The Arab World and the Challenges of Globalization

The Arab World and the Challenges of Globalization
Prepared By: Hassan Krayem
Dr. Hassan Krayem is a lecturer in the Political Studies and Public Administration Department at the American University of Beirut, Lebanon

Abstract: This article discusses the nature of the process of globalization that has greatly affected the world in the last two decades. Globalization is defined and economic globalization is emphasized. Also "Neo-Liberalism the ideological discourse of globalization is critically reviewed. "De-Globalization" the alternative to globalization is also discussed. The second part of the article outlines the conditions of the Arab world and basic problems and challenges it is confronting with regard to development and globalization. Finally, the integrative option is presented as a necessary plan to face the pressures of globalization.



Humanity enters the 21st century having achieved tremendous and comprehensive progress in its productive, technological and scientific capabilities. Nevertheless, such vast potential for productive capabilities have not been transformed into factors of improvement of the difficult conditions of the life of many humans in various sectors. According to the World Bank 1,300 million of the inhabitants of the universe get an income of less than one dollar a day, and thus suffer from severe poverty. Forty percent of the world population also suffers from lack of electricity and health services. According to the UNDP about 800 million suffer from malnutrition and 500 million suffer from chronicle malnutrition. 17 million die every year of diseases that can be cured like diarrhea, malaria and Tuberculosis.  That description normally fits the countries in the south, which increases the gap between the rich north and the very poor south. The increase in the level of social polarization internationally is closely associated with poverty and social marginalization. According to the UNDP, in the last thirty years the income of the lowest twenty- percent of the very poor income earners dropped from 2 to 1.45 percent of the world income. Where as the income of the highest twenty percent of the very wealthy income earners increased from 70 to 85 percent of the global wealth. 358 billionaires have a fortune that exceeds the cumulative income of 45 percent of the population of the world or 2.3 billion individuals. As for the unemployment figures, it shows an increase in the rate of unemployment and deterioration in the conditions and qualities of job opportunities. The International Labor Organization (ILO) reports indicate that in 1995 about 30 percent of the global labor force suffered from unemployment or underemployment. Such high unemployment rates have pushed large segments of the population towards what is known as the informal economy which is composed of unstable low paid, low productive jobs in which the laborers do not have any health or social protective systems. In 1995 in Latin America figures show that about 55.7 percent of the labor force worked in the informal sector.     
In the last decade the world has witnessed an important development in the tendency towards greater globalization. More than 135 states joined the World Trade Organization, and the various rounds of negotiations, especially the Uruguay round, leading to many international agreements in free trade and liberating global trade in relation to commodities, services and capital. All of these took place while the role of science and technology; information and communication were increasing tremendously leading to economic globalization in production, distribution, consumption and an unprecedented financial globalization. At the same time, some sort of a globalization of ideas began to take place as the dominant international centers and institutions tried to impose and market them. However, it was faced with an increasing resistance and limited success. In this particular meaning, globalization is a new phenomenon. However, according to many economists globalization is a reflection of an essential characteristic in the capitalist system in order to expand and impose its laws and mechanisms globally, annexing markets and countries in a process of increasing merging in an uneven manner that would centralize wealth, on the one hand, and lead to social destruction and marginalization on the other. Globalization has not reached its final form yet. It is still experiencing many changes in form and substance, and the world is passing through a transitional stage in which many contradictions and confrontations between the large economic blocs are taking place, especially at the levels of large corporations and regional economies.


I. What is Globalization?

The Concept of globalization involves more than the geographical extension of issues and phenomena to the world. It includes an "intensification of global connectedness and a consciousness that intensification, with a corresponding diminution in the significance of territorial boundaries and state structures."  
At its most basic, there is nothing mysterious about globalization. The term has come into common usage since the 1980s, reflecting technological advances that have made it easier and quicker to complete international transactions-both trade and financial flows. It refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity.
The term "globalization" has acquired considerable controversial force. Some view it as a process that is beneficial and also inevitable and irreversible. Others regard it with hostility, even fear, believing that it increases inequality within and between nations, threatens employment and living standards and thwarts social progress. The crises in the emerging markets in the 1990s, especially in East Asia have made it quite evident that the opportunities of globalization do not come without risks-risks arising from volatile capital movements and the risks of social, economic, and environmental degradation created by poverty.
Globalization is not just a recent phenomenon. Some analysts have argued that the world economy was just as globalized 100 years ago as it is today. But today commerce and financial services are far more developed and deeply integrated than they were at that time. The most striking aspect of this has been the integration of financial markets made possible by modern electronic communication.  There are also broader cultural, political and environmental dimensions of globalization, but this paper will exclusively focus on the economical aspects of globalization.


A) Economic Globalization of Production and distribution.    

