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IN business, it is desirable to have certain law that makes good commercial sense, and helpful to know what fundamental concepts like “a contract of sale of goods” actually mean. The Supreme Court in PST Energy 7 Shipping LLC and another v OW Bunker Malta Ltd. and another (“The Res Cogitans”)  UKSC 22 grappled with precisely this question.
Some readers may have memories of postwar Alexandria and Cairo or will have read Lawrence Durrell's Alexandria Quartet – the tales of a cosmopolitan high society. Egypt appeared in the mid-1940s to be as economically developed as war-torn Greece and equally ready to catch up with the rest of Europe. To the north, Turkey was singled out like Greece for special assistance under the Truman Doctrine (March 1947) and seemed virtually a part of Europe. To the west, in “French” Algeria, Algiers was at least as prosperous as the rest of France, and, further west, Casablanca was home to big French industrial interests poised to transform the picturesque Moroccan protectorate into Europe's California. At the eastern end of the Mediterranean, a newly independent and polyglot Lebanon was fast becoming the West's principal commercial gateway to Iran, Iraq, and the Gulf. Riding on the postwar oil boom in those states, Lebanon would become the Middle East's Switzerland in the 1950s and 1960s and apparently exemplify an easy “modernization without revolution” (Salem 1973). Beneath snow-covered mountains, on the unspoiled shores of a clear and relatively unpolluted Mediterranean Sea, Beirut was as pretty as Geneva in those days, at least in the richer parts of the city, and livelier than Calvin's home. Inland, to the east of Lebanon's two mountain ridges, the open Syrian economy boomed with new manufacturing and agricultural development in the 1950s (Sachs and Warner 1995: 34). Morocco and Turkey also grew rapidly during this period because their open economies took advantage of expanding world markets. Of all the new states in the region, however, Iraq had the most promising prospects for balanced development. It was endowed in 1960 with the world's fourth largest proven oil reserves, the most water of any country in the Middle East and North Africa (MENA) including Turkey, some of the richest alluvial soils, a strong British educational system, and a relatively large, skilled workforce. Further east, Iran had three times the population and a diversified economy with oil reserves slightly more plentiful than Iraq's and very substantial natural gas deposits as well (OPEC 2008, Table 9). Captivated by the cash flows, the young shah would dream of making his country into the world's third or fourth mightiest military power.
A state is supposed to be strong and nimble to take full advantage of the accelerated flows of capital, goods, and information associated with the post–Cold War surge of globalization, but few states in the MENA seem to be in the running. Perceived or imagined threats to their survival hobble and tangle a number of them in mushrooming security bureaucracies. Structural adjustment and the rise of political Islam and various ethnic identities have taken their toll, rendering many incumbent regimes ever clumsier, more repressive, and burdened with ever higher costs of police and military establishments. So much so that a representative group of Arab intellectuals issued the Arab Human Development Report 2002 sparking widespread debate about an alleged “freedom deficit” that was preventing any sustained development in the region. And in Iran, record urban crowds – reminiscent of the massive serial demonstrations leading to the 1979 revolution – protested the irregularities of the June 12, 2009, presidential elections. Indeed, if the World Bank's Voice and Accountability indicator, as reported in Figure 3.1, is a fair measure of the freedom deficit, the region's regimes on average scored lower in 1998 and worse in 2008 than those of any other region except the former Soviet Union, which had helped to shape a number of them to its obsolete security specifications.
This chapter tries independently to compare the capacities of the MENA regimes to mobilize resources efficiently and effectively for sustainable development in response to the challenges of globalization. To recall from Chapter 1, MENA polities consist of three major types – praetorian republics, monarchies, and, last, democracies of varying degrees of institutionalized competitiveness. Each category is in turn composed of subtypes. Praetorian republics are either “bunker” or “bully” states. Praetorian republics ruled by “bullies” have some elements of both civil society and rational-legal legitimacy, which in turn reduce, but do not altogether eliminate, the importance of violence and coercion in political life. The structural power of local capital, although negligible in praetorian republics governed by bullies, is noticeably greater than in bunker states, where security of property is insufficient to permit capital accumulation in the home country. Consequently the “bully” responses to economic globalization are less brutal than those of the bunkers. The limited capacities of the “bully” states, however, and the structural weakness of capital within them, to say nothing of their own political power requirements, have severely constrained their efforts to globalize. Egypt, Tunisia, and post-2005 Iran – after hardliners engineered the election of President Mahmoud Ahmedinejad – comprise the “bully” states of the MENA, whereas Algeria, Iraq, Libya, Sudan, Syria, and Yemen are the bunker states.
