Spring of Hope, Winter of Despair: Rescuing a New Middle East from Neoliberal Control

by Younes Abdullah Muhammad

15 months after the dawn of the Arab Spring, Egypt, the most populated and arguably most influential Arab nation, has completed the first round of presidential elections.  A June 16-17 run off will pit Muslim Brotherhood backed candidate Mohammed Morsi against Ahmad Shafiq, a remnant of the Mubarak regime.  The results disappointed liberals within and outside the country but there is still room for hope.

Pro-democracy activists might recognize that democracy is a means and not an end in itself.  There now exists an opportunity to distinguish the limitations of national political concentration in a world dominated by transnational economic institutions.  In Egypt, an opportunity exists to attack the core disease.  People all over the world must unite to pose progressive, paradigmatic alternative to neoliberal globalization, a global social movement that can end the clash of civilizations by allowing the best of Occupy Wall Street to mesh with the tremendous potential of the Arab Spring.

The perpetuation of western dominance may be contingent on the insertion of a New Middle East into the neoliberal fold.  Actual causality of the Arab Spring stems not only from the West’s support of non-democratic regimes, but from efforts to liberalize the Arab world’s economies, from monetary policies of Western central banks, particularly the U.S. Federal Reserve, and from the military intervention of he global war on terror.  Significantly, the Arab Spring helped inspire protests in Europe against austerity, opposition in Wisconsin to collective bargaining repeal, and eventually the popular sentiment of Occupy Wall Street.  In many ways the futures of the Islamic world and West today are inextricably linked.

While ostensibly western powers fear the rise of political Islam, western influence unintentionally contributed to the collapse of the Mubarak regime and the region wide rise of the Brotherhood in its aftermath.  The Muslim Brotherhood may have worked for decades to gain political inclusion amidst authoritarianism but the pathway to power occurred as part of the Bush administration’s doctrine of “democratizing” the Middle East.

In 2005 President Bush pushed Hosni Mubarak to hold open parliamentary elections.  Plagued by the debacle of war in Iraq and rising Arab anti-Americanism, Bush wanted to convince the Muslim world of his benign intentions.  Mubarak, a long-time ally, complied.  The U.S. had never jeopardized his control.  In 1983, shortly after he replaced the assassinated Anwar Sadat, Mubarak was asked why he refused national reconciliation meetings with Umar al-Tilmisani, the spiritual leader of the brotherhood who had been released from prison, “That would upset Washington,” he replied.  U.S. officials guaranteed him that Islamists had little support, but the Brotherhood gained majority opposition.  A year later, after the push for elections in Palestine led to parliamentary control for Hamas, a Brotherhood offshoot, Mubarak cracked down.  Today, as Egyptians face a run off between a representative from the Brotherhood and the former regime, many fear the revolution in Egypt is controlled from behind the scenes.

The actual goal of Bush’s policy for democratization at the barrel of a gun was always market expansion.  The agenda was to transform the entire Middle East, viewed as final frontier for globalization.  That real reform started late in 2004 when IMF structural adjustments helped propel deregulation, opened the Egyptian economy to further foreign investment and paved the way for an assault on Egyptian labor unions.  Their reforms created economic growth but the gains from that growth went predominantly to the networks of privilege connected to the state.  The outcome was expressed succinctly by Kamil Abbas, general coordinator of the Center for Trade Union and Worker Services; in an interview with the Wall Street Journal in August 2010 he explained, “The gains touch only certain segments of the population-the upper crust of society…you have the employees making $20 a month in some new businesses.  What kind of reform is that?”  These neoliberal reforms contributed greatly to the animosities that led Egyptians to the streets in emulation of Tunisians who suffered from the same.

The IMF and World Bank touted Egyptian reforms right up unto the Arab Spring.  In its summary of the executive board’s yearly meeting with the Egyptian officials in 2010, the IMF reported, “Egypt made significant progress in wide-ranging structural reforms that accelerated after 2004.  This spurred rapid output growth-averaging 7percent a year during FY 2005/06, FY 2007/08-underpinned by foreign investment-driven productivity gains and the favorable external environment.  Reforms also reduced fiscal, monetary and external vulnerabilities, leaving some room to maneuver on macroeconomic policies in the event of negative shocks.”

The World Bank concurred explaining, “since the appointment of a reformist government in July 2004, Egypt has embarked on a reform path.  The reforms have been sustained…and the government has established a solid track record as on of the champions of economic reforms in the Middle East and North Africa region.”