Economic "globalization" is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through trade and financial flows. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders.
Economic globalization is a process or a movement towards a world economic system where multinational companies transcend national boundaries and legal systems taking power from governments.
Markets promote efficiency through competition and the division of labor - the specialization that allows people and economies to focus on what they do best. Global markets offer greater opportunity for people to tap into more and larger markets around the world. It means that they can have access to more capital flows, technology, cheaper imports, and larger export markets.
The 20th century saw unparalleled economic growth, with global per capita GDP increasing almost five-fold. But this growth was not steady - the strongest expansion came during the second half of the century, a period of rapid trade expansion accompanied by trade - and typically somewhat later, financial - liberalization.  The story of the 20th century was of remarkable average income growth, but it is also quite obvious that the progress was not evenly dispersed. The gaps between rich and poor countries, and rich and poor people within countries, have grown. The richest quarter of the worldصs population saw its per capita GDP increase nearly six-fold during the century, while the poorest quarter experienced less than a three-fold increase. Income inequality has clearly increased. But, as noted below, per capita GDP does not tell the whole story.
During the 20th century, global average per capita income rose strongly, but with considerable variation among countries. It is clear that the income gap between rich and poor countries has been widening for many decades. The most recent World Economic Outlook studies 42 countries (representing almost 90 percent of world population) for which data are available for the entire 20th century. It reaches the conclusion that output per capita has risen appreciably but that the distribution of income among countries has become more unequal than at the beginning of the century.


B) Financial  Globalization

The succession of crises in the 1990s-Mexico, Thailand, Indonesia, Korea, Russia, and Brazil-suggested to some that financial crises are a direct and inevitable result of globalization. Indeed one question that arises in both advanced and emerging market economies is whether globalization makes economic management more difficult.
Does increased integration, particularly in the financial sphere make it more difficult for governments to manage economic activity, for instance by limiting governmentsص choices of tax rates and tax systems, or their freedom of action on monetary or exchange rate policies? In the short-term, as we have seen in the past few years, volatile short-term capital flows can threaten macroeconomic stability. Thus in a world of integrated financial markets, countries will find it increasingly risky to follow policies that do not promote financial stability. This discipline also applies to the private sector, which will find it more difficult to implement wage increases and price markups that would make the country concerned become uncompetitive.
But there is another kind of risk. Sometimes investors-particularly short-term investorsرtake too sanguine a view of a countryصs prospects and capital inflows may continue even when economic policies have become too relaxed. This exposes the country to the risk that when perceptions change, there may be a sudden brutal withdrawal of capital from the country.  
There is no denying the fact that the globalization of finance has surpassed the globalization of production. With a daily turnover of 1.2 trillion dollars in 1995, the global currency trading has gained a life of its own, and much of it is hardly related to the real economy. The deregulation and globalization of financial markets in developing countries coupled with lower interest rates and institutionalization of savings in developed countries are the main factors behind the rapid transborder capital mobility.
However, increased global capital mobility has been accompanied by an increased frequency of financial crises in both the developed and developing countries.  The fact that there is a positive correlation with international financial liberalization and financial crises has been well established. Even the International Monetary Fund (IMF) has admitted this fact. In a recent study, which looked into the empirical relationship between banking crises and financial liberalization in 53 countries during the 1980-95 period, the IMF also came to the conclusion that banking crises are more likely to occur in liberalized financial systems.  
As recent financial crises are the outcome of international financial liberalization, there is a growing concern to restructure the present international financial architecture. Surprisingly, the need for effective and meaningful regulations is not only expressed by leftists economists or radical groups, even the true believers of liberalization and globalization are also advocating the relevance of capital controls and regulatory mechanisms. Critics had never anticipated that the tide against free-market financial system would turn so quickly. Perhaps, certain recent events, particularly the contagion effects of the Southeast Asian currency crisis and the near collapse of a multi-billion hedge fund, the Long-Term Capital Management, seem to have contributed in the sudden change of mindset. Increasingly, it is being admitted that if the international financial system is not regulated, no country can remain immune from the impact of financial crisis.
In order to situate the policies of globalization in their social and historical contexts it is useful to illustrate their relationship with Neo-liberalism as the ideology that explains the contemporary economic policies at the global level.  


II. Neo-liberalism: the discourse of globalization

Neo-liberalism" is a set of economic policies that have become widespread during the last 25 years or so. "Liberalism" can refer to political, economic, or even religious ideas. "Neo" means new kind of liberalism. The liberal school of economics became famous in Europe when Adam Smith, an English economist, published a book in 1776 called The Wealth of Nations. He and others advocated the abolition of government intervention in economic matters. No restrictions on manufacturing, no barriers to commerce, no tariffs, and free trade was the best way for a nation's economy to develop. Such ideas were "liberal" in the sense of no controls. This "free" enterprise," "free" competition economic liberalism prevailed in the United States and Western Europe through the 1800s and early 1900s. Then the Great Depression of the 1930s led to the triumph of Keynesian theory and social democracy in the USA and Western Europe challenging liberalism as the best policy for capitalism. In essence, full employment was viewed as necessary for capitalism to grow and it can be achieved only if governments and central banks intervene to increase employment. Also governments should play their role in providing essential services such as health and education to all citizens, and they should provide social safety programs for the poor. The belief that government should advance the common good became widely accepted.
But the capitalist crisis over the last 25 years, with its shrinking profit rates, inspired the corporate elite to revive economic liberalism. That's what makes it "neo" or new. Now, with the rapid globalization of the capitalist economy, we are seeing neo-liberalism on a global scale.
At the international level, neo-liberals have concentrated all their efforts on three fundamental points:
1) Free trade in goods and services.
2) Free circulation of capital.
3) Freedom of investment.

