Obama Still Does Not Understand the Middle East Part I

I did not watch the Obama speech regarding the Middle East as I do not watch many of his speeches when they air. This is not exclusive to him, I simply do not enjoy listening to American leaders way of talk since the “war on terrorism” began. It has filled with buzz words with minimal meaning, a strong character delivering these words, and a complete lack of understanding of what they are talking about with cheers after meaningless diatribes. I read Obama’s speech in its entirety after reading Netanyahu’s rebuttal this morning about the contents. I thought “maybe, oh maybe Obama actually said something worthwhile.” Of course I was met with a let down like usual, as news outlets like to over hype content of Obama’s speeches, especially in regards to the Israel-Palestine conflict. There are numerous other tid-bits in the speech that I disagree with as well and will attempt to analyze. I will divide this blog into two pieces as to not bore people to death putting two large subjects in one lengthy blog post. This first one will be about Obama’s economic policies.

To not be accused (which will happen anyways) of quoting “out of context” here is what Obama says when referring to the economies of Tunisia and Egypt at length.

First, we’ve asked the World Bank and the International Monetary Fund to present a plan at next week’s G8 summit for what needs to be done to stabilize and modernize the economies of Tunisia and Egypt.  Together, we must help them recover from the disruptions of their democratic upheaval, and support the governments that will be elected later this year.  And we are urging other countries to help Egypt and Tunisia meet its near-term financial needs.

Second, we do not want a democratic Egypt to be saddled by the debts of its past.  So we will relieve a democratic Egypt of up to $1 billion in debt, and work with our Egyptian partners to invest these resources to foster growth and entrepreneurship.  We will help Egypt regain access to markets by guaranteeing $1 billion in borrowing that is needed to finance infrastructure and job creation.  And we will help newly democratic governments recover assets that were stolen.

Third, we’re working with Congress to create Enterprise Funds to invest in Tunisia and Egypt.  And these will be modeled on funds that supported the transitions in Eastern Europe after the fall of the Berlin Wall.  OPIC will soon launch a $2 billion facility to support private investment across the region.  And we will work with the allies to refocus the European Bank for Reconstruction and Development so that it provides the same support for democratic transitions and economic modernization in the Middle East and North Africa as it has in Europe.

Fourth, the United States will launch a comprehensive Trade and Investment Partnership Initiative in the Middle East and North Africa.  If you take out oil exports, this entire region of over 400 million people exports roughly the same amount as Switzerland. 

So we will work with the EU to facilitate more trade within the region, build on existing agreements to promote integration with U.S. and European markets, and open the door for those countries who adopt high standards of reform and trade liberalization to construct a regional trade arrangement. 

Now just let me preface this so it does not seem like generic Obama-bashing. He is not unique with this approach or wording. The US has had a policy of neo-liberal economy reform starting with Nixon but got much stricter from Bush I onwards. This is apparent in the Washington Consensus or the Structural Adjustment Policy by the International Monetary Fund and World Bank. These policies essentially put countries on a neo-liberal reform program that its makers do not need to follow. The basis of the agreements which is necessary to take out a loan with the IMF or WBG includes cutting government spending by lowering taxes on the rich and by getting rid of government workers, lowering of currency values (which will be discussed), balancing national budgets, export based economies of primacy resources, etc. Now I am sure most people here are not great Political Economy majors and most of this makes no sense or seems like the things you hear America stands for or should stand for.

Without going on a diatribe of how the US does not do the vast majority of the things it forces the world to do through the IMF and WBG here is the simple truth. The US and EU propagate this ideology as “how they made it to be where they are today, so follow these tracks become like us.” This is a simple fairy tale considering the US and other hegemonic powers since capitalism have used mercantilism (protecting the national economy as opposed to giving into the international economy) to be where they are today. China is still a good example of this. Although trade exports have interested greatly since 1973 China still protects many aspects of its economy through various means such as currency. Countries in the Middle East are not as lucky.

An issue about currency value lowering. This has many effects on the economy that readers should be aware. The usage is to promote export subsidies, so by cutting the value of your currency your workers earn less for the products they are making. This makes the product itself cheaper for the world market. Since you cut government spending these people have no safety net to fall back on in what is called the poverty trap. The more they work and produce they less they bring home with no safety net to stop them from poverty.

Egypt is the largest Arab country by far and is one of the poorest per capita. Anyone who has been to Egypt has seen the overcrowding, the poverty, the begging and dirty children, and the despair. So what we are advising is to cut government spending, lower the value of the currency, and make export based? Egypt, minus military spending financed by the US, has small overall government spending. I agree that the government covers a wide area but the pay they give these people and departments is horrible and insufficient.

I do not disagree that Arab countries need to trade within each other more since the market is so close but it has a fundamental flaw. Most Arab countries are “developing” (for the more colonialist and degrading users) or Third World countries and their economies reflect as much. Most Arab countries have a small industrial sector, with a large agricultural sector, and potentially promising service sector.  Anyone with a basic knowledge of political economy knows that agricultural based economies are the lowest profit yielding economies, mostly losing money as a result. Egypt already has a food and water shortage of its own and Obama’s advice is to harness that and try and profit? Obama should be talking about industrial and service sector emphasis, with protection on the former and allowance of their competition for the latter. The Arab service sector can not compete on WTO/IMF/WBG standards, anyone who has seen the plethora of bootleg stores knows this. They have a knack for working with the items but not the investment to compete. Again, Obama’s strategy…cut government spending (which also includes education) as to keep them in the bubble of inability to compete.

The countries he is talking about reform for mostly do not have oil beyond basic consumption and minimal exports. So his comparison to Switzerland (which was an insult to begin with, or a gauge if you believe he is benevolent) is a tid distorted. The largest oil holders are Iraq, Saudi Arabia, and Iran (if he is including them in his Middle East). He is not even referring to getting these economies off of an oil based program or making better use of the oil that is in the Middle East.

Fundamentally Obama’s strategy is the same as all the presidents before him. Push a neo-liberal economic agenda on third world countries without adhering to them yourselves. Further create poor economic conditions and keep a dependency on the First World for demand. This is the change of US policy? Wow, I guess it is a good thing I did not read the speech with the idea there would be something new. Egyptians were not protesting for neo-liberal reform or just political reforms. The vast majority were un or underemployed Egyptians wanting some stability, upward mobilization, and possible prosperity in their economic situation. Obama’s complete lack of acknowledgement shows his complete misunderstanding of the Arab Middle East. Any reading of an economic report of the Arab World overwhelmingly shows employment to be a chronic problem for the Arab world.

Photo by nymag.com


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