The central bank of the neoliberal order is the U.S. Federal Reserve, another external institution largely responsible for the conditions that sparked the Arab Spring.  The financial crisis of 2008 exposed globalization’s systemic inter-connectedness and U.S. monetary policy since has pushed interest rates to zero, bailed out banking institutions and inserted massive liquidity into the developing world.  Near-zero interest rates in the U.S. allow banks to borrow for nothing and invest at arbitrage rates abroad and grant multinational firms the ability to buy real assets overseas.  In November of 2010, the U.S. Federal Reserve initiated a second round of quantitative easing, or the purchase of $600 million in long-term treasuries which had the effect of pushing new dollars to developing countries.  The immediate consequence was inflation however as global commodity prices rose.  In Egypt, rising food costs pushed people to the brink as dollar devaluation appreciated the Egyptian pound to slow dollar inflows and curb inflation and similar-conditions reverberated through the region.  Mohamed Bouazizi, a Tunisian fruit vendor self immolated on December 17.  By January 6, 2011 Algerian youth took to the streets protesting the price of sugar and by February thousands of Egyptians were in Tahrir Square.

The national institutions of neoliberalism must feign awareness of trans national influence however.  In a CNBC interview, the St. Louis Fed Chairman was asked about quantitative easing, “the question is at what cost and did it actually lead directly to these skyrocketing commodity prices for things like grain and things like copper and part of the reason we have seen so much unrest in the Middle East?”  He denied the global effects of Fed policy and emphasized the central bank’s mandate to promote domestic interest.  “These countries chose to have a flexible rate and that is up to them,” he said.  The region’s been transformed and the economies have collapsed in the 15 months since.

The presidential run-off suggests that Egyptians will undoubtedly face further neoliberal reforms.  There is hardly doubt that an election of former Prime Minister Ahmed Shafiq would cement sustained control of the former regime, but fears that a victory for the Muslim Brotherhood represent revolution are exaggerated.  Khairet al-Shater, the Brotherhood’s initial choice for presidential candidate met with neoliberal ideologue Thomas Friedman after the first round of parliamentary elections and explained, “It is no longer a matter of choice whether one can be with or against globalization, it is a reality.”  When Mohammed Morsi met with U.S. Senator John Kerry early this year he stressed an interest in further economic development.  “They certainly expressed a direction that shouldn’t be a challenge to us provided they follow through,” Kerry said.  And Abdel Moneim Aboul Fotouh, a former Brotherhood member that recently lost in the first presidential round, took the stage at the World Economic Forum in 2012 and announced that the Arab world would soon be open to foreign investment and full-fledged participation in the international order.

There is less contention than imagined between the military and Brotherhood as well.   As soon as Islamists took majority control of the parliament, Egyptians took to the streets demanding an end to military rule but the Brotherhood supported a slow transition to power and sat silent as the military issued a billion dollar loan to the central bank revealing its control of he economy.  They have essentially endorsed plans to sign a $3.2 billion loan agreement with the IMF, and agreement the New York Times reported, “bears a striking resemblance to one Egypt’s military rulers negotiated and abruptly rejected, last spring, citing concerns that it would saddle future governments with such a large debt that would amount to a violation of Egyptian sovereignty.”  They are also negotiating a billion dollar loan with the World Bank.

Wael Gamal, moderator of the Drop Egypt Debt Facebook page, explains that the structural adjustments that accompany the IMF’s assistance will dismantle food subsidies and pave the way for enhanced neoliberal penetration.  “Just servicing Egypt’s debt costs close to $3 billion a year, more than all the food subsidies that the IMF harps about, more than our own heath expenditures.”  “We are burdened with $35 billion debt to foreign banks, mostly borrowed under the Hosni Mubarak regime, none of it to help the people,” he said.

There is much cause for concern.  The liberalization of economies under authoritarian rule only shifts even more power to an already embedded elite, but policymakers, politicians and pundits typically call for extended neoliberal reforms in post-crisis economies while failing to account for the role neoliberal reform played in creating the crisis.  Such circularity perpetuates global inequality as neoliberal policy fails to wrest control from autocrats and dictators but also inserts the additional dimension of totalitarian, transnational institutions that replicate the paternalistic extraction processes of traditional colonialism and empower speculators abroad as parasitic elites.  And that is exactly the idea.  Today the long-term consequences are visible in the developed world as well.  The Eurozone is in crisis and Greece, Ireland and Portugal are on the IMF’s Books.  The economy in the U.S. continues to stutter as potential default and future austerity looms on the hegemon’s horizon.