Over the past twenty years, the IMF has been strengthened enormously. Thanks to the debt crisis and the mechanism of conditionality, it has moved from balance of payments support to being the imposer of structural adjustment policies, meaning of course neo-liberal ones. The World Trade Organization was finally put in place in January 1995 after long and laborious negotiations.

The main points of neo-liberalism include:

1) The rule of the Market. Liberating "free" enterprise or private enterprise from any bonds imposed by the state no matter how much social damage this causes. Greater openness to international trade and investment. Reduce wages by de-unionizing workers and eliminating workers' rights that had been won over many years of struggle. No more price controls. All in all, total freedom of movement for capital, goods and services. An unregulated market is the best way to increase economic growth, which will ultimately benefit everyone.
2) Cutting public expenditures for social services like education and health care and reducing safety net for the poor. It may also include reducing even maintenance of roads, bridges, water supply in the name of reducing government's role. However, government subsidies and tax benefits for business may be allowed as incentives to promote investments.
3) Deregulation.  Reduce government regulation of everything that could diminish profits, including protecting the environment and safety on the job.
4) Privatization.تSell state-owned enterprises, goods and services to private investors. This includes banks, key industries, railroads, toll highways, electricity, schools, hospitals and even fresh water. Although usually done in the name of greater efficiency, which is often needed, privatization may lead to concentrating wealth in a few hands and making the public pay even more for its needs.
5) Disregard the concept of "Public Good" and replacing it with "individual responsibility." Pressuring the poorest people in a society to find solutions to their lack of health care, education and social security all by themselves.
Around the world, powerful financial institutions like the International  Monetary  Fund  (IMF),  the  World  Bank  and the Inter-American Development Bank have imposed neo-liberalism. It is raging all over Latin America. The first clear example of neo-liberalism at work came in Chile with economist Milton Friedman policies. Other countries followed, with some of the worst effects in Mexico where wages declined 40 to 50% in the first year of NAFTA while the cost of living rose by 80%. Over 20,000 small and medium businesses have failed and more than 1,000 state-owned enterprises have been privatized in Mexico.


III. What is the Alternative? Deglobalization?

In 1997, the financial crises that started in East and Southeast Asia moved to Russia and Brazil in 1998. These crises were a reflection of a financial global crisis for as the average rate of capital movement increased, the average rate of global trade and productive investment remained intact. The reason for that was the availability of a surplus capital, which was able to move fast to other countries in order to obtain a higher and safer rate of profit. In 1992, capital moved to Southeast Asia because of the higher economic growth rate. That led to inflation in the stocks and real state markets as well as in the real value of the national currencies. Faced with first financial crisis, this capital retreated and withdrew from the region resulting in the collapse of the national currencies in many of these countries, especially Malaysia, Thailand and South Korea. What happened in this region is an indicator that the pattern of financial globalization has entered - into the crisis stage as many countries began implementing systems of financial control and regulation to protect them. This does not mean, however, that economic, technological and trade globalizations are not continuing strongly.
On the other hand, the resistance of the developing countries, social movements, civil society organizations, labor unions, pro-environment movements, and human rights organizations exemplified another kind of resistance to globalization. The demonstrations in Seattle in December 1999, against the World Trade Organizationصs meetings, and the protest movements in many other countries, were a clear expression of the increasing awareness of the people and societies, of the dangers associated with free trade and globalization. Globalization is viewed as a cover up for the hegemony of the strong capitalist centers on the global economy in order to adjust it to maintain and promote their own interests at the expense of the developing countries and the vast majority of the real producers in developed countries. The horizon for changing, correcting or even decreasing the negative impact of globalization to protect the right to development and to protect the rights of the workers, small producers, and marginalized groups in the industrial world, depend on that sort of resistance that is being practiced by the people through their organizations, which express their interests and their choices
In recent years many social movements, trade unions, political groups and intellectual forms became very active in their opposition to globalization and its main vehicle World Trade Organization. The alternative ideas are not yet well developed but they include:

1) Reorienting economies from production for export to production for the local market.
2) Drawing most of the financial resources for development from within rather than becoming dependent on foreign investment and foreign financial markets.
3) Carrying out the long-postponed measures of income redistribution and land redistribution to create a vibrant internal market that would be the anchor of the economy.
4)  De-emphasizing growth and maximizing equity in order to radically reduce environmental disequilibrium.
5) Not leaving strategic economic decisions to the market but making them subject to democratic choice.
6) Subjecting the private sector and the state to constant monitoring by civil society.
7) Creating a new production and exchange complex that includes community cooperatives, private enterprises, and state enterprises, and excludes TNCs.
8) Preserving the principle of subsidiarity in economic life by encouraging production of goods to take place at the community and national level if it can be done so at reasonable cost in order to preserve community.

