x Abu Dhabi, UAEMonday 24 July 2017

Think tank's Middle East warning goes largely unheard

Washington think-tanks wheel out their fellows like trained seals to perform at partisan political events.

Washington has its think tanks. There are hundreds of them and they may focus broadly on a range of issues or narrowly on the most arcane of policy matters. They inhabit distinct bands on the political spectrum and their senior fellows are wheeled out to perform like trained seals under the big tent of partisan politics. If, as the Iraqi statesman Nuri Said is alleged to have said, the modern Middle East is a cluster of tribes with flags, Washington is a conurbation of tribes with think tanks.

There are exceptions. The Carnegie Endowment for International Peace is well regarded for its impartial reporting and depth of coverage, and at a conference last week it put forth a prognosis for the Middle East that was both hopeful and dour. What began as a thorough if dry analysis of the region's sound economic fundamentals ended as a warning that stable growth means nothing without good governance.

The occasion of the event, billed as "Economic Crisis and Middle East Conflicts", was the release of the IMF's economic outlook for the Arab world, its first since last October, presented by Masood Ahmed, the director of the fund's Middle East and Central Asia department. The report forecasts 3.7 per cent regional growth this year in non-oil-related output, down from 6.1 per cent last year but well above the global average of a 1.3 per cent contraction.

Both oil exporting and oil importing nations are suffering from the global credit crisis, according to the report, but at a manageable rate. In the oil-rich Gulf, revenues are down along with lower petroleum prices, but cash-rich governments continue to spend aggressively to stimulate demand. New lending has declined along with corporate profits, and equity and property markets have taken a beating, but inflation is under control. Remittances from guest labourers in the Gulf economies have held steady at an estimated US$40 billion (Dh146.92bn).

Remittances, of course, are vital for the Arab world's non-oil exporters, which rely heavily on transfers from family members working in richer countries in the Gulf and in Europe. So with output slowing dramatically and unemployment on the rise, what is sustaining inflows at current levels? Guest workers may be making do with less, Mr Ahmed said, or families may have decided to remain in their host nations until the end of the school year before returning home. In a worst-case scenario, expatriate workers have already returned along with their savings, which would imply a sharp and imminent drop in inflows.

Either way, a prolonged world recession would most certainly hollow out remittances to the Levantine economies, with little in the way of public spending or foreign direct investment to offset the declines. And this is where the Carnegie briefing took a decidedly grim cast. Picking up where Mr Ahmed left off was Marina Ottaway, the director of the institute's Middle East programme. A decline in remittances, she said, would have "truly horrendous" consequences. It would devastate the informal economies that have evolved in the wake of liberalisation, and which have done so much to raise living standards throughout the Levant. In Egypt, for example - a country Ms Ottaway knows well, having taught at the American University in Cairo - there is already "enormous social unrest" in response to what she called political paralysis at the highest levels.

Deregulation, she argued, has not been followed up with social reforms such as improved health care and education, a failure made worse by rising unemployment and high birth rates. The proliferation of unorganised labour strikes would intensify, she said, particularly if the recession lingers and remittances fall significantly. "Workers can only sacrifice so much," Ms Ottaway said. "This distress will increase and this will force governments that have been playing ostrich for so long to finally face the possibility that they must address the problem."

Though blunt, Ms Ottaway's remarks were understated relative to their implication. Should the global recession last much beyond the year, the social contract binding the governed and the government in poorer remittance-dependent countries may be nullified, possibly with violence. With the remittance liquidity of the petroleum boom evaporating and with little reason to hope for more responsive governance, the lure of radicalism becomes that much more compelling.

The Carnegie conference attracted an audience of about 60 or so, which is not surprising given its unglamorous subject matter. A seminar on combating radical fundamentalism, a popular topic in Washington even under Barack Obama, the US president, would have attracted a disproportionately larger crowd. This is unfortunate, as a global power interested less in the genesis of new threats than in the liquidation of old ones is doomed to wage everlasting conflict.

If sober assessments such as those aired last week at Carnegie were met with a wider hearing among Washington think tanks - perhaps under a shared banner of candour and reason - America's military commitments in the Middle East might not be as onerous tomorrow as they are today. sglain@thenational.ae