Lounsbury on Iraq & MENA: War, Politics, Economy & Related Questions

Allow me make make clear here as I have elsewhere that I oppose this war, albeit on the basis of a different principle than many people do. I’m not claiming to know the region (hence, the questions), nor am I “running with the party line”. It is well documented from non-news sources such as Human Rights Watch and Amnesty International that no one has murdered more Muslims than Saddam Hussein. Just as you are not trying to defend his attrocities, neither am I trying to defend the American aggression. The part that I do not understand, and that I am seeking clarification from you about, is that I really don’t see anything substantively different about mainstream Arab reaction to the war and mainstream American reaction to the war. Both are angry about what they are seeing on TV. America might be an 800 pound gorilla, but why do the Arabs not view Saddam in the same way? When he was engaging in mass murder, rape, and torture of fellow Muslims, what were they seeing him as — a fuzzy little bunny rabbit? What exactly is it that clouds their objectivism?

The only thing from my point of view, is that I’m not sure I’d call it an “Islamic administration.” Technically of course, it can’t be ( that would violate the Turkish Constituition. But even beyond that, analyses I read after the election seemed to indicate that a) they still got a minority of the total vote ( 34% ) - it was a 'landslide victory" only because the opposition splintered widely ( most failing to get the 10% threshhold needed to be reprsented ), b) much of that was from outside their core constituency and more a protest party against the deeply scandal-tarnished previous government that presided over a serious economic downturn, and c) they have very carefully moderated the religious rhetoric since then ( and they were already moderate offshoot off an earlier Islamist party, who were themselves rather moderate by Islamist standards ).

I don’t see Turkey as sliding into an Islamist abyss at this point. Indeed it will be interesting to see whether the AKP can hold that big protest vote they got in the next election. From what I’ve read that seems to mostly hinge on economics, not ideology.

  • Tamerlane

One of the reasons I finally felt able to support the narrow goal of the removal of Saddam was because the Islamic Conference at (I think) Doha followed the broad line of OBL (in stating that Saddam is a bad Muslim). I read that as implicitly accepting a dichotomy between the future for him (Saddam) and for the Iraqi people, that action to remove Saddam was not action against Islam, or necessarily bad for Muslims.

Of course, on present form it’s entirely probable this US administration will squander (what I perceive to be) valuable collateral in the battle to not lose hearts and minds. I see that battle as vital for at least two reasons;

    • The long-term stability of US/Western-Islamic relations.
    • That *potential *Muslim extremists will at least have the opportunity to measure the Mad Mullahs (likely) anti-western rhetoric against the more measured Islamic views of OBL and the Conference.

Do you have a view on the significance of fellow Muslims distinguishing Saddam the bad Muslim from the suffering Iraqi people ?

And welcome aboard.

Sure there is an upside. I am in asset management here, believe me I see it and we have been working to mobilize funds. I’m looking to mobilize some serious dough here, really serious, no piddly two digits of millioins you know.

However, this has to be executed masterfully, which is not out of the question but given the Administration’s performance to date, I am discounting that at a VERY high discount rate. It is possible, but can you seriously tell me that the Halliburton issue, etc. is showing an Administration that is finally learning to manage PR well.

For example, we already have threats from shiite opposition to turn on the Americans if they stay too long. The risk of a guerrilla action from Sunni secularists and Shiites (not together, but if one or the other feels screwed) is very high.

My underlying fear is that (a) the city battles will be terrible, based on nationalist rather than Sadaamite resistance (b) the post -battle period will be marked by a highly unstable peace. I will be clear, I regard the odds being against a quick and stable peace given my present understanding of the way things are being handled by the Administration, and this is not my armchair view. This is my fucking job to figure out how we’re going to do this.

So, yes it can work, but the chances of fuck up are high and I have not seen very much skill on the Admin’s at what will be a very delicate situation.

I’ve dealt with kind of sit. (business side of course) for a long fucking time. My confidence is not high, but that could change if I see better performance by the Admin.