Generally it is a strategy that consciously subordinates the logic of the market, the pursuit of cost efficiency to the values of security, equity, and social solidarity. Deglobalization or the re-empowerment of the local and national, however, can only succeed if it takes place within an alternative system of global economic governance.
Today's need is not another centralized global institution but the de-concentration and de-centralization of institutional power and the creation of a pluralistic system of institutions and organizations interacting with one another, guided by broad and flexible agreements and understandings.
It was under such a more pluralistic system of global economic governance, where hegemonic power was still far from institutionalized in a set of all-encompassing and powerful multilateral organizations and institutions that a number of Latin American and Asian countries were able to achieve a modicum of industrial development in the period from 1950 to 1970. It was under such a pluralistic system, under a General Agreement on Tariffs and Trade (GATT) that was limited in its power, flexible, and more sympathetic to the special status of developing countries, that the East and Southeast Asian countries were able to become newly industrializing countries through activist state trade and industrial policies that departed significantly from the free-market biases enshrined in the WTO.
The following section focuses on the conditions of the Arab world in order to discuss the challenges of globalization.

  IV. The Arab World: a Panoramic View
 The Arab world as part of the third world does not differ from other south peripheral states in its history of the economic merging into the global market whether through direct colonialism, or through uneven and unequal economic relations that reflect the economic domination through the international division of labor, international trade relations, monopoly over technology and market domination. Nevertheless, there are particular characteristics that distinguish the Arab world from the rest of the south states. The most important of which are:

1. The existence of huge quantities of crude oil, which made it the first source of that vital commodity to the industrial world for a long period of time. About two thirds of the oil reserve in the world lies in the Arab world. This strategic commodity plays a significant role in the economic growth in the Arab world. On the other hand, it increases the dangers associated with the plans to regain control over the region in order to monitor the use of this strategic commodity. This has been the case in the last two decades in the Gulf States especially after the direct American military intervention after the Gulf war in order to firmly control oil production, oil pricing, transportation and marketing. As a result of the oil wealth there developed an accumulated monetary wealth in the Gulf States especially after the increase of the oil prices in 1973. However, most of it went to finance security systems and purchasing of weapons that sucked the surplus capital from the region and transferred it to the developed countries turning it into one that lacks capital and suffers from debt. The Arab world has also witnessed in the last decades some degrees of labor migration, which helped in the spread out of the oil fortune outside of the rich oil producing countries, especially in the 1970صs and 80صs. This tendency, however, was reversed in the 1990صs after the second gulf war negatively affecting many Arab economies such as Yemen, Egypt, Sudan, Jordan, Lebanon, and Palestine.

2. The second characteristic is greatly linked to the first. The strategic location or position that the Arab world occupied during the cold war and its experience of a long historical conflict with the Zionist settlement project in Palestine supported by the dominant international centers has affected the Arab world as it forced many Arab countries to follow a pattern of militarization and to fight five very costly wars in which a lot of economic resources were allocated to military budgets and weaponry.
The economic and geo-political importance of the Arab world is behind the targeting of many projects, which aim at the restructuring of the region in accordance with international balance of forces. That is not only reflected with the direct American military presence in the Gulf, but also in the peace settlement projects starting with the Madrid conference in 1991. Economic projects such as the Middle East order sometimes, or the Mediterranean order some other time, are designed to replace the fragile Arab regional order with alternative ones. On the other hand, to integrate the economies and countries in the region in the new international order intensifying their dependency and increasing the domination of the imperialist powers over the national governments in the Arab world.  

3. Lack of water resources in the Arab world has become a strategic and security issue as well as an important developmental issue. The population of the Arab world represents five percent of the world population, but they only get one percent of the available global water resources. More importantly, most of these water resources are not controlled by the Arab states, which may lead to wars and conflicts with other states in order to secure this vital commodity. On the other hand, the adaptation with lack of water is pushing the sates in the Arab world to abandon agriculture as the economic value of water in agriculture is much less than its value in industry or domestic use. The rate of population growth is still relatively high in the Arab world, estimated about 2.1 percent annually. That means that the population will double in about forty years. It may reach 600 million by the year 2035. This will increase food dependency as the Arab world imports now 15 percent of the food products and thus pay very expensive and costly bills.

4. The Arab world has experienced in the last fifty years, an increase in the role of the state in the economy. This was true whether the model of the state was a شsocialistص, liberal or conservative oil-rentier model.  In the last decades the role of the state decreased, as a result of the global tendencies and international trade, capital movements and communications. Inevitably this weakened the protection provided by the state to many segments of society, especially the poor, as a result of the policies of structural adjustments. That negatively affected the human development record especially social development in the Arab world. As for the oil-rentier states it suffered from a sharp drop in the oil prices, which resulted in accumulated budget deficits and therefore a decrease in its ability to redistribute the surplus rent to many groups in society.

5. The fifth characteristic, which has made some consider the Arab world exceptional, is the problem of lack of democracy. Arab states share the elements of the absence of the principle of alteration of power, lack of political participation, the hegemony of the state as an authoritarian machinery, disrespect of human and minority rights. In spite of some of the political liberalization that has taken limited and controlled character in some Arab countries since the late 1980صs, the intensity of political and social polarization increased threatening these states with civil wars and social disintegration especially with the increase growth of extreme violent and intolerant tendencies. This limited political opening is not more than an attempt to manage the crisis by the existing regimes and it is revocable as the phenomena of personification of authority, weak democratic and civic culture, and weak social and capable forces to support the democratic process. Therefore, lack of democracy becomes an essential obstacle to the development in the Arab world strongly producing irrational policies and deficiencies in the allocation of resources. The problem becomes more severe when this reality is related to the hegemony of the state over social life and civil society organizations that are forbidden, weak or dependent on the state. All of this takes place with the lack or absence of the شrule of law.

