Dar al Islam.

The Mediterranean, the world system and the “wider EUrope”

Volume 2: The Chain of Peripheries and the new Wider Europe

by

Peter Herrmann and

Arno Tausch (Eds.)
© Nova Science Publishers, Hauppauge, New York

Cover illustrations:

Cover:

Overarching: The house of peace (Dar al Islam)

http://islamicity. com/Culture/MOSQUES/Europe/TMp105b. htm

The archs of the Great Mosque in Cordoba, Spain

The smaller images symbolize:

1) Dar al Islam:

http://ccat. sas. upenn. edu/~rs143/map5. jpg

2) We will have only a common future or we will have no future

http://earthobservatory. nasa. gov/Newsroom/NewImages/Images/lights_europe. jpg

Credit: Image by the NASA GSFC Scientific Visualization Studio

Satellite: DMSP VE Record ID: 6529

Growth in "mega-cities" is altering the landscape and the atmosphere in such a way as to
curtail normal photosynthesis. By using data from The Defense Meteorological Satellite
Program's Operational Linescan System, researchers have been able to look at urban
sprawl by monitoring the emission of light from cities at night. By overlaying these "light
maps" onto other data such as soil and vegetation maps, the research shows that
urbanization can have a variable but measurable impact on photosynthetic productivity.

2
Cover text:

With the process of a “wider Europe” (EU-Commission President Romano Prodi’s “ring
of friends”) that extends from Marrakech in Morocco to St. Petersburg in Russia
gathering speed, the growing rift between Europe and America also is about how to deal
politically with the countries of the Mediterranean-Muslim world. The house of Islam
(Dar al Islam) was pivotal to the European path to the Renaissance and to the re-
discovery of classic Greek philosophy. The Mediterranean policy of the European Union
aims at a positive and cooperative relationship with the region.

A successful integration of the Mediterranean South would have tremendous and positive
repercussions for regional and world peace. World-wide leading experts from the field of
world systems analysis, economics, integration theory, political science, theology and
area studies, agnostics, Christians, Jews and Muslims alike discuss the issue with
European decision makers. The outcome is an interdisciplinary evaluation of this
projected export of peace, cooperation, dialogue and stability in the framework of world
center-periphery relationships.

Contributors to Volume 2: Syed M. Ahsan, Gernot Köhler, Syed Mansoob Murshed,

U U

Hans-Heinrich Nolte, John R. Oneal, Kunibert Raffer, Bruce Russett, David Skidmore,
Arno Tausch, The First Declaration of Alexandria, and Patrick Ziltener

3
Biographical Sketch of the authors by alphabetical order of their last names

Ahsan, Syed. M. is Professor & Director of Undergraduate Studies in Economics at

Concordia University in Montreal, Canada, and a Research Fellow at CESifo, University
of Munich, Germany

ahsansm@vax2. concordia. ca
TU UT

Herrmann, Peter is Director of the European Social, Organisational and Science

Consultancy (ESOSC) – Independent Research, Aghabullogue and Lecturer at the
Department of Applied Social Studies at University College Cork, both Ireland

herrmann@esosc. org
TU UT

Kohler, Gernot is Professor emeritus of Computing Science at Sheridan College,

Oakville, Ontario, Canada

gko15@hotmail. com

Murshed, Syed Mansoob was associate professor of development economics at the

Institute for Social Studies in The Hague and at the United Nations World Institute for
Development Economics Research (WIDER) in Helsinki. Recently, he became Prins
Claus Chair Holder in Development and Equity at the Utrecht School of Economics
(USE), Utrecht University, the Netherlans.

Murshed, Mansoob [M.Mansoob@econ.uu.nl]

Nolte, Hans-Heinrich is retired professor for History of Eastern Europe at the Seminary
in Hannover; address: Historisches Seminar, Im Moore 21, D-30167 Hannover, and
Bullerbachstr.12, D-3o89o Barsinghausen, Federal Republic of Germany. He is editor of
the Journal “Zeitschrift fuer Weltgeschichte” (Peter Lang Verlag) and President of the
“Verein fuer Geschichte des Weltsystems”

nolte@hist-sem. uni-hannover. de
CNolteVGWS@aol.com

Oneal, John R. is Professor and Director of International Studies at the Department of

Political Science at the University of Alabama, Tuscaloosa, Alabama

joneal@tenhoor. as. ua. edu

Raffer, Kunibert is associate professor of Economics at Vienna University, Austria

4
Kunibert. raffer@univie. ac. at

Russett, Bruce is the Dean Acheson Professor of International Relations and Political
Science at Yale University; Director, United Nations Studies at Yale and Editor, of the
Journal of Conflict Resolution

bruce. russett@yale. edu

Skidmore, David is Professor at the Department of Politics and International Relations at

Drake University, Des Moines, Iowa 50311, USA

david. skidmore@drake. edu

The First Declaration of Alexandria was signed on January 21, 2002 in Alexandria, by
His Grace the Archbishop of Canterbury, Dr. George Carey; The Sephardi Chief Rabbi
Bakshi-Doron; The Deputy Foreign Minister, Rabbi Michael Melchior; Rabbi David
Rosen, President of the WCRP; The Rabbi of Savyon, Rabbi David Brodman; Minister of
State for the Palestinian Authority, Sheikh Tal El Sider; Representative of the Greek
Patriarch, Archbishop Aristichos; The Melkite Archbishop, Archbishop Boutrous
Mu'alem; Representative of the Armenian Patriarch, Archbishop Chinchinian; and The
Bishop of Jerusalem, the Rt. Revd. Riah Abu El Assal. Contact: The Administrator,
Susanne Mitchell, Anglican Communion Office, Partnership House, 157 Waterloo Road,
London SE1 8XA, United Kingdom

susanne. mitchell@anglicancommunion. org

Tausch, Arno is Ministerial Counselor in the Ministry of Social Security, Generations

and Consumer Protection in Vienna, Austria, and an Associate Visiting Professor of
Political Science at Innsbruck University

Arno. Tausch@bmsg. gv. at

Ziltener, Patrick is a researcher at the Max Planck Institute for the Studies of Societies in
Cologne, Federal Republic of Germany

ziltener@mpi-fg-koeln. mpg. de

5
Today, like some 25 years ago, an educated, accomplished and humble soul is needed.
Today, we should refrain from claiming that we have a monopoly on the truth. The
absoluteness of truth, in itself, should make us, not only to accept variations in mankind's
culture, religion, language and colour of skin - under the banner of the same unique and
absolute truth - but also to recognize those variations as a unique opportunity to build a
world based on peace, freedom and justice.

A. Khatami, President of Iran

We must take the Andalusian Way, for it will lead us to Averroes and Maïmonides, both
natives of Cordoba, both philosophers, legal experts and medical practitioners, one a
Jew, the other a Muslim, who represent the symbiosis between cultures at the highest
level.
The transmission of Greek science and philosophy by Arab translators and the
transmission to the Christian world of Arab science and philosophy are shining examples
of interpenetration between cultures and of cross-fertilisation of civilisations. The
exemplary nature of Muslim Spain must inform our present-day activities: it established a
connection between the Orient and the Occident and between Antiquity and the
Renaissance.

P. Cox, President of the European Parliament 1999 - 2004

6
Table of Contents

D TOWARDS A WIDER EUROPE (2) ................................................................... 9

TU UT

SUPPING WITH THE DEVIL WITHOUT A LONG SPOON: THE HISTORY OF ACP-EU
TU

PARTNERSHIP ....................................................................................................... 9
UT

Kunibert Raffer ................................................................................................. 9

TU UT

A CHAIN OF INTERNAL PERIPHERIES ALONG THE OLD MUSLIM-CHRISTIAN

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BORDERS OR: WHY IS EUROPE’S SOUTH POOR? .................................................. 30

UT

Hans-Heinrich Nolte ........................................................................................ 30

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THE EFFECTS OF EUROPEAN INTEGRATION ON ECONOMIC GROWTH AND

TU

CONVERGENCE OF ITS MEMBER COUNTRIES ...................................................... 48

UT

Patrick Ziltener ............................................................................................... 48

TU UT

BEYOND THE WASHINGTON CONSENSUS. A QUANTITATIVE REFLECTION ON THE

TU

WORLD ECONOMIC AND WORLD POLITICAL CONDITIONS OF TURKISH EU-

ACCESSION ......................................................................................................... 89
UT

Arno Tausch .................................................................................................... 89

TU UT

E THE WORLD SYSTEM AND DAR AL ISLAM.............................................. 147

TU UT

GLOBALIZATION AND ISLAM. AN ECONOMIST’S PERSPECTIVE ......................... 147

TU UT

S. Mansoob Murshed ..................................................................................... 147

TU UT

GROWTH, INSTITUTIONS AND POVERTY: THE MENA PERSPECTIVE ............... 159

TU UT

Syed M. Ahsan............................................................................................... 159

TU UT

FUKUYAMA’S DREAM, HUNTINGTON’S NIGHTMARE AND A GRASSROOTS

TU

REVERIE........................................................................................................... 195
UT

David Skidmore ............................................................................................. 195

TU UT

ARAB UNEMPLOYMENT AS A WORLD-SYSTEM PROBLEM................................ 211

TU UT

Gernot Köhler ............................................................................................... 211

TU UT

DOES THE ‘WAR AGAINST TERRORISM’ PROVE THE ‘CLASH OF CIVILIZATIONS’

TU

RIGHT? SOME EVIDENCE ................................................................................. 227

UT

7
 John R. Oneal and Bruce Russett .................................................................... 227
TU UT

F. LAYING THE GROUNDWORK FOR A COMMON FUTURE: THE FIRST

TU

DECLARATION OF ALEXANDRIA – IN THE NAME OF GOD WHO IS

ALMIGHTY ........................................................................................................ 257
UT

FIRST DECLARATION OF ALEXANDRIA OF THE RELIGIOUS LEADERS OF THE HOLY

TU

LAND ............................................................................................................... 257

UT

G DOCUMENT AND DATA APPENDIX ................................................................. 259

TU UT

TOWARDS A WIDER EUROPE ............................................................................ 259

TU UT

HUMAN DEVELOPMENT EFFICIENCY ......................................................................... 264

TU UT

POVERTY INDICATORS ........................................................................................... 265

TU UT

DATA FOR THE MULTIVARIATE ANALYSIS IN SECTION C (ARNO TAUSCH) ......................... 296
TU UT

H INTERDISCIPLINARY BIBLIOGRAPHY: GLOBALIZATION, INEQUALITY, AND A

TU

WIDER EUROPE .................................................................................................. 306

UT

I INDEX OF NAMES ............................................................................................. 349

TU UT

J INDEX OF SUBJECTS ........................................................................................ 358

TU UT

8
D Towards a Wider Europe (2)

Supping with the Devil Without a Long Spoon: The History of ACP-EU Partnership

Kunibert Raffer

The Devil was sick,

The Devil a saint would be;
The Devil was well,
The Devil no saint was he!
European proverb

Lister (2002, p. 2) characterises the history of EU-ACP relations as “emblematic of” a

”disjuncture between high development aspirations and limited, positive, measurable
development performance”. While she is certainly right, one would have to ask to what
extent Brussels really and earnestly sought to realise these aspirations. While some
positive evidence can be found during the early years, this does not appear to be so
during the last decade, which also saw a considerable re-orientation towards the “’near
abroad’, at the expense of developing countries” (IDC 2002, part V, p. 1).

The demise of the bi-polar world affected North-South relations and donor interests
strongly. Increased Western interest in the former Eastern bloc, now called Countries and
Territories in Transition (CTTs) made the South fear that DAC-donors might shift their
resources to the East. The discussion on whether to recognise payments to CTTs as
Official Development Assistance (ODA) fuelled fears that donors could maintain their
ODA-levels while shifting their money along with their interest towards formerly
communist countries.

The difficult negotiations at the Cannes Summit necessary to secure a nominal increase
of 1. 5 per cent over five years, which was practically a reduction in real terms although
the EU increased its financial capacity by the accession of three new and rich members,
were unlikely to allay such fears (Raffer & Singer 1996, p. 102). Nor was the fact that aid

9
to the former East and to the southern Mediterranean rim was significantly increased, a
decision accommodating German and Austrian interest extremely well.

Austria, a country not generally known for loudly propagating views on development co-
operation, strongly argued for a substantial reduction in her EDF-contributions because of
her particular generosity towards her Eastern neighbours, for which she wished to be
compensated by reduced commitments vis-à-vis ACP countries. (Raffer 1995, p. 45) This
position ran counter to the generally and officially declared view of the OECD that
Official Aid (OA) to the East would not and should not reduce or substitute traditional
aid. In parenthesis it should be mentioned that an important share of Austria's relatively
high OA had been caused by the cancellation of Polish debts, which the US - a country
practically without claims of its own - had "convinced" Europeans to grant. Therefore
this relatively generous OA can hardly be called a voluntary choice.

Understandably, there was concern among the countries forming the ACP (Africa,
Caribbean, Pacific) group that the EU would lose interest in continuing the Lomé system
that had preserved special relations to former European colonies and turn to Eastern
Europe instead. When Lomé IV was signed, the Commission's Vice-President, Manuel
Marin (1989) therefore assuaged ACP anxiety that Lomé co-operation might become as
much a thing of the past as the bi-polar world. He assured that signing "only a few weeks
after the Berlin Wall came down, underlines a permanency in ACP-EEC cooperation
which goes beyond the historic events we are living through". Seven years later European
interests had shifted, political and security interests were redefined to fit a "post-Lomé
world" (Commission 1996, p. i), a fine example of what "permanent" means when it
comes to EU commitments once hopes of getting economically profitable pay-offs in
exchange are gone.

This paper is going to analyse the changes in EU-ACP relations, including the
foreseeable end of this formerly special relationship that is no longer in the EU's
economic and political interest. After commenting on recent changes in the EU's
geographical orientation, a brief analysis of the evolution from the Treaty of Rome via
the Lomé system to Cotonou and "partnership agreements" follows.

Geographical Reorientation towards the East

Discussions whether to subsume official aid to CTTs under ODA started immediately
after the demise of the Eastern bloc. While interests to do so differ widely among DAC-
members the EU, in particular Germany and Austria, have shown strong interest in these
newly accessible markets in the neighbourhood. Both countries were among the major
donors to the East. Austria - traditionally rather ungenerous to SCs - even took the first
rank, averaging above 0. 2 per cent during the three years 1991-93.

Analysing data of the first years after the demise of the "Eastern bloc" Raffer & Singer
(1996, p. 212) nevertheless found that the thesis of a clear shift of DAC aid from South to
East was hardly supported by OECD data in spite of exceptions such as Germany or the

10
EU budget apparently proving the rule. This finding was corroborated later, also if ODA
figures increased by "innovative" recording are corrected. It should be mentioned,
though, that perceptible "broadening" (or increased inclusion of items not or not always
considered to qualify as aid) by the DAC increased ODA from 0. 32 per cent in 1989 to
0. 33 per cent in 1990, keeping ODA at this level in 1991 and 1992 (Raffer & Singer
2001, p. 86; for more details v. Raffer 1998b). This trend towards increased "broadening"
was apparently discontinued after 1994. As the OECD changed their data base after
Raffer (1998b) had started to circulate as a "grey paper" clear proofs are impossible. This
boosting of ODA was quite useful to counter accusations of shifting aid away from the
South to Eastern Europe during the first half of the 1990s, though. Based on corrected
figures Raffer & Singer (2001, p 90) nevertheless concluded: "Less money for all
recipients rather than shifts of available resources between groups still appears to be the
most plausible conclusion from available data, even though slight increases for both types
of aid were recorded in 1998. " Once the Cold War was over aid had lost its strategic
importance, having presumably served its purpose. The enormous "peace dividend" that
would result from decreased arms expenditures and had been expected to increase aid to
both East and South did not materialise. The élan of these expectations raised while
communism crumbled suggests a comparison to the period immediately after WWII,
when North-South co-operation was propagated on a scale strongly influenced by the
Marshall Plan.

Among donors the EU is an exception, where a clear re-orientation towards the East can
be observed, easily explained by plain self-interest as these countries are candidates for
accession. Commissioner Patten stated at a hearing of the International Development
Committee of the House of Commons that the goal of projecting stability around the EU
has made "the proportion of our external assistance which is traditional ODA" decline
(IDC 2000, p. 23). Much money is going to accession candidates. The East, the Balkans
and the Mediterranean are generously funded. Poland received twice as much as Asia and
Latin America together (ibid. , p. 27). Both in 1997 and 1998 no ACP country was among
the top ten recipients of OA or ODA (OECD 1999; 2000), with Poland topping the list in
both years. According to Oxfam more than half of the budget of the European
Commission's Humanitarian Office went to ex-Yugoslavia in 1999, "four times the
amount of aid going to 70 ACP countries. " (IDC 2000, p. 77) In 2002 “Chris Patten
plainly and without compunction stated that, ‘We spend in Poland, an enlargement
candidate, every year more than we spend in Asia and Latin America together’”(IDC
2002, part III, p. 4). He asserted however “that spending in the ‘near abroad’ was not at
the expense of allocations to low income countries. ” This is not easily reconciled with
Table 4 one page earlier according to which the ODA shares of this group decreased from
85 per cent in 1980 to 76 per cent in 1990 and 39 per cent in 2000. Both all DAC
members and the UK increased their shares for this income group to which many ACP
countries belong slightly over this period. However, as “Work remains to be done with
clarifying which budget categories are focussed on development objectives” and the
“ability to report clearly on spending by sector as required by the OECD’s Development

11
Assistance Committee is being developed” (IDC 2002) the real distribution of funds
might be difficult to establish.

Inter-Press Service reported on 17 May 2000 about a proposed shift in EU resource

flows. The EU Commissioner for External Relations told reporters that stabilising the
Western Balkans, in particular Kosovo, was a priority, and that the Commission was
proposing cuts in commitments in most other external actions to finance this. For
reconstruction of the Balkans Euro 5. 5 billion were immediately promised, even before
concrete projects were assessed. According to the Commissioner "we had to raid other
parts of the budget" (IDC 2000, p. 25). The British Secretary of State for International
Development saw it as "raiding money that would otherwise be used for development of
the poorest" (ibid. , p. 5).

The new Cotonou agreement facilitates further financial marginalisation. The accession
of Eastern European countries will certainly put more pressure on the ODA budget,
irrespective of whether payments in preparation of accession are recorded as OA.
Payments to new members to help them adapt may be assumed to be no longer recorded
as OA. Nevertheless they are likely to affect the EU's willingness to fund ODA,
especially in the case of the ACP group, where interest was largely lost.

From Rome to Mauritius

The history of Lomé mirrors North-South relations very well, including their origin in the
colonial past and the situation after the demise of communism. When the Treaty of Rome
creating the European Economic Community (EEC) was signed in 1957 several
signatories were colonial powers. Since they had no intention to sever economic links
with their colonies the Treaty had to contain clauses (Art. 131 et sequ. ) linking these
colonies with the Community. The first European Development Fund (EDF 1) was
established. Naturally, the colonised were not asked for their approval. After
decolonialisation international agreements became necessary to continue these relations
with what now were independent countries. Yaoundé I and II were signed, the first
Agreement of Yaoundé between the Six (original EEC-members) and 18 newly
independent African states. It abolished tariffs and trade barriers for nine agrarian
commodities, reducing them for other products except for those considered sensitive by
the Europeans (whose production was of interest to EEC agricultural policy). Provisions
for capital movements and locations of firms were included, aid by EDF 2 and the
European Investment Bank was agreed on. In return European exports had to be granted
preferential treatment - or "reverse preferences" - by the Yaoundé countries. Other
Southern Countries (SCs) complained about massive trade diversions. This led to the
Arusha Agreement with Kenya, Tanzania, and Uganda, less generous than Yaoundé I, but
the first break-away from the strong concentration on francophone Africa. Yaoundé II
invited all African states with "structurally similar" economies to join. Mauritius did.

Reverse preferences were heavily criticised by the US and the UK, worrying about their
export markets. Britain stopped her attacks when she decided to become a member of the

12
Community herself. Britain's accession, more precisely her relation to the
Commonwealth, made new arrangements necessary. Under the UK Treaty of Accession
Asian Commonwealth countries were not offered association. There was only a
declaration of intent to seek "appropriate solutions" for problems that might arise in the
field of trade. On 28 February 1975 a totally new Treaty was signed in Lomé, the capital
of Togo - Lomé I, thus preserving the dominating influence of francophone states.