Okay Lib, I see where you are coming from. Sorry, I have not been around to see things in context.

I am not, by the way, harping on regional expertise to toot my own horn per se, it is just that I see commentaries here, elsewhere that clearly fundamentally misunderstand the regional sociology, and I want to emphasize the communication disconnect is very, very deep.

Well, the phrasing is a bit hyperbolic, but yes, we are all clear on Sadaam being a bad guy.

I’ve said in the past, he’s like John Gotti running a country (except Sadaam is well educated, I know people who knew him back in the Cairo days). Not crazy, but mean.

However, that’s a matter of degree in a region that has largely only known despotism, so mean gets respect if its even handed.

This ain’t Kansas and the ideas and sources of legitimacy in the backs of peoples minds are very different.

It’s often a rude shock to the newcommer who hears all the beautiful language bandied about, e.g. in re corporate governance, and then finds the reality and what people actually understand that language to mean is radically different.

Very good points.

What colors their view?

Well, look at US history in the region. Mixed. Most populaces have only know nasty dictatorships which have been frequently supported by American Administrations with a “next quarter” mentality, rather than looking to a longer run.

As such our sudden concern for their well-being rings hollow. If I were in their place, I would not necessarily think any differently. The way many seem to see it, at least one Arab is standing up to the Big Bully. Sure, he’s a nasty Bully himself, but at least one of theirs is standing up. Sure he’ll get whomped in the end, but it is invigorating to populaces that feel put upon, despised, scorned and powerless to see at least one of their leaders not acting, and I quote now from my secretary “craven dogs.” That is quite an insult in Arabic and the fact she included the local leadership, despite the mukhbarat threat says a lot.

The anger is deep. It has been long running and it will not be easy to address. Yet it must be addressed. I think with intelligent policy, it can be addressed. Give people hope and take away the reek of hypocrisy.

What I really fear is we are going to make another Egypt, another craven dog regime like Mubarek’s in Cairo.

I dearly hope that I am wrong, but…

Lib, not wishing to anticipate those obviously more immediately engaged in the region than I, but an article in the Guardian yesterday implied that to some in the region the fact is that Saddam is their gorilla.

Good lord.

By the way everyone, I also have an apology thread in the BBQ, wanted to let everyone know about that, but forgot to put it in the OP.

thanX for this insightful dialogue.

Bravo. Nice to hear it put so well.

Welcome to the reality of traditional authority. Welcome to the reality of the traditional understandings of power.

This is why the simplistic idea that Israel or an Iraq or whatever will inspire ‘democratic reform’ is a terribly naive and even stupid idea.

There are some democratic habits and traditions in the Arab world, but they are marginalized and will need a long time to grow and send down roots. Right now they are like desert scrub.

On the economic situation, I am sharing with you some comments I made privately to Tamerlane before returning, jsut before the war started.

Regrettably, this recent news suggests that the theoretical threat I raised is more real than I had feared, although the currency situation is likely to stabilize if the war does not last: “Egypt’s government issued a decree Monday, March 24, ordering both private and state-owned exporting companies to sell at least 75 percent of their foreign hard-currency earnings to state-owned banks, in a bid to stave off capital flight fueled by the war in Iraq.” http://www.menareport.com/story/TheNews.php3?sid=245286&lang=e&dir=mena

However, since this is just something I have been trying to think through at present, why not a commentary, with the caveat it’s without deep reflection or study, but my gut arising from being in the midst of things.

However, in general the arab economies are, in terms of their external trade, exporting to the developed world with little internal lateral connnections.

Egypt is pretending to do the right thing currency wise, but in reality they are not. They floated the pound, but are unwilling to work through the consequences. Now the timing is desperately poor, but typical of the Egyptian government, which only takes the right step after years of dawdling. Nasserist Socialism is the rule.

I must say, if you go into most Egyptian stores, e.g. Omar Effendi, you have the wierd feeling you have been transported to an Arab East Germany (or better Poland). As I lived in East Germany for a time back in the good old days, when men were men and the Red Army did maneuvers… I know what I speak of there.

