Enriching the Middle East's Economic Future IV
The following is a report created based on the findings of the conference "Enriching the Middle East's Economic Future IV" which took place in Doha, Qatar May 3-5, 2009.
Enriching the Middle East's Economic Future IV
May 3-5, 2009
The Global Financial Crisis
1. There was a consensus that the blame for the current economic challenges should be laid on American consumers run amok and globalization gone awry. To fix these two causes the group recommended, respectively, greater production in the U.S. to reduce imports, and more balanced demand across the globe. As the U.S. consumes less, who will fill this consumption void? Tapping into global consumption potential will be critical.
2. A widely accepted view at the meeting was that American over-consumption, the unregulated banking system, trade imbalances, monetary policy, and other systemic economic failures drove the financial crisis. These developments together have killed the old economic structure and created the need to develop a new global economic system.
3. Several participants argued that the economic system is not the underlying problem. Rather, a lack of proper regulation created the financial collapse. These groups recommended that the U.S. should continue to stabilize the financial situation and let the dust settle before making any dramatic changes to the current economic system.
4. While economic and financial objectives are more easily laid out than resolved, it is critical that the main goal must be to reduce unemployment in the U.S. and globally.
5. Implications of the global crisis are:
- Increased political and social instability globally due to an increasingly impoverished middle class.
- Shifts in the world’s balance of power that will leave China more involved in international institutions, a reordered EU, and great military might in China due due to its large blue water navy.
- Global demystification with the Western/American free market capitalist model.
6. Although it is the harder path, the strategy forward must focus on improving the lives of the 99.8% of Americans who contribute 50% of the American economy through increased employment and rebuilding from the bottom up rather than trickle-down policies for the other 0.2% which produces the remaining 50% of the US economy.
7. Those who have benefited from the current crisis include: regulators (excluding the SEC), lobbyists representing banks, restructuring lawyers and specialists, most debtholders of U.S. banks and insurance companies, and investors with good credit. Those who have lost out include: financial markets, financial industry executives, real estate owners, manufacturing, and countries depending on remittances, to name a few. Calculations for improving the economic recovery must take account of these ‘winners’ and ‘losers.’
8. Key recommendations for reform of international economic institutions in the wake of the global economic crisis and changes in geopolitical power are the following:
- Rise of the G-20: The G-20 has by now eclipsed the G-8. Most panelists viewed this as a positive development, as the G-20 will involve a more diverse and representative group in making the important decisions for the global economy.
- Future of the IMF and World Bank: The international community could not succeed in replacing the Bretton Woods institutions wholesale. Instead, efforts should be focused on reform of the existing institutions so that they can better match the needs of the emerging multipolar world order.
- The Poorest: The rise of the G-20 and reform of the IMF and World Bank will provide new opportunities for billions in China, India, and elsewhere to sit at the table of international economic governance. Still, hundreds of millions of others in the world's very poorest countries will remain absent. For both ethical and security reasons, world powers, both old and new, must try to meet the needs of these poorest of the poor.
America and the World Now
9. Two basic trends shaping global politics today were recognized: 1) the rising power of the state and 2) the empowerment of individuals and non-state actors. Given these two realities, the new president should apply five key approaches to American foreign policy:
- Reclaim America’s identity so that its actions are consistent with its values.
- Redefine how the U.S. frames major problems facing the world.
- Expand dialogue with fewer limits and barriers.
- Continue to increase investment in a civilian/diplomatic corps.
- Exercise strategic restraint and patience. While the recommendations bear a high political price because of their delayed payoffs, they are America’s best chance at global security.
10. The U.S. should look towards smart diplomacy, winning the hearts and minds of the world through development, the granting of more student visas, and so forth.
11. Institutions, including the U.N. should be reformed and utilized to deal with international disputes.
The Financial Crisis and the Middle East
12. Regarding America’s foreign agenda the following policy recommendations were made:
- The U.S. is overextended and will inevitably revert to its traditional offshore role--a reality that will include normalizing relations with Iran, Syria and Israel.
- As the U.S. undergoes this shift, policy makers will have to bear in mind that the offshore field will become increasingly crowded and accommodation will be necessary.
- In the Middle East, the U.S will have to reassess and maintain its role as a balancing player. In general, America’s preeminence in the world will decline in the shadow of the financial crisis, but that does not necessarily mean that it cannot serve its interests through greater acuity.
Oil Prices and Stability
13. What is the validity of the concept of a "fair price" for oil? A "fair price," some argue, would provide more predictability to oil prices and guarantee sufficient income in order for investment in new oil sources to be profitable. In the end, though, market forces will set the price.
14. While the global economic crisis has had its effects on the Middle East, it was generally agreed that this is a moment of opportunity for those considering investing in the region, or for those in the region considering investments elsewhere. Because of the downturn, many assets are undervalued, and those willing to invest could reap the rewards. Relative to other parts of the world, the Middle East has better rates of growth and more liquidity for investing.
15. The lack of an oil law in Iraq is making investors cautious about investing in the country's oil sector. Iraq's government and industry need to enter into a dialogue to devise a comprehensive system for the country's petroleum sector.
16. The current moment presents a great opportunity for Middle Eastern countries to shift their massive accumulation of wealth into investment and engagement in the global financial system.
Women Mean Business in the Global Economy
17. While progress for women in business is evident in all of the legal systems of the countries represented, many political, financial and cultural barriers still exist. In order to overcome existing challenges and move women forward in the public and private sectors, the group recommends that states:
- Educate women from primary school through college.
- Work to bring women out of poverty.
- Select female leaders at all levels of government and establish more aggressive policies that encourage growth for women in business.
- Educate both men and women on the value of women’s participation in the work force.
- Continue dialogue about women’s issues among policy makers and academics. Specifically, hold additional discussions at major regional conferences on this topic.
18. While few believe in quotas for women, even opponents acknowledge that they can be a necessary tool. Notably, women are well-represented in the lower levels of business, but poorly represented at the corporate or board levels. This disparity shows that discrimination still exists and quotas could be used to fight this inequality. If you force social change by putting women in jobs, they will either rise to the occasion or step aside, so there should be no fear of quotas.
The Problems with Terrorism
19. The suggestion was made that terrorism is mostly a political phenomenon that demands a politically-focused solution, rather than force, which is the current approach. Socioeconomic factors affecting terrorism should also be addressed.
20. With regard to terrorism, Pakistan has been unable to adequately address the challenges posed by the empowerment of the Taliban and al-Qaeda following the U.S. invasion of Afghanistan. To alleviate these challenges:
- The Western and Muslim communities must jointly address the issue of terrorism in both Pakistan and Afghanistan. In particular, all parties must address seriously the danger of nuclear weapons in Pakistan falling into the hands of jihadi extremists.
- The war against terrorism must also incorporate the ideological battle forged by extremists.
21. The Gulf countries should establish a special fund to assist development in Central Asian countries lacking oil and gas but dependent on remittances from the Gulf. This fund could assist these countries in their efforts to launch different labor-absorbing projects, primarily those of small to medium size.
22. The international community should support Tajikistan to preserve social and political stability. This will enable Tajikistan to remain an access point to Afghanistan for non-military goods.
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Published: Tuesday, April 20, 2010