What’s not working in the World Economic Order

/0 Comments/in , , , /by

I just spent three months working in Jordan and two weeks in Lebanon. Watching the spectacle of the US presidential politics from a distance has had a sobering effect on my usual quick retorts to questions about US politics even though I’ve been at it for several decades in this part of the world. Arabs of all political stripes are alarmed by both presidential candidates, one because she is well-known and carries a great deal of baggage, and the other because his posturing is both alarming and invigorating as there is still a mystical glow around hard-charging leaders in this part of the world, as elsewhere.

It shouldn’t be surprising, I suppose. The chaos that now engulfs the MENA region has much of its origins in the upheaval of autocratic regimes that once provided stability so prized by international investors and Western leadership. The irony is that today, many in society long for the law and order days of the old regimes, as long as they aren’t the targets of repression and human rights violations. And there is symmetry in their yearning in the populist rumblings across Europe and the US.

Indicative of the seismic shifts that are going on are challenges to the ‘economic order’ that has guided free market policies since the heydays of Reagan and Thatcher. Rob Rowden writes in Foreign Policy about a article by an IMF economist that takes direct aim at two cherished principles of its Washington consensus for countries in financial crisis: the need fiscal austerity during economic slowdowns and the deregulation of financial markets.

Commonly referred to by its critics as ‘neoliberalism,’ the IMF author criticizes these tenets for not achieving higher growth rates as promised, in fact, Rowden points out, “fiscal austerity and increased financial openness have often exacerbated economic inequality, which itself could become a drag on future economic growth rates.”

To be fair, the IMF article also notes that other principles promoted by the IMF have been more successful in addressing issues of growth, stability, and capital fluctuations. Rowden writes, “Most strikingly, the article infers that three policy prescriptions long advocated by the IMF’s critics — regulation of some capital flows, Keynesian fiscal stimulus policies, and effective economic redistribution — all have more merit than the IMF has long contended.”

bbc.com

bbc.com

An especially relevant point in the article for developed economies is that the financial crisis of 2008 demonstrated the weaknesses in the IMF’s prescriptions in dealing with economic inequality, stabilizing financial markets, and reviving economic growth. Most levels of GDP growth are still failing to measure up to levels before the crisis, hence the stagnation that is feeding the middle class angst among Europeans and Americans, benefiting non-traditional political candidates like Donald Trump.

As the FP article notes, “Today, in a time when Thomas Piketty’s critique of worsening economic inequality is a best-seller, leading U.S. presidential candidates rail against free trade deals, right-wing anti-immigrant parties win elections across Europe, and even the Organization for Economic Cooperation and Development calls on its members to put the brakes on austerity, it’s clear that the political center, which has favored neoliberal policies for the last 30 years, is no longer holding.”

For the US, the challenges of addressing economic inequality, lower growth rates, and the resulting depression in job quality and compensation, have brought out a strong anti-establishment fervor among the fast-fading white majority as well as conservative ethnic groups who see their share of the economic pie turning sour. Globalization, represented by the IMF’s Washington Consensus, is a convenient target for those who want to return to or move towards a new golden age. The lack of logical discussions in this age of turbulence has resulted in pithy pitches to damn trade deals, erect barriers, punish corporations, and target immigrants. It is hardly a basis for sustainable policies but nevertheless the reality being faced in the US and abroad as the current world order has failed to deliver its promises.

As the Foreign Policy article concluded, “The cynics who provide comfort for those delusions are as dangerous as the extremists.” It is a rough road ahead that will not be mended easily.

What Hadith and Cheese Making tell us about Work and Labor

/0 Comments/in , , , /by

Once the Prophet (PBUH) was sitting with his companions and they happened to see a young man busy working in the early hours of the morning. The companions watched him and commented on how beneficial it would be if he put his effort in worshipping Allah (S.W.T.) instead. When he heard this, the Holy Prophet said to them: “Do not say that! Because if he is working to be independent and self-sufficient, it is in the way of Allah. Even if he were striving to earn a living in order to support his family, it would still be a noble act. It is only when a person takes pride in his efforts and money that he is working in way of Shaitan. 

This simple, yet provocative story, recounts Mohammad’s support for just and noble work. Yet many youth today avoid jobs that require physical labor and would rather wait for less tiring opportunities. Labor market realities are not working in favor of those who wait. With economic stagnation dominating MENA economies, and a growth rate of 5% off in the distance, it is hard to imagine a robust economy anywhere in the region. Even the UAE, which is doing better than most, has very high unemployment among its young people, especially university graduates. And foreign worker participation remains very high.

Given MENA’s growing population and the reluctance of young people to consider employment that seems to lead nowhere, governments are scrambling for strategies to bring more entrants into the formal economy. From programs to certify skilled workers now in the informal economy and efforts to replace foreign workers with local substitutes, to a variety of wage and work subsidies to make national employees more attractive to companies, the work space is literally littered with opportunities, but the dent in overall employment is barely noticeable. Even large-scale efforts to promote entrepreneurism only produce hundreds rather than the tens of thousands of jobs needed, if locals will take them.

Labor and Work

I recently went to a cheese maker’s shop in Jordan who started out as an environmental activist. Then she decided that Jordanians needed to source more of their basic needs locally and in a more sustainable way. So she started making cheese. If you’ve ever tried, you know it’s not so simple to make cheese, despite the fact that when our parents made laban or labneh or halloum, it looked pretty straight-forward.

