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Underdevelopment or dedevelopment in the Arab world Development by encroachment in the Arab region Development is about unleashing human potentialities and broadening the choices of people. Development is also the infusion of knowledge in production, incremental growth in capital and progressive institutional change that responds to the demand of working people. Development, in the broad sense, combines the freedom paradigm and capital accumulation – but, not in a static combination. It is the mediation by which the people interact with the social condition for the purpose of development. It is the outcome of peoples’ struggles to improve their lives through the political process. 2 De-development De-development is the purposeful activity of eroding and deconstructing developing entities, and, primarily, of stripping the peoples in those entities of the right to own and control their resources, and use them for their own benefit. Article 1 of the International Covenant on Economic, Social and Cultural Rights, says: “All peoples may, for their own ends, freely dispose of their natural wealth and resources without prejudice to any obligations arising out of international economic cooperation, based upon the principle of mutual benefit, and international law.” Empirics Table 1. Growth in real GDP per capita in the AAS region 19711980 19801990 19902000 19712000 GCC countries 1.85 (7.67) 0.50 (2.78) Other diversified economies 5.87 (0.16) 0.35 0.02 Total AAS 4.99 (3.43) 0.34 (0.85) Source: United Nations Statistics database. 4 Long run average per capita growth rate Real percapita income Logarithm (average=about zero percent) 8.2 8.1 8 7.9 7.8 7.7 7.6 Real per capita income Linear (Real per capita income) 7.5 7.4 7.3 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 7.2 5 Despite a solid growth performance since 2003, unemployment rates responded poorly to growth and remained high. There was roughly a one percentage point drop in unemployment over a three-year period (2003-2006) that witnessed a cumulative growth rate of 17percent- based on official sources 6 Law of labour demand In an area that exhibits the highest rate of unemployment globally, this weak response in job creation to growth makes anomalous the law of labour demand as derived demand. It also points to deep seated reasons associated with the nature of the accumulation process that disrupt the intermediation between economic expansion and social development. Employment derives from development when there wasn’t any. 7 May day: Markets are unusually different The labour market is where labour services are exchanged for money value. In an Arab labour market: labour share forms 20 to 25 per cent total income (it is around 70 per cent in advanced economies), productivity is always near zero, and, if a more comprehensive form of assessing unemployment is carried out, more than half of the labour force could be considered unemployed; more importantly, most of those remaining employed will be clients of the rentier state (not workers who exchange labour service for a money wage but for submissiveness). To construct an imaginary market as a lifebuoy of development represents a form of deceit based on misrepresentation of fact. A different approach and criterion for job creation is required. 8 Investment rates plummet as private sector takes over Investment ratio 0.35 0.3 0.25 0.2 0.15 Investment ratio 0.1 0.05 19 75 19 79 19 83 19 87 19 91 19 95 19 99 0 9 More than just machines When the cornerstone of development-the creation of jobs, fails to be met, the causes have to be explored not so much in the slow rate of build-up in machinery, plant and equipment, but more so in the way power, control and decision making are articulated between the regional and extra-regional social formations. 10 Oil: bliss or burden Oil rents dichotomise an economy. A highly capitalised oil sector creates few jobs relative to the capital invested in it and, in an adjunct manner, decent job expansion occurs through patronage in the public sector. Oil is a curse only because there social forces that intended to be that way. 11 ‘Wherever merchant capital dominates: backward conditions dominate’ Weak financial intermediation between money assets that accrue from oil and a healthy rise in income associated with rising productivity (unrequited transfers or un-cashed cheques) Rents earned without effort ( Keynes and euthanasia of the rentier) Preponderance of commercial activity (import led growth) and the state devolves a social articulation strengthening divisions. Economy leans ever more heavily towards the service and informal sectors. 12 Labour productivity Table 1: Labour Productivity Growth (selected countries) 1980-2001 percentage . Iraq -6.9 Jordan -1.5 Saudi Arabia -2.9 Syrian Arab Republic -0.2 United Arab Emirates -2.4 Yemen 0.2 Source: ILO (2003) Key Indicator of the Labour Market 13 Unemployment trap . Service sectors already hire more than ten million extra-regional workers and pay out poverty wages. The region is in an unemployment trap. The articulation of a cross class-border alliance forbids the peoples of the region from locking in resources. 