We were commissioned by the editors of the series in which this volume appears to produce a manuscript on the politics of economic development in the Middle East and North Africa (MENA). In fact we have written a book that seeks to describe and explain the responses of that region to the threats and opportunities posed by economic globalization, the driving force of change not only for these, but for virtually all economies in the developing, not to say developed, world. We have sought to avoid the normative debate over the phenomenon. We have also not speculated on the possible consequences for the MENA of increasing criticism of and resistance to globalization and its standard bearers. We have assumed that at least for the foreseeable future this criticism and resistance are unlikely to fundamentally alter the course or momentum of economic globalization, whatever its consequences for the rhetoric and actions of such standard bearers as the IMF and World Bank.
We are convinced that globalization should be the starting point for understanding economic change in the region. It is the primary thesis against which all countries of the region are struggling to form responses. The widely perceived analogy, at least in the MENA, between today's globalization and yesterday's colonialism provides an analytical framework with which to understand not only the region's response as a whole to ‘awlama (the newly coined Arabic term for globalization), but also the strategies employed by individual countries and particular social forces within them. Similar to the colonial dialectic which pitted the region's traditional, radical, and revolutionary nationalists against imperialism, the “globalization dialectic” is now generating three distinct stances contending with what is simultaneously a threat and an opportunity, both politically and economically. Aspiring globalizers contend with reactive moralizers in search of new syntheses that might promote the needed reforms in the name of the authentic Islam.
Writing a second edition a decade after the first provides ample time to reflect on our original work. By and large it seems to have stood the test of time, even if some assumptions and implied prognoses were off the mark. We overestimated both the magnitude and the consequences of the financial squeeze on the MENA. Excess global liquidity, which caused investors to seek out higher rates of return in emerging markets, combined with substantial increases in hydrocarbon prices, generated financial resources for the region in excess of what we anticipated. Pressures for governments to become more transparent and accountable were correspondingly less. But so, too, did we underestimate the creativity of MENA governments in combining focused governance reforms with persisting authoritarianism, so that they maintained or even enhanced revenue flows without democratizing. We also did not foresee the dramatic emergence within the regional and global economies of the Arab Gulf states and the increased speed and depth of change to their domestic political economies. Iran's collapse into praetorianism was likewise not anticipated. On the other hand, the basic finding of the first edition, which was that the MENA countries can be categorized according to regime types and that those types in turn determine capacities to respond to the threats and opportunities of globalization, has been borne out. Over the past decade the region's worst performers have been the most repressive and the best performers the most democratic, with others similarly arrayed as predicted. So, too, has the claimed relationship between financial sector autonomy and civil society capacity been demonstrated to obtain.
Readers familiar with the previous edition will notice that this one is considerably larger. That is due not just to updating, but to a remarkable increase in available comparative economic and governance data over the past decade, a phenomenon that has paralleled and contributed to economic globalization. We have drawn on this data to evaluate propositions contained in the first edition and to formulate new ones. We have also used it to enrich analyses of specific countries. Discerning readers will notice a substantial increase in tables and figures, which we hope will help both to explicate and to reinforce our arguments that link globalization, regime, and civil society types and capacities with political and economic outcomes.
Egypt, Tunisia, and the area controlled by the Palestinian Authority are not ruled from bunkers by elites beholden to clans, tribes, or other traditional social formations. In the case of Egypt and Tunisia, and the prospective Palestinian state, the ruling elites are at once both more narrowly and broadly based. Their rule rests almost exclusively on the institutional power of the military/security/party apparatus, but because these elites are not drawn from a clearly identified social formation, they are at least not unrepresentative of their relatively homogeneous political communities. Because the state provides the primary underpinning for these regimes, they have relatively little incentive to build and maintain ruling coalitions based in their respective political societies. The rulers of each of them seem content to restrict their extrastate coalition building to the placation of rural and traditional elites. Rent-seeking arrangements with crony capitalists are more for the purposes of serving state-based patronage networks than for broadening ruling coalitions.