The Indonesian experience as part of the late 1990’s Asian crisis poses some noteworthy parallels to what might happen in Egypt, epicenter of the New Middle East.  The Asian crisis was caused by speculators borrowing money in Japan at one percent and flooding East Asian high growth economies with liquidity that pushed the arbitrage rate of return to averages of about 10 percent.  Then suddenly, an interest rate increase at the U.S. Federal Reserve caused a speculative outflow and a chain reaction that posed systemic risk.  In Indonesia, 30-year, western backed dictator Suharto accepted IMF, World Bank reform and agreed to repeal subsidies, end public services, implement austerity and open up to further foreign investment.  The threat of austerity stirred massive public protests that led to the removal of the country’s leader.  Today, Indonesians may have democracy but economic woes remain.  Indonesians continue to pay off the $30 billion in World Bank debt wasted by Suharto IMF reforms continue to liberalize the economy at the expense of the majority and remnants of the regime, alongside a colonialist elite, dominate the economic landscape.

Today’s dominant economic model subverts the principle power of the nation state, to protect the public interest, and transfers powers of planning and persuasion to transnational organizations that impose their will on states, oftentimes by pitting them against one another to exploit labor.  Reaction to the Asian crisis sheds light on the effects.  The Clinton administration, backed by Alan Greenspan at the Fed, requested increased U.S. funding at the IMF to resolve the threat of collapse.  The lone voice of dissent, congresswoman Maxine Waters from South Central Los Angeles, pointed out that many Americans inner-cities resembled the third world and had no access to investment.  For the West, the institutions that propel neoliberalism help legalize an economic imperialism abroad and coerce the market expansion and control of natural resources necessary to perpetuate the system, but the consequential sequestration of state resources at home only exacerbates domestic inequality.

That is cause of the inextricable link between the West and Middle Eastern economies and thus neoliberal penetration is the primary concern of western powers.  As pawns of he transnational elite, politicians in the West care little about the policy of Islamists as long as economies are “reformed” by the IMF.  As Secretary of State Hilary Clinton explained in a recent interview with PBS’s Jim Lehrer about the Arab Spring, “We are always better off on the side of democracy but we have to keep our eyes wide open.  It wasn’t long ago, during the Cold War, that if somebody was elected, somebody we didn’t like, we took some action.”  She was referring, proudly, to a series of covert wars and coups against elected governments responsible for extreme state sponsored terrorism abroad and secret government at home.  As her husband’s administration explained, the U.S. has a right to use military force to ensure “uninhibited access to key markets, energy supplies, and strategic resources.”

The global energies spurred by the Arab Spring have created the potential to formulate an alternative paradigm that attacks the neoliberal cause of global inequality at the core.  Deregulation, cheap global labor and excessive rights for corporations and international capital have widdled away gains from the progressive era.  Rather than retreat to protectionism, currency wars and national concentrations people must mobilize, like transnational institutions, in ways that consider impact across the globe.  Promoting progressive reforms of the neoliberal order, development over the war, and international collaboration in place of economic imperialism while resisting neoliberal control could produce the first global social movement.  There is precedent in a platform that has an ability to surpass debate between left and right, east and west; nations of the world would be wise to return to what was once known as the American system of political economy in order to achieve those objectives.

The American economy was built on a rejection of the same neoliberal principles once implemented in the British colonies.  Revolutionary America’s economic rise had much to do with government; its greatest periods have been marked by limited protectionism, public investment and the cultivation of human capital and internal industry, a system that could almost be called the Chinese approach today and that runs counter to the neoliberal method.

At the conclusion of America’s revolutionary war, Treasury Secretary Alexander Hamilton outlined the American system in his treatise “On the Subject of Manufactures” a rejection of Adam Smith’s free trade.  He and others proceeded to discuss the role of public debt, development and national banking and founded a system that birthed the modern factory, public education and the development of industry and infrastructure while preserving individual liberty.  Nowhere was more congenial to Enlightenment ideas that the United States, where government of the people and for the people birthed an alternative to Europe oligarchy.  It is important to note that Morocco was the first foreign government to sign treaties protecting U.S. ships in the Atlantic for trade.

