GlobalThoughts – May 15, 2001 Middle East, Asia, Economics, A few musings on the Meaning of Life

Middle East

I know that people are expecting some globalthoughts on all this Middle East stuff but I really don’t have much to add based on my recent trip.

It’s a pretty hopeless situation. Leaders of countries are popular and above expectations which is the opposite of what you would expect in a hopeless situation but it is what you expect when people rally behind their leaders in a hopeless situation. Bush is doing rather well in the US even with a worse economy and recessed stock market. Sharon is pretty popular in Israel; Israelis on all sides are happy he is cracking down. Remember that there were years of warfare without glimpse of a better future before they got around to Oslo; the Israelis feel that Oslo with Arafat was a waste because in their minds they offered virtually 1967 borders with half of Jerusalem and got back an Intifadah along with demands for 1948 borders and a Right of Return that ran beyond those borders. The Palestinians think the Israelis never really offered them anything in good faith that was worth taking and for other Arabs it was very easy to knock the whole process because after all it wasn’t their lives at stake and Palestinian aspirations do not necessarily match their interests.

I am told that negotiations take place behind the scenes with Assad and Arafat’s people but I really don’t believe it. I think Sharon will just stall for time and has no real interest in making concessions to an Arafat who has no real interest in making compromises. Assad seems to be cutting himself a rather pathetic figure trying to buttress his rather weak geopolitical and military position by showing he can make more anti-Israel speeches than anyone else on the block. He is not moving Syria anywhere forward anytime soon. I don’t know what Jordan’s Abdullah sees in him. Anyway, Abdullah has made some big-time mistakes of his own and is beginning to take criticism within Jordan for it. When I visited in September I noted discussions with advisors in Jordan who mentioned that the King was putting all his eggs in the IT basket and overlooking endemic problems in the country such as poverty and infrastructure; he may now have decent investment laws and great billboards around town touting an aspirational future but the IT and domestic markets are dead and no one cares about investing in Jordan right now. 

Iran seems to be caught up in its own internal power struggles and there will not be any serious reforms as long as this continues.  I am also revising downward my political viability rating for Avraham Burg in Israel because I am being told everywhere that he is a featherweight and unelectable. Until Labor gets its act together with its leadership lineup in September, there is no real opposition to Sharon except for Netanyahu who remains a potent threat within the Likud party (now there’s a Messiah if ever there were one, right?). Peres will not pull out of this government for the time being because he has no future outside of it; Shas will not bring down the government because in open elections it will lose half its seats under the reversion to the old system where people will vote for parties and not for prime ministers.

I tend to think that the Israelis will get tired of this war of attrition after another 6 months and the pendulum will again swing toward the Left. Israelis disagree and say they can live with this a long time, even if they all have to do extra reserve duty. We won’t know until the future who is right but we have had enough years to see that the two sides can keep this game going even though no side can really win. Ultimately, I revert to my October 2000 position and state that as long as Arafat is the head of the Palestinians, Israelis will probably continue to feel this way and therefore they will continue fighting to maintain the status quo. They see negotiating with him as a non-viable option and I believe he is ultimately afraid to take a bullet for telling his people that not all dreams can be achieved.

Personally, this was the first time I traveled to the region in which I didn’t really feel excited to talk about these issues. It is a bit of a dead-end right now, I find both sides frustrated and frustrating, and I feel bad about the whole thing. I don’t think Sharon or anyone in Israel has a strategy except to hold the line; the Palestinians have every reason to hate and will continue to do so because breaking the cycle holds little promise of future benefit; neither side can expect a good year ahead. As far as the economy, the Israelis still blame NASDAQ far more than internal disquiet so there is no real incentive for them to seek relief in the hope of peace for economic reasons.