Now, in regards to the financial sector, again connections are largely north-south, but the region is a net creditor due to capital outflows.

The weakpoint is that all commerce is dollar bound, and many if not all of the regions’ countries run current account deficits of no small size, relative to GDP. They need, then, dollars.

The danger is getting locked out of the market - if no one is willing to buy Jordanian dinars, to take an exmaple of a relatively healthy currency in a non-petrol state, they need to have official provisions. Now, mitigating the risk is the inflow of dollars to the Gulf, which if the Gulf so chooses, can be provided through a variety of means to help out the neighbors.

As such, there may be enough dollar liquidity to bridge over a temporary lock out due to contagion - i.e. the Pound regime collapses (Egypt repegs, or takes some severe capital controls measures, which we have already begun to see) reaction in curency markets hits all the MENA currencies or all the non-petrol MENA currencies…

I believe you see where I am going. Mind you, I am not a currency trader, my business is direct investments, so I am looking at this from an informed but outsider’s perspective. Still it is not my area of expertise.

The policy angle really is, I do not think the current administration is adequately thinking about nor preparing for a potential crisis along these lines. I know State Econ councillors are concerned about this, but the policy seems to be “all is good so far!” Or as the phrase went from the French film, “So far, so good” but “It’s not the fall, it’s the landing” that is important.


But in regards to the currency crisis issue and the article, I have read the article (I also know the author personally, good solid and well trained fellow) and I think it very fair for its brief overview. The problem he abstracts away from, for it is in some ways impossible to solve without a crisis is the transitional problem – the problem that is leading the Egyptians to stumble. As Argentina and the Asian financial crisis demonstrated, these kinds of transitions are terribly painful. Do you think any government here could survive this and be a democracy? Do you think that such a transition will not breed much pain and thus… al-Qaeda connexions? You know my thinking.

The problem at the moment, and the one which I am presently grappling with for our Jordanian portfolio companies is that while Jordan, for example, has a relatively well-managed (if overvalued) currency regime, we have seen in the past --as he alludes to-- that a currency crisis contagion is extremely hard to fend off once the ball gets rolling. The scenario which I am looking at for a kind of worst case issue is a month or two long period of clear instability in Iraq (even presuming the war goes well, we still have major post Saddam uncertainty and you can adequately argue the political / historical risk in this area).

In such a scenario I can see the Egyptian government panicking, and given the Bush administration’s less-than-felicitious handling of public diploacy not getting the proper public support, and imposing clear exchange controls or some other severe liquidity event.

In my analysis, we then risk seeing contagion hitting the weaker currencies, first Lebanon and then others. As we have seen with Argentina, and the severe battering the Latin American currencies took on this in far more stable situations, we look at some terrible downside risks if htere is not coordinated responses by Central Banks. At the same time, the Bush administration has sown major bitterness, so timely help will not necessarily be forthcoming in a timely manner.

Here, we are looking at some fairly serious consequences for the regional financial systems, e.g. Central Bank of Jordan only has so much reserves and if no one wants to buy diners, then they are fucked. This is actually a risk to Turkey and even Israel, although there is of course the Gulf to defend against this.

Presently regional financial balances are very unhealthy, and while the scenario I have just outlined is something of a doom scenario, if also is a realistic one. I can say for attribution that Western diplomatic economic staff is seriously concerned about this situation, as we are in the private sector.

The longer term issues and the critique I saw of the countries in the region not developing their economies are really seperate issues.

Certainly the issue of development is two edged, frankly Jordan, Egypt, Lebanon (or Syria, but they are in near autarky) are not oil doped economies, and while Arab Nationalism and Socialism certainly have hurt their development, neither are they well-placed for industrial development and as such the critique made is, at best facile and superficial. Issues run far deeper, and of course this gets into what you know best – fractured societies without real unity, unstable situations even for good governments (e.g. the Ben Ali regime in Tunis, although not pleasant, has done a damned good job in development. You might raise this issue in comparision with the 50-60 year old failure of democracy in Egypt – a history which I am sure 99% of the Board is not acq. with, or the same in Iraq (let us not forget the Baathist were CIA darlings and the same kind of ‘transformational’ talk was used about them.)