6. The issue of severe centralization of the state and its institutions along with the backwardness of the administration, and the wide spread of corruption. In the Arab world this issue is associated with the continuous use of the state by the ruling elite as basic means in political mobilization and the reproduction of power. Such practices decrease the state as a reflection of the public good and increase the rentier functions politically and economically. This characteristic makes corruption in the administration, which is a global phenomenon, a very peculiar case in the Arab world because it is linked to the dominant political relations distinguishing Arab state and society. The absence of an efficient public administration capable of implementing public policies and managing development not only hinders development and leads to the loss of efforts not withstanding the heavy cost of waste and corruption.  

7. There is a special characteristic to the woman issue in the Arab world. In addition, to the general socio-economic factors that hinder the integration of women in society and their active participation in development, there are special social and cultural factors relevant to dominant traditional social structure in the Arab world, which enhances this extreme male chauvinism and increases the differences between men and women marginalizing the latters role. A lot must be done to abrogate all forms of discrimination against women, legally and practically, especially as the principle of equality between men and women does not contradict the Arab values. This principle of equality is one of the important bases of development.  

8. Labor migration in the Arab world. There are different problems here; on the one hand we have countries that export labor force, especially the skilled ones, which leads to the loss of an important human resource and essential component of development that cannot be compensated by their remittances to their countries. On the other hand, there are the countries that import immigrant labor and with the absence of appropriate agreement among the Arab countries this has created many problems to the immigrant laborers themselves, who do not usually get any form of social protection, and thus work under harsh conditions and low paid jobs. In addition, this issue takes special dimension in the rich oil producing countries, especially in the Gulf, as there is a high rate of employment of foreign labor, especially of Asians in numbers that may lead to demographic imbalances. Moreover, labor problems are intensified in countries like Algeria, Morocco, Lebanon, and Jordan especially in relation to higher unemployment and underemployment rates.  

9.The last characteristic has to do with the fact of the plurality of the Arab states and the existence of huge differences among them. If development under current conditions require large economic structures and wide markets, most Arab countries do not have the necessary conditions to engage in a successful developmental process if they are left alone, but collectively the Arab states possess many factors to allow the process of development to succeed. Some states have tremendous oil wealth and financial capabilities, but they lack population and they are mostly deserts. Other states are large, heavily populated and have great agricultural capabilities (Egypt and Sudan), but they lack capital. Others yet, small and medium sized that might have elements like human resources, economic experience but lack other elements. In general, the Arab world can be divided into five groups:
a. Those who have lots of oil, and little of other factors including population, thus depending primarily as rentier states on oil. This group includes Kuwait, Oman, Qatar, United Arab Emirates, Bahrain and Libya.
b. Oil producing countries with a population and other capabilities that allow them to build a diversified economy. This group includes Algeria, Iraq and to some extent Saudi Arabia.
c. Countries that depend heavily on human resources with the existence of limited economic and financial resources. This group includes Lebanon, Jordan, Palestine, Tunisia, and to some extent Syria.
d. Countries that are more industrialized and enjoy not only human resources but also the availability of agricultural resources long experiences with agricultural production, and relatively large markets. This group includes Egypt and Morocco.
e. The last group includes the poor agriculturally based economies and entails Sudan, Mauritania, Somalia and Yemen. The last country, despite its oil production is grouped with the other countries because of its level of development is closer to them than to other Arab countries.


Although most Arab countries have achieved significant progress in a number of social indicators since 1970, this did not change the position of the Arab countries in general according to the human development reports, which placed them in clear low positions in relation to other developing countries in other regions with the exception of sub-Sahara African countries.  
The conditions and factors of development are unevenly distributed in the Arab world, which makes the achievement of development conditioned by various missing forms of economic cooperation and integration. The intra-Arab economic relations are very low in contrast with Arab relations with other regions especially with the developed Western countries. Also, the political relations between the Arab countries are experiencing a lot of tensions, divisions and separations, which makes the potential for real integration very difficult. The various reports show that intra-Arab trade relations do not exceed 7 to 8 percent of the total volume of Arab trade, while it reaches 80 percent with the Western world.
 V. The Arab World and the Structural Adjustment Policies: Paving the Road for Globalization

