Why has the Middle East been so Slow to Globalize?

Abstract

The notion that the poor countries of the world can in any reasonable interval achieve rich-country incomes without trade and capital flows is utterly implausible. If the poor countries of the world have to depend on themselves for the saving to finance the investment that they need, or have to develop themselves the skills and technology they need to become rich by our standards, its going to take forever.—Nobel Laureate Robert Solow

George Seurat created sweeping ‘Pointillist’ landscapes by painting millions of tiny dots. But that effort is nothing compared with the painstaking detail involved in creating a landscape of economic, political and social reform.—King Abdullah II of Jordan, April 2004

Over the last several decades, the economic performance of the Middle East and North Africa (MENA) has lagged behind many other parts of the world. While a number of factors have been cited as the cause of the region's malaise, the lack of globalization is increasingly mentioned as a possible source of difficulty. Focusing on the factors responsible for increased levels of globalization, it appears that internal policy reforms rather than external constraints are primarily responsible for the relative integration of the MENA countries into the world economy. Of the areas of policy under the direct control of MENA governments, improvements in several categories of governance, rather than further economic reforms, appear most effective in the attainment of increased levels of globalization.

Keywords:

• Globalization
• Middle East
• economic integration

Keywords:

• JEL CLASSIFICATIONS:
• FO2
• F150

Notes

Notes

1. Cf. Sachs (2000) for an elaboration on globalization's impact on growth.

2. As developed in A.T. Kearney (2002).

3. A full critique of the index is given in Lockwood (2004).

4. For an extensive discussion on factor analysis see Rummel (1970).

5. See for example Lopez-Carlos (2005).

6. See for example Miles et al. (2004).

7. Available from: Global Economic Software, Ltd, www.globaleconomicsoftware.com. Cf. Looney (2003) for an application of this data set to the Middle East.

8. The MENA countries included are Morocco, Tunisia, Egypt, Pakistan, Saudi Arabia and Iran. In addition two regional countries Israel and Turkey not normally grouped as MENA nations were included.

9. For a description of this technique and interpretation of results see SPSS Base 10.0 (SPSS, 1999).

10. For this purpose a classification tree was developed. See SPSS (2001) for a description of the program and logic underlying classification trees.

11. The predictive variables were the six governance measures and ten economic freedom indices) listed in table 5, as well as an overall average of the governance variables and the economic freedom measures. The reforms are averaged over the 2000–2002 period and the Kearney globalization rankings are for the year 2002 (the latest year available).

12. A good discussion of how groups are formed is given in Breiman et al. (1984).

13. One has to assume most of the MENA countries not included in the KFP index are likely to be even less integrated into the world economy.