Negotiated in a political climate of perceived Southern power, Lomé I contained the most
far reaching concessions ever granted to any group of SCs by any donors. Starting in
1973 negotiations for Lomé I took off in the year of the "first oil crisis". SCs tried to
follow OPEC's example by establishing more commodity cartels. They were perceived to
be on the brink of wielding commodity power. The South demanded a total re-
organisation of the world economy, calling for a New International Economic Order. The
establishment of the ACP Group (Africa, Caribbean, Pacific) in Georgetown foiled the
European approach of parallel negotiations with three regional groups.

The European Commission (1996, p. 9) frankly acknowledged the reasons for this
unprecedented generosity:

"concern to defend . . . economic and geopolitical interests in the age of the Cold War . . .
the international situation . . . European anxiety at the first oil crisis, i. e. a fear of raw
material shortages and a desire to hold on to valued overseas markets, united with
geostrategic interests. "

The first Lomé treaty stipulated a contractual right to aid. Its great innovation was Stabex,
the STABilization of EXport revenues, deliberately offered as an alternative to Southern
demands for commodity price stabilisation. Like an insurance scheme it conferred
contractual rights of compensation for export earnings shortfalls of selected commodities.
Special regulations for bananas, rum, and most notably sugar were granted. The Sugar
Protocol guaranteed a minimum sugar price linked to the price of beet sugar within the
EEC for a quota of roughly 1. 22 million metric tons per year. Thus ACP exporters
participated automatically in intra-EEC policies preserving European farmers' incomes,
another unique feature. Lomé I did away with reverse preferences. This was due to US
pressure rather than ACP power. Seeing reverse preferences as a means to secure
advantages in ACP markets the US had successfully demanded their abolition (Raffer &
Singer 2001, p. 100).

Lomé I already blocked off demands for more fundamental changes in the global
economic framework. Further evolutions after Lomé I are easily explained by a
determined and tenacious, yet slow and diplomatic undoing of what had been granted in a
period of anxiety by skilfully taking advantage of the worsening position of SCs.
Negotiated at a period of less European anxiety Lomé II already saw a slight shift
towards greater influence by the European donor side, a tendency strongly accentuated by

13
Lomé III and IV. Arguably more important was that the drive of ACP countries to get
new concessions comparable to those of Lomé I was stopped. Donors turned more self
assertive. Geopolitical conditions have changed perceptibly since 1973-75, and the EU's
anxiety with them. Later Conventions including the new "post-Lomé" arrangement
signed at Cotonou slowly moved from contractuality to conditionality, continuously
changing power relations. The history of Lomé also highlights the loss of political weight
by SCs due to the debt crisis and the end of the Cold War.

Based on their experience with Lomé I ACP countries demanded the inclusion of other
important commodities into Stabex, which covered some agricultural products and iron,
as an important new feature of the second treaty. Considering minerals much too
important for Stabex the Europeans offered a new system for mineral exports, Sysmin. In
contrast to Stabex's automaticity - payments depended only on losses in export revenues -
Sysmin was tightly controlled by the Commission having the exclusive right to approve
financing. Brussel's massive leverage on ACP exporters was hoped to "enable specific
Community action . . . to halt the dangerous decline in mining investment, particularly in
Africa. " (Meyer 1980, p. 10) The director-general for development, Klaus Meyer, also
stated most clearly that the Community's supply interests would preclude automatic
application. The political tide had started to turn. This imposed system for minerals
proved quite unattractive to ACP countries, and thus hardly successful. Only 35 per cent
of the funds available for 1986-95 were actually committed (Lister 1999, p. 151).

Strict control of the use of transfers as well as of all Lomé funds was introduced by the
third treaty. In the words of the Commissioner for Development, Edgard Pisani (1985),
the man whose ideas largely shaped Lomé III, its mechanisms were designed to "make
the Convention clearer, more solid and stricter in its execution". It was also found that
"the means and the will had to be better harnessed towards the objective of development.
" (ibid. ) In fact an elaborate, not to say cumbersome, planning and execution system was
established (for a highly simplified schematic description cf. Raffer & Singer 1996, pp.
94f), which complicated disbursements perceptibly. The whole Lomé structure was
"Sysminised". This "clumsiness" of Lomé, however, proved highly useful later on and
was extensively used as an argument when Brussels wanted to abolish the whole Lomé
system. A person set on rolling back and undoing initial concessions could not have done
any better. In parentheses it should be mentioned that the new CSPs (Country Strategy
Papers) – apparently influenced by the IBRD and its PRSPs (Poverty Reduction Strategy
Papers) – are hardly a simplification of administrative work, but is not unlikely to lead to
a duplication of work.

Within the ACP group there was a great deal of skepticism about the European idea of
this elaborate co-ordination, which resulted in a large administrative burden for
recipients. But finally: who pays the piper calls the tune. The term "policy dialogue", also
used initially but dropped later, strongly recalled the "dialogue" with the IMF. The
Directorate General VIII tried to work out an alternative to the "Structural Adjustment" of
the Bretton Woods Institutions (BWIs). These attempts and the goodwill acquired in the

14
past were doubtlessly useful to make the changes of Lomé III more palatable to ACP
countries. The search for alternative adjustment, however, was soon discontinued once
Lomè III was signed, and Brussels fully supported the BWIs, although they could not
deliver lasting positive results.

Available Stabex funds had proved insufficient to cover contractual claims when all
commodity prices plummeted at the beginning of the 1980s. In 1980 only 53 per cent of
legitimate ACP claims could be covered. In 1981 less than one quarter of established
claims was initially covered, but financial manœvring finally allowed paying around two
thirds. To deal with such steep declines either the amount of money would have had to be
increased substantially or claims would have to be reduced. Lomé III reacted to these
"difficult years" for Stabex by a new Article 155 containing more detailed rules than
Lomé II on how to reduce transfers if the total of legitimate claims exceeded allocations.
The huge and notorious backlogs of undisbursed funds - several years of annual
payments - would have suggested an appropriate increase of allocations for an
underfunded Stabex. This would have reduced the Commission's administrative problems
and backlogs, and provided enough money for stabilisation in the future. From the point
of view of efficiency it would have been recommendable. But it would have strengthened
Stabex, the one feature of the Treaty not totally under Brussel's control. Generally, the
tendency away from de facto unconditional balance of payments financing, characteristic
of the original Stabex, was strongly reinforced by Lomé III - a phenomenon known to
Americans as "mission creep".

Formal support for Structural Adjustment was an important innovation of Lomé IV.
Interestingly this was accompanied by strong criticism of the Bretton Woods approach by
practically all EU organs, from the Commission to the European Parliament. Even the
relevant part of the Convention reads like a compendium of criticisms of the BWIs,
which might also have been conducive to making changes more acceptable. Lomé IV
consolidated and continued the process of Sysminisation with minor changes. To give
examples: now the Commission finalised the financing proposal and forwarded it to the
Community's decision making body. ACP countries were to be given an opportunity to
comment on any amendment of substance, which the Commission intended to make. The
Chief Authorising Officer (an EEC organ) approved the tender dossier before invitations
to tender were issued, subject to the powers exercised by the EU delegate. The list of
tasks of the delegate grew slightly. A Mid-Term Review of Lomé IV was stipulated,
which also offered the possibility of demanding changes of the Treaty. This Mid-Term
Review in particular increased conditionality and European leverage.

Lomé IV also started the process of differentiating ACP countries. When joining, the
Dominican Republic - heavily dependent on sugar exports - was denied access to the
Sugar Protocol. When post-Apartheid South Africa joined formal membership could not
be denied. But Brussels largely avoided financial commitments, de facto denying
membership to the country. The general trade arrangements, the protocols on bananas,
rum, beef, sugar, coal and steel products, Stabex, Sysmin, structural adjustment support,

15
and EDF resources (except for refugee assistance) are not applicable. South Africa has
the right to participate in the Joint Assembly. It is eligible for tenders for EDF 8, but not
under preferential ACP conditions (on details cf. Perry 2000). Like under Lomé,
however, large financial backlogs soon started accumulating under the European
Programme for Reconstruction and Development, and complicated and inefficient
structures were established by the Commission (Perry 2000, p. 11). A new two-class
Lomé - to avoid the word apartheid - was created although the country would have
needed resources to overcome the legacy of a racist regime that had also been supported
by EU members. These two cases mark the change towards differentiating ACP countries
continued by the present Treaty.

Practically on signing Lomé IV a barrage of severe criticism of the Lomé system started,
which was to continue until the new Cotonou Treaty was agreed. The experience of
rather limited results of Community aid - the Commission (1992) speaks of "mediocre
results" - was quoted. Of course, it was conveniently forgotten that Brussels forced rather
cumbersome and absurdly complicated planning and execution procedures into Lomé III,
so cumbersome that even the EU was not adequately aware of procedural issues. Thus
errors, shortcomings and inefficiencies had to be expected. They were documented by the
Post-Fiji study (Price Waterhouse 1992), both within ACP countries and within the EU. It
goes without saying that these European shortcomings and inefficiencies were not
appropriately mentioned. The Commission used its own undermining of the system to
justify the abolition of Lomé, benefitting from its own incompetence as an aid
administrator, not least by putting the blame on others.

Lomé's implementation problems and their causes cannot be properly understood without
discussing the Commission's efficiency as a donor. The peer review of the EU "again
identified aid management as the weakest point of the Community's programmes. "
(OECD 1999, p. 108) The Commission's preoccupation with procedures, controls and
administration rather than results is quoted as a reason. At the enquiry into the
effectiveness of EU aid in the House of Commons the British Secretary of State for
International Development stated that "the Commission is the worst development agency
in the world. The poor quality and reputation of its aid brings Europe into disrepute. "
(IDC 2000, p. xxiii)

The Secretary of State testified that the government had to intervene to avoid that NGOs
and people committed by the Commission to implement projects did not go bankrupt.
There were "lots of trouble" in Britain. She qualified such slowness as "unforgivable" and
spoke of a "disgracefully bad administration" (ibid. , p. 16) Delays and inefficiencies in
disbursement forced a local NGO-director in Pakistan to take out a personal loan, using
her residence as a collateral, to be able to pay staff salaries that should have been covered
by Brussels. One Committee member suggested "some form of compensation" for
consultants and NGOs if something goes wrong through no fault of theirs. A lot of
organisations ceased to apply for EU funds, he stated, because they could not afford the
administrative risk involved. Commissioner Nielson called the case of "the fabulously

16
well organised and successful agricultural research network" CGIAR "very
embarrassing". The Commission was "unable to pay because the dossier was moved from
one Directorate-General to another and the patient did not survive that transfer. " (ibid. ,
p. 41) In plain English: the delicate task of transporting a document within reasonable
time from one DG to the other proved too much for the EU. Arguably so, because the
Commission was too heavily engaged in preaching the importance of good governance or
high standards of public sector management to ACP countries.

By the end of 1999 the backlog of outstanding commitments had reached over Euro 20
billion. During the last five years the average delay in disbursement of committed funds
had increased from 3 to 4. 5 years. For some programmes the backlog was equivalent to
8. 5 years of "payments". (ibid. , xvi) According to Commissioner Nielson the ACP
countries fared better than the Mediterranean programme regarding the general overall
time lag (ibid. , p. 37) even though some states have practically collapsed in Africa. The
whole truth is not always immediately told. None of the money for Nicaragua in the wake
of hurricane Mitch was spent by 6 July 2000. Questioned in detail by a British MP
familiar with the situation on the Atlantic Coast the Commissioner first blamed the
Nicaraguans but had finally to admit that this delay was not caused by corruption or
problems in Nicaragua: "It is a Brussels problem. " (ibid. , p. 43). At least on this
occasion the blame put on the recipient was at severe odds with the truth. This does not
justify the argument that the Commission correctly singled out ACP countries as the real
culprits of administrative problems. Nor does the fact that Official Aid (to the East) had a
relation between commitments and payments of 2. 06 in 2000 (IDC 2002, Table 2).

Greenidge (1999, p. 111) points out that commitment rates of "funds under the
discretionary control of EU institutions" lagged far behind those driven by unforeseen
events or dialogue during the first two years of Lomé IV. Decisions taken by the EU
alone were slower than others. According to Greenidge (1999, p. 112) "unhelpful
interpretation of the articles", and a Commission saddled with minutiae contributed to
frustrating effective implementation. While partnership creates problems absent in a
command-obey relationship, this cannot be blamed on SCs. The quality and effectiveness
of Brussel's aid is indeed appalling, not discussing it as an important factor in Lomé was
strategically indicated, though, if one wanted to destroy rather than to reform the system.

Suffice this to show that simply putting the blame on the ACP group or on the concept of
partnership allegedly making implementation difficult is unjustified. One also wonders
why the Commission wanted to expand its activities, given its administrative problems.
Its greater efficiency hardly seems to be a credible reason.

Whether this is to change remains to be doubted. Wit regard to 2001 the Commission
(2002, p. 7) stated:

"The reform process, launched in May 2000, still has a way to go in achieving its
objectives, but improvements are already evident. For example, for the first time since

17
1990, there was a reduction in the level of outstanding commitments waiting to be paid
(RAL). This reduction was 3 %. The number of years of payments necessary to clear up
the RAL decreased from 4. 12 years at the end of 2000 to 3. 66 years at the end of 2001. "
(ibid. , p. 12)

The International Development Committee (IDC 2002, part IV, p. 7) “supported the
Commission’s proposal to examine old and dormant commitments with a view of
rescinding them”, and welcomed the “progress” made. One would have to check to what
extent the reduction of backlogs was already achieved by simply rescinding parts of
commitments.

The shift of power away from the Commissioner for Development - the Commissioner
for External Relations, e.g., chairs the Board of EuropeAid - does not suggest increased
openness to development issues. Van Reisen (2001, p. 12) summarises:

"The portfolio of the Commissioner for Development exists on paper, but in reality the
responsibility has been handed over to the Commissioner for External Relations. . . .
Commissioner Nielson may be responsible for EU development policy, but he is certainly
not in charge of EU policy towards developing countries. "

As the DG Development hardly has any functions left but programming with ACP
countries, the author finds it "difficult to come to any other conclusion than that a future
Commission would deem a separate Directorate for Development as superfluous. " (ibid.
; cf. also Dearden 2002, p. 16). The decision to abolish the Council of Development
Ministers, subsuming development policy under external relations does not render this
conclusion less likely, also indicating new priorities. If she is right the demise of the ACP
group would also be connected to the demise of a separate development DG, if it can
survive that long. Development policy would in all likelihood finally be totally
substituted by Brussel's political and economic interests. Van Reisen (2001, p. 13) also
points out that "Development Co-operation is not included as a distinct item in the list of
31 topics covered in the screening exercise of accession negotiations for pre-accession
countries". As they have not been asked to make clear commitments on the aspects of the
current development practices in the Community, they may not feel an obligation towards
this part of the acquis once they are members. Their interest in the South has always been
very small. Communist aid was mainly accounted for by the Soviet Union and - to some
extent - the GDR.

Reforms so far should not lead objective observers to expect too much. The IDC (2002,
IV p. 2) identified a “continuing lack of clarity about the respective roles and
responsibilities of DG External relations, DG Development, and EuropeAid. ” Asked
whether there were clarity about them Commissioner “Nielson answered with a short and
honest ‘no’”. He assessed “EuropeAid and the structures of relationships as a ‘strange
construction’” (ibid. ). Unsurprisingly, the IDC were told during a recent visit to Nigeria
“that there are £600 million of unspent funds, and that a so-called ‘quick start’ project

18
had taken 2 years to disburse its first Euro. ” (ibid. , p. 7) One has to agree that such
“delays are unacceptable and demand further progress. ” Lack of transparency and
continued unacceptable delays in payments to NGOs had to be identified as problems
again. A considerable change to the better would be necessary to introduce good
governance to the EU and to stop easily avoidable waste of taxpayers’ money.

It is true that Lomé was unable to stop the marginalisation of Sub-Saharan Africa or to
increase trade ties between the Union and the ACP group. But its means have always
been quite small. The first financial protocol of Lomé IV for instance amounted to 12 000
million ECU for five years, or 2 400 million ECU per year. Compared with total ODA
flows from DAC-members of $ 56. 7 billion in 1991 or $ 60. 4 billion in 1992 (OECD
1994) this is not overwhelming. Fluctuating a little with the dollar/ECU exchange rate
this was around 5 per cent of total DAC-ODA or about 10 per cent of total ODA by EU-
members. The share of Stabex, an institution meeting particularly strong skepticism, was
12. 5 per cent of al Lomé funds, below 1 per cent of total DAC-ODA. Remembering that
total ODA itself is only a small percentage of all flows, expecting substantial impacts
from either Lomé or Stabex is unwarranted. Just by comparing these resources with the
flows to Eastern Germany since re-unification and their results renders such expectations
absurd and not totally in line with perfect honesty. One would not need to go further, e. g,
by comparing these sums with EEC-ACP trade or the effects of European protectionism.
The impact of EU-aid may be and actually is often reduced or annihilated by measures in
other fields. In technical terms this is referred to as lack of "coherence".

The Mid-Term review changed the relations further away from what can meaningfully be
called partnership. The money earmarked for an ACP country under the national
indicative programme was now paid out in two separate tranches. The second tranche
was made conditional upon the country's performance as well as "the situation in each
ACP State" (The Courier, no. 144, March-April 1994, p. 6). The Courier concedes
"There is some uncertainty over what this exactly means" (ibid. ), but it goes in the
direction of donor "flexibility" and IMF conditionality. An essential elements clause was
introduced, allowing the suspension of the Convention in the event of serious violation of
the principles of democracy, human rights or the Rule of Law, without clearly defining
serious violation. The EU's own undemocratic structures - where "laws" are passed in
secrecy and not by elected parliamentarians - seem all right, though.

The way the Mid-Term Review was dealt with under time pressure by the Joint Assembly
at Strasbourg is also illustrative of what catchwords of political conditionality, such as
democracy or good governance, actually mean to the EU. As The Courier (no. 144,
March-April 1994, p. 7) reported in detail, the session had to be suspended for an hour in
order to allow members the opportunity to read the texts on which they had to vote. It
turned out, though that two English texts had been made available, whose numbering of
the paragraphs diverged, so that amendments could not always be matched to the
paragraphs in the draft resolution. This apparently fundamental flaw was drawn to the
attention of the chair (a European), who pressed ahead with the voting and the resolution,

19
as amended, was finally agreed by 59 votes to five with seven abstentions. The Courier
wondered: "The important question, of course, is what the Joint Assembly actually
decided at the end of this confused session. " The EU had demanded that only
parliamentarians from representative assemblies be members of the Joint Assembly. Such
fine and democratic procedures evidently need democratic legitimisation.

Apparently, it was also largely forgotten now that the inclusion of human rights into
Lomé III was an ACP demand directed against the EEC states that were in

"a close economic (and political in some cases) embrace with the Apartheid regime of
South Africa. For this reason the EU insisted that it be relegated to an annexe rather than
being incorporated in the body of the text. Today the tables have turned somewhat. "
(Greenidge 1999, p. 116)

Human rights violations by black dictators are seen in a darker light than those of white
Africans were. With Lomé IV political and ideological orientation has become part of the
system. Before, Lomé was based on the recognition of the right of ACP states to
determine their development models in all sovereignty. Lomé's political and ideological
neutrality was an asset during the Cold War, but has meanwhile turned not useless and a
hindrance to dominating ACP countries.

Once the Mid-Term Review was completed, the European Commission (1996) continued
its attacks by issuing its Green Paper. As it stimulated a wide discussion on the future of
European co-operation with the ACP states in an unprecedented way it also has the merit
of fostering an open and participatory discussion.

Regarding content the Green Paper suggested four "possibly options", three of which
would break the ACP group, either into regional agreements, via specific agreements
with LLDCs, or by bilateral agreements under a very loose general umbrella. Thus the
situation the Europeans had initially wanted in the 1970s could be re-established. It was
proposed that resources should be "budgetised". The EDF, Lomé's separate instrument,
would thus disappear. According to the Commission (1996, p. 39) the principle of
partnership "has come up against a number of difficulties". It "has proved hard to put
initial intentions, based on the principle of equal partners, into practice". Among the
reasons that "seriously undermined" partnership are "growing conditionality" or the
Community's tendency to decide for recipients "like other donors". Unashamedly, the
Commission used its own undermining of partnership to justify its abolishment.

