Nasdaq Hacking; Price of Oil; Food Crisis; Arab Revolutions; 21st Century Arab Awakening? Prof Lehmann

London, UK - 8th February 2011, 14:30 GMT

Dear ATCA Open & Philanthropia Friends

[Please note that the views presented by individual contributors are not necessarily representative of the views of ATCA, which is neutral. ATCA conducts collective Socratic dialogue on global opportunities and threats.]

Some key thoughts and questions which have emerged out of the recent Socratic dialogue:

Nasdaq Hacking

. Nasdaq confirms a breach in network, specifically a service that lets company directors securely share confidential docs. Consequences?
. Nasdaq: If hackers could breach inner trading systems, it may cause jitters among listed companies and millions of daily share transactions.

Price of Oil

. Oil price scenarios are circulating on both sides of the Atlantic which point to oil touching $150 to $200 per barrel if petro-regimes get affected by new insurrections? Probability?

Food Crisis

. Droughts, Floods and Food: We’re in the midst of a global food crisis, 2nd in three years. Brutal impact on world's poor. More insurrections?
. Is a global 21st century version of the French Revolution emerging ever since capital markets' 2008 crash & money printing by US, China etc?
. Rising food prices a problem in Saudi Arabia: In Middle-East's largest economy, food inflation is expected to hit 9% this year. Impact?

Arab Revolutions

. If Egypt's revolution is a still born baby will the people of other Arab nations still carry on with their spontaneous insurrections?
. US President Obama has said Egyptians won't permit an unresponsive government to fill Mubarak void without representation or free & fair elections.
. US Secretary of State Hilary Clinton warns of 'perfect storm': Rulers in Middle East must enforce political and social reforms or face backlash.
. What does this suggest about Egypt & Arab world? Those who make peaceful revolution impossible will make violent revolution inevitable! - JFK
. Gdansk, Beijing or Tehran? Hunt for Cairo parallels: Will Middle-East Governments melt away like 1979 or 1989 or stand firm like China?
. Which time feels like the present for Arab nations: 1776 US, 1789 France, 1848-50 Europe, 1917 Russia, 1979 Iran, 1989 China, 1989 Germany?

Egyptian Pharaoh

We are grateful to Prof Jean-Pierre Lehmann, founder of Evian Group -- dedicated to an open world economy -- from IMD Lausanne, Switzerland, for his submission to ATCA.

The 21st Century Arab Awakening?

Digital-Demographic Revolution

Inspired by their Tunisian soulmates, Egyptian demonstrators adapt the same slogans from the original French – “Mubarak, degage,” or “Mubarak, push off” – and use the same technologies, Twitter and Facebook. Violent uprisings have erupted in Yemen. Yemenis are not only among the most impoverished and most oppressed among Arab countries, but also the most fertile. Today the population stands at 24 million, which will reach 40 million in 2030 and 50 million in 2045. As much of the world ages, in 2045 the average age in Yemen will be 18! What is happening in the Arab world may be a “digital revolution”; it is also a “demographic revolution”.

Fire Spreads or Extinguishes?

The question is whether the fire of the Tunisian revolution will spread through the region, or be rapidly extinguished by formidable police power of the other states. Will Tunisia’s Jasmine Revolution prove to be the Arab region’s “Gdansk moment” – the birth of Solidarnosc on 31 August 1980 that set off a chain of events ultimately culminating in the fall of the Berlin Wall a decade later? A lot can happen in 10 years. Liberation from the oppressive suffocation that the Arab world has endured for decades need not be an impossible dream. But given the entrenched nature of the regimes and their propensity for violence, an Arab awakening may prove to be as turbulent, if not more so, than the collapse of the Soviet empire.

Stultifying Arab Economy

How to explain the seething masses and the stultifying Arab economy? When it comes to the transformations, China, opting after the death of Mao to “embrace” globalization, has emerged as a global leader. India, Vietnam, Brazil, Peru and South Africa are among the countries that chose a similar path. Arab countries, by mostly staying out of the global process, have earned the epithet: “the orphans of globalization.”

Weak Global Integration

By virtually any indicator, excluding oil, the Arab region’s global integration is weak. For example, 80 million Egyptians export less than 14 percent of what 68 million Thais export. The Vietnamese, 89 million, only recently rejoined the global economy and their exports are more than double Egypt’s. Excluding fuel, the United Arab Emirates, 6 million people, account for more than 50 percent of total Arab League exports. 10 out of the 21 members of the Arab League are not in the WTO and others (eg Saudi Arabia and the UAE) have only very recently joined. Foreign direct Investment is small. There a number of reasons, not the least because the region has not regionalized let alone globalized. Cross-border investments and trade between Arab League members are minimal. There is no Arab market.

Intellectual and Cultural Dimensions

Weak global integration refers not just to economics, but also to intellectual and cultural dimensions. More books are translated into Greek, population 11 million, than into Arabic. Whereas in the 1960s there were some 3000 books published annually in Egypt, the number has dropped to 300. This penury is ironic as the Islamic Caliphate and its House of Wisdom in Baghdad once translated into Arabic all the Greek and Latin classics, saving them for posterity. The first UN Development Programme Arab Human Development Report, published in 2002, compiled by Arab thought-leaders, highlighted three shortfalls – in freedom, knowledge and womanpower.

Orphans of Globalization

Being the orphans of globalization does not mean the region is independent of the outside world. Most Arab countries have a high proportion of their populations living and working abroad, in Europe, the Gulf states and North America – for example, 6 percent of Tunisians live in France. Hence, the region’s economies are highly dependent on remittances. Tourism and foreign aid are also vital. All this reinforces the notion of the Arab region as a passive actor on the receiving end of the global economic stage. The Arab region bifurcated from many other countries and regions in responding to globalization late last century. As the Lebanese author Saad Mehio commented: “while the rest of the world geared up to join the march of globalisation [after the end of the Cold War],” the Arab region experienced “more political oppression, more intellectual and cultural stagnation, and more economic and social despair.”