You have to pay attention to not overheat the milk, add the starter at the right time, let the culture do its work, and then more patience is needed through the final steps to the end product. No wonder no one makes cheese at home anymore! Who can spend the time it takes when there’s no guarantee that something won’t go wrong.

Organic food markets making a mark Photo: Jordan Business Magazine

Organic food markets making a mark
Photo: Jordan Business Magazine

Making cheese reminds us that making choices in life are not always in our control, there are many mediating factors: age, gender, education, physical condition, training, temperament, opportunity, even wasta have a way of shaping choices we can make. But like the Jordanian cheese maker, we need to start somewhere with a belief that we can do something with our lives, even when it seems that there are tough challenges ahead.

Start with thinking about the differences between labor and work. Although they are used to mean the same thing, by definition, labor involves hard physical work. Work, on the other hand, is defined as “activity involving mental or physical effort done in order to achieve a purpose or result.” It is this emphasis on achieving a result that should guide us as we look for opportunities to grow, earn money, and have satisfaction in our lives.

Some want to work with as little labor as possible, because they are interested only in compensation, not achievement. People who see the challenges and are still determined to make a difference in their lives are willing to take a risk and treat work as a means to achievement – of a better job, better salary, having a family, and raising children – all started because of their parents’ labor and work. This is not always evident at the start, especially in technical and vocational job sectors. Yet this is the work that makes a modern society function – building and maintaining infrastructure,  making clothing, furniture, ice cream, and food, and providing all kinds of support services.

Later that day, I met a man who is proud to say that he is a farmer. He has a degree in agronomy and is one of the pioneers in developing, producing, and marketing organic products for local sale and export. He says that the short-sighted view of young people is supported by the reluctance of families to accept marriage prospects who are not “good enough” because of their jobs. This attitude will only be mitigated when society remembers that it was only a few generations ago that many family members were illiterate and only did manual labor…that was then and now…it’s time to rethink what matters about work, and labor.

Top photo: tastejo.blogspot.com

Feeding the Beast – Time to Separate Politics from Economic Reforms?

/0 Comments/in , , , , /by

Image property of SyrianFreePress@wordpress.com

Jordanians have been waiting months for a new national employment plan that is supposed to revamp the education and training systems to bridge the gap between education and employment; and provide guidance for the integration of Syrian refugees into the country’s workforce. It may appear after the Eid.

There is an interim government in place, tasked with preparations for elections in September, running the country, and implementing an agreed IMF reform agenda. According to the IMF, “These reforms will be focused on the business environment, the energy and water sectors, the financial sector, and the labor market. The reforms will also focus on protecting the most vulnerable segments of the population and in supporting Jordan’s efforts in hosting the Syrian refugees.”

he reforms include strengthening the tax base, controlling public spending, dealing with tax incentives and income tax in general, and ensuring the national safety net for the most vulnerable constituencies. The goal is to improve employment opportunities; encourage transitions from the informal to formal economy and support SME growth; promote cost recovery in the energy and water sectors; and improve the country’s financial system though greater transparency.

King Abdullah then announced an Economic Policies Council “to discuss economic policies, programs and development plans, supporting the government’s efforts aimed at overcoming economic difficulties, investing in opportunities, achieving higher growth rates and enhancing the competitiveness of the national economy.” Few women were in evidence on the Council’s roster.

The announcement of higher prices for water and energy were greeted with some small protest demonstrations and, according to the media, young people involved were demanding jobs. They initially turned down offers of private sector employment, preferring government jobs. Whatever the actual outcome, it was reported that they eventually agreed to work in the private sector…no further details.

Popular resentment towards tougher economic policies is not surprising…the US itself is unable to fund badly needed infrastructure repairs due to political sensitivities. Here in Jordan, the announcement of more economic reforms elicited three responses from local friends I consulted: the government hasn’t been doing its job properly; more meetings are a way to delay implementation of needed changes; and the government must do more to incentivize the private sector.

Women are underutilized in Jordan's development

Women are underutilized in Jordan’s development

Speaking about unemployment, one said that if Jordanians really wanted to work, there are plenty of opportunities to replace the half-million foreign workers in the country. He believes that until the government undertakes effective economic strategies that investors will not take Jordan seriously. He also spoke about the need to more proactively engage the informal sector through certification programs that enable those working outside the system to be licensed and trained to run their own businesses.

Another friend spoke about replacing the many job subsidies offered by the government with a higher minimum wage, better working conditions, and better use of government resources to eliminate waste and inefficient procurement processes. This would enable the government to pay more attention to fighting corruption and promoting effective governance, not to mention put in place more attractive job conditions.

A third source noted challenges to the economy from the impact of regional conflicts which is stifling commerce and scaring investors. He believes that business friendly reforms are the key to attracting more investments and so supports the start-up on the Economic Policies Council and the progress of the Jordan Investment Fund.

What these various perspectives underscore is that Jordan, at least for these sources, has a long way to go to rebuild the ties between decision-makers and the people. There seems to be a shrug when hearing about sacrifices needed when GID officers steal arms meant for anti-Assad fighters and sell them on the black market – their only punishment being kicked out of the service keeping their pensions and ill-gotten gains.

King Abdullah seems to sense that time is against the country. At the first meeting of the Economic Policies Council, he tasked them to “put solutions in place without any [hidden] agendas except serving people and combating poverty and unemployment. These are the interests of the people who are concerned with issues that matter to the country.”

For its part, members of the Council “underlined the indispensability of a participatory approach in the economic decision making and integrity between financial, monetary, investment and labour policies.” Time will tell is this is a call for effective action or another opportunity to avoid proactive and sometimes painful policies.