Naturally, diplomatic lip service is paid: "Partnership is undoubtedly still the ideal form
of cooperation relations and any future agreement between the EU and the ACP States
must endeavour to restore it. " (ibid. ). This formulation already implies that partnership
had been destroyed - otherwise it could not be restored. To do so the Commission (1996,
p. 75) proposes a "phased and individualized approach". Due to different perceptions
between the country and the EU joint aid management is "time-consuming" and "less

20
effective". This hardly refers to the Commission's own management record. Nor would
the Commission's efficiency justify that: "the EU should take sole management
responsibility" where needed, with the aim of conferring "steadily more responsibility" to
deserving beneficiaries, recipients where "good governance improves". As "standards of
governance can change very rapidly" there is "no point" in "five-year fixed allocations"
(ibid. , p. 72). Annual reviews as adopted for the Euro-Med partnership were proposed,
which would provide substantially more leverage than the two-tranche system. Aid
should be given according to "merit" and "performance criteria" (ibid. , pp. 70f). Co-
operation should depend not only on needs but also on a country's "institutional and
political choices. " (ibid. , p. 41) The initial pragmatic approach is no longer plain
common sense. Strengthening the political dialogue is demanded. Based on experience
the Commission declares "support is appropriate only when certain conditions - primarily
political - are met. " (ibid. , p. 40) Economic goals, such as development, are no longer a
primary concern.

Naturally, any remnants of the "legally binding system" (Article 2, Lomé IV), even the
watered-down Stabex and Sysmin, restrict donor power. Apparently to allay fears the
Commission wrote: "The idea of compensation itself is not being challenged since there
are good reasons why special aid packages should be available to keep macroeconomic
management on track". Complaining that "automatic triggering . . . is making them less
relevant" the Commission (1996, p. 72) concluded that they "need to be abolished or at
least amended. " As compensation is always relevant if and when shortfalls occur this
would be patently illogical, unless increasing leverage is the relevant goal. Arbitrarily
granted compensating aid would, of course, increases leverage enormously.

Consequently the EU saw making the policy dialogue "part and parcel of its common
foreign policy" (ibid. , p. vi) as the foundation of the new partnership. ACP countries
have to commit themselves to institutional reforms, and to conducting "economic, social
and environmental policies reflecting the major undertakings made at the Rio,
Vienna, Cairo, Copenhagen, Beijing, Istanbul and Rome international conferences"
(ibid. ; bold in orig. ) Brussels accepted no obligation to do so. It insisted that these
respective responsibilities must be seen in political terms.

Regarding policy incoherence or inconsistency the Commission was outmost clear. It

recalled that the Maastricht Treaty demands consistency, and Art. 15a inserted into Lomé
IV in 1995 demands coherence. The Green Paper repeatedly invoked the importance of
this principle (e. g. Commission 1996, p. 3;4;14;41;45f). Nevertheless the Commission
(1996, p. 46) refuses expressly and steadfastly any commitment to coherent and con-
sistent policies:

"consistency . . . that is the external effects of policies other than development

cooperation, can in any case never become an international commitment on the part of
the Community. . . . consistency remains a matter of judgement. The Treaty of the
European Union answers these concerns by imposing the principle of consistency,

21
particularly with regard to its external activities (Article C of the Treaty) and explicitly
with regard to development cooperation (Article 130v). "

Although it is argued that the Maastricht Treaty must be respected to the digit behind the
decimal point in the case of austerity policies politically justified by the common
currency and WTO discipline is keenly cited to justify changes, the Commission has no
intention whatsoever to obey the Maastricht Treaty when it comes to aid (cf. also ibid. , p.
ix). European taxpayer's money is going to be wasted for projects whose success will be
destroyed by taxpayer's money as in the past. Subsidised EU beef exports to West Africa
undermining EU aid to support local beef production or EU sugar exports practically
annihilating world sugar prices and sugar refineries financed by aid are examples. This
bodes ill for the efficiency of ODA and is a somewhat sobering illustration of what Euro-
pean bureaucrats think of the Rule of Law obviously more welcome as a stick to beat
SCs. The Commission (1998b, p. 34) strictly refused to bind its own internal procedures
by treaty, which does not alleviate fears of arbitrariness.

Coherence would also demand the removal of the debt overhang. Lomé IV (Art. 239)
calls external debts "a major development issue" constraining "growth and development".
The Commission (1996, p. 35) stresses the importance of progress in managing external
debt, speaks of the "bankruptcy of many African states" (ibid. , p. 5), declaring: "In the
light of the enormity of the foreign debt problem facing many ACP countries, it is hard to
turn a blind eye to international initiatives in this area. " (ibid. , p. 57) The Commission
managed to do so.

Although the main intentions of the Green Paper formed its backbone the Commission's
(1998b) basis for negotiations was more accommodating, though still somewhat vague on
details. It proposed to preserve parts of the original Lomé arrangements until 2005.
Renewed US interest in SSA - the Commission (1998a, p. 18) referred explicitly to the
US African Growth and Opportunity Act (HR 1432 EH, 105th Congress, 2nd Session) -
might explain this. So would the common bargaining manœvre of demanding more than
intended to allow for "compromise". Clearly, a system such as Lomé cannot be totally
abolished at one stroke. It should be noted though that both the EU and the US
documents contain very similar ideas increasing donor leverage (Raffer 1999).

The WTO proved immensely useful to cleanse trade relations from disliked historical
obligations. Lomé needs a WTO waiver, which the Commission (1996, p. 34) qualified -
while emphasising the need to honour WTO obligations - as unlikely to be achieved for
any new Convention. Reciprocal trade preferences will have to be part of any new treaty.
The pre-1975 situation of reverse preferences will finally be restored.

To guarantee WTO-compatibility of Free Trade Areas (FTAs) by including substantially

all trade ACP countries would have to liberalise substantially. Quite frankly the
Commission (1998a, p. 18) declared its strong economic interest and its hope that

22
European firms "themselves under the pressure of globalization" would benefit greatly.
SADC countries would have to liberalise to an extent, which even in the Commission's
(1998a, p. 13, English in the orig. ) opinion is "politically . . . certainly not defendable
and would even run counter to the principle of asymmetric liberalisation, as conceived by
the Commission. " The Commission (1998a, p. 28) does not consider liberalising its
system of agrarian protection. Very sensitive products, such as rice, will remain as
protected as before, regardless of ACP-export potential. Rightly, the Commission does
not foresee noteworthy impacts of FTAs on its Common Agricultural Policy. While there
logically is a larger potential for liberalisation in ACP economies, the Europeans are
apparently unwilling to establish a level playing field, reserving the right to protection
where it suits them.

The alleged inefficiency of preferential treatment has often been used to corroborate the
case for reciprocal FTAs. Initially, the EU had argued this special trade agreement to be
necessary in the case of South Africa because it could not be considered a typical ACP
country. Meanwhile the EU demands this type of agreement for all ACP countries.

Arguments against preferences seem to disregard some facts. In 1989 only 7 per cent of
all ACP exports enjoyed a preference margin above 5 per cent. Products of particular
interest to the EU remained highly protected. The complex rules of origin appear "more
of a penalty than an advantage for trading with the EC. " (Bossuyt et al. 1993, p. 40)
Nevertheless some countries, such as Mauritius, Kenya, Zimbabwe, and Jamaica were
able to increase exports thanks to Lomé (Frisch 1996, p. 69). Davis & Mbuende (nyi),
two African parliamentarians, argue that the Commission’s prevailing analysis presents a
very distorted view of the trade performance of individual ACP countries supported by
looking at aggregate trade: "a more appropriate basis for judging the significance of ACP
trade preferences would be to look at how individual ACP countries have performed in
those areas where they enjoy significant margins of preference" (ibid. , pp. 5f). Doing so
shows that some 26 ACP countries have enjoyed higher export growth to the EU than the
average for Mediterranean and Latin American SCs, some 8 ACP countries higher than
the average for Asian SCs. Some countries have developed entirely new manufactured
and non traditional agricultural exports or expanded significantly in sectors enjoying high
tariff preferences.

Cotonou
The new Treaty - initially scheduled to be signed in Suva - finally put an end to Lomé.
Remaining funds from previous EDFs are to be transferred to EDF 9 and used in
accordance with the new conditions, apparently an indication of how urgently the EU
wanted to exit from Lomé. The new Financial Protocol amounts to Euro 15. 2 billion
(Lomé IV/2: Euro 14. 625). Assistance under EDF 9 is - according to Annex I - "up to"
Euro 13. 5 billion, an increase of 4. 1 per cent in nominal terms, if the whole maximum
amount should become available. Even with modest inflation this means a remarkable
reduction in real terms. At the weak exchange rate of the Euro at the time of signing this

23
meant noticeably less than the two pints of beer and the packet of chips per head in an
average London pub used to illustrate the impact of Lomé IV/2.

Replacing fixed financial allocations by a ceiling for payments under Cotonou is an

important innovation in EU-ACP conventions. It invites reduced disbursements and must
be interpreted with the disbursement backlogs and the Commission's "efficiency" in
mind. Cotonou makes "raiding" other funds to back policy interests in the Balkans,
Eastern Europe or elsewhere easier. The EU can pay much less than the maximum
stipulated, a clear case of moral hazard. The "geopolitical" shift of EU-interests to
neighbouring regions and the transfer of backlogs from earlier EDFs justify expectations
of actual payments falling well short of the ceiling stipulated. This, in turn, would
certainly provide a very good argument for reducing resources further. The introduction
of a "sunset clause" by ECHO (Dearden 2002, p. 17), placing a time limit on undisbursed
commitments clearly points in the direction of reduced flows as well.

Like in the DAC the catchword of "partnership" is used frequently by the Convention,
ranked by frequency well before gender issues and sustainability. Partner(ship) is used 52
times in only 100 Articles - and nine times in the Annexes. The EU was apparently able
to overcome its reservations against partnership mentioned above and to overcome the
number of difficulties it poses. It is a biased partnership, as real decision power rests with
Brussels - which it always has done under Lomé, but without any of its restrictions. As
before the Commission "shall be responsible for taking financing decisions on projects
and programmes" (Art. 57. 5). Since the Treaty fixes the total amount of money available
it could have been used in a pioneering way to test self-monitoring, which was
successfully done by European recipients under the Marshall Plan, in the case of Lomé.
Raffer (1998a, 1999) specifically recommended simplifying Lomé procedures by using
self-monitoring.

Dealing with post-emergency action Article 73 demands that the transition from the
emergency phase to the development phase must be eased, that the affected population
should be re-integrated, and that the causes of crises should be removed as far as
possible. Raffer & Singer (1996, pp. 195ff) had advocated a relief-development
continuum by connecting emergency action with long term development and crisis
prevention, as now stipulated.

Trade provisions are strongly shaped by WTO agenda. Economic and trade co-operation
shall be implemented in full conformity with WTO provisions (Art. 34. 4). A preparatory
period until the end of 2007 is foreseen to negotiate new trade agreements (now called
"partnership agreements"). Art. 37 allows the option of not entering into such
agreements, in which case the possibilities for a new trade framework, equivalent to the
present situation and in conformity with WTO rules are to be examined. Art. 37. 9 is the
legal base of the EU's "Everything [sic!] but Arms" initiative. Several Free Trade Areas
(FTAs) will allow Brussels to target restrictions more specifically on items the EU does
not wish to liberalise, thus remaining more protectionist. Beef can for instance remain

24
subject to restrictions only for country groups that actually do or could export it but could
be liberalised vis-à-vis countries unlikely to export any. Effective liberalisation can thus
be minimised by splitting. If all ACP countries formed one FTA with Brussels that would
not be possible.

Davis & Mbuende (nyi) point out that supply side constraints will severely limit the
possibility of ACP countries to benefit from the new FTAs - a fact also recognised by the
Commission (1998a, p. 53) identifying a "lack of supply capacity and competitiveness of
most ACP countries which renders them unable to cope with external demand and
competition". They show that liberalisation will lead to substantial fiscal losses in
countries where tariffs are a main source of government income. The Commission has
not tackled any of these problems so far. The authors fear that special treatment for least
developed countries would be restricted to longer implementation periods, and a slower
pace of tariff dismantling. These fiscal losses will increase aid dependence.

Lomé's remnants still serve for propaganda purposes. Thus the Commission (2002, pp.
33f) writes:

"In the context of the Cotonou Agreement (for the ACP countries), the EC is also already
providing far reaching non-reciprocal trade preferences. Preparations for the forthcoming
negotiations on Economic Partnership Agreements with ACP sub-regions (due to
commence in September 2002) began in earnest during 2001. Developing countries are
also benefiting from unilateral trade preferences in the context of the Generalised System
of Preferences, which was further improved from 1 January 2002. "

As the EU is about to end these "far reaching non-reciprocal trade preferences" the word
"already" is clearly misleading.

Bananas are the best known case of WTO scrutiny. A panel ruled that Lomé's banana
system "violated the world trade rules in several ways" (The Courier No. 164, 1997, p.
9). Duty free preferences covered by a WTO waiver were not condemned. The licensing
system provided an incentive to companies to import higher cost ACP fruit. Producers
fear that maintaining
their market shares on trade preferences alone would at least be very difficult. However,
waivers are only granted for limited periods of time. It remains to be seen how long the
main scope of the banana protocol, to secure present treatment, will be able to survive.
Producers are now encouraged to diversify, although, Greenidge (1999, p. 113) points
out, bananas have been produced by ACP states in pursuit of diversification

Liberalisation, privatisation, and support for the private sector have become as dominant
as within the WTO. Chapters on trade in services and trade-related areas corroborate this
impression. TRIPS are fully integrated (Art. 46) including the protection of patents on
plants. Like in the respective WTO treaty no appropriate protection of traditional
knowledge or clauses against so-called bio-piracy are stipulated. The clause from the

25
 TRIPS agreement that countries may decide not to allow patenting of plants and animals
is not referred to. The tendency to go beyond the WTO, visible in the first proposals by
the Commission (cf. Raffer 1999) is occasionally reflected in the Convention. Article 50
contains the agreement to enhance co-operation regarding trade and labour standards, an
issue that SCs had struggled to keep out of the WTO agreements. The reason was an
understandable fear that such clauses might be used as "justification" for protectionist
actions. Art. 43. 3 obliges ACP countries to participate fully and actively in any future
international negotiation in this field, which restricts their options. A "need" is also
stipulated for ACP states to participate in multilateral trade negotiations. Compared with
earlier formulations that seemed to prepare the field for making ACP countries accept
unspecified future multilateral treaties - such as the now shelved MAI, not negotiated by
ACP-countries - this is less binding.

Summing up the main features of Cotonou show the complete victory of the EU:
♦ The initially envisaged agreements with several groups of associated countries will
be realised by 1 January 2008 (Art. 37. 1)
♦ The system of reverse preferences is to be re-established with the help of the WTO-
system - the EU was one of its two main designers. It allows the EU to return to the old
and preferred arrangement, and to open ACP countries to European export interests.
♦ Stabex, the most far reaching concession of Lomé I, is finally gone. Financial support
against export earnings volatility may be expected to be discontinued soon.
♦ WTO compatibility will also in all likelihood serve as the means to undo commodity
protocols. Bananas seem to be just the start.
♦ The Commission now has absolute carte blanche to allocate money as no objective
criteria for needs and performance exist, which in turn is to be the base of resource
allocation. Arbitrariness has become part and parcel of "partnership" (cf. Raffer 2002, pp.
180f).

Conclusion

After a quarter of a century and a long and tenacious process of rolling back the far
reaching concessions granted by Lomé I under special circumstances, the new Cotonou
treaty is the decisive step in restoring the situation the EEC had originally wanted when
negotiating the first Lomé Convention but was afraid to demand. The WTO framework
decisively shaped by the EU as one of the most important parties comes in so handy to
destroy Lomé that one might ask whether the EU did not realise the WTO's effects on
EU-ACP relations. Strategically, moving the goalposts from outside the Lomé playing
field would of course be a very efficient way to abolish the play altogether.

The one consistent feature since the mid-seventies is the admirably tenacious effect to
undo what was agreed on – with the Commission’s own words - in a period of anxiety.
Considering the appalling administrative inefficiencies in Brussels this is surprising.
These inefficiencies, however, do not allow to explain disjuncture between aspirations

26
and performance mentioned by Lister (2002, p. 2) uniquely by a long-term strategy of
dismantling the concessions of Lomé I. Undeniably, though, they were an asset with
regard to undoing this system.

27
Further references:

Bossuyt J. , G. Laporte and G. Brigaldino (1993), European Development Policy After

the Treaty of Maastricht - The Mid-Term Review of Lomé and the Complementary
Debate, Maastricht: European Centre for Development Policy Management.
Commission (of the EU) (1992) "Development Cooperation Policy in the Run up to
2000: The Consequences of the Maastricht Treaty", SEC (92) 915 fin
Commission (of the EU) (1996) Green Paper on relations between the European Union
and the ACP countries on the eve of the 21st century, (Draft) Brussels (14 November)
Commission (of the EU) (1998a), "Analyse du projet des directives de négotiations,
Accord du partenariat CE-ACP", Document du travail des services de la Commission
(January)
Commission (of the EU) (1998b) "Projet de communication de la Commission au
Conseil, Recommendations de décision du Conseil autorisant la Commission à négocier
un accord du partenariat pour le développement avec les ACP", (28 January)
Commission (of the EU) (2002) Annual Report 2001 on the EC Development Policy and
the Implementation of the External Assistance, Brussels
Davis, Rob & Kaire Mbuende (nyi) "Issues to Be Addressed in ACP-EU Trade
Negotiations" with a foreword by Glenys Kinnock, no year indicated (mimeo)
Dearden, Stephen J. H. (2002) "Does the European Union's Development Policy Have
any Future?", DSA European Development Policy Study Group Discussion Paper no. 24,
also on: http://www. edpsg. org/index. pl
TU UT

Greenidge Carl B. (1999) "Return to Colonialism? The New Orientation of European

Development Assistance", in: Lister (ed), pp. 103ff
IDC (International Development Committee, House of Commons) (2000) The
Effectiveness of EC Development Assistance (Session 1999-2000, Ninth Report), London:
Stationary Office, or http://www. publications. parliament.
TU

uk/pa/cm199900/cmselect/cmintdev/669/66902. htm#evidence UT

IDC (2002) The Effectiveness of the Reforms of European Development Assistance,

Report and Proceedings of the Committee (Second Report, HC 417-I) http://www.
TU

publications. parliament. uk/pa/cm200102/cmselect/cmintdev/417/41702. htmUT

Frisch, Dieter (1996), "Die Zukunft des Lomé-Abkommens, Erste Überlegungen zur
europäischen Afrika-Politik nach dem Jahr 2000", afrika specturm 31 (1), pp. 57ff
Lister, Marjorie (1999) ”The European Union's Relations with the African, Caribbean
and Pacific Countries”, in: Lister (ed), pp. 143ff
Lister, Marjorie (ed) (1999a) New Perspectives on European Union Development
Cooperation, Boulder, Colorado & Oxford: Westview
Lister, Marjorie (2002) “European Development Policymaking: Globalization and the
Post Lomé World”, DSA European Development Policy Study Group Discussion Paper
no. 25, also on: http://www. edpsg. org/index. pl
TU UT

Marin, Manuel (1989), "Lomé IV - the scope of a new Convention", The Courier, No.
U U