14 Virtuous/vicious circle Profits are drawn from short term speculative and commercial activity tapping into oil rents as opposed to a knowledge based /increasing returns economy. Resources are being intermediated by speculation on a poorly regulated regional asset market- things might get worse- the bursting of a huge real estate bubble. 15 A rough measure of capital per worker Trend Trend in capital per worker 9.9 9.85 9.8 9.75 9.7 9.65 9.6 capital per worker Linear (capital per worker) 199019921994199619982000 16 Time is of the essence Uncertainty, fragile security and deepening labour force differentiation enhances short term rents in all the sectors making the present more valuable than the future. But, it may be relevant to recall the overarching condition of geopolitical uncertainty and its impact on inter-temporal preferences, institutional vulnerability, and the already inherent uneven developmental state of the member countries, i.e. uncertainty about the future deadens investment and development State guarantees are required to promote the long term investment projects that create jobs 17 Actual and foregone GDP War loss: Conflicts exclude stability over the long term needed to redress frail investment in infrastructure, plant and equipment and create social schisms that set back social development for a very long time. 600 400 Actual GDP 300 Foregone GDP 200 100 20 00 19 98 19 96 19 94 19 92 19 90 0 19 88 Billions of US dollars 500 18 Money goes abroad Uncertainty drives resources away. (people, raw material brokered by a distorted price system and money assets). Needless to say, within the existing institutional context, presumptive redistribution allowing for lesser concentration of private wealth and greater interest in regional development is highly unlikely either within or across member countries. In any case, to date much of the region’s excess savings, some four trillion dollars over 30 years, are divested abroad- a rentier class does not have a stake in the region. 19 Unlike others: high savings Saving and investment ratios 90% 80% 70% 60% S as % GDP 50% I as % of GDP 40% Poly. (S as % GDP) 30% Poly. (I as % of GDP) 20% 10% 19 70 19 73 19 76 19 79 19 82 19 85 19 88 19 91 19 94 19 97 20 00 20 03 0% 20 High inequality The inter/intra wealth and income divide between lower and highest quintiles/deciles is highest globally in this region (Texas income inequality data project). Where there was growth, income inequality rose at a faster rate. 21 Security Security is best understood as a totality with three interrelated levels: first, national security, including the protection of the right of people in the Arab world to selfdetermination; secondly, democratic security through the promotion of citizenship rights and the institution of democratic accountability; and, thirdly, human security, particularly the right to social protection and decent employment. 22 Sovereignty These manifestations of security are to be considered not separately, but either in their wholeness or as a combination in which national security, which is a direct product of the degree of alliance between the labouring classes and the ruling regime or the distance that ruling regimes keep from imperial power centres, holds primacy. The practice of realising national security through the mediation of the struggle of the labouring classes, and the changing power structure of class alliances and fronts, will form the substance of sovereignty. 23 Unlocking potential The right to development is synonymous with the right to peoples’ security as defined earlier. The degree to which international relations and economic imbalances, in particular, the dollar as an overstretched global currency, may have become dependent on either the prolongation and/or the outcome of the conflicts in Arab region is now greater than it was before. Smoothing the transition from an international order by the degree to which foreign powers exercise influence and control in the region runs counter to their obligation of the international community. We need to demystify the process in the region and situate matters accordingly. 24 Encroachment and dispossession The Arab world is subject to a process of accumulation by encroachment and dispossession and, hence, de-development. Although it is possible to observe narrow strips of accumulation by commodity realisation and doux-commerce in the Arab world, the preponderance of violently imposed social dislocation, rents structured around oil, and commercial, as opposed to industrial activity unequivocally indicate that accumulation by extraeconomic means (encroachment and dispossession) holds primacy over the course of events.