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The Middle East and East Asia: A tale of two economic trajectories

- August 11, 2015

People wait in line to buy gas cylinders at a distribution point in Cairo on Jan. 19. (Mohamed Abd El Ghany/Reuters)
This post is part of the “International Relations and a new Middle East” symposium.
With the hopes raised by the “Arab Spring” faded, the region’s agenda is once again dominated by terrorism, unspeakable human rights abuses, civil wars, use of chemical weapons, failed states and now a brutal would-be caliphate. Was this the only possible trajectory? Looking back 50 years, the Middle East faced challenges of postcolonial state and nation-building, low per-capita income and heavy-handed authoritarianism. East Asia faced much of the same, yet today has become the epicenter of the global economy. How could similar conditions lead to such disparate outcomes?
At the core of this puzzle are two competing models that leaders embraced to gain and retain power in each region. Most Middle East leaders thrived for decades on nationalist rejection of the global political economy. Their strategies of “self-sufficiency” leaned on state and military-industrial entrepreneurship and rentier politics. East Asian leaders, by contrast, survived politically through economic growth led by engagement with the global economy. These models explain the two regions’ different paths vis a vis development, diffusion and democracy.
Regarding development, East Asia’s typical model emphasized developmental states steering export-led manufacturing, foreign direct investment and improved education. The Middle East’s typical model emphasized high tariffs and extensive state and military enterprises. As a result, while trade openness was lower in East Asia 50 years ago, it had become twice as high as that of the Middle East by the 1980s. In East Asia, greater openness led to rising standards of living and higher literacy levels, including female literacy. In the Middle East, less openness led to recurrent economic crises, stagnation, collapse, widespread poverty and unemployment, vast gender inequities and high illiteracy.
What prevented Middle Eastern regimes from shifting to a different model in the face of such a disappointing record? Dominant forces, particularly the military and other protectionist groups that benefited from economic closure across the region. Military expenditures relative to income remained at least twice as high in the Middle East as East Asia, competing with the population’s socio-economic needs. This history of rapacious states created the space in which radical Islamist movements could take root.
Regarding diffusion, the respective models were reflected in the nature of things that diffused more easily in each region. In East Asia, successful export-oriented models of political economy diffused from Japan, Taiwan, South Korea, Hong Kong and Singapore to Malaysia, Thailand, China, Indonesia, Vietnam and other “tigers” and “dragons.” As a result, East Asian economies today are increasingly vital to each other: Over 50 percent of their total exports stay within the region.
By contrast, most Middle East regimes built firewalls against outward-oriented models, blocking change to protect their own ruling coalitions and conspiring against those who might have favored such shifts in Lebanon, Jordan and elsewhere. Those dominoes that did spill over Middle East borders included civil wars, terrorism and human rights abuses rather than trade. Turkey is one of the few to eventually escape this domino effect. In recent years, some Persian Gulf monarchies have begun diversifying away from oil, but they are still a long way from achieving new socio-economic models. As a result of these different diffusion patterns, Middle East economies are far less integrated with each other and the world than their East Asian counterparts. Less than 16 percent of Middle East exports stay in their region. While East Asian economies account for 25 percent of world exports, those of the Middle East account for only about 5 percent, largely oil. Likewise, East Asia contributes nearly 30 percent of the world’s manufacturing exports, and the Middle East contributes less than 2 percent.
Regarding democracy, authoritarians launched export-led models in East Asia with little intention to develop democratic institutions. Yet, in time, economic growth, stronger private sectors and professionalized militaries fostered better conditions for democratic institutions. Not all states in that region have gone through that transition yet, but a good number have. By contrast, devastated private sectors and civil societies and entrenched military industrial complexes have made authoritarianism more resilient in the Middle East.
So, is the die cast? Cases around the world suggest that history can weigh heavily on a state’s future but does not invariably impose a point of no return. Southeast Asia was once labeled the “Balkans of the East,” but it is now a thriving region where a flexible, reformist and “modern” Islam has largely overcome its radical competitors.
The barriers for the Middle East may be high but not insurmountable. Achieving effective reforms will require more than what some label “neoliberalism” that retains such basic features of the old model as corruption and rents. Reforms will demand a thorough transformation toward increased openness to the global economy. Such openness has lifted many millions out of poverty elsewhere and, if done well, can narrow inequality. Turkey, Morocco, Jordan, Tunisia and some Persian Gulf sheikdoms have begun to make strides toward greater economic openness, but they still have a long way to go. Only far more extensive reforms, embedded in a new regional pattern, can prevent predatory states from being overrun by even greater predators like the Islamic State.
Etel Solingen is the Thomas T. and Elizabeth C. Tierney Chair in Peace Studies at the University of California at Irvine and the author of “Regional Orders at Century’s Dawn: Global and Domestic Influences on Grand Strategy” (Princeton University Press 1998), “Nuclear Logics: Contrasting Paths in East Asia and the Middle East” (Princeton University Press, 2007) and “Comparative Regionalism: Economics and Security” (Routledge, 2015).