120 (March-April), pp. 12ff

28
Meyer, Klaus (1980) "The Second Lomé Convention, the European Community and the
North-South Dialogue", The Courier, no. 61 (May-June)
OECD (1994) Development Co-operation, Efforts and Policies of the Members of the
Development Assistance Committee, 1993 Report, Paris: OECD
OECD (1999) Development Co-operation, Efforts and Policies of the Members of the
Development Assistance Committee, 1998 Report, Paris: OECD
OECD (2000) Development Co-operation, Efforts and Policies of the Members of the
Development Assistance Committee, 1999 Report, [The DAC Journal 1(1)] Paris: OECD
Perry, Beth (2000) "EU Policy towards South-Africa, 1977-2000", DSA European
Development Policy Study Group Discussion Paper no. 19, also on: http://www. edpsg.
TU

org/index. pl
UT

Pisani, Edgard (1985) "Giving tangible expression through frank and fair dialogue to the
hopes raised by the new Convention", The Courier, no. 89 (January-February), p. 15
Price Waterhouse (1992), Study on the Causes of Delay in the Implementation of
Financial and Technical Cooperation - Final Report, November (ACP. RPR. 472)
(mimeo)
Raffer, Kunibert (1995) "Österreichs Entwicklungshilfe: Ein trauriges Kapitel", in:
Österreichische Gesellschaft für Außenpolitik und Internationale Beziehungen &
Österreichisches Institut für Internationale Politik (Hg), Österreichisches Jahrbuch für
Internationale Politik 1995, Wien: Böhlau, pp. 21ff
Raffer, Kunibert (1998a) "Rolling Back Partnership: An Analysis of the Commission's
Green Paper on the Future of Lomé", DSA European Development Policy Study Group
Discussion Paper no. 9, also on: http://www. edpsg. org/index. pl
TU UT

Raffer, Kunibert (1998b) "Looking a Gift Horse in the Mouth: Analysing Donors' Aid
Statistics" Zagreb International Review of Economics & Business 1(2) (November 1998),
pp. 1ff
Raffer, Kunibert (1999), "Lomé or Not Lomé - The Future of European-ACP Co-
operation", in Marjorie Lister (ed), pp. 125ff
Raffer, Kunibert (2002) “Cotonou: Slowly Undoing Lomé’s Concept of Partnership”,
Journal für Entwicklungspolitik (JEP) XVIII(2), pp. 171ff; preprint: DSA European
Development Policy Study Group Discussion Paper No. 20, also on: http://www. bham.
TU

ac. uk/DSA/conf01papers. htm and http://www. edpsg. org/index. pl

UT TU UT

Raffer, Kunibert & H. W. Singer (1996) The Foreign Aid Business, Economic Assistance
and Development Co-operation, Cheltenham (UK) & Brookfield US: Elgar [paperback:
1997]
Raffer, Kunibert & H. W. Singer (2001) The Economic North-South Divide: Six Decades
of Unequal Development, Cheltenham (UK) & Northampton (US): Elgar [Paperback:
2002]
van Reisen, Mirjam (2001) "European integration and enlargement: Is there a future for
European development policy " Nedworc, La Hulpe, Belgium (mimeo)

29
A chain of internal peripheries along the old Muslim-Christian borders or: why is
Europe’s South poor?

Hans-Heinrich Nolte

Mapping inequalities

Even when taking a rough glance at the inequalities in the European Union we
are drawn to the fact that the southern borders constitute the poor regions of the Union.
Of course there is a long discussion on what we might establish as being “poor” and the
gross-national-product per head may not alone be interpreted as an indicator for wealth,
since it is an indicator for economic standing. But then, if we look at the gross-national-
product per person for the year 1998 (Regionen 2001, p. 43) we find that of the regions
belonging to the EU at that time Alentejo and Andalusia, the Mezzogiorno and most of
Greece are below 15. 000 KKS or even below 10. 000 KKS. The difference between a
region of Bulgaria with 4. 347 KKS and the region of Inner London with 49. 202 KKS is
more than ten times. And joblessness in Southern Spain, Southern Italy and Greece in
1999 was at more than 15 %, while in southern Britain, most parts of the Netherlands, in
northern Italy and southern Germany it was at less than 5 % (Regionen 2001, p. 102). If
we add the regions Eastern or Eastern-Central-Europe, which are supposed to become
members of the EU within the next years, the data are indicating an even more clear
inequality: the gross-national-product is below 10. 000 KKS per head, and joblessness as
a rule is at more than 10 %.
The economic structure of the continent today thus does remind one of the
history of medieval European expansion: the center-countries - France, England, western
Germany, northern Spain and northern Italy - the elites of which organized expansion and
took part in it, still today are well-off, while the territories which were added to this
center by these expansions - either in the way of Reconquista against Muslim states or of
mission by sword against heathen countries - still today seem to be less well off. Does
this map only show an analogy, or is there some reality to this very “longue dureé”?
At this point we do not want to open the question of the formerly socialist
countries, where there may be and most certainly are also recent reasons why they are
staying behind, even if we find old reasons also and the “backwardness” of Eastern
Europe may not be attributed to the socialist period alone (Hofbauer 2000, Adamczyk
2001, compare Tausch 1997 p. 143 - 187 ). Following German reunification it was
relatively easy to predict that these regions would develop into internal peripheries,
(Nolte 1992a) a prediction up to now proven adequate despite the high financial transfers
from western Germany to the “new countries” of the Federal Republic: both indicators
used above show eastern Germany with mostly below 15. 000 KKS and above 15 % in
joblessness and thus rather in the league of the south than in the league of the center

30
(Regionen 2001 p. 43 and 102). There may be an old history to this in a complicated way,
since these regions also belong to those conquered by Christian expansion from the 10th P P

Century on, or, in the ideology of the time, reconquered against Slavonic and heathen
states by German and Christian crusades in the 12th Century (Hermann 1974, Kahl 1973).
P P

But here we leave these questions aside.

We want to ask, whether it may be argued that the “poorness” of the European
south has a causal connection with the fact that these countries were reconquered by
Christians between the 11th. and the 19th. centuries (Sicily and Bulgaria).
P P P P

Introduction

„Europa erat omnis divisa in partes tres“ Henryk Samsonowicz has noted - old
„romano-germanique“ Western, old „gréco-slave“ Eastern and to the north of the Limes
„cette troisième Nouvelle Europe . . . ethniquement très differénciées“ including
Scandinavians and Slaves, Baltes and Hungarians, German settlers, Armenian traders and
„les nouveaux venus turques”(Samsonowicz 2000)1. In economics, politics and of course
TP PT

religion the South was leading in the European System for a long time (Nolte 1996). The
Muslim conquest of the „South of the South“, though afflicting severe losses in the
beginning did not lead neither to an overall impoverishment of the region nor to an
expulsion of the Christian and Jewish parts of the population. Culturally the encounters of
the three religions were rich and influenced the North also (Fletcher 1992, Hernandez
1984), and there can be no talking of a “fall” of Muslim economies before the
Reconquista (Feldbauer 2001). Already Fernand Braudel has shown that much of this
common life and general well-being of the Mediterranean lasted well into Early Modern
Times (Braudel 1987).
The „North of the South“, along the Limes one might say, till this day may be
considered to be powerful and rich. Mainly during the 19th. and 20th Century -
considerable parts of „New Europe“ to the north of the Limes also ascended to a leading
position in the system - Scotland, Middle and Northern Germany, Scandinavia. Even a
first glance at a socioeconomic map of Europe will show though that the „South of the
South“, the regions bordering the Muslim world, is „poor“ - excepting those regions like
the Baleares, Nice or the Crimea, where tourists and pensioners from the North live and
thus bring about artificial statistical effects (Neundörfer 1964 ff; Inforegio 99). Since it
does not seem convincing to simply blame Muslim neighborship - how might the
phenomenon be explained?
The attempt to contribute to answering that question presented here is following a
World-System-approach (Wallerstein 1974 ff.) which from the beginning (Nolte 1982)
aimed at including political, social, cultural, religious and intellectual history into the
economic contexts of the developing world-wide-division of labor. In our further

1
TPSzüs 1990, who is drawing the lines east of the Carolingian Empire resp. West of the Orthodox
PT

world to my mind does not give adequate weight to the common „barbarian“ structures of all
regions christianized from the South.

31
research, which is concentrating on religious and intellectual relations (Nolte 1995 a, b,
1997 a) the „World-System" (Nolte 1993) is considered as structured along the lines of
I. competition 2TP PT

II. accumulation of competences (Nolte 1997 b)

III. hierarchies in space (for a graph see Ahrweiler 2001, p. 338) and
IV. expansion (for an attempt at periodization Nolte 1992 b).
In methods, this very broad program always has meant that research may not be
done by one generalist, but is dependent on bringing together different area-specialists
working together in "non-linear research " (Nolte 1995 c).
My own fields of specialization nota bene are religious and social history of
Early-Modern Russia and the history of the German-Russian War 1941-45. In the work
of bringing together researchers capable of comparing the histories of certain regions in
relation to their respective centers my role was that of the generalist, and my own
specializations were more important as ways of understanding the character and
preconditions of area-studies, than in contributions to these fields of regional history. In
regard to the question of regional history my job was that of the generalist, helping in the
comparisons and trying to follow the maxime, Stein Rokkan once has set up for
comparative research: that in the end it should be possible to stroll from one example to
the other, looking back and forth (Rokkan 1972). This may at best have been achieved
partially in the three volumes on internal peripheries, which I edited following bigger
conferences (IP (=Internal Peripheries in European History, III volumes, edited by Nolte
H.H., starting 1991) = Nolte 1991 ff.). But this was our aim.

I.

In this project of comparing internal peripheries it is proposed to understand as

internal peripheries such regions, where conditions are organized to the favor of people
living in other regions. Conditions are defined in the field of politics, economy, social
structure, religion and ideology. What really is "to the favor of" can only be defined in
historical research, which is to be organized by turning to area specialists working in
nonlinear ways, since the meaning of favor changed over time as well as the sources we
find changed. But for a first attempt - in the sense of a quarry for questions, not a plan for
answers - a set of indicators is established (Christiane Nolte in IP (=Internal Peripheries
in European History, III volumes, edited by Nolte H.H., starting 1991) II).
Within all European states we find sharp differences in income, political
participation or involvement in intellectual movements; as for example Bruno Fritsch
already in 1970 showed in the relation of Appenzell-Innerrhoden to Basel-Stadt (Fritsch
1970) and Michael Hechter in the relation of England to the "Celtic fringe" of Great
Britain (Hechter 1975). Examples given in the volumes on Internal Peripheries (Nolte

2
TPSince competition was decisive, the defeat of the universalistic powers "Imperium" et
PT

"Sacerdotium" in the Middle Ages was the starting point for Europe as a system, following a early
modern prehistory of the „barbaric“ regna keeping their ground against the Roman Empire (which
we tend to call Byzantine today, Ahrweiler 2001) see Nolte 1996.

32
1991 ff.) were William Brustein on the Midi in France, Erik Gurgdies on Mecklenburg,
Steven G. Ellis, K. Theodore Hoppen and Jürgen Elvert on Ireland, Jerzy Topolski on the
"Eastern Wall" of Poland and Antonia Saez-Cala on Galicia or Povarnicyn on Perm. But
just to follow some indicator (even a very solid one as depopulation) will not by itself
prove the point that the conditions are organized in favor of the center - which in our
cases would by Basel-Stadt, London, Paris, Berlin, Warsaw, Madrid or Moscow. Of
course the whole debate on development is implied here - indicators may show that a
region A is "less" developed than region B, but only rarely one can show, whether the
reason for that is that region B is exploiting region A or the fact that people in region in
region B are working harder or with more ingenuity. This is the point, where the concept
"accumulation of competences" has to come in.
But maybe even before that an argument stemming from geography has to be
considered. A wish to reach a certain stage of living standard within region A in relation
to the living standard of B will not generally be convincing. Within the context of a
changing regional division of labour there must be possibilities for a certain nation, either
to foster the development of a certain region or to withdraw resources, if the profitability
changes. The same will be true on the upper levels of cultural "continents" or the World-
System as a whole. There is no need for deserts to have a certain population, to make the
argument a little straightforward.
The geographer Hans-Jürgen Nitz (Nitz in IP (=Internal Peripheries in European
History, III volumes, edited by Nolte H.H., starting 1991) II, see also Nitz 1993) drew the
attention to the Northern territories of Sweden, Canada or Norway, which in geographical
terms are disfavored when compared with the center or more yet the south of the same
countries. These disfavored regions ("Ungunsträume") were relatively densely populated
in a period, where timber found a good place on the world-market and could most
profitably be produced by wood-peasants ("Waldbauern"), who made a living during
summer on their farms, forwarded some provisions for the wood-companies and were
available as timber-workers during the winter. Norbotten then "boomed“. But when
mechanization had the number of hands decrease and cheap long-distance-traffic made it
easy to have provisions for these few hands from the foodstuff-factories in the center,
Norbotten and Northern Canada depopulated and whole towns were deserted. In Russia a
comparable process is under way.
A comparable process also happened in the high parts of the Alps, where
"Bergbauernwirtschaft" combining cattle breeding with timberwork turned unprofitable
in the 20th Century and many parts of the mountains were left. But in other parts a new
industry, tourism, offered new economic and social possibilities and the population
increased. Both ways of living - "Bergbauer" and "tourism-employee" are socioeconomic
forms dependent on a center and organized according to needs of this center, but in the
context of regional division of labor the tourism-employee may well have a higher
income than his tourist, as the Bergbauer in many cases was more wealthy than many
town-people. The changes in the uses of an Ungunstraum in the geographical sense of the
word do not by itself prove that there is an internal periphery in the sense of the historical
definition proposed above.

33
II.

Keeping in mind that an "Ungunstraum" not automatically can be considered to

be an internal periphery organized to the profit of people living in a center, my thesis is
that we find a chain of internal peripheries in the proposed narrow historical sense of the
word in almost all states on the northern shores of the Mediterranean and up to Tatarstan.
Historically, this is the old border between the Muslim and the Christian Worlds, pushed
north and west by Muslim expansions from the 9th. to the 17th. Centuries and pushed
P P P P

south and east by Christian expansions from the 10th. to the 20th. Centuries, but mostly in
P P P P

Early-Modern Times.
Following Christiane Nolte on Andalusia in IP (=Internal Peripheries in
European History, III volumes, edited by Nolte H.H., starting 1991) I this region
definitely may not be considered to be geographically disfavored in relation to the
Spanish center around Madrid. On the contrary: the Spanish highlands are relatively
barren, cold in wintertime, expensive for building land-traffic, without access to cheap
water-transport, etc., while Andalusia has rich agricultural possibilities, is close to the sea
and has access to cheap water-transport not only by easy harbors but also (in early
modern times) by water-transport, it has wonderful mountains and beautiful coasts for
tourism and considerable possibilities for extracting industries. And yet with a long
tradition Andalusia is characterized by a high percentage of joblessness, much
emigration, and a lower standard of living, than Madrid and also than - for instance -
Catalonia. The reasons may not be looked for in geography, they have to be found in
history.
Andalusia was conquered by Castilia in the 13th. and 15th. Centuries. The old
elites were forced to leave the country - the economic elites, because they were Jewish,
and the political elites, because they were Muslim. New populations migrated into the
country. In the beginning the peasants received relatively good terms, but in the course of
time conditions were turned more in favor of the nobility, which succeeded in founding
latifundias. This nobility politically dominated the four towns represented in the
parliament of estates of Spain, the cortes (Jaen, Cordoba, Sevilla and Granada) but its
main interests were centered in Madrid, where careers were made and fortunes won.
Even the fact that the Spanish crown concentrated the traffic to the Americas in
Sevilla/Cadiz did not help to make the harbor a world-center of trade and capital as
Amsterdam or later London.
The pull, the suction which Spanish absolutism created in favor of Madrid proved
strong. Local and regional elites - which lived through the conquering, because they were
or became Christians, or which developed anew - did not so much attempt to develop
their province, but to make careers in Madrid. The politicians for a long time followed
the same trend. That way till today, in Andalusia living-standards are lower and
joblessness is higher than in the North, despite the possibilities of the new tourism-
industries.
Catalonia, as Marie-Luise Rommel and Rulf Treidel have shown in IP (=Internal
Peripheries in European History, III volumes, edited by Nolte H.H., starting 1991) II and
III, is representing quite a different case. A strong medieval tradition of trade and

34
industry in towns like Barcelona or Zaragoza went on relatively untouched by the
Reconquista. Even following the Union with Castilia for a long time Catalonia kept its
own political institutions. When, in the 17th Century, Spanish absolutism intervened
more decisively into the affairs of the crown of Aragon, for instance by expelling the
Moriscos, the Muslim population in 1609, yet a different agrarian structure remained -
there were many middle-class-peasants, and the Mesta3 already since 1511 had lost the
TP PT

privilege to move their sheep across acreage. That way the elites of Catalonia found their
way to modernity in industry and developed into an economic center of Spain, although
politics remained centered in Madrid (Fletcher 1992, Hernandez 1984).
The South of Italy also may hardly be considered to constitute a geographically
disfavored region. And yet it has developed into a classic case in the debate on regional
inequalities, the conception "Mezzogiorno" being coined for other regions also (for
instance the south of the former Soviet-Union, Tausch 1991). Giovanni Arrighi has
shown the contexts of mass-migration from the mezzogiorno to the North of Italy and of
Europe, and there is little doubt that the many programs of aid and support for the region
were not able to bridge the gap between North and South up to now (Arrighi 1985).
Again historically the region is characterized by the expulsion of the Muslim and Jewish
parts of the population after conquering it in the 11th century. The nobility established in
Sicily and Naples politically was not oriented to a far-away-capital (or at least, when
some emperors from Germany or kings from France tried to orient them, many rebelled
against that idea). But, again in the long run agrarian structure was turned into a
latifundia-system, with little chances for local peasants.

3
TPeditorial note: Mesta: “association of Spanish sheep farmers, formed to regulate sheep raising
PT

and to prevent cultivation of pastureland. Its date of origin is uncertain, but by 1273 Alfonso X of
Castile formally recognized its long-established privileges, which were confirmed and extended by
his successors. The mesta gradually escaped local jurisdiction and came under direct supervision
of the crown. It prospered, especially in the 15th and 16th cent., by exporting wool from its highly
prized Merino sheep. The mesta yielded large revenues to the crown, but its monopoly of large
areas of land exhausted the soil and contributed to the economic decline of Spain by preventing
intensive agriculture. Attacked by reforming ministers in the 18th cent., it was not abolished until
1837” (definition according to http://www.infoplease.com/ce6/world/A0832873.html).
TU UT

This term must not be confounded with the geographical expression “meseta”. Let us again
quote from this scientific source: “The center of Spain forms a vast plateau (Span. Meseta
Central) extending from the Cantabrian Mts. in the north to the Sierra Morena in the south and
from the Portuguese border in the west to the low ranges that separate the plateau from the
Mediterranean coast in the east. It is traversed from west to east by mountain chains—notably the
Sierra de Guadarrama—and the valleys of the Douro (Duero), the Tagus, and Guadiana rivers.
Except for some fertile valleys, the central plateau is arid and thinly populated; wheat growing,
viniculture, and sheep raising are the principal rural activities. The plateau comprises Castile-
León, Castile–La Mancha, and Madrid, which form the heart of Spain, and Extremadura, which is
in the west.” (definition again according to http://www.infoplease.com/ce6/world/A0861227.html)
TU UT

35
 Things went quite different in the Balkans, the next scene of Christian-Muslim
fighting for centuries (Lampe 1982, Adanir 1989, Faroqhi 1995). Within the Ottoman
Empire these territories had been „Imperial borderlands“, only loosely policed by the
center in Istanbul and with a developing export economy of livestock, wheat, cotton,
wine and tobacco to the West. The territories south of the Danube were not
"reconquered" in the course of Christian expansion in the 17th. and 18th. Centuries by a
Northern power, but established as own states following constructions of national identity
in the 19th. and 20th. Centuries.
The Turkish nobility following independence lost its hold on the soil (Hütteroth
1993) and mostly was expelled. Quite generally peasants gained a powerful position. The
new governments tried to „modernize“ their states and economies following Western
patterns (Szlajfer 1990). And yet economic development was slow and the Balkans were
not able to bridge the gap to center-countries (Aldcroft 1995). Their case is falling into
the general problems of semi-peripheral states and development-politics, not into the
special problems of internal peripheries. But their case has to be kept in mind for the
debate in general:
1. a peasant-structure alone also is not enough for development (compare though
Boeserup 1972, Senghaas 1982);
2. political sovereignty alone does not solve the problems of uneven development either,
at least not - and this is the
3. point to keep in mind - at least not within relatively short terms.