International economic conditions have changed in the 1980صs. The Arab countries were pushed like the majority of the developing countries to partake the structural adjustment policies in order to get out of its socio-economic crisis, which was caused by three factors. The increase in interest rate, the protective measurements taken by industrial countries, and the drop in the role material prices, especially crude oil led to tremendous drop in the value of external revenues that entered the Arab countries. The decrease in the capital transfer from oil producing Arab countries to other Arab countries led the latter to resort to financial institutions and borrow loans to compensate for the decrease in capital transfer and the decrease in their own exports. This led to an increase in the total value of external debt to about 201 billion dollars at the end of 1998, or in other words to about 49.2 percent of the GDP of the Arab countries. This is a relatively high rate compared with the amount of debt of all developing countries reaching only 26 percent of the GDP of all developing countries. Expenditures remained relatively high while servicing the debt increased and revenues continued to decrease especially after the sharp drop in the price of crude oil during the second half of the 1980صs. Consequently deficits in the balance of trade and in the balance of payment increased. On the other hand, inflation increased and foreign currency reserve began to dry up. Local capital began leaving and moving outside the Arab countries. These developments pushed the Arab countries to decrease their expenditures. The expenditures for investments and the expenditures that had a social character were the most affected by such measurement. Rates of economic growth dropped, unemployment rates increased, wages decreased, social services deteriorated quantitatively and qualitatively, and large segments of the middle class were increasingly impoverished. That sort of deterioration continued in the late 1980صs and early 1990صs as a result of the second gulf war, and in the 1990صs with the drop of the oil prices.
Structural adjustment programs as pursued by the IMF and the World Bank are not based on managing the economic crisis of the developing countries in a manner, which would help in their process of development. Rather it follows a course that aims at resolving the problems of the lending of the financial centers and economies and protecting the dominant economic center. Such programs were launched with the explosion of the debt crisis and were highly associated with the problem of debt from the perspective and interest of the lending nations in particular.
The problem can be summed up in the inability of the indebted nation to pay back the loans and to service them. Therefore, the necessary economic and financial adjustments aimed at decreasing the imbalances in the financial and budget deficits of the indebted nations through the decrease of the شuselessص expenditures. This provides financial surpluses that can be used to pay the annual interest servicing these loans to the lending nations. That is the essence of the economic stabilization plans imposed by international agencies, and it is in general short term and direct measurements that can at the same time allow for the longer term adjustments through the adoption of the wider program of structural adjustments.
The group of suggestions and recommendations in the structural adjustments programs in the Arab World, contain similar measurements in other countries such as:

1)Minimizing the role of the sate in the economy and decreasing governmental expenditures on services, developmental and social projects.
2)Privatization of governmental enterprises and raising the prices of public services.
3)Liberating financial transactions and currency exchange, leaving it to the market.
4)Lifting of all governmental subsidies in production or consumption and abrogating all protective measurements to national sectors of agriculture and industry.
5)Providing legislative and tax incentives for foreign and local capital to encourage investments, while increasing direct and indirect taxation on all citizens to obtain necessary financial resources.
6)Increasing the dependent integration into the global economy in various means including the continuation of the policy of borrowing from international monetary agencies and according to its terms.
7)Directing the economy towards exports to satisfy the needs of the international market and to further depend on imports to satisfy local needs.

From that overview, it is clear that this option seeks to transcend the difficulties and obstacles facing capitalist expenditures, and to open up the south markets including the Arab markets for its commodities. That is why we cannot find any mentioning of the essential problems that the Arab countries are suffering from or any solution to these problems from their point of view.  What is labeled as plans and developmental projects are not more than partial sectoral executive plans undertaken by the international institutions to provide the necessary infrastructure for profitable investments.

Most Arab countries have agreed to implement the programs of economic stabilization and structural adjustments as required by the IMF and World Bank. Morocco started since 1983, Tunisia since 1986, Jordan since 1989, Egypt since 1991, and Yemen and Algeria since 1995. The rest of the Arab countries like Lebanon, Syria and Sudan work in their own ways without any formal commitment in the implementation of measurements that fit the structural adjustment framework. However, structural adjustment policies in the Arab world generally characterized by being slow, gradual and cautious in order to avoid social upheavals and intensive crisis that may result from the implementation of the structural adjustment program especially so at the social sphere. Based on the above, and in accordance with the peace settlement projects one can say that the Arab world was and still is confronted with two contradictory options to build the future of the region. The first option is the option of dependent economic growth, which is integrated with the current contemporary economic conditions and based on the ability to respond to requirements of structural adjustments. In the context of this option, the Arab world is divided into three regions: the Middle East, the Gulf and the Maghreb or North Africa. These regions are linked with other regions outside the Arab world. Like the European common market for North Africa, Israel and Turkey in the new Middle East order, and the United States of America directly with regard to the Gulf states. This means the prevention of a unified geographical system and a common cultural and political identity, which are necessary to provide the essential components of a comprehensive development like a consistent cultural character, human financial and economic resources.
The alternative option stems from a different diagnosis of the problems and of development, and is based on the rise of people and societies to a higher standard of living, a higher economic and political performance, more efficient and more responsive to the requirements of social justice, democracy and continual progressive within the unified Arab order.
 VI. Basic Problems and Challenges of Globalization Facing the Arab World
 The basic problems of development in the Arab world can be divided into five main categories as follows:

First, restoration of economic growth:

Statistical data show that the Arab world in the last decade has been experiencing a state of economic stagnation where the rate of productive labor and real wages are equal to 1970 figures. The GDP of the Arab world reached 408 billion dollars in 1997. The annual rate of economic growth during the period of 1975-1995 was 3.2 percent while it was estimated at 2 percent in 1999. The GDP per capita income was 2,327 dollars in 1975 and rose up to 2,914 in 1980, but was later dropped to 1,842 dollars in 1990. The quality and pattern of economic growth are the two primary decisive factors in the process of social and economic development. Economic experts consider that it is very essential to obtain higher rates of economic growth, different in different countries, in the coming years to avoid deterioration in the labor market and in the conditions of the economic active population. This requires an increase in the rates of investments, a decrease of the external debt, and guarantees that allow the continual poring of capital. The ability of the Arab countries under the current circumstances seems to be limited in attracting its own migrated private capital, which is estimated between 500-750 billion dollars. To attract such capital there must be some relative political stability and essential economic reforms that do not yet exist. As for Arab exports they are growing slowly at the very low rate, which is 1.5 percent in the recent years in contrast to the rate of 10 percent for all developing countries and 6 percent for the growth of global rate. In addition, Arab economies and markets were not able to attract except very small percentage of international capital that was invested in the developing countries.


