Marketplace, April 7, 2004
Attention is focused this week on Condoleezza Rice's testimony about what sheknew and when she knew it. But more important information about what Americacould have done -- and could do to prevent future terrorist attacks -- mayemerge from elsewhere tomorrow. That's when the International Monetary Fundbegins a conference examining the economies of the Middle East - a topic theUnited States has basically ignored for decades.
In fact, for a quarter century now, the Arab nations of the Middle East havesteadily withdrawn from the global economy. Yes, they supply a large portionof the world's oil. But over the last 25 years the region's share of globaltrade has dropped by 75 percent, even as its population has doubled. The 22nations of the Arab League, with 260 million people, receive half as muchdirect investment from the rest of the world as Sweden, with a population of9 million. And foreign equity investment in the region is about the same asforeign equity investment in Indonesia.
In other words, apart from oil, Arab nations have become more and moredisconnected from the rest of the world. With surging populations, theresult has been widespread poverty along with yawning gap between a few whohave become very rich off oil revenues, and everyone else. It's a viciouscycle.
Repressive regimes have spawned corruption, vague laws, unpredictable rules,inefficient state-run monopolies, high tariffs, red tape, and othermechanisms designed to maintain political stability through payoffs,favoritism, and outright bribes. But all this has driven foreign investorseven further away - plunging the region into greater poverty. And povertyand oppression have been the seedbeds of violence.
For decades now, the United States has viewed the Middle East as a placerequiring military and diplomatic attention, at most, but not basic economicreform. And that may have been a huge mistake - a failure of intelligencemore fundamental than any intelligence failure preceding 9/11.