The region most directly to be compared with Sicily in Italy or Andalusia within
Spain might be the South and East of the kingdom of Hungary – an old borderland, and
reconqered from a center - more Vienna than Buda, by the way. At a first glance the
comparison does seem to hold. But no research on these regions is referred to in this
paper.
Elena Druzhinina has shown in IP (=Internal Peripheries in European History,
III volumes, edited by Nolte H.H., starting 1991) I that the Christian conquest of the
Northern shores of the Black Sea by Russia in the 18th century has given room for a
relatively liberal society within Russia, where the peasants mostly were emancipated, had
good rights to the soil and as a matter of fact proved a basis for the economic success of
the Southern Ukraine in the 19 Century, when it turned into an exporter of grain to the
center-countries. The cattle-breeding Muslim groups of these steppes fled Russian power
or were resettled in other regions (Gadzhiev 1988, Chekmenev 1994), but many of the
Muslim Tatar peasants and Muslim-nobility on the Crimea remained. Many new
immigrant-settlers flocked in, especially Germans. Politically the Southern Ukraine
remained an internal periphery; economically a boom was realized there producing raw
materials for export. But in completely changed conditions, under Stalinism, when rights
to the soil had lost their importance, the political division of power between center and
periphery in the SU proved to be continuously decisive and the population of the Ukraine
and the other steppe-regions conquered by Russia in it's southward expansion was
subdued to one of the most gruesome political starvations ever witnessed and forced to
labour in the system of collective farms invented in the center.

36
 The most Northern region of the Muslim-Christian-frontier in Early-Modern
Times was Tatarstan. As Andreas Kappeler and myself have shown (Kappeler 1982,
Nolte 1969), differing from the victories of Latin Christian countries the Muslims in
Tatarstan were not expelled and remained socially relatively strong as free farmers, small
nobles, traders and craftsmen. Tatarstan remained an internal periphery in political,
economic, religious and social terms within the Russian Empire and the Soviet Union.
But the conditions for a revival were kept, and today a sovereign Tatarstan is the most
important Non-Russian member of the Russian Federation - as Izmail Sharifzhanov has
pointed out in IP (=Internal Peripheries in European History, III volumes, edited by
Nolte H.H., starting 1991) II. Tatarstan cannot lay claim to international assets for a
tourist-industry. But it is situated in the geographical center of the Russian Federation,
has considerable economic assets and may very well turn into a motor for industrial
development and modernization for all of Russia, as long as ethno-religious tolerance is
kept and peace may reign. Whether or not people will succeed in that will to a large
degree depend on the question, whether an interregional division of power will really be
put to work in Russia.

III.

It does seem safe to conclude that along the borders between medieval Islam and
medieval Christianity, pushed south in a very long process from the 10th. to the 20th
P P P P

Century, we find a long chain of internal peripheries (or semi-peripheral sovereign states
on the Balkans). This phenomenon cannot be explained by geographical disfavors,
because on the contrary most of these regions are geographically favored - relatively fine
soils, enough humidity, and easy access to sea-transport.
Why did these regions become internal peripheries?
Generally, as in the overall debate on development and underdevelopment, it
might be argued that it was not so much the South, which „fell back“, but the North, or -
following the movements of the center in Early Modern Times - the West, which „surged
ahead“ and by that created the differences we are considering (compare Elsenhans 1984).
In fact, the ways, in which the northern centers hampered the southern provinces, would
have to be analyzed in detailed studies and cannot be exhaustively described in this only
general sketch. We might review some arguments on the basis of materials made
available in comparative studies of internal peripheries.
A first argument might deal with the agrarian structure: latifundias (as in
Andalusia or Ukraine), it has been argued, constitute a bad precondition for economic
development, while the existence of considerable social strata with medium income,
preferably well-to-do peasants, are considered to be a good precondition of economic
development. But if considered over a longer period this argument alone does not hold.
Rights of peasants settling on a frontier generally were "good" or at least better than in
the center. In Andalusia as in the southern Ukraine the settlers received big enough plots
with sweeping legal assurances when they settled in the region, else they would not have
left their old places up north. We may even talk of a special kind of "Cossack-society" on
the Russian borders, characterized by a seemingly archaic form of fighting men's

37
democracy - who though, from the very beginning, were not able to stand up to the center
4
TP. In Andalusia the nobility only in the 16th Century succeeded in making big estates the
PT

norm, as in the Ukraine only in the 20th century the Bolsheviks succeeded in forcing the
peasants into a centralized structure of big collective farms, almost two centuries later
than the settlement happened. But they did, and the peasants were not able to wield
enough power to stop them.
Both in Andalusia and in the Ukraine the position within the system played a role
(Nolte 1995d). As in other semi-peripheral countries, it was difficult for the owners to
export anything else to the world-market than raw materials. Of course these might be
important mining products as copper from Rio Tinto or iron-ore from Krivoj-Rog. But
most of their products, for which a place on the world-market might be found, were
agrarian raw-products - wool and olives from Andalusia or wool and grain from the
Ukraine.
Though the point is that the people living in these regions were not capable to
develop enough other products to compete on their national or on the world market with
their respective periods. Partly this was due to the fact that the regional elites were not
successful enough in the accumulation of competences. It certainly takes a long time -
generations - to really learn, and in premodern times learning mostly is dependent on
families 5. And although institutionalized learning did grow more important in the
TP PT

process of modernity, families still kept parts of their old roles. The breakdown of
communism also did show that it is difficult to train cadres in institutions with sufficient
success. For instance the trained cadres were not capable to develop the GDR at the same
speed as the FRG, when the old elites had left (compare the local example Schwarzer in
IP (=Internal Peripheries in European History, III volumes, edited by Nolte H.H.,
starting 1991) II).
The elites of Andalusia and the Ukraine either were not big or not inventive
enough and this lack of complexity perhaps partly may be explained by their lack of
internal differences, and by the lack of groups - within the elites! – who are different in
culture and religion.
The other point is constituted by relations in political power. The interests of the
Mesta in Spain, well represented at the court in Madrid and exporting wool to Flanders -
played a detrimental role for the small holdings in Andalusia, and the regional elites were
in no position to change that. Or to switch centuries: the Bolsheviks hoped to pay for
their program of forced industrialization by exports of grain, which constituted an
argument for the degree of control realized by collectivization (Danilova 1989, Ivnickij

4
TPAvrich 1976, Buganov 1995, for the center-periphery-aspect Nolte 1994. Obviously there are
PT

some similarities to the American-frontier-societies, but the American federal structure of politics
offered a much better chance to Kentucky than the absolutist structure of Russia offered to the
Cossacks.
5
TPAgain my example from Russia: the noble families carrying on forms of behaviour and criticism
PT

of the Tsar despite of Peters attempts to increase and secularise institutional education. But also it
may be asked, what importance familied did have for the Intelligentsia in modern Times, compare
Dietrich Beyrau 1993.

38
1994). That the world-market collapsed following 1929 was not anticipated, but anyway
collectivization offered that much control that the government was able to feed the
people flocking into the new industrial towns. Control at terrible costs, as we know - the
starvation of 1932/3 (Conquest 1986, Nove 1993)
The argument for a continuity of power structure may be surprising. In the case
of Spain, in the Mesta, there is one single organization, the history of which we may
investigate (Klein 1964). In the case of the Ukraine that is lacking. The structure of
ownership was changed completely in the Revolution of 1917/1928, which means that
we have no possibility to do research in archives of estates. Also, in the Ukraine in 1918
a new autonomous state-organization was established, which did not simply lack its own
powers in decision-making (Kappeler 1994). But in fact in the collectivization-campaign
this autonomy was rendered powerless, and the center in Moscow was sitting in the
drivers chair alone6. For that reason the fact that the elites of Tsarist Russia used the
TP PT

steppes of the Ukraine as they thought appropriate, may be compared to the fact that the
elites of Soviet Russia used theses steppes (and the people living there) as they thought
appropriate - keeping of course in mind that we are comparing a late feudal/early
capitalist absolutist reign with the government of a party of intellectuals.
Economic interests or ratios existed. But the main point was that the Spanish
kings and the vested interests of the Mesta were able to enforce their aims in Andalusia,
not so very dissimilar from the degree of power, which enabled the CPSU to enforce its
aims in the Ukraine. The argument would mean that over a longer period of time
peripheral status in political terms is important, in addition to peripheral status in religion,
economics or social structure.
This argument does lead to the differences between the regions compared.
Catalonia fared better than Andalusia. One of the reasons for that does seem to be that
Catalonia kept its own political and economic elites, despite Spanish absolutism. These
elites in the 19th Century were able to concentrate on industrialization, which was
successful and made Catalonia the economic center of Spain, although it stayed a
periphery politically - which status was enforced during the Franco-government. In
religious politics this long-lasting autonomy was reflected in the fact that the Crown of
Aragon tolerated Muslims far longer than the Crowns of Castile and Leon.
Religious tolerance is marking the most obvious difference between the Latin and
the Orthodox segments of the old Christian-Muslim-frontier. On the whole, in the
orthodox segment more Muslim ethno religious groups survived than in the Latin
segment. No Muslims remained in Andalusia, Catalonia, Sicily or Hungary - all were
killed or expulsed. Not as if tolerance could be taken for granted in the Orthodox
segment. But the radicalism of intolerance which led to "cleansing the blood" was first
developed in Latin Christianity as part of the enforcement of the new social discipline of
modern times. Only later this behavior was "learned" in the East as part of the process of
modernization. When Ivan the Terrible conquered Tatarstan, the Muslim society stayed

6
This is obvious also from Soviet editions of sources, where all decisions are shown as decisions
TP PT

of the Party in Moscow: V. P. Danilova, 1989. Compare Meissner 1985 p. 115 - 238.

39
there as a whole, with nomads and peasants, noblemen and free Tatars. When Catherine
the Great conquered the Southern Ukraine, most segments of the Muslim society were
destroyed - excepting only the majority of the Crimean Tatar peasants and noblemen,
who stayed on, but were expulsed by "Marxists" in 1944 (Marxism of course is a western
ideology, in the tradition of secularized Judaism and Christianity). That way today there
is a Muslim society in Tatars tan, but none in Andalusia. In the 19th Century the
Circassians mostly fled or were put to flight after the Russian conquest (Chekmenev
1994), and for that reason the Russian Federation today is stretching towards the coast of
the Black Sea. But the Chechnians stayed on 1859 (and also were expelled in 1945, but
were allowed to return sooner than the Crimean Tatars; Poljan 2001, Bähre and Popkov
in IP (=Internal Peripheries in European History, III volumes, edited by Nolte H.H.,
starting 1991) III).
Of course the argument may not be turned around. These regions were within a
worldwide hierarchy, so the argument does not imply that wherever ethnically mixed
populations exist, they will surge ahead. The argument does imply though

1) that competition of elites defined by religion or ethnicity within a certain region offers
chances and may constitute part of the dynamism of the people living there; as for
instance the competition between Protestant, Catholic and Jewish elites in Germany in
the 19th Century or competition between the many immigrants in the US, and

2) that chances are lost, where competition is ended by expelling (or even killing) certain
groups. Again Germany may serve as an example - it has lost much intellectual
dynamism after the holocaust. But within our argument its Andalusia and Sicily, centers
of the world of learning before the expulsion of its minorities.

Political sovereignty constitutes another important difference. The Orthodox

ethnic groups subdued by the Ottoman Empire south of the Danube and Carpathian
Mountains were not "reconquered" (as might have been expected in the beginning of the
18th Century with Habsburg well established south of the Danube in Belgrade and south
of the Carpathians in "Little Vallachia") but managed to become independent nations in
the 19th. and 20th. Centuries, admitted to the European concert of Powers and capable of
using a certain room of political and economic maneuver. This also does apply to the
Muslim Ethnic groups in Europe on the Balkans (Albanians and Bosniaks) and in the
former Russian Empire, from Tatarstan to Chechnya. Autonomy also has strong basis in
Catalonia in the traditional settings of the country. But the Muslim and Jewish segment of
"pre-Reconquista" Andalusian society, which was economically as well as intellectually
leading, may never be restored. In Sicily in that religiously and ethnically complex "pre-
Anjou" society which enabled the "wonder of the world" Emperor Frederic II, after 1266
intolerance had a comparable effect. And that the "Spanish"(Ladino) Jewish ethnic
groups, which fled the Inquisition to the Ottoman Empire in the 16th Century, were
destroyed in the 20th Century by genocidal politics of a center-country shaped by Latin
Christianity, namely Germany, transferred such politics of radical extinction to the South-
Eastern borderland.

40
 I hope to have made the point that the territories conquered or reconquered from
Islamic powers between medieval times and the 20th Century till today have in common
a more or less peripheral situation in relation to the center of the European World System.
These peripheral situations are different - there are some internal peripheries and some
semi-peripheral countries; in some the former Muslim and Jewish populations have been
extinguished, in others they stayed on.

The situation does seem to exemplify the notion of the "longue dureé", which Fernand
Braudel has applied to the Mediterranean in Early Modern Times, in an important respect
and even for a period lasting the whole history of the European System that is starting in
the Middle Ages. European expansion towards the South (which in most places was a
Reconquista) started with the crossing of the Ebro in Spain and the Ottonian (Holy
Roman Empire) invasion of Southern Italy in the 10th Century. But then the argument
P P

puts more importance to the "événementielle" of events, than Braudel does. The battles of
Cotrone 982, Las Naves de Tolosa 1212, Kasan 1552, Belgrade 1717, the Balkan wars
1912 decided issues; these "events" started long decisions. That Otto II. lost the battle of
Cotrone against the Arabs decided that Sicily would stay Arabian and Apulia stay
"Roman" (i. e. Byzantine) till the Normans would come, and that there would never be a
Saxon/German conquest of southern Italy Italy 7. Also the defeat of the German forces
TP PT

gave hope to the subdued Slavs of the land east of the Elbe-river to rise against
Christianity and the German masters, which then led to 150 years of heathen-Slavic
"republics" between Germany and a Christian Poland (Hermann, 1974).

Of course what I have offered is no more than a sketch. It does not purpose to constitute a
historical comparison stretching over more than 1000 years of history of
Christian/European and Muslim cohabitation, fighting or even toleration. In a
comparison, as Stein Rokkan is quoted above, the possibility must be offered to stroll
from one example to the next. The examples can only be written by historians, who are
necessarily experts in their respective area-studies, know the sources for the requested
period and of course know the languages and the scripts to read them. This sketch might
be read as a proposal for comparative research, it does rely on some research others have
done, but it does not offer the comparison itself. It is not possible to do such comparisons
for yourself and on your own.

Concluding thesis

We find a chain of internal peripheries along the old border between Christianity
and Islam in the regions conquered (resp. reconquered) from the 10th to the 20th

7
TP PTMore than two centuries later, in 1212, the German Emperor Frederic II. inherited the „kingdom
of both Sicilies“, but that definitely was very different from the three territories in the 10th.
Century, united by the Normans into that new kingdom officially in 1130. The history of Frederic
II. gives an idea of the material and cultural wealth of what today is the Mezzogiorno in the 13th.
Century, when there were Arabian, Greek und Norman minorities in the kingdom.

41
centuries. Although not disfavored geographically these regions have tended to become
internal peripheries. Reasons are:
1. The centralized power structure, legitimized and entrenched in the period of
expansion, tended to outlast this period.
2. The regional elites did not accumulate enough competences, tended to be less
diversified and also often center-minded.
3. Where ethno-religious minorities were denied elite-status, dependence on the center
was entrenched.
4. Where ethno-religious minorities were expelled or even murdered, the regional
societies lost dynamism8. TP PT

5. Organizing a region for exporting raw materials, which quite often does seem obvious
in the period of conquering (especially where minorities are expelled and the country is
"empty"), will establish a role on markets, which then is difficult to leave behind.
Taken as a whole my thesis does assume a high degree of continuity in history.
This is surprising, since the centers are moving constantly. But obviously it is quite
difficult to change a negative trend.

8
TP Minorities do seem to constitute a necessary part of European societies, despite the vigour and
PT

method, with which European societies have exterminated their minorities: Aymard: 1989.

42
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47
The Effects of European Integration on Economic Growth and Convergence of its
Member Countries

Patrick Ziltener

I. Introduction

For the last twenty years, regional integration projects have been at the core of the
processes of transnationalization of economic (and political) activities. The World Trade
Organization (WTO) counts 150 preferential trade agreements (PTA); most of them were
concluded in the 1990s. Most of these regional agreements were a reaction to the
relaunching of Western European integration in the 1980s and the NAFTA treaty (1992).
In the 1990s, the EU has strongly promoted market integration, not only by extending its
membership to former EFTA countries (Austria, Finland, Sweden), but also by bi- and
multilateral agreements with countries in Central and Eastern Europe, “preparing” them
for accession in the years to come. The Euro-Mediterranean Partnership aims at building
a Euro-Mediterranean Economic Area (EMEA) providing for a “free trade area”9 that TP PT

encompasses the EU member states, the Mediterranean non-members and any Central
and Eastern European countries that remain outside the Union. The EU connects
Association Agreements with the Mediterranean countries with the commitment to
conclude free trade agreements among themselves until 2005. According to EU External
Relations Commissioner Patten, this is the “only way to prepare our already agreed
objective of an overall EU-MED free trade area by 2010”; the goal is “a
decompartementalized and open market” (Patten 2001).
Considering the proliferation of regional integration projects in the last 10 years and the
rigorous energy with which the EU Commission puts such schemes forward, it is
surprising how little is known about their real economic effects. Usually these projects
are legitimized by economic integration theory as it was developed for the early stages of
economic integration in Western Europe (most prominently Viner, 1950, The Customs
Union Issue, and Balassa, 1962, The Theory of Economic Integration). However,
economic analysis “has never been critical in accomplishing progress in economic
integration in the framework of the European Community;” “economic analysis has not
been critical to key instances of progress of the Community” (Pelkmans 1992: 3, 5). In
recent years there have been skeptical statements, mainly by sociologists, about the real
impact of decades of economic integration in Western Europe. Therborn (1995) has
assessed the economic effects of the European Union, EU (the former European

9
TP PTThe „free trade area“ would provide for reciprocal free trade in manufactured products and
reciprocal access for agricultural products „of interest for both sides“ (EU Commission 1995,

48
Economic Community, EEC, and European Community, EC) on its member states as
being marginal. The EU “does not operate mainly as a ‘common market’ (its impact on
trade has been uneven and unsystematic), but as a normative area governed by an
extensive body of rules, vigilantly and strongly protected by a European judiciary, to
which even nation-states are held liable” (Therborn 1999: 24). For the Austrian
sociologist Haller (2000) the question is still open: “Was economic integration in the
form of the EU really the main factor which increased wealth and prosperity on this
continent?” His hypothesis is that the Golden Age of economic growth in Western
Europe just happened to coincide with the beginning of European integration (Haller
2000: 546, 534).

The aim of this paper/chapter is to evaluate the knowledge about the real economic
effects of European integration on growth and convergence of its member states and to
confront it with mainstream economic theory. Section II looks back at the early debate on
the relation between integration and growth. The Single Market project was the core of
the integration relaunch in the 1980s. Section III traces back its origins and how its
implementation was legitimized by economic simulations and estimates. The actual
policies of the EU Commission, however, did not take the prerequisites and policy
implications of these models into consideration. Section IV provides an overview on the
results of the evaluation of the effects of the Single Market, confronting these with the
simulations and estimates. If there was no short-term integration-induced macro-
economic process with significant economic gains, there is still the possibility that there
are long-term positive growth effects. Empirical research based on economic growth
theories, however, could not prove the existence of such a ‘growth bonus’ (section V).
Section VI presents some results of a recent research project on the importance of intra-
EU transfer payments. These results allow the conclusion that structural policy payments
are more important for the convergence of EU member countries than market integration.
The last section draws some conclusions regarding the prospects of development for the
so-called accession countries: Positive effects of market integration are generally
overestimated, and the importance of transfer payments for real economic convergence is
higher than generally acknowledged. Therefore, the political ‘terms of accession’ will
largely determine the future economic development of these countries.

II. Does Integration Foster Economic Growth? The Early Debate

Trade Creation and Trade Diversion

At the beginning of economic integration theory and research was the differentiation
between static and dynamic effects:
static effects: gains derived from trade creation net of losses due to trade diversion,

COM (95) 72 final, p. 10).