The differences between bunker and bully praetorian republics, other than the key issue of the lack of autonomy of the bunker states from social formations, are not great. The leaders of Egypt and Tunisia, not having been forced to forge societal as opposed to state-based coalitions to come to or maintain their power, lack the political legitimacy that flows, as Max Weber described, from tradition, charisma, or rational-legal procedures. Yasser Arafat used a combination of his coercive capacity based in the Palestine Liberation Organization (PLO) and support from Israel and the United States, as well as political alliances on the ground in the West Bank and Gaza, to assert control over Palestine. By virtue of having built those alliances and because of his historical role as state builder, Arafat personally enjoyed considerable legitimacy, but after his death in 2005, the Palestinian “state” lost much of its legitimacy. Fatah, the party he had founded, was attempting in 2010 to restore that legitimacy, but it also required credible progress toward a two-state solution. Meanwhile Iran, discussed in Chapter 7, was apparently losing any semblance of democratic legitimacy and relying ever more on police and paramilitary power like the other bully praetorians.
The monarchies in the region are better positioned than praetorian republics to take advantage of the opportunities of globalization. They have more active private sectors, some of which have joint ventures and other constructive relationships with multinational companies, in petroleum-related industries for the most part. Many of them also have concentrated financial systems, discussed in Chapter 3, that enable them to engage in a controlled liberalization consonant with the Washington Consensus. However, the monarchies are also politically more vulnerable than the praetorians because they did not undergo the full political transformation of a colonial dialectic. And they depend almost as much as the other regimes discussed so far in this book on their military and police forces to stay in power – rather than on any deeply rooted traditional legitimacy to which their official propaganda machines lay claim.
Most of them are relics of British imperialism. Britain generally preferred to intervene as little as possible in the internal affairs of these possessions because their prime importance lay in their geographical positions, astride passages to India, not in any intrinsic worth. It was easier to deal with ruling families by anointing them as monarchs than to reorganize their territories as crown colonies. Borders were matters of chance and political opportunity. As colonial secretary in 1921, for instance, Winston Churchill invented Jordan for the sake of one of the sons of the Sharif Hussein of Mecca. The father was owed favors for sponsoring T. E. Lawrence's Arab Revolt against the Turks in World War I. Abdullah, the son in question, had been promised Iraq, but the British gave this plum instead to his younger and more cosmopolitan brother Faisal, who became “available” after the French expelled him from Syria in 1920. The British protected other ruling families, the Sabahs of Kuwait, the Khalifas of Bahrain, the Thanis of Qatar, and the Qabbous of Oman, as well as other tribal notables along the Arabian coastline of the Persian Gulf, helping them to assume the trappings of monarchy and to limit the field of Saudi expansion. Only Morocco's ruling dynasty has roots in the precolonial past, whereas Saudi Arabia, defined by the conquests of its ruling family, only fully emerged with defined borders in the early 1930s. Despite receiving British subsidies, the Saud family retained its independence first by winning the holy lands of Mecca and Medina in 1926 and then by offering oil concessions to the Americans.
The MENA, which hesitated more than any other region of the world to adopt the reforms needed to benefit from the new international division of labor, has progressed considerably since the 1990s in adopting the neoliberal principles of the Washington Consensus as its basis for formulating national economic policies. Global changes are breaking the cocoon that had once protected the region from major structural changes. This chapter first views the degrees to which the region has engaged in the globalization dialectic, and then goes on to analyze the continuing international and regional incentives and counter pressures. Although the MENA continues to attract a disproportionate share of attention from external powers and to receive abundant petroleum as well as strategic rents, the financial flows no longer insulate it from the need to reform. Rapid economic growth is needed to meet the region's spectacular gift and challenge: the youth bulge of record numbers reflecting major demographic changes (Fuller 2004). Although many states such as Algeria, Iran, and Turkey dramatically reduced their birth rates in the 1990s, their baby booms of the 1980s keep enlarging labor markets. Local economies, in wealthy countries such as Saudi Arabia as well as poorer ones, need to offer sufficient employment to preserve social stability in the face of regional and international threats and challenges. Out of self-preservation, they are compelled to seek to attract new businesses, technologies, and compensatory capital flows, which in turn require economic structural adjustments. That this process is proceeding unevenly attests to those states’ different internal capacities for reform, the topic that is taken up in Chapter 3.
By economic globalization is meant the removal of barriers to exchanges of goods, people, capital, and ideas. Technology drives the process. Just as steamships and wire transfers made possible the pre-1914 era of globalization, so the information revolution has accelerated the present era of globalization that began in the 1950s with telexes and container ships. In contrast to Western theories of progress and modernization, however, there is nothing inevitable about globalization. It is the product of deliberate government choices to remove barriers to trade and to the movement of people and capital and not to engage in new forms of censorship. Were the Great Recession of 2008–10 to deepen into another Great Depression, the process might yet be reversed. More likely, however, it may be a more universal application of the Washington Consensus that will require the United States to structurally adjust and manage its twin fiscal and trade deficits.