Second, demographic and labor problems:
 The rate of increase of population declined in the last two decades from 3.2 percent in 1985 to 2.7 in 1992, and reached 2.5 in 1996. However, population will increase for it is estimated now about 280 million and may reach 600 million in 2035. More importantly the percentage of those who are below 15 years old will double during that time. It is already a high percentage estimated at more than 50 percent of the population. It is important to note that the rate of growth of the labor force rose from 3.2 percent in the 1980صs to 3.3 percent during the first half of the 1990صs and 3.7 percent during the second half of the 1990صs, which would increase rates of unemployment and poverty. In general the estimates for the rate of unemployment in many Arab countries is no less than 15 percent.
The population structure in the Arab world is distinguished by increasing growth of population in the cities as a result of the rural migration and it is usually associated with the ruralization of the city especially because of the severe problems in housing, transportation and food. Slightly more than half of the population (52%) lives in the cities or urban centers. It is estimated that in the year 2035 the urban population would be more than 350 million. As for the Arab labor force structure it is distinguished by several negative characteristics the most important of which is the low productivity of labor and the modest contribution of women in economic activities that was estimated in 1997 at about 19 percent only. It is expected to rise in the year 2000 to about 26 percent but that would still be considered as a low percentage. In addition, there is an increase of the unskilled labor, which is estimated at more than 50 percent of the labor force. Furthermore, the wide spread of underemployment, the immigration of skilled labor, and the poring of a large percentage of children into the labor market (less than 15 years) are also important negative characteristics of the Arab labor force. On the other hand, about 40 percent of the total labor force works in agriculture, 38 percent in services and 22 percent in industry.


Third, problems of the environment, agriculture, food and water:

As we have mentioned before, lack of water is not only a developmental problem but is a strategic security one. The Arab world is considered the most dependent on food imports. As for drinking water only 70 percent of the population in the Arab world are getting now safe drinking water. The imbalance and food provision is estimated to be about 61 percent in the year 2000. The value of the food gap in 1995 was estimated at 12.7 billion dollars, with an increase of 18.7 percent in contrast with 1994.
In general agriculture production reached about 74.6 billion dollars in 1996, or 13.1 percent of GDP. It has increased from 8.9 percent of GDP in 1985. Nevertheless, the Arab world still suffers from a variety of obstacles and problems that are facing the food security process. The most important of which are lack of water, changes in climate, erosion of soil, weak material and monetary capabilities, low investments in the infrastructure and lack of development of the human skills.
There are also many environmental problems like direct desertification i.e. the desert movement (African and Arab deserts) or desertification that is a result of the deterioration of the forestry and the cutting of trees. This problem is more intensified when it is linked with population growth, increase in food needs and the climate changes that are expected to lead to greater drought. The negligence of the environment has an annual cost, according to many experts, of 14 billion dollars, or of 3 percent of GDP. It is already a big problem in Yemen and North Africa. Air pollution is also affecting more than 60 million of the inhabitants of the cities or about 40 percent of the total urban populations or 20 percent of the total population. According to experts to remedy the situation protecting the environment, fighting pollution and desertification will cost between 58 to 78 billion dollars in the next decade and it is considered a necessary and essential effort for development.  