49
dynamic effects: integration-induced effects in the medium and long term—scale effects,
increased efficiency, competition, specialization and growth, and welfare gains.
The early empirical literature on the effects of Western European integration was quite
limited in scope and almost entirely confined to estimates of trade creation and trade
diversion. Mainly US-analysts were worried by the perspective of trade diversion caused
by the creation of the EEC. Early empirical analyses concentrated on the development of
international trade; almost all concluded that trade creation had been by far higher than
trade diversion. 10 TP PT

More recent analyses confirm the trade creation effects of early Western European
integration. 11 Trade creation/diversion by PTAs were considered to be short-term effects.
TP PT

12
TP However, a look at the history of Western European integration shows that it has been
PT

an almost continuous process of negotiation and implementation of trade liberalization

(table 1).

Table 1: Market Creation and Market Expansion in Western Europe, 1945–2000

U U

Date of Enactment Measure Countries involved

Agreement
1944 1948 Market creation: Benelux Customs Union B, NL, LUX
1951 23. 7. 1952 Market creation: Common Market for European Coal and EC 6 (D, F, Benelux,
Steel (ECSC Treaty) I)
Implemented on May 1st, 1953 P P

1957 1. 1. 1958 Market creation: Common Market for industrial goods; EC 6 (D,F, Benelux, I)
common agricultural policy (Treaty of Rome)
Jan. 1st, 1959 first reduction of tariffs by 10 %
P P

1962-66 Agreement on agricultural, financial and

competition system
July 1st, 1968 Customs Union completed
P P

July 1st, 1977 Reduction of internal tariffs completed (EC

P P

9)
1959 3. 5. 1960 Market creation: European Free Trade Area (EFTA) EFTA 7 (GB, DK, P,
SW, NW, A, CH)
1972 1. 1. 1973 Market expansion: EC entry of Great Britain, Ireland, EC 9 (D,F, Benelux, I,
Denmark GB, IRL, DK)

10
TP Cf. Balassa (1967), Truman (1972). Truman (1972: 287) commented from a US-American
PT

perspective: “In terms of trade in manufactured products, a combined net loss from European
integration of less than three quarter of a billion dollars is a relatively small price to pay for
increased European economic and political stability. ” According to Mayes (1978), Japan has
profited from the creation of EC and EFTA more than each of their member states.
11
TP De Grauwe (1988), Frankel (1992), Eichengreen (1993, 1998), Eichengreen/Vazquez (1999), cf.
PT

Ziltener (2001: 14ff).

12
TP Cf. Verdoorn/Schwartz (1972: 292): “Although the time lags of price reductions in international
PT

trade often are considerable, taking into account the length of the adaptation period and the
gradualness of the tariff-changes, it is probably fair to say that by 1969 at least as far as the EEC is
concerned, the greater part of the impulse-effect of the tariff-changes must have manifested itself.
“

50
 1972/73 1973 Market creation and expansion: Free trade agreement EC – EC 9 and EFTA (P,
EFTA countries SW, NW, IS, A, CH,
later plus NW, FIN)
1979 1. 1. 1981 Market expansion: EC entry of Greece EC 10 (D,F, Benelux,
I, GB, IRL, DK, GR)
1985/86 1. 7. 1987 Market creation and deepening: Program to create a Single EC 12 (D,F, Benelux,
Market by December 31st, 1992;
P P I, GB, IRL, DK, GR,
in mid-1995, 90 % of measures are implemented by SP, P)
member countries
1985 1. 1. 1986 Market expansion: EC entry of Spain, Portugal EC 12 (D,F, Benelux,
I, GB, IRL, DK, GR,
SP, P)
3. 10. 1990 Market expansion: Inclusion of the German Democratic EC 12
Republic into the Federal Republic of Germany and
therefore into the EC
1992 1. 1. 1994 Market expansion: European Economic Area (EEA) EU 12 plus FIN, SW,
Agreement NW, IS, A, FL
Integration in Single Market, R&D policy, cohesion
policy; not integrated: agricultural policy, foreign trade,
economic and monetary policy
1994 1. 1. 1995 Market expansion: EU entry of FIN, SW, A EU 15 (D,F, Benelux,
I, GB, IRL, DK, GR,
SP, P, FIN, SW, A)
Eastern European enlargement:
1991 “European Agreements”
1998 negotiations for accession

Note: Transition and implementation periods of different length have to be considered in

the accession agreements; for instance, three and a half years (six years for financial
regulations) for the enlargement of 1973; five years (seven years for freedom of
movement of labor and trade with specific agricultural products) in the case of Greece;
seven years (ten years for certain agricultural products and fishery) in the cases of Spain
and Portugal; special regulations for the new “Länder” in Eastern Germany in the
agricultural and transport sectors and for the single market implementation by December
31st, 1995.
P P

EC and Foreign Direct Investment (FDI)

U

In the 1960s, the question of the effects of regional integration on the flows of foreign
direct investment (FDI), mainly from North America to Western Europe, became more
prominent. Schmitz/Bieri (1972) tested empirically the so-called ‘tariff discrimination
hypothesis’ by examining whether or not the imposition of a common external tariff by
the EEC was a major factor in bringing about substantial increases in US direct
investment in that region. Contrary to the majority of empirical studies that have tested
this hypothesis, their findings at least suggest that tariffs did significantly affect US
international capital movements and exports to the EEC. According to Schmitz/Bieri
(1972: 268), US-FDI in that region significantly increased after the EEC was formed,

51
while the growth in US exports to the region significantly decreased. They found that
regional integration influenced the locational competition for investment.
“The growth rate in the share of U. S. direct investment in the EEC significantly
increased after the EEC was formed, while the rate of decline in the share of U. S. direct
investment in Canadian manufacturing significantly decreased. The rate of change in the
share of U. S. investment in EFTA followed a trend similar to Canada, but the decline
was not statistically significant” (Schmitz/Bieri 1972: 262f.).

Within the EC, about 50 % of US-FDI flows went to Belgium (1959-1969). This country
was the winner of locational competition for FDI in the integrated area, just as the UK
and Ireland have been the winners in the last fifteen years. According to Davenport
(1982: 233) Belgium gained from its “skilled labour force, favorable geographic
situation, good infrastructure, attractive tax and credit incentives, and the laissez-faire
attitude of the public authorities. ”

Growth Effects and Welfare Gains

U

In contrast to recent analyses, early economic integration theory was, as Davenport

(1982: 226) writes, “on the whole, rather agnostic as to whether customs unions will or
will not increase overall economic welfare. ” Robert Mundell estimated the welfare
effects caused by customs reduction to be “almost negligible. ”13 Balassa (1975)
TP PT

tentatively suggested, on the basis of the so-called ‘welfare triangles,’ that an $11 billion
increase in trade in manufactures is associated with a welfare gain of (only) $0. 7 billion
or 0. 15 % of GDP. Truman warned in his conclusion to an empirical trade development
analysis:
“This conclusion, however, does not imply that from the national viewpoint of each of
the individual member countries there was a positive welfare effect, since such a
calculation should include terms-of-trade gains and losses which might offset net trade
creation for each importing country” (Truman 1972: 281).

Maddison (1964) comments on the political as well as economic implications of the

analyses of the effects of integration. These
“are often depicted in rather extreme terms, with little regard for the other factors influen-
cing growth. Thus the effects of E. E. C. tend to be over-emphasized at the expense of
other elements in the process of integration. It is difficult to prove much empirically, as
there is very little analogous experience of integration on this scale, and economic theory
is still in an unsettled state on the dynamic effects of such a process, which are obviously
relevant in economies that are growing so fast” (Maddison 1964: 68).

13
TP PT Quoted in Pelkmans (1992: 15).

52
The hypotheses regarding dynamic effects have never been theoretically developed or
empirically tested. Even regarding the core argument of integration theory, scale effects
in a larger market, there has been no consensus among economists in the early phase of
Western European integration. Maddison (1964) rejected
“the idea that the size of the markets has been the major force restraining European
competition, or that removal of trade barriers is the main cause of any increase in
competition. (. . . ) The maintenance of high levels of demand and the prospect of fairly
continuous expansion have made the major contribution to changing European attitudes.
Without this high demand, integration itself would never have taken place” (Maddison
1964: 73). 14 TP PT

Even in 1980, “dynamic effects” were a “nice playground (. . . ) - no model has ever been
spelled out and, as a consequence, the dynamic effects remain cloudy at best” (Pelkmans
1980: 338).

III. The Promises of the Single Market Project

“The European market must serve as the unified ‘home’ base necessary to allow
European firms to develop as powerful competitors in world markets. ”
Memorandum of the European Roundtable of Industrialists (ERT) to EC-Commissioner
E. Davignon, June 1983

“1992 was born for sound economic reasons and those forces continue
to be its engine. Ironically, it was politicians who in 1957 first conceived
the idea of a common market—often over objections from the business community. Now
the situation has been reversed; it is the entrepreneurs
and corporations who are keeping the pressure on politicians to
transcend considerations of local and national interest. ”
Giovanni Agnelli, president of FIAT, 1989

14
TP PTCf. Maddison (1964: 70f): “The gains in European productivity have been large in mass
production industries such as cars and household durables, and trade in these items has greatly
increased. However, the rapid growth in income and the high elasticity of demand for durables at
European income levels have been a major factor in the expansion of the market. (. . . ) The rise in
productivity due to exploitation of economies of scale is therefore probably a normal consequence
of rising income rather than a specific result of increased trade. The new possibilities of exploiting
of economies of scale and choosing the best location for production afforded by the Common
Market policy of freedom for movement of capital and enterprise as well as goods will probably
only be utilized gradually. It requires a good deal of investment to achieve such economies, and as
part of it will be made abroad, entrepreneurs will probably not take full advantage of the
possibilities until the final stage of the Common Market is completed and the extra political and
currency risks from investment outside one’s own country are considered to have disappeared. ”

53
The economic crisis of the 1970s put an end to the deepening of the integration of the EC
economies. Despite the elimination of tariffs on intra-EC trade, the ‘common market’
remained fairly fragmented due to the non-tariff barriers that proliferated or even
intensified during the economic downturn. By creating new links with business interests,
the EC Commission was able to give the integration process new momentum in the early
1980s.

The Origins of the Single Market Project

U

The Single Market or 1992 project, which aimed at creating a unified “home market”
without tariff or non-tariff borders in Western Europe by 1992, was hammered out by an
alliance between the EC Commission and the European Roundtable of Industrialists
(ERT). 15 The ERT was established as an informal panel on the initiative of
TP PT

Commissioners Etienne Davignon and François-Xavier Ortoli in April 1983; it was

composed of seventeen top European industrialists,16 and was later expanded to include
TP PT

forty members. The list of desirable measures compiled by the ERT became the core of
the famous White Paper Completion of the Internal Market (COM (85) 310 final) by the
Commission. It identified three categories of barriers to the free flow of goods, services,
capital, and labor in the EC:
physical frontiers like intra-EC customs posts,
technical frontiers like different technical regulations or norms for goods and services as
well as discrimination against foreign bids for public purchases, and
fiscal frontiers, the need to levy value-added tax or services on goods imported from
other EC countries.

The White Paper consists of several hundred items of legislation that were to be enacted
in order to overcome this situation by the end of 1992.
The European Council (heads of state and government) adopted the White Paper in
December 1985, as a part of the so-called Single European Act (SEA). The SEA states
that the unanimity of decisions is no longer required for regulations and directives
pertaining to the establishment of the internal market, but that “the Council shall issue
directives, acting by a qualified majority. ” The SEA moved away from the objective of a
harmonization of national laws and regulations, which had been the goal of the EC from
the beginning, called instead for the mutual recognition of laws and regulations between
member states, setting only minimal standards. The old strategy, according to the
Commission, had proven time-consuming and fruitless.
Between 1985 and 1992, a volume of legislation unprecedented in the EC was adopted.
Most of the member states have implemented the measures in time.

15
TP For the history of the Single Market project see Green-Cowles (1995) and Fielder (2000), for
PT

the ERT see Nollert (2000) and van Apeldoorn (2000).

T T

16
TP They represented the companies Fiat, Olivetti, Unilever, Volvo, ICI, Nestlé, ASEA, BSN,
PT

Thyssen, Shell, Philips, Compagnie de St. Gobain, Renault, Lafarge Coppée, Bosch, Ciba-Geigy
and Siemens.

54
Hybrid Simulations and Big Numbers
U

“. . . the Commission wanted to produce a big number, and must have decided
whenever there was a choice that the correct number was the largest one available. ”
(Waelbrock 1990, 1992: Are the Figures Right?, p. 20)

For the development of the Single Market project as well, economic integration theory or
research played no significant role.
“[EC-Commissioner]Lord Cockfield and others asserted that the policies of the White
Paper would lead to higher growth, yet all the ministers could perceive was a very
technical list of proposals and a few interesting principles. There was no explanation of
how and over what period all these would generate economic growth for the Community
as a whole, how sectors or product markets would be affected by the more radical
proposals, what adjustments would be expected, and when” (Pelkmans 1992: 14ff).

The Commission was highly interested in economic expertise that could legitimize the
implementation of the project that was the core element of the EC integration relaunch. It
created a Committee of the ‘Costs of non-Europe’ project with the Italian Paolo Cecchini
as its chairman, under the responsibility of the EC Directorate-General for Economic and
Financial Affairs. There were nine ‘external’ members (among these Jacques Pelkmans,17 TP PT

who has been quoted several times in this chapter), for some of the sectoral studies other
non-Directorate specialists joined. For about ten years, nearly all scholarly contributions
on economic integration theory and research in Europe came from one of these people.
It was not an easy job, not only because of the severe time constraints it imposed.
Pelkmans complained:
“. . . the initial lack of understanding or outright lack of interest among economists and
non-economists alike was so great that it took considerable effort merely to explain what
the White Paper was all about, and how these proposals could be classified in academic
jargon” (Pelkmans 1992: 4).

The theoretical approach and the integration model for the analysis have been published
as The Economics of 1992. The E. C. Commission´s Assessment of the Economic Effects
of Completing the Internal Market (Emerson et al. 1988). They regrouped the Single
Market project elements in five categories: tariffs, quantitative restrictions, cost-
increasing barriers, market-entry restrictions, market-distorting subsidies and practices.
The impact of these different market barriers were analyzed in terms of the costs of their
presence (their ‘opportunity costs’). The ‘costs of non-Europe’ were understood as the
same as the benefits of completing the internal market. In contrast to the older economic
integration theory, which was mainly interested in effects on trade, this analysis aimed at

17
TP PT Among Pelkmans’ numerous publications on the Single Market, see especially
Pelkmans/Robson (1987), Pelkmans/Winters (1988).

55
assessing the potential growth effects, by concentrating on dynamic effects of integration
as formulated by the older theory (box 1).

Box 1

Emerson, Michael et al. (1988), The Economics of 1992. The E. C. Commission´s

Assessment of the Economic Effects of Completing the Internal Market

The effects:
“The creation of a true European market will, on the one hand, suppress a series of
constraints that today prevent enterprises from being as efficient as they could be and
from employing their resources to the full, and, on the other hand, establish a more
competitive environment which will incite them to exploit new opportunities. The
removal of the constraints and the emergence of the new competitive incentives will lead
to four principal types of effects:
a significant reduction in costs due to a better exploitation of several kinds of economies
of scale associated with the size of production units and enterprises;
an improved efficiency in enterprises, a rationalization of industrial structures and a
setting of prices closer to costs of production, all resulting from more competitive
markets;
adjustments between industries on the basis of a fuller play of comparative advantages in
an integrated market;
a flow of innovations, new processes and new products, stimulated by the dynamics of
the internal market.
These processes liberate resources for alternative productive uses, and when they are so
used the total, sustainable level of consumption and investment in the economy will be
increased. This is the fundamental criterion of economic gain. ” (p. 2)

The Cecchini group developed a model based on partial equilibrium analysis,

comparative static microeconomics. Macro-dynamic models were used as
“a secondary tool of analysis in order to get some insight into the effect in terms of the
main macro-economic variables beyond aggregate economic welfare, such as
employment, prices, the budget etc. (. . . ) it was felt that some hybrid simulation work
was required, injecting micro information into macro-dynamic models” (Emerson 1990:
48f).

Emerson admitted that the “hybrid simulation” did not resolve the problem of the micro-
macro-combination in a theoretically satisfactory manner. But the goal was a quantitative
assessment:
“The politician asks the economist to speak in terms he recognizes—time paths,
adjustment costs, employment growth, inflation, budget deficits, external payments, etc.

56
The Commission’s hybrid micro-macro-simulations offer at least some perspectives on
these accounts” (Emerson 1990: 49).

The size of the potential effects of the Single Market project depended, of course, on the
definition of the amount of costs of the constraints. Even more decisive were the
assumptions on the kind of ‘European market’ that would result. The Cecchini group
modeled two scenarios, a narrow, technical, and short-term view of the costs of ‘tangibly’
identifiable frontier barriers, with a passive macroeconomic policy, and a broader,
strategic, and long-term view of the benefits from having a fully integrated, competitive,
and rationalized European market, flanked by a coordinated macroeconomic policy (Box
2). Especially the variable ‘increased competition’ was the key factor: The stronger the
competition, the higher the predicted growth effects.

Box 2

Emerson, Michael et al. (1988), The Economics of 1992. The E. C. Commission´s

Assessment of the Economic Effects of Completing the Internal Market

The estimates:
“Overall these estimates offer a range, starting with around 70 billion ECU (2. 5 % of
GDP) for a rather narrow conception of the benefits of removing the remaining internal
market barriers, to around 125 to 190 billion ECU (4. 5 to 6. 5 % of GDP) in the
hypothesis of a much more competitive, integrated market. (. . . ) Overall, it would seem
possible to enhance the Community’s annual potential growth rate, for both output and
consumption, by around 1 percentage point for the period up to 1992. In addition, there
would be good prospects that longer-run dynamic effects could sustain a buoyant growth
rate further into the 1990s. ” (p. 5)
“The common assumptions underlying the foregoing estimates (notably the cumulative
totals) are that a) it might take five or possible more years for the larger effects to be
reached, and b) in any event it is assumed that micro and macroeconomic policies would
ensure that the resources released as costs are reduced, are effectively re-employed
productively. ”(p. 5)

Two scenarios:
“With a passive macroeconomic policy. The overall impact of the measures is manifest
strongly in the initial years in the downward pressure on prices and costs, but this is
followed with only a modest time-lag by increases in output. The major impacts,
however, appear in the medium-run, after about five to six years, by which time a
cumulative impact of +4. 5 % in terms of GDP and -6 % in terms of price level might be
expected from a full implementation of the internal market programme. (. . . ) The total
impact on employment is initially slightly negative, but in the medium-term it increases
by about 2 million jobs (nearly 2 % of the initial employment level). The budget balance

57
is improved markedly, and the current account of the balance of payments is improved
significantly. Each of the simulated measures or changes in economic behavior
contributes to the positive results, stimulating gains in productivity and investment,
increasing real incomes and expenditure. “ (p. 5f. )
„With a more active macroeconomic policy. (. . . ) In the middle of the range, for
example, lies a case in which the GDP level after a medium-term period might be 2. 5 %
higher, in addition to the 4. 5 % gain suggested under the passive macroeconomic policy,
thus totaling 7 %. “ (p. 6)
„The potential gains from a full, competitive integration of the internal market are not
trivial in macroeconomic terms. They could be about large enough to make the difference
between a disappointing and a very satisfying economic performance for the Community
as a whole. “ (p. 6)

Medium- and long-term effects:

„Firstly, there is increasing evidence that the trend rate of technological innovation in the
economy depends upon the presence of competition; only an integrated market can offer
the benefits both of scale of operation and competition. Secondly, there is evidence in
fast-growing high technology industries of dynamic or learning economies of scale,
whereby costs decline as the total accumulated production of certain goods and services
increase; market segmentation gravely limits the scope for these benefits and damages
performance in high-growth industries of the future. Thirdly, the business strategies of
European enterprises are likely to be affected in the event of rapid and extensive
implementation of the internal market programme; a full integration of the internal
market will foster the emergence of truly European companies, with structures and
strategies that are better suited to securing a strong place in world market competition. “
(p. 6f)

The EC Commission was satisfied with the results of the Cecchini group and publicized
them for mass circulation in the form of a short booklet Europe ’92 (Cecchini 1988)—the
‘big numbers’ made big headlines and led to a real Europhoria in the late 1980s.
In the recent discussion on the economic effects of the Single Market project, it is usually
overlooked that the Cecchini model contained several aspects of conditionality. Firstly, as
regards macroeconomic policies, the issue was essentially whether demand policy would
accommodate the increased potential for economic growth:
“It is sure that the implementation of the internal market programme will put downward
pressure on costs and prices, and create the potential for greater non-inflationary growth.
It is not sure, however, how far this potential will materialize. (. . . ) It is necessary,
however that the credibility of these favorable expectations be supported by a well
coordinated, growth-oriented macroeconomic policy. If this is not done, the market
liberalization process risks generating defensive and negative reactions, in which case the
viability of the programme could be threatened” (Emerson et al. 1988: 8).