ECONOMY

The Fed keeps lowering interest rates but it is not really helping. Lower rates help drive Japan to economic collapse (as well as put additional pressure on the Chinese economy) and we don’t want that. Lower taxes will take years to have any effect (and it is mostly smoke and mirrors at work right now in Washington). Lower taxes also spur higher interest rates. The third option is to have a little war. The Bush team seems to be stirring the pot the last few months with China, Iraq, Israel/Palestine and maybe hopes a little conflict will break out and help create a bit of defense-oriented spending. Consider that our last cycle of economic growth was in part spurred by the Gulf War. Just a thought. Also remember our soldiers need some bang-bang every few years or else we just throw away all the armaments and buy new ones without getting any benefit from the ones we bought. Our pilots quit if they don’t get any action after a few years and it is really expensive to replace them. So the law of averages is that we are due for some bang-bang before long even if we have to suck somebody in to be the scapegoat villain. (Consider that we virtually gave Iraq the green light to invade Kuwait and Britain pulled its troops away from the Falklands before the Argentines came in, so I am not exactly talking nonsense here.)

As for China, one thought: I don’t know if it was a rogue Chinese pilot who flew too close, a deliberate effort to make a scene for some reason or part of a tit-for-tat that was going on behind the scenes, but I don’t think the plane thing was just an accident out of the blue. It may have been an accident, but it was not out of the blue. Who forced the issue I don’t know and don’t expect to know but fortunately the issue got resolved by the time I traveled and the issue was hardly raised during my visit; it really wasn’t viewed as important enough over the long term to discuss during the short term. The Chinese may have gotten a plane over this of marginal value but they lost big time: Americans usually apathetic focused on China as a new cold war enemy. Will this affect their 2008 Olympics bid? I hope not; it is important that China get the games; they want it badly and it will serve as an important incentive for things to change in the country. I don’t see China as a military threat and I think their ambitions are internal; I think Defense Secretary Rumsfeld is using China as a bogeyman to get a higher defense budget and that he doesn’t intend to let truth stand in the way of his opinions.

While I was away, it appears the energy crisis has become a real big issue in the US. But even though this is not really OPEC’s fault, the markets are adjusting well and prices will be down in a few years in a fundamental way. The holiday for oil-producing companies will end. I think that the Bush Team will not be able to rig the oil markets to stay at a stable-to-high level.

ASIA

There are some thoughts strewn about my latest journal on this month’s visit to Asia. The visit was in part to compare and contrast Singapore, Thailand, Hong Kong, Beijing, Seoul and Tokyo. For those who don’t want to rummage through that long article, go to the Summing Up section at the end but I think the article itself is worth at least a skim. I’m not going to repeat the points here but try to go beyond them.

It’s interesting to note how these countries see themselves in competition with one another. Ratings are important to these guys, just like colleges in the US go crazy over US News ratings. There are real differences between the various countries and they are all worth visiting. There is also real change going on in these countries as they leapfrog technologies and either catch up to or surpass various thresholds. There are also some places where money goes farther than normal and this enables one to enjoy some additional pleasures. Generally, I saw what I expected and found out the things I wanted to know.

A few points: There is a real nutty work ethic here; people are working so hard. Americans live to work; Europeans work to live; Asians work to eat. I almost had to bring along an invasion force to get one of my Japanese friends out of the office during a weekend at the end of a holiday week. My colleagues in Saudi Arabia were too busy to leave their desks; my Thai friend has a heck of a schedule to keep up with. I’m not quite sure why everybody feels they are so busy. Although lately in the US when you ask someone How Are You, they don’t say OK, they say Busy. Doing What? I don’t know, just so Hectic these days. As if it’s shameful to be not too busy. There is an Arab saying that says If you have no friends, you might as well be dead. I think one must always make time for one’s friends and family; after all, what are we working for? Just to get up the next morning and go back to work?

Meanwhile, there are still not that many countries in which you can drink the tap water and I’m not sure that people are getting a lot of benefit or security out of all the work they are putting into the various enterprises that they don’t control. The US is still one of the only places in the world that any moron can put himself in business for $100 and a phone call (maybe that’s not such a good thing but it is the case and it is a real source of freedom for its own sake), but meanwhile many people who are supposed to be not happy because they don’t have political freedom turn out to be not terribly interested in politics, just in making a living. This is as true in Thailand and Japan as it is in Syria and the United Arab Emirates. Americans seem to be preoccupied with this issue with regard to other nations even though the majority of Americans don’t even bother to vote. I think more emphasis should be placed on the importance of economic freedom than political freedom. Democracy is a nice abstract word, but freedom from red tape would be more meaningful to the average person around the world.

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