Later Abraham Lincoln won the Civil War, issued his own greenback currency, created the scientific foundation for America’s world class public university system, and established a transcontinental railway with massive federal expenditure while sale of securities at the New York Stock Exchange to European investors made Wall Street the epicenter of modern capitalism.  Meanwhile in Egypt, the British forced an agrarian economy based on cotton, indebted the khedive with rapacious loans and conditions that resemble those of the World Bank or IMF so that Egypt’s railroads could be built by European world.  By 1876 Egypt was bankrupt, its budget controlled by British banker Lord Cromer who did not believe in education for peasants and levied heavy taxes on the poor; paving the way for the full-fledged colonization that continued until Nasser’s failed revolution.

By World War I, America was an international power and President Woodrow Wilson enunciated his fourteen points calling for self-determination and interpreted with great fanfare in the Middle East as U.S. supports for decolonization.  When the U.S. sent the King-Crane Commission to the region, they discovered overwhelming support for U.S. collaboration as long as the fledging Israeli state was not acknowledged, however American opposition to interventionism hindered any potential cooperation between the two world wars.

FDR’s reforms and efforts to combat the Depression exemplified the progressive nature of the American system.  Wall Street was regulated and massive public works created the infrastructure for the miraculous World War II economy, pitting the way for an industrious American middle class, something the rest of the world aspired to until it too was destroyed.

President Eisenhower used the American system to develop the interstate highway network and in 1956 when Britain, France, and Israel threatened war after Nasser nationalized the Suez Canal, Eisenhower intervened in the name of decolonization.  However Cold War realisms pushed America off toward the realm of imperialism and centered the Middle East in a new great game.

Anti-Americanism resentment has followed 40 years of U.S. support for both Israel and Arab authoritarianism.  Today the scars from the war on terror run deep but support for intervention in Libya and Syria documents the potential for collaborative development.  However only a revival of the American system can resolve the contentious issues that underlie international relations in the Muslim world.

The void created by the Arab Spring and the economic complications that have followed represent a perfect opportunity to call for the American system’s revitalization.  Pushing a Marshall Plan for the Middle East could reestablish the opportunities that existed over the years for cooperation: a plan to develop both social and physical infrastructure in the Arab world, stabilize political reform and serve the people could generate stimulus at a level to revive the ailing global economy.

The results would reverberate around the world.  A multiplier effect would increase demand for exports everywhere and altered perspectives and government’s role could inspire development of the west’s neglected infrastructure as well.  Perhaps, most importantly, neoliberal domination would be abolished, the power of he nation state to counterbalance private capital’s assault would be reestablished, and a contemporary clash of civilizations could be transformed into one of collaboration.

Last winter, the Occupy Wall Street movement temporarily centered the American consciousness on the manifest inequalities of the present economic order.  Since then, a plethora of gifted economists have been promoting systemic alternatives.  Questions about the Euro’s survival have inspired new thinking and there are many innovative ideas in the Arab world as well, drawing both from anti-imperialist thought and an Islamic economics that prohibits interest and rampant speculation and promotes profit-sharing mechanisms.  As the global economy remains in disrepair, edging closer to abyss, the alterations of the Middle East represent an opportunity that must not be missed.

Whoever takes power in Egypt will be encumbered by high inflation, dwindling reserves, fractured security and reduced tourism and foreign investment.  Such circumstance virtually mandates maintenance of he neoliberal stance introduced in 2004, but mounting opposition to neoliberalism’s global elite is akin to the 18^th century revolutions that birthed the democratic era, a state that aptly described Charles Dickens, A Tale of Two Cities that resembles today.  “It was the spring of hope, it was the winter of despair.  We had everything before us, we had nothing before us, we were all going directly to heaven, we were all going directly the other way,” he famously wrote.

The French Revolution he was describing was one of history’s bloodiest, but introduced the concept of middle class or bourgeoisie.  Today the world is also on the potential threshold of a new order but must also address the aristocracy and promote a global middle class.  An opportunity to do just that rests in the New Middle East.  Otherwise, the spring of hope and winter of despair may be followed by a series of events that takes the whole world to hell.

Younes Abdullah Muhammed is a Muslim American and Master of International Affairs.  He is presently detained in solitary confinement in Alexandria, VA.  He is the founder of Islam Policy and can be contacted at islampolicy.com