58
Secondly, the estimates depended on the degree of competition that would result—the
economists had criticized the White Paper for not containing proposals for a strong
European competition policy.

The Commission’s ‘Second Agenda’

U

As previously mentioned, the Single Market project goes back to a cooperation between
the Commission and representatives of European big business. The first goal of the
program was to ensure and improve the competitiveness of the large European
companies, by “creating a unified ‘home’ base necessary to allow European firms to
develop as powerful competitors in world markets” (Memorandum of the ERT, 1983).
Neither for the Commission nor for the ERT companies was the tool ‘increasing
competition. ’ Besides having a large and unified market as a base, the keys to success on
the world markets were considered to be a critical size of the companies and capabilities
for innovation. The EC Commission formulated it this way:
“The relationship between competition and innovation is not linear and indeed there
exists an optimal level of competition beyond which competition has an adverse effect on
innovation because of the difficulty of allocating gains and the greater risks which occur
in highly competitive markets. The optimum market structure from the standpoint of
innovation ought rather to promote strategic rivalry between a limited number of firms.
”18 TP PT

Already in 1984, before the adoption of the Single Market program, some legal obstacles
to cooperation among European companies had been abolished in the EC. The EC
programs in research and technology, developed by the Commission in cooperation with
another Roundtable of Industrialists since the late 1970s, promoted successfully R&D
cooperation among the European companies. EC technology policy was, besides regional
policy, the fastest developing EC policy area in the 1980s (Krieger /Delapierre 1987,
Sandholtz 1992, Parker 2000). With the relaxing of the prior rules and the extension of
the possibility of such cooperation to the production and marketing of products, the EC
assisted the development of European transnational company networks at the European
level. Padoa-Schioppa et al. (1987: 65) already noticed that this represented “a
considerable relaxation of competition policy in the interests of a strategic policy
objective. ”

Not a “liberalization big bang,” as modeled in the economic analyses and perceived in the
public discussion in the 1980s, but the creation of European companies able to survive
the competition with their US and Japanese rivals was the main agenda of the
Commission. It is called the second agenda here because this was not the main message
of the Commission to the public, and not what the public discussion at the time was

18
TP PT The Economics of 1992, European Economy no. 35, March 1988, quote from p. 129.

59
about. The project of a European Monetary Union (EMU) dominated the scene in the
1990s, and in the recession years the predictions of the 1980s were completely forgotten.
My argument is that the development of a European economic policy, especially a strong
competition policy and the coordination of growth-oriented national macroeconomic
policies, was not just neglected during the implementation of the Single Market project. It
was not wanted by the main actors behind the project. In this sense, most of the scenarios
of the Cecchini group have been completely unrealistic from the beginning, especially the
ones that predicted the “big numbers. ”

Why is it nevertheless interesting to evaluate what really happened during and after the
implementation of the Single Market project? Because, as the next section shows, it
allows us to review and verify core theses of economic integration theory regarding the
channels of impact of the integration measures, beyond macroeconomic growth effects.

IV. Evaluating the Effects of the Single Market

“Real life, however, is rarely so simple. ”

The Single Market and Tomorrow’s Europe. A Progress Report from the European
Commission, p. 77

Already in its first assessments of the effects of the Single Market project in the early
1990s the Commission presented a balance that did not have much in common with the
Cecchini models and estimates. Surprisingly, first of all a very positive employment
effect was presented: 9 million additional jobs between 1986 and 1990 (COM (93) 700
final). For about half of this time span (1986-90) almost no measures had been
implemented by the member states; the employment effect could at best be interpreted as
a dynamic anticipation of the Single Market. Moreover, all the economic scenarios had
predicted a short-term “slightly negative” effect on employment due to downward
pressure on prices and costs and to the processes of restructuring the companies’
activities. Only in the medium-term would employment increase by about 2 million jobs
(Emerson et al. 1988: 5). The Commission also proudly presented figures showing,
besides the doubling of intra-EC trade, a tripling of mergers and acquisitions and no
evidence of increasing competition.
The results of the Single Market Review process looked different again. In response to a
resolution by the European Council to report in 1996 on the effectiveness and impact of
the Single Market project, the Commission launched a series of thirty-eight independent
research studies to assess the impact of the project on both specific business sectors and
across the economy as a whole. 19 It was accompanied by a wide-ranging business
TP PT

survey, conducted with 13,500 companies in 1995, designed to find out their opinions on

19
TP To ensure the independence and objectivity of the work, the background research was carried
PT

out by contracted parties, “operating only subject to quality control by Commission services. ” In
addition, a panel of independent academic experts was appointed “to ensure that sound methods of
analysis were employed” (Commission 1996: 146).

60
the various types of measures adopted in implementing the Single Market project and
their impact on sales, competition, and firms’ strategies. On the basis of these studies and
the survey, the Commission published a synthesis report under the title The Single Market
and Tomorrow’s Europe.
This was the first extensive ex post-analysis of what had been happening to the European
economy up to that point as a result of an integration package. Due to the time period in
which the studies were made, only short- and medium-term effects of the project could be
analyzed. The main result was that the implementation of the Single Market project had
not stimulated a macro process as modeled by the Cecchini group, an integration-led
“chain reaction” had not taken place.

Box 3

“There were strong hopes that the programme would set Europe on a higher, and possibly
permanently higher, growth path. Removal of trade barriers would create more
competition, drive down prices and costs, thereby stimulating demand from consumers
and encouraging companies to make further efficiency-related investments to gain
economies of scale—and so on in a beneficial chain reaction. The world-wide economic
recession of the early 1990s put paid early realization of that hope, and with it the
prospect of big increase in job creation. ”(p. 3)
“Ideally, we should see a virtuous circle of benefits. Single market measures should give
companies some initial cost savings, increasing their efficiency and productivity. This
should increase sales, and therefore profits. The profits would be ploughed back into
investment and employment. Investment would give more business to makers of capital
goods, while the increase of people in work with more money to spend would stimulate
demand for consumer goods. A rise in growth and demand would lead to a further
increase in sales. And so on.

Real life, however, is rarely so simple. ” (p. 77)

Commission (1996), The Single Market and Tomorrow’s Europe

Nevertheless, the Commission struck a positive balance (table 2), a balance that looks
quite different from the assessment of the effects in 1993. At that time, 9 million
additional jobs were said to have been created by the Single Market project; now the
figure is estimated to be only between 300,000 and 900,000.

Table 2:
U U Balance of the EU Commission on the Completion of the Single Market
(1996)

Area Effect of the Single Market project

Employment 300,000-900,000 additional jobs

61
Growth Increased output by more than 1 %,
enduring growth effect
Inflation Rate 1 – 1. 5 % lower
Investment in the EU + 2. 7 %
FDI flows to the EU Increase
Convergence Poorer EU states grow faster than the
rich ones
Intra-EU-trade Intensification:
manufactures + 14 %,
services + 7. 6 %
Public sector purchases Share of purchases from other
member states increased from 6 to 10
%
Transport costs – 5 billion ECU a year
Telecommunications equipment Accelerated price reductions (– 7 %,
savings 1. 5 – 2 billion ECU)
Air transport traffic + 20 %

Source: Compiled on the basis of Commission (1996),

The Single Market and Tomorrow’s Europe, p. 2f.

Before discussing the reasons that the Commission emphasizes why a macroeconomic
process did not evolve as expected, I will, in the following, review the quantitative and
qualitative empirical findings of the Single Market Review and some other analyses that
can be linked to the main theses of the economic integration theory: trade and investment
effects, scale effects, competition, specialization, and distributional aspects.

a) Trade and Investment Effects

U U

The period 1985-95 saw a significant rise in intra-EU-trade—on average an increase of

14 % in exports of manufactured goods and of 7. 6. % in services export. Imports from
non-EU members increased as well, but to a lesser degree (6. 7 % in manufactures, 3. 1
% in services). According to the Commission (1996: 84), there is no evidence that there
was significant trade diversion. Part of the trade dynamic has to be attributed to the
business cycle, to the economic boom in the late 1980s. Once the recession started, the
level of intra-EU trade decreased again.
Economic integration research sought to isolate the effects of the Single Market project
on trade (Jacquemin/Sapir 1988b, Neven/Röller 1991, Sapir 1996). The results confirm
that trade creation was bigger than trade diversion, like in earlier integration periods.
According to Neven/Röller (1991) and Sapir (1996), non-tariff barriers in the EC before
the Single Market seem to have been, in general, more detrimental to firms outside the
EU than to those inside it. However, in sectors where public procurement is important,
the fragmentation of the EU market was more harmful to intra-EC imports than extra-EC
imports.

62
Increased trade does not seem to have displaced foreign direct investment (FDI) within
the EU. One might have imagined that many companies, given the prospect of being able
to sell their goods freely within the EU, would tend to supply the market from a single
factory, even to the extent of closing down other plants and undertaking disinvestment.
According to the Commission, this happened only in isolated cases (Commission 1996:
85). The FDI flows to the EU, both in terms of building plants on Greenfield sites and of
undertaking mergers and acquisitions, rose sharply in the late 1980s and early 1990s. FDI
doubled as a share of total EU fixed assets investment, from a 2. 8 % average in the first
half of the 1980s to 5. 8 % in 1990-92. In 1992, the EU took in a full 50 % of worldwide
FDI. These levels also decreased with the recession.
Empirical analyses of FDI flow, which control for a wide range of factors, found little
evidence for an impact of the Single Market project. Buigues/Jacquemin (1994) found
evidence in their empirical analysis of the relationship between FDI and exports to the
EC that non-tariff barriers have been a significant determinant of Japanese FDI, but that
they played only a minor role in influencing US-FDI. Srinivasan/Mody (1997) searched
the location determinants of US and Japanese FDI in a sample of thirty-five countries,
including ten EU member states, for the years 1977-1992. According to their results, the
main predictors for FDI flows are (national) market size and labor cost; the specific
inclusion of a Single Market project variable improved the explanatory power of the
equation, but only marginally. Even when splitting the data into periods (1977-81, 1982-
86, 1987-92), there was no evidence that the formation of the Single Market project
significantly improved the EU’s share of either US or Japanese FDI. In the case of
Japanese FDI, assuming East Asia to be the benchmark group of countries, the share of
FDI directed to the EC fell in the period 1987-92. Clegg (1996) also found no evidence
that the Single Market has had a positive impact on US-FDI. Dunning (1997) concluded
from these results that the main impact of the Single Market project has been through
other channels, influenced by the project (income levels, market sizes, etc.).
“Inter alia this makes it very difficult—and indeed of questionable value—to consider
IMP [Internal Market Programme, PZ] (or a proxy for the same) as an independent
variable—except, perhaps, in the years immediately following 1985, when FDI was
influenced more by the expectations of the programme’s outcome, i. e. prior to dynamic
effects coming on stream. But, even considering the IMP as an independent variable, and
the difficulties associated with its measurement, the few studies [. . . ] all generally agree
that it has stimulated both extra and intra EC FDI, but the former more than the latter—
but not as significant as have other variables” (Dunning 1997: 209).

Barrell/Pain (1999a) find in a sample of six EU member states, with a dummy variable
for the period 1989-1994, that in this period US-FDI inflows were larger than in the rest
of the period investigated (1987-1994). 20TP PT

20
TP Blomström/Kokko argue that the relationship between regional integration and FDI is different
PT

between different groups of member countries: “The perhaps most serious problem in the study of

63
As for the early period of European integration there was locational competition for
investment following the Single Market project. Among the “winners” were the smaller
Benelux countries in the geographical core of the EU and Ireland, Spain, and Portugal on
its periphery. With 37 % of all investment placed in the EU by non-EU firms between
1990 and 1993, the UK was the “winner” regarding FDI (Commission 1996: 86). The
intensified locational competition has to do with the fact that, through the Single Market
project, companies could base their decisions about their location more on economic
criteria and less on the political need to be present in a particular member state in order to
have any hope of winning a public contract in that country.
The empirical study by Pain/Lansbury (1996) found that the UK profited most from the
competition for investment in general, not only regarding FDI; Italy, the Netherlands, and
Portugal benefited to a lesser extent, and France and Belgium may have lost German
investment. They identify an investment diversion effect by the Single Market project, a
negative effect for the US and Austria. The key factors in the competition for investment
seem to be, besides market size, R&D expenditure and labor costs. Because of lower
labor costs compared with Germany, the UK has attracted more US-FDI; however,
Germany and France have gained investment because of their high levels of R&D
expenditure (Barrell/Pain 1999a). These authors conclude:
“Countries can deregulate their factor markets and compete on prices to attract FDI, as in
the UK. Other host economies have pursued different paths. (. . . ) Labour costs are not as
central in many investment decisions as they once were, particularly for companies ma-
king high technology products. Contiguity to major centers of production and research is
now equally, if not more, important” (Barrell/Pain 1999a: 931).

Much of this investment took the form of mergers and acquisitions. These soared in the
late 1980s, declined slightly in 1991/92, and then picked up again. But only part of these
were transnational; about 60 % took place within a single member economy. Between
1986 and 1990, the number of transnational mergers jumped from 200 to 2000

the relation between regional integration and foreign direct investment is the multi-dimensional
character of the issue. For instance, it is reasonable to expect that regional integration will have
different impacts on investors from the participating economies and outside investors. The impact
may vary depending on the character of existing foreign direct investment: horizontal and vertical
investment, or import-substituting and export-oriented investment, are not likely to be affected in
the same manner by the elimination of trade and investment barriers. The major home countries, i.
e. the countries where multinational corporations (MNCs) have their home bases, may experience
different effects than the countries hosting foreign MNCs. Integration between developed
countries (North-North integration) may differ from integration between developing countries
(South-South integration) or agreements between countries at different levels of development
(North-South integration), depending on how competitive and complementary the economies are.
The time dimension may be important, so that static effects differ significantly from dynamic
effects. The degree of integration at the outset, and the significance and nature of the changes
brought about by the RIA will also matter. In addition, the patterns of trade and investment before
the RIA are important determinants of how much adjustment is necessary after the agreement”
(Blomström/Kokko 1997: 3).

64
(Commission 1994). France and Italy saw the biggest relative increase in mergers and
acquisitions involving a company in another member state, but the absolute level of deal-
making remained highest in the UK. During the period of implementing the Single
Market project, British companies were involved in no less than 58 % of all intra-EU
mergers and acquisitions (Commission 1996: 86). An analysis of the Commission in
1990 concluded that companies preferred growth by acquisitions because it is faster and
eliminates competitors. 21 TP PT

An example for the very fast process of concentration is the development of the
production of refrigerators and washing machines in the EU:
1985: some 150 companies supply 75 % of the EU market.
1990: fifteen groups control 80 % of the EU market.
1995: seven groups have 86 % of the market (Commission 1996: 89).

The share taken by the leading four manufacturers, averaged across industry as a whole,
rose from 20. 5 % to 22. 8 % over the 1987-93 period; for R&D-intensive sectors, this
concentration ratio jumped from 32. 9 % to 38. 9 % (ibid. , 88).
Brühlhart/Torstenssohn (1996) examined the degree of geographical concentration of
industrial production among eleven EU countries. They found that geographical
concentration increased significantly during the 1980s. Their Gini index of concentration,
computed for eighteen industrial sectors, rose from an average of 0. 156 in 1980 to an
average of 0. 188 in 1990 (an increase of 21 %). The three sectors with the largest
increases in the Gini coefficient (textiles: 60 %, clothing and footwear: 54 %, leather
goods: 42 %) are ranked from the lowest in terms of scale economies, which contradicts
the predictions from economic integration theory.
It should not be forgotten that the waves of mergers and acquisitions in the 1980s and
1990s have been global phenomena (UNCTAD 2000). But obviously the Single Market
project has had a positive influence on these. Dunning (1997) points out that
“those involving EC firms as sellers have undoubtedly been facilitated by the IMP
[Internal Market Programme, PZ]. The result of these M&As on the intra-EC location (cf.
the ownership) of economic activity is ambiguous; but, in the majority of cases, there has
been some restructuring of activity of the acquired firm; and this, as well as the
distinctive sourcing and exporting policies of the acquiring firms may well affect both
intra- and extra-EC trade. (. . . ) EC-based MNEs [Multinational enterprises, PZ] have
improved their competitive position vis-à-vis US and Japanese MNEs; and it is highly
likely that the IMP has contributed to this improvement” (Dunning 1997: 210).

In general it can be said that small and medium-sized companies benefited less from the
Single Market project than larger groups, which, according to the Commission (1996: 3),
had the structures to exploit the new market better. This is confirmed by the results of the
EUROSTAT-Business Survey. On the average, there was no big impact of the Single
Market project on the development of the companies’ unit costs (table 3). However,

21
TP PT European Economy/Social Europe, Special Edition 1990, p. 56.

65
significantly more larger manufacturers report lower costs rather than higher ones. It is
the fact that there are so many more small firms than big ones, which makes the overall
total look so neutral. Since more than half of the companies in all categories did not see
any impact of the Single Market project on their unit costs, we are led to question one of
the core theses of economic integration theory, namely scale economies.

Table 3:
U U Impact of the Single Market Project on Companies’ Unit Costs by Size:
Manufacturing Sector

Decrease No change Increase

EUR-12 15 53 14
More than 1000 employees 26 55 7
500 to 999 employees 22 57 9
200 to 499 employees 21 53 8
50 to 199 employees 16 56 13
20 to 49 employees 12 51 17

Source: Commission (1996), The Single Market and Tomorrow’s Europe, p. 99

The results of the analysis of the effects of the Single Market project regarding the
development of trade and investment have, up to now, more or less confirmed the
expectations from the point of view of economic integration theory. The evaluation of the
scale, competition, and specialization effects contradict the assumptions.

Table 4:
U U Opinion of European Industrial Enterprises on the Effects of the
Single Market Project (1995)

Type of measure Percentage of enterprises reporting the effect of the European Single Market
as
Positive No effect Negative No opinion
Harmonization of technical regulations 31 51 9 9
and/or standards
Mutual recognition of technical 32 49 7 12
regulations and/or standards
Conformity assessment procedures 23 56 5 15
Simplified patenting procedures 13 64 2 21
The opening up of public procurement 9 71 4 16
The elimination of customs 60 30 5 5
documentation
Deregulation of freight transport 43 43 3 12
The elimination of delays at frontiers 56 35 2 7
The change in VAT procedures for 32 41 15 11
intra EU sales
The liberalization of capital movements 23 61 2 14
Double-taxation agreements 17 60 2 21

66
Source: EUROSTAT-Business Survey (Single Market Review);
Commission (1996), The Single Market and Tomorrow’s Europe, p. 150

Table 5:
U U Opinion of European Service Enterprises (Excluding Distributive
Trades) on the Effects of the Single Market Project (1995)

Type of measure Percentage of enterprises reporting the effect of the European Single Market
as
Positive No effect Negative No opinion
Harmonization of 11 70 7 12
licensing/authorization requirements
Mutual recognition of 12 72 4 12
licences/authorizations
Measures to facilitate cross border 22 65 3 10
operations
Measures to facilitate physical 9 78 1 12
establishment in other EU states
The opening up of public procurement 9 73 4 15
The liberalization of capital movements 16 72 1 10
Double-taxation agreements 11 69 2 18

Source: EUROSTAT-Business Survey (Single Market Review);

Commission (1996), The Single Market and Tomorrow’s Europe, p. 151

b) Scale Effects
U

Box 4
“It was thought that large benefits from the single market wold come from companies
exploiting their potential scale economies. But, generally, they have not. The implication
of the Business survey is that companies say they have concentrated more on internal
rather than external growth but this does not square with the recent wave of mergers and
acquisitions. Nor is their claimed emphasis on internal growth consistent with evidence
that most EU companies are still failing to realise the full potential of scale economies
that can be made in their sector. Companies seem to be claiming that they are grasping
the nettle of economies of scale when, in fact, they are going for the ‘soft option’ of
mergers and acquisitions in order to stay profitable. ” (p. 101)

Commission (1996), The Single Market and Tomorrow’s Europe

Not only the answers of the companies in the EUROSTAT-Business Survey, but also the
sectoral analyses of concentration of industrial production as presented above raise

67
questions regarding the validity of the scale-economies concept. The key to the problem
seems to lie in the analyses of concentration and competition.

c) Competition
U

As mentioned above, the variable ‘increased competition’ was the key factor in the
models and estimates of the Cecchini group (see boxes 1 and 2): The stronger the
competition, the higher the predicted growth effects. Did the Single Market project create
more competition?
The Commission argues, in accordance with economic theory:
“In a perfectly unified and perfectly competitive market, there would be a single price, or
at least a series of single prices per sector. This has clearly not yet happened across the
EU” (Commission 1996: 90f. ).