Fourth, the problems of social and economic performance:
 In most Arab countries, the average rate of growth in the 1990صs was lower than the average rate of population growth, with the exception of Libya and the Gulf states. The share of industry in the production structure as part of the total GDP decreased in 1996, for in 1985 it was estimate at 35.3 percent and dropped to 31.2 percent in 1996. The share of light industry, however, rose slightly from 9.2 in 1985 to 10.5 in 1996.
These figures, however, are not sufficient to describe the reality of the industrial sector. Extractive industry represents 20.7 percent. It is heavily dependent on the production and marketing of crude oil and natural gas. These two basic commodities in this industry are externally oriented and thus are affected by the fluctuations in the international market whether in terms of their prices or in terms of the quantities produced. The light industry is composed of food industry (23% in 1996), clothes and textiles (15%), oil refineries, natural gas, petrochemicals, chemical fertilizers, steel and iron, minerals and cement. The industrial sector is faced with many obstacles that start with the absence of an institutional structure appropriate to industry itself, the weakness of the supporting services for the industries, the national market limitations, and the various obstacles forbidding the free movement of commodities and individuals between the Arab countries. However, other types of obstacles have to do with the higher cost of industrial products and its lower quality. This leads to the inability of export-led industries to compete with similar products outside and imported products inside especially with the implementation of open trade policies. Labor-intensive industrial products such as food, clothes and textiles need to be supported by modern technology to increase its comparative advantage and its competitive edge. Arab industries must provide technical know how and necessary training to implement international standards and criteria.  
Social development in the Arab world is still below the required level because of the absence of necessary plans and strategies to formulate the necessary solutions to the many social challenges. These are increasing the rate of unemployment, the low participation of women in economic activities, the concentration of the educational system on quantities rather than qualities, the low enrollment in vocational education, and the low scientific and technological research output of universities and Arab research institutes. In addition, the housing problem is intensifying while living conditions are deteriorating and a widespread poverty is increasing for a large segment of the population. Illiteracy is still estimated at 41.4 percent, and although it is decreasing as a percentage the number of illiterates is increasing. Illiteracy varies from one country to the other as it reaches 60 percent in some of the least developed Arab countries and it drops to less than 20 percent in some other countries such as Lebanon and the Gulf states. Female illiteracy, however, is higher for it reaches about 75 percent in Mauritania and Yemen, and it was estimated in 1997 to reach 53.6 percent for all Arab countries.
As for the indicator, Gini co as in the UNDP reports it is twice as much in the Arab world as it is in the other developing countries. Furthermore, while in the 1960صs the differences in the per capita income between the oil producing countries and the non-producing countries was 2 to 1, it reached 9 to 1 in 1987, and it has increased in 1999 to 33 to 1, as the average per capita income in Sudan is 480 dollars while it is 15,770 dollars in the United Arab Emirates.
Fifth, cultural and political problems:

It is very difficult to envision a process of real development without and appropriate political performance, and without a supporting cultural project. While there are many problems that can be talked about only two obstacles are emphasized here.
The cultural identity crisis with its particularity in the Arab world for the disturbed cultural and civilizational relations with the West, take many times religious forms. However, the essence of this crisis stems from the differences between the systems of values, and is a reflection of the Arab rejections and confrontations with the Western cultural penetration that is also associated with political and economic domination.


VII. Arab iIntegration as an Option

The ultimate objective of development is to increase the standard of living of the people, to decrease the gap in wealth and income and to improve the quality of life in the country. Indicators of success depend on the ability to achieve positive results in increasing economic growth, accelerating social development, increasing the standards of living, and stabilizing the legal and political system. This is carried out through the increase in per capita income and in employment, and the improvement and expansion in the basic educational and health services and social security system. Therefore, we cannot consider economic growth a sufficient cause for social development especially in developing countries and in particular in the Arab world. It is irrational to limit the economic role of the state to the macro-economic and financial balances. The state should pay sufficient attention to the establishment of the essential social and economic infrastructure especially in health and education. It should also be concerned with the redistribution of income, the social safety nets in addition to infrastructure projects such as electricity, irrigation, roads, as well as preserving environmental, natural and water resources. The primary developmental problems such as poverty and unemployment cannot be left to the assumption that the mere economic growth will automatically expand economic activities and private sectorصs investment, which in itself provide solutions. The negligence of social issues has very long-term negative effects. The disregard of nutrition, health, education, family disintegration and the feelings of insecurity will distort the basis of growth, expel investment and hinder technological progress.
The general characteristics of an alternative developmental plan should include the following:

1. The developmental option must be an Arab integrative option that can unify and efficiently use the available human, natural and financial resources in an incorporated manner as opposed to the current divisions or to the regional plans that cannot respond to the developmental needs.
2. The democratization of political life at the level of the state and society is a fundamental base for development. This is true at the level of the system, the opposing forces, or the social structure. That is not only necessary to increase the level of popular participation but it is also vital to enhance the political legitimacy of the regime. The higher the level of participation of citizens in the decision making policies directly through referendums or indirectly through elections, and the freedom to join political parties, trade unions and associations, the higher the legitimacy of the political system and the more stable it is.
The concept of participation takes more important dimensions in the sphere of social development as decentralization and municipalities in particular play a significant role in providing more efficient services and effective participation in development. In this way the role of the cooperative popular banks, educational institutions, and health service providers, depends on forms of cooperation with municipalities, NGOصs, private sector, governmental agencies, trade unions, universities, and other civil society organizations.
3. Governments should play their role in development and implement social and economic policies to manage the many existing problems such as poverty, marginalization of groups, food security and unemployment as opposed to the current neo-liberal policies. This requires a redefinition of the role of the state, which enables the state to play the role of an efficient, rational and economic manager that gives the social dimension of development a priority and participates in providing the basic social services. The essence of the new conception of the state is based on the abrogation of the alleged contradiction between the state and the market, and it is also based on the participation of civil society. This open state is based on the experiences of many east-Asian states that achieved better records of development in the last decades. The open state is a state that carries public policies in education, health, food, labor, vocational training, culture, housing, and the environment with the aim of correcting inequality and enhancing the integration between the social and economic spheres as well as enhancing civil society.
4. The replacement of the partial economic options with collaborative policies integrating industrial development with a qualitative improvement in the conditions of the agriculture. At the same time to decrease the level of dependency in essential needs and to increase self-reliance to satisfy local needs in addition to the necessary reforms of educational system and development of research.