Well, I am getting far afield and I need to get back to trying to think through contingency planning for the portfolio companies – luckily we have some diversification so there is some insurance against a serious crisis but these are non-trivial risks.

I appreciate that you can understand how difficult it is for me to wrap my brain around this. There appears to be a contradiction that you might can straighten out for me. If what they actually want is brutality, then why do they oppose what they perceive as the 800 pound gorilla? Would they look more favorably on the coalition if it did indeed rape and pillage by flattening the cities and moving into them with heavy armor and an iron-grip occupation?

First sorry if that prior message sounded rude, I am trying to fit these replies into what I hope you all appreciate is a very busy and stressful environment for me, and I want everyone to know that I am not trying to put anyone down, but speed and my habitual abruptness…


Imagine coming over here to work… I’ve learned a lot the hard way. Luckily langauge gives me access.

Much of the classic Middle East still is quasi tribal in nature, that is people see and feel legitimate authority as being heirarchical. It’s legimitacy often flows from relationships, not institutions, and as such there are concentric circles of legitimacy.

You father’s legimitate authority over you is strong than your uncle’s, etc. etc. etc. Of course sheer force also comes in to trump. Fictive kinship and personal relations play a role. Even for highly Westernized and secular people, their unconscious understanding of things, esp. when back here, tends to slide towards this framework.

If you (the outside operator) don’t understand and insert yourself into these networks,… well life gets a lot harder.

Now there is an understanding there should be reciprocity in order to maintain legitimacy. That is why the Saudi and other Arab states are so highly geared toward ‘redsitributional’ investment/spending rather than straight out investments and services. Despite the facades of modern state apparatus, much works by these unconscious frameworks.

These things are changing - but slowly. One reason in my mind that Iran looks more like a real democracy, however flawed, than Egypt is that the apparatus, the frameworks have gone native. Sure, you and I may not like a theocratic democracy, but if you want to see real evolutoin, and not superficial aping, then this is the way it has to go. Maybe not so extreme, but if we want an Iraqi democracy, for example, it has to go native. That will mean some things “we” think are necessary must go by the wayside until they become native plants.

In short the magical transformation of the region is an utter crock, and real transformation requires approaching Iraq with a sophisticated sense of what can work, and how.

So, it’s because the coalition forces are outsiders?

Bingo, the ultimate outsiders. Neither Arab nor Muslim, nor even well-tied to the region by personal ties.

In addition to the political history in re colonialism and American interventions in the past.

I think I finally understand it. Strangely, perhaps, that is exactly the libertarian view.

Interestingly, Arab colleagues tell me that in recent years (they estimate since sanctions began 12 years ago) the rhetoric of the Baath party is increasingly using religion and Islam. Saddam’s speeches in particular, as one associate describes it, are “littered with quotations from the Quran and Islam, this would have been unheard of in the early days.”

This is seen by some analysts as an attempt by the Baath party to try to associate themselves with the increased religious sentiment sweeping the region, the waves of fundamentalism that have replaced the drive for secularism and socialism in the sixties.

No. It has some naturalistic relationship in re the expectation of reciprocity, but coercion is not ipso facto illegitimate. Too much coercion, yes, unjust acts, yes, but per se, no.

In re Baath turn to religion, yes precisely: let me repeat, the confident assertions of a secular Iraq represent in no small part the nostalgic assertions of Iraqi exiles. Things are not 1970 or even 1980.

Still, that is not to paint Iraq as a Saudi Arabia, only to balance the picture.

I meant simply that it is the libertarian view that outsiders ought not to interfere in the business of others without their consent. Clearly, I did not mean that libertarianism advocates coercion. Although the Arabs themselves might be internally coercive, that does not excuse an outside coercive interference in their affairs by government.