pro-American reconcilatory attitute will be accelerated. As for Iraq, she is eager to remove the U.N.'s economic sanctions in order to rehabilitate her economy and to secure oil sovereignty inside OPEC.
The potentials for economic development in the Middle East, if there would be peaceful time, will be more higher than the
last decade. Peace in the Middle East may provide the momentum for economic development. The potential for such
development lies in the area's natural resources and plentiful manpower. Manpower is not confined to Israel - one and half
million Egyptian teachers, engineers, scientists and managers are presently employed in the Gulf states, and numerous
Palestinians are studying at universities in neighboring Arab countries. Potential market exist and both foriegn and local
capital are available. Many observers perceive the potential of this region for large-scale economic and commercial growth
and development. At present, however, they are deterred from embarking upon concrete ventures by political uncertainty
and military risks. In relation to this, four organizations of regional economic cooperation in the region, i.e. GCC, ACC,
AMU, and ECO will play an important role for economic development and cooperation.
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Publisher: Research Institute of the East-West Economy & Society (RIES) Editor: Dr. Seong Min HONG
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