Exorbitantly High Youth Unemployment

There are a lot of “orphans” and most are young – 65 percent of the population of the Arab League is under the age of 30. Youth unemployment rates are exorbitantly high – as high as 75 percent in some countries like Algeria. While the informal economy provides partial compensation, this does not provide security; the Jasmine Revolution was triggered by the self-immolation of a young man, Mohamed Bouazizi, unemployed after police confiscated his wheelbarrow, used to make ends meet by selling fruits and vegetables.

Corruption and Cronyism

When asked their greatest ambition, up to 40 percent of young Arabs reply: to emigrate permanently. More oppressive than the lack of political freedom are pervasive corruption and cronyism. A bright former Egyptian student of mine explained why he was settling permanently in the US. He was from the minority Copt community – roughly half of whom are believed to have left Egypt – and from a lower middle-class family, hence lacking “wasta,” or connections; there were no opportunities for him in Egypt. Multiply that loss by millions, and one gets a sense of human capital flight from the region.

Digital Revolution

The forces for political change are strong and mounting, emerging mainly from young Arabs and facilitated by the digital revolution as highlighted by ATCA. The Jasmine Revolution may be the harbinger of change from within and by civil society, and may inspire forces in other authoritarian stagnant regimes. There have been a number of self-immolations following Bouazizi’s example, in Algeria, Egypt and Mauritania. The political atmosphere remains tense, to put it mildly, throughout the region. Arab leaders are not normally peacefully ousted at the ballot box. Following Jasmine, more unrest and revolution may come, from which democracy may emerge.

Iran Scenario and Alternatives

What would an Arab awakening look like? The political repression of the opposition and the ideological void provide fertile ground for the Islamists. Close connections between big business and dictators, huge amounts of wealth acquired by the elites, have tarnished liberal capitalism. Therefore, many fear an “Iran scenario.” There are alternative models, even among predominantly Muslim countries. The political transition in Indonesia is encouraging. Malaysia has managed the balance between economic growth, multi-ethnicity and politics reasonably well.

Turkey as Model

But the most relevant model and partner for the Arab region is Turkey. The combination of moderate political Islamism with a liberal market-oriented economy and the rise of new entrepreneurs transformed that country from a political and economic backwater for much of the 20th century to an increasingly global dynamic player in the 21st. Europe can play a constructive role by favoring the forces of awakening rather than siding with the forces of repression as France seemed to do in the early days of the Jasmine Revolution.

Glimmers of Hope

In the last century when dictators still ruled in Southern Europe and standards of living were low, the gap between North and South Mediterranean was narrow. In the last 25 years, however, the gap has become a deep chasm as the North democratized, prospered and globalized, while the South stagnated, or, in some cases, regressed. By cozying up to dictators, Europe must bear its share of responsibility; Europe could, indeed should, play a constructive role in narrowing the Mediterranean chasm. But ultimately the initiative must come from the Arabs themselves. As the world is painfully aware with Iraq, attempts to bring about regime change by foreign invasion result in mayhem. Just as the courageous Tunisians took to the street, inspiring the army to stand back, forcing the dictator to flee, so must similar scenarios elsewhere in the region. The Arab awakening is not an impossible dream. With Jasmine, we may be seeing early glimmers of hope.

[ENDS]

Jean-Pierre Lehmann is Professor of International Political Economy at IMD International -- Institute for Management Development -- in Lausanne, Switzerland, since January 1997. His main areas of expertise are the socio-economic and business dynamics of East Asia, the impact of globalisation on developing countries and the government -- business interface, especially in respect to the global trade and investment policy process. In 1994 he launched the Evian Group, which consists of high ranking officials, business executives, independent experts and opinion leaders from Europe, Asia and the Americas. The Evian Group's focus is on the international economic order in the global era, specifically the reciprocal impact and influence of international business and the WTO agenda. Jean-Pierre Lehmann acts in various leading capacities in several public policy institutes and organisations. He obtained his undergraduate degree from Georgetown University, Washington DC, and his doctorate from St Antony's College, Oxford University. He is the author of several books and numerous articles and papers primarily dealing with modern East Asian history and East Asia and the international political economy.

Prior to joining IMD, Jean-Pierre Lehmann has had both an academic and a business career which over the years has encompassed activities in virtually all East Asian and Western European countries, as well as North America. He was (from 1992) the founding director of the European Institute of Japanese Studies (EIJS) at the Stockholm School of Economics and Professor of East Asian Political Economy and Business. From 1986 to 1992 he established and directed the East Asian operations of InterMatrix, a London based business strategy research and consulting organisation. During that time he was operating primarily from Tokyo, with offices in Seoul, Taipei, Bangkok and Jakarta and was concurrently Affiliated Professor of International Business at the London Business School. Other previous positions include: Associate Professor of International Business at INSEAD (European Institute of Business Administration) in Fontainebleau, France; Visiting Professor at the Bologna Center (Italy) of the Johns Hopkins University School of Advanced International Studies; twice in the 70s Visiting Professor and Japan Foundation Fellow at the University of Tohoku, Sendai (Japan); and Founding Director of the Center for Japanese Studies at the University of Stirling (Scotland), where he also taught East Asian history in the University's History Department. From 1981 to 1986 he directed the EC-ASEAN 'Transfer of Technology and Socio-Economic Development Programmes' held in Singapore, Bangkok, Jakarta, Kuala-Lumpur and Manila.

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