Journal Essay

Globalization and Its Discontents in the MENA Region

Robert Springborg

Summer 2016, Volume XXIII, Number 2

Dr. Springborg is a visiting professor in the Department of War Studies, King's College, London, and a research fellow at the Italian Institute of International Affairs.

The great wave of globalization that welled up as the Cold War was ending and peaked with the 2008-09 global financial crisis has, after a brief recovery, been steadily ebbing away. Between 1985 and 2011, global trade grew at an annual average rate of almost 6 percent, almost twice the annual rate of global GDP growth of 3.1 percent. The rapid expansion of trade in goods and services, made possible by technological innovations such as containerization and the Internet, and a favorable global political environment, were the principal drivers of that rapid economic growth. Since 2011, annual global trade has grown less than GDP: 2-3 percent.1 Stagnation in global trade, as symbolized by the final breakdown of the Doha Round of WTO negotiations in December 2015, has acted as a brake on world economic growth, and IMF forecasts do not anticipate a reversal any time soon. Regional trade blocs are proliferating, while the global financial infrastructure erected in the wake of World War II is facing increased pressure from emerging countries and even open competition from the Asian Infrastructure Investment Bank initiated by China. Revanchist anti-globalization political forces are gathering strength in both the United States and Europe. A previous wave of globalization commenced with the rise of steam navigation and the telegraph in the 1870s and dramatically ended with the outbreak of World War I. It was not followed by another wave until the 1980s, suggesting that globalization crests have been intermittent, unpredictable, driven by the world's political context and punctuated with extended periods of stagnation.

Despite its signal contribution to economic growth and increased national income equality between the global North and South — the latter almost doubled its share of global economic output from 20 percent in 1997 to just less than 40 percent in 2016 — globalization's great wave stimulated a matching wave of skepticism in the developed and developing worlds.2 Globalization was rightly seen by all as contributing to inequality within countries; in much of the developing world, it was interpreted as a new manifestation of neo-imperialism. In the Middle East and North Africa (MENA), this view was particularly widespread, reflecting perceived colonial legacies as much or even more than contemporary economic consequences.3 In fact, globalization was driving more rapid economic growth in MENA than in the old colonial powers — growth that compared favorably to that in other emerging regions, with the notable exception of the very high-performing East Asia. Nevertheless, neoliberalism and the Washington Consensus became derogatory terms in MENA, conflated with globalization and employed to discredit it.4 The Arab uprisings in 2011 were commonly attributed to the effects of globalization, even though they came more than two years after globalization had gone into dramatic reverse; world trade had fallen almost 13 percent in 2009, devastating economic growth almost everywhere. So a case can be made that it was not rapid globalization, but its sudden and dramatic slowing, that has been the cause of Arab and MENA discontent.

If that is the case, discontent is likely to deepen. The slowing pace of globalization is having a more negative impact on the developing than the developed world. Capital flows from the latter to the former, a major component and driving force of globalization, have reversed. In the 18 months ending in January 2016, more than one trillion dollars of investments were recalled by developed economies from developing ones.5 By comparison, between 2001 and 2011, more than three times that amount flowed the other way.6 In 2015, there was a record $60 billion outflow from the bond and stock markets of emerging economies.7 Equity markets in developed economies have outperformed those in emerging ones since 2011; the total capitalization of the latter in 2016 was about one-quarter lower than it had been in 2010.8 Moreover, 2015 was the first year since 1988 in which more funds flowed out of emerging markets than into them.9 A major cause of capital flows back to the developed world is the closing productivity gap, which had widened rapidly during the globalization era. By 2016, productivity growth had dropped to 0.9 percent annually in emerging markets, one-quarter of the rate at the high tide of globalization in 2007, and not substantially better than the 0.4 percent rate in developed economies.10 The failure of globalization to resume its rapid pace is increasingly being interpreted as the "new normal," compared to the golden age from 2001 to 2008, when a driving force was China's extraordinary growth from the world's sixth- to its second-largest economy, following its 2001 entry into the WTO.11 As prospects dim for China to resume such rapid growth, so too do those for a reaccelerated globalization.

Whether rapid or slowing, globalization has posed major economic and political challenges to the MENA countries. Globalization's take-off from the mid-1980s, combined with the end of the Cold War and a reduction in the geostrategic rents it had generated for MENA, induced the region's states to undertake the political and economic reforms required to ride the globalization wave and extract benefits from it, including more foreign direct investment (FDI). Virtually all MENA states adopted at least some of the "ten commandments" of economic liberalization demanded by the Washington Consensus (see Table 1), typically coupling them with cautious political openings. The two decades of rapid globalization did not produce a new MENA liberal age akin to that of the colonial era. These years did, however, witness noticeable shifts from the prevailing, if already diluted, statist economic development model to something more akin to capitalism. These were accompanied by "hybrid" authoritarianism, a system in which elections, freedom of expression and human rights began to have real, though limited, meaning. Militaries appeared to recede further from seats of presidential power, while many of the monarchies witnessed expansions of parliamentary activity.

Most if not all of these reforms of MENA political economies came to an abrupt halt with the Arab uprisings of 2011, which themselves followed the global economic crisis of 2008-09 and presaged the five years of stagnating globalization and growth from which the world is yet to emerge. As globalization has slowed to a crawl, MENA states have scrambled to meet intensifying domestic and regional economic and political challenges. Just as they turned in unison in a liberal direction in the late 1980s as globalization intensified, so they have now turned en bloc in a conservative one, shoring up state authority over the political economy while justifying de-liberalization on security grounds.

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