Underdevelopment or de-development in the

Arab world Development by encroachment in the

Arab region

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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.

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.”

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EmpiricsTable 1. Growth in real GDP per capita in the AAS region

1971-1980

1980-1990

1990-2000

1971-2000

GCC countries 1.85 (7.67) 0.50 (2.78)

Otherdiversified economies

5.87 (0.16) 0.35 0.02

Total AAS 4.99 (3.43) 0.34 (0.85)

Source: United Nations Statistics database.

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Long run average per capita growth rate

Real percapita income Logarithm (average=about zero percent)

7.2

7.3

7.4

7.5

7.6

7.7

7.8

7.9

8

8.1

8.2

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Real per capita income

Linear (Real per capita income)

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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

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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 Employment derives from development when there derives from development when there wasn’t any.wasn’t any.

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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.

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Investment rates plummet as private sector takes over

Investment ratio

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

Investmentratio

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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.

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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.

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‘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.

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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

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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.

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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.

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A rough measure of capital per worker

Trend

Trend in capital per worker

9.6 9.65 9.7

9.75 9.8

9.85 9.9

1990 1992 1994 1996 1998 2000

capital per worker Linear (capital per worker)

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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

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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.

0

100

200

300

400

500

600

19881990

19921994

19961998

2000

Bill

ions

of

US

dolla

rs

Actual GDP

Foregone GDP

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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.

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Unlike others: high savings

Saving and investment ratios

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

S as % GDP

I as % of GDP

Poly. (S as % GDP)

Poly. (I as % of GDP)

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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.

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SecuritySecurity 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 self-determination; 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.

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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.

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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.

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 extra-economic means (encroachment and dispossession) holds primacy over the course of events.