Obviously, this cannot be the test for an impact of the Single Market project. However,
there should be, according to economic integration theory, an integration-induced price
convergence trend. On the basis of the Single Market Review process results, the
Commission concludes that the Single Market project “appears to have brought a slight
acceleration of this narrowing of prices over time” (ibid. , 92). But, regarding
competition, the movements of the final prices are decisive. There is no general trend that
could firmly be attributed to the Single Market (ibid. 98).
The other main dimension of competition analysis is the development of profit margins.
The Commission buttresses its argument rather unconvincingly with the fact that profit
margins indeed decreased between 1988 and 1991—but then, in 1992, they jumped to a
high level again, the second highest between 1980 and 1992, right at the moment when—
as the Commission (1996: 79) emphasized in another context—many of the single market
measures were coming on stream.

The EUROSTAT Business Survey showed that between 60-80 % of the European
companies did not perceive increasing price or quality competition during the years when
the Single Market project was being implemented (Commission 1996: 96). A closer look
even reveals that many of the companies that did feel greater competition are ones
located at the EU periphery, mainly in Ireland, Spain, and Greece. For the companies in
the Mediterranean area, this has probably more to do with the entry of their country into
the EU than with the Single Market project, which coincided exactly (Spain and Portugal)
or took place only five years earlier (Greece). Paradoxically the manufacturing firms
detected relatively more new competitors from other EU states due to the Single Market
project than did service companies; the EU market in manufactures has been much more
integrated than that in services even before the Single Market project.
According to economic analyses, the Single Market project should have come closest to a
big bang liberalization in services because it represented, as the Commission (1996: 59)
writes, “the first serious assault on barriers to the provision of services across the EU. ”
Indeed, in some sectors there were significant integration-induced changes, especially in
air transport, distribution, and telecommunications and information services. In the trans-
EU distribution of goods, the Single Market project has triggered a process of complete

68
restructuring. Both manufacturers and retailers have tightened their control over
distribution, leading to more vertical integration and concentration of distribution.
SONY, for instance, has reduced the number of its warehouses in the UK from eight to
one and was looking in 1995 for as few as four for the whole of Europe. PHILIPS too
reduced its warehouses in the EU, from fourteen to four. At the same time, a new type of
logistic company has emerged (cf. Plehwe 1999, 2000). General wholesalers have often
been bought up by other distribution companies or eliminated from the distribution chain
and forced into other activities.
However, these changes in the service sector were embedded in a complex process of
technological breakthroughs, global restructuring, and the interplay between national,
EU, and international regulatory reform. The effect of the Single Market project is
difficult to assess, in some sectors it may have been, for a rather brief period, a
strategically important element in this process. The answers of the European service
companies (without distributive trades) in the survey are revealing: The percentage of
companies reporting the Single Market measures as having no effect at all is as high as 70
% (table 5), higher than in the case of manufacturers (table 4).

The extension of cross-border competition was expected to create a strong competitive

impulse in public procurement. The sums that central and local governments spend in the
EU on goods, construction, services, etc. each year equal about 11. 5 % of the EU’s total
output.
The results of the Single Market Review process do not prove that the Single Market
impulse has had significant effects. More than 70 % of the companies, manufacturers as
well as services companies, did not perceive any effect of the Single Market project in
this regard (tables 4 and 5). Many public procurements authorities profess a
disappointment that their contract advertisements have not drawn enough new bids or
sufficiently competitive bids. The Commission (1996: 36) attributes this partly to the fact
that companies from other EU states are often bidding through their local subsidiaries,
which in turn tend to price their offers in line with domestic competition. Larger
companies appear to be gaining the most from the new system. The expected price
convergence was not generally observed, which is not surprising given the weakness of
the competitive impulse. It has to be taken into consideration that there have been delays
in the implementation of the liberalization measures in many member states.

The Commission found that there is, after the implementation of the Single Market
project, still “a worringly high ratio of marketing alliances between companies in exactly
the same product line. ” In 1986-93 such agreements between ‘rivals’ constituted around
70 % of the total (Commission 1996: 103).

In conclusion, it can be stated that there is, except for some specific sectors and areas,
remarkably little evidence that the Single Market project has increased competition. This
contrasts fundamentally with the assumptions of the economic models meant to assess the
effects of the implementation of this project.

69
d) Specialization
U

In economic integration theory, specialization of economies according to comparative

advantages is a consequence of regional integration. A stronger specialization has been
expected not only because of the implementation of the Single Market project, but also
because this project coincided with the Southern enlargement of the EU (Spain,
Portugal), which extended membership to comparatively less developed countries.
“In a perfect world, that is one with perfect competition, maximized economies of scale
and so on, the creation of the Single Market should have led to greater industrial
specialization by countries on the basis of their respective comparative advantages—one
country exporting predominantly in cars while another relies on its main export of shirts.
This would mean an increase of ‘inter-industry’ trade (i. e. one country’s trade with
another in a particular sector represents less than 10 per cent of that other country’s
reciprocal trade flow in the same product.
In fact, the trade increase between the member states has been qualitatively different. It is
‘intra-industry’ trade which has been increasing, that is trade within the same sector
where countries engage in the simultaneous import and export of similar product lines (. .
. . )” (Commission 1996: 80).

In contrast to the economic models and predictions of the 1980s, where greater
specialization has been one of the core mechanisms to increase competitiveness, the
Commission (1996) did not see a fundamental problem in the ‘non-effects. ’ With regard
to the Monetary Union, the Commission concluded:
“This was probably the best thing which could have happened to the EU at this time. The
specialization which would have happened in inter-industry trade would have meant
some countries experienced contractions in certain sectors and expansion in others (. . . ).
With intra-industry trade, the adjustments take place within firms rather than among
industries. The EU economy becomes more diversified and therefore more able to stand
sector-specific shocks, such as sudden increases in the price of raw materials. A shock
like this would affect one EU country more than any other—which is particularly
important during the run-up to monetary union” (Commission 1996: 83).

Other empirical integration research confirms the result of the Single Market Review
process, namely that the Single Market project did not trigger greater specialization
between EU countries. Sapir (1996) presents this result in his study for the four biggest
members: Germany, Italy, France, and the UK.
“Several factors may account for the fact that the 1992 program has not, at least so far,
produced major inter-sectoral shifts in the pattern of specialization within EC
manufacturing. Firstly, the liberalization of manufactured goods markets during the
period 1986-1992 may not have been as far-reaching as expected either because these
markets were already largely liberalized prior to 1986, or due to delays in the
implementation of the 1992 program. Secondly, the liberalization of manufactured goods
markets may not have produced inter-industry shifts of resources due to rigidities
elsewhere in the economy, particularly in labor and services markets. Thirdly, and

70
perhaps most importantly, many of the effects of increased integration may have taken
within, rather than across, industries. Hence, contrary to Krugman’s hypothesis, the 1992
program may have resulted (like in earlier phases of European integration) in increased
intra- rather than inter-industry specialization” (Sapir 1996: 461).

Krieger-Boden (1999) found that there is empirical evidence for increasing specialization
among EC countries at the beginning of the 1980s—but only until the mid-1980s, before
the implementation of the Single Market project. The countries that seem to have
specialized more have been those which were quite specialized already, mainly Greece
and Portugal. With respect to the 1990s, her estimates “underline the slow pace of change
and reveal that there seems be much ambiguity” (Krieger-Boden 2000: 26). At the
subnational level too, Krieger-Boden finds a contradictory image. If there is a process of
regional specialization—and for many member countries there is no evidence for that—it
seems to progress very slowly.
In conclusion, it can be stated that there is remarkably little evidence that the Single
Market project has contributed significantly to increased specialization.

e) Distributional Aspects
U

Economic integration theory has never developed a complex theory on the distribution of
the effects of regional integration. 22 From the findings of empirical integration research,
TP PT

22
TP PTEmerson et al (1988) argued in The Economics of 1992: “Difficult as it is to estimate the
aggregate gains from market integration, this task is relatively manageable compared to that of
forecasting its distribution by country or region. While the latter task has not been attempted, it is
worth noting that neither the economic theory nor relevant economic history can point to any
clear-cut pattern of likely distributional advantage or disadvantage. Theories of vicious circles of
divergence of regional fortunes, resulting from market integration exist, but so do alternative
theses that point to more balanced or indeterminate outcomes; the latter theses including important
recent developments in the analysis of trade between industrialized countries. Smaller countries, in
particular those having recently joined the Community with relatively protected economic
structures, have proportionately the biggest opportunities for gain from market integration” (p. 9).
Molle (1990) summarized the economic research on the convergence process under the conditions
of regional integration: “The integration of the markets for goods and production factors realised
by the European Community since 1950, has contributed to the convergence of national wealth
levels; although the mechanisms are not too well documented, technology transfer, direct
investment and market opportunities stand out as the main influencing factors” (Molle 1990: 192).
The Padoa-Schioppa report (1987) aimed at analyzing the dimension of equity at regional level as
a consequence of the Single Market project was very cautious regarding the
convergence/divergence question: “Increased openness of product and factor markets certainly
generates economic gains in the aggregate. However, the spatial distribution of such gains is less
certain and unlikely to be even. Regions tend towards an equalization of income per head as a
result of the mobility of capital and labour only under severe and unrealistic conditions, such as
the absence of economies of scale or specific locational factors influencing the investment
decision. When these and other conditions are not satisfied, the outcome in terms of regional
convergence or divergence becomes uncertain” (p. 93). For more recent empirical research see
Neven/Gouyette (1995), Fagerberg/Verspagen (1996), Cambridge Econometrics (1997).

71
however, some channels of impact can be reconstructed. Several distributional aspects
have been discussed in the sections above already: the effects of the locational
competition for investment, intra-EU and from third countries, a different impact of the
project regarding competition, etc.
It has to be added that many of the Single Market project’s regulatory elements have had
a different impact on member states, due to differences in their regulatory policies. For
instance, the new system of VAT accounting and trade statistics collection introduced by
the Single Market project has been an improvement for countries that had complicated,
rather inefficient national systems. In the cases of Denmark or the UK, the new method
replaced already quite efficient national systems, which caused adaptation costs. Similar
asymmetric adaptation costs have been observed in other areas as well (cf. Commission
1996: 13ff).
The employment effect of the Single Market project has been different for the member
economies. It is estimated that in manufacturing the project may have caused a drop in
overall employment of 0. 53 % by 1993. 23 By country, the EU measures appear to have
TP PT

boosted manufacturing employment by 5. 11 % in Ireland, by 1. 5 % in Spain and

Portugal, and by 0. 76 % in the UK and Belgium. These countries have been the
‘winners’ of the competition for investment. Germany, Luxembourg, the Netherlands,
and Italy, however, are estimated to have lost, respectively, by 2. 51 %, 2. 67 %, 1. 89 %
and 1. 04 % more manufacturing jobs than they would have if the Single Market project
had not been implemented (Commission 1996: 108).
In contrast to the widespread expectations in the 1980s, the peripheral countries were not
the ‘losers’ of the project. In general, it can be said that lower-cost economies benefited
at the expense of high-cost economies (cf. Commission 1996: 108). 24 However, it has to
TP PT

be taken into consideration that, at the company level, generally the companies of the
core countries were the ones to take over their competitors in the peripheral countries.
The relatively better growth performance of the peripheral countries has to be explained
by several factors. Firstly, as has been shown, they were among the ‘winners’ of the
Single Market project with regard to several dimensions. Secondly, this is at least partly
due to “structural interventions” in the framework of the EU regional policy. The
monetary transfers to these countries in the period from 1988 to 1999 amounted to 1. 5 %
of the GDP of Spain, 3. 3 % in the case of Portugal, and 3. 5 % in Greece (Commission
2001).

V. Is There a Long-Term „Growth Bonus“?

23
TP Single Market Review, Report Employment and Manufacturing.
PT

24
TP Krieger-Boden (2000) concludes that “— as predicted by the theoretical considerations for the
PT

case of integration progressing from an intermediate to a high level — the manufacturing sector as
a whole seems to have withdrawn from the centers toward the periphery” (Krieger-Boden 2000:
28).

72
Having analyzed empirically all the major channels of impact that were at the core of the
economic models of the Cecchini group, we find no evidence for an integration-induced
macroeconomic process with significant economic gains, a fact that is not surprising
anymore. How did the Commission explain that “real life was different”? Largely by
ignoring all the empirical findings of the Single Market Review process that
fundamentally contradict economic integration theory; it emphasizes the adverse impact
of the economic downturn in 1991/92:
“. . . just as many of the Single Market measures were coming on stream. Demand failed
to respond to any early price cuts or quality improvements from the Single Market
programme, and then it slacked. This diminished the enthusiasm of companies to risk
expansion. Recession made it harder for the economy to find alternative use for those
resources (. . . )” (Commission 1996: 79).

Interestingly enough, the Commission does not refer to the aspects of conditionality
stressed by the Cecchini group, namely the implementation of a strong EU competition
policy and a coordinated growth-oriented macroeconomic policy.
There have been counteractive tendencies as well. Under the EU system that requires
member states to give notice of new technical rules they propose to make, the member
states notified in Brussels some 430-470 new proposed regulations each year from during
1992-94, a period when the EU was supposed to be moving towards a common technical
environment (Commission 1996: 29). Yet the Commission also emphasized the delays of
the member states in implementing the Single Market measures. Therefore the “full
effects in terms of competitiveness for European business have yet to be realized” (ibid. ,
3). The models of the Cecchini group predicted that it would take five or possibly more
years for the larger effects to be reached, and they included the chance for long-term
dynamic effects of integration. The study done by Cambridge Econometrics (1997) could
not prove a sustained impact of the Single Market beyond a short-term impulse on
investment and R&D.

In the remainder of this section, we ask whether recent empirical analyses has been able
to identify a medium- or long-term effect, beyond the specific measures of the Single
Market project of the 1980s and of European integration since the 1950s.
Italianer (1994) found a positive effect of intra-EC-trade on growth for the early years of
European integration (1961-1973).
“For the second period, 1974-86, the negative impact on growth from the integration
variable stands out, being neutralized if the effects of enlargement is included. For the
period 1987-92, intra-EC6 integration as measured by our proxy has not contributed to
growth of EC6 GDP, although intra-EC12 integration has, to the tune of 04. percentage
points per annum, or a cumulative total of 2. 4 %. The trade openness variable
contributed slightly negative to economic growth, mainly due to the decline in the share
of extra-EC6 trade in EC6 GDP” (Italianer 1994: 700).

He concludes that

73
“the welfare function by which to judge the gains from European integration is
presumably too complicated to be quantified in any satisfactory way, notably because of
the fact that other objectives than the pure efficiency gains to which economists are
attached are included, such as political and redistribution objectives” (ibid.).

Landau (1995), assessing the impact of the Common Market on the growth rate (1950-
1990, 17 OECD countries, dummy variable for Common Market countries), found no
growth benefits whatsoever for EU members compared to countries at a similar stage of
development who did not join the EU: “. . . allowing for the general growth pattern over
time and the ‘catch-up effect’, there is no statistically significant impact of the Common
Market on the growth of its member countries” (p. 780). This agrees with the conclusion
of De Melo/Montenegro/Panagariya (1992) who used growth regressions in a cross
section of 101 countries and did not find growth effects associated with EU integration
(dummy variable for participation in regional integration processes, 1960-1972, 1973-
1985). Henrekson/Torstensson/Torstensson (1997) report that a EEC/EFTA dummy is
significant if one runs a cross-country growth regression on a sample of twenty-two
OECD-countries (time period 1975-1990); European integration may provide a growth
bonus of 0. 6-0. 8 % for its member economies. But they find that this relation is not
robust with respect to the set of control variables and that there are no significant
differences between the effect of EEC or EFTA membership on economic growth.
Baldwin/Seghezza (1996), in contrast, find that cross-country data reveal a rough
correlation between the national factor productivity growth rates and the degree (and
duration) of European integration. However, their exploratory regressions into this
phenomenon prove inconclusive, and they find almost no econometric support for trade-
induced technology-led growth associated with European integration. In an attempt to
estimate the dynamic effects of integration, based on a time-series analysis for six
integration schemes (including EEC and EFTA), Brada/Mendez (1988) did not find that
economic integration processes imply faster productivity effects and conclude that the
‘dynamic effects’-argument cannot serve as a rationale for integration. Vanhoudt (1999)
tested the endogenous growth theory-hypothesis of a scale effect (the larger the scale of
the market, the higher its long-term growth rate). He finds “that there is no growth effect
whatsoever resulting from the enlargement of the market. ” In a second step he tries to
estimate a “long-run growth bonus of EU membership” in a sample of twenty-three
OECD countries. He finds no convincing evidence to support the idea of a long-run
growth bonus associated with EU-membership, even with membership length as a
variable. Bornschier/Herkenrath/Ziltener (2002) find for two periods, 1982-90 and 1991-
1996, a significant negative effect of EU membership on the accumulation of capital
stocks—which cannot be explained by a Single Market-induced ”cleansing process”
only.

VI. Does EU Membership Foster Convergence?

74
The rapid development of EU regional policy in the 1980/90s has been intertwined with
the adoption of the Single Market project (Ziltener 2000a, b). It is important to state,
however that though its main aim is enhancing the competitiveness of less developed
regions in order to integrate them into the European market (Tömmel 1987, 1999), it
follows a logic different from “pure” market integration (cf. Borrás/Johansen 2001). Up
to now, economic integration theory has not systematically incorporated processes and
effects of this kind of supranational political ‘steering’. For an assessment of the effects
of the Single Market project—moreover, of market integration as such—it is essential to
control for the effects of these EU policies. A recent research project at the University of
Zurich aimed at doing this (Bornschier/Herkenrath/Ziltener 2002); this section
summarizes the main findings.
Empirically evaluating transfers in the EU, there are two dimensions that have to be
looked at: First the net transfer flows between the member states and the EU institutions,
and second the payments from the EU to the member states as part of its regional,
structural and cohesion policies. Two new variables were created based on EU data:
EU structural policy payments to member states = EU payments to member states
(payments of the regional and social funds, the European Agricultural Guidance and
Guarantee Fund (EAGGF) guidance section, without the payments of the EAGGF
guarantee section, without the reimbursement of levying costs of equities and other
payments, accumulated 1986-93, per capita).
EU net position = total EU payments to member states minus member state payments to
the EU, accumulated 1986-93, per capita.

Table 6 shows the results of the OLS-estimates.

Table 6:
U U The Impact of EU Membership on Economic Growth and Convergence –
OLS-Estimates

Dependent variable: economic growth between 1980 and the end of 1998; n = 33
(1) (2) (3) (4) (5) (6)
Growth of real 0,70 ** 0,69 ** 0,67 ** 0,68 ** 0,67 ** 0,72 **
capital stock (8,48) (8,92) (8,91) (9,09) (9,31) (9,00)
Growth of 0,34 * 0,37 * 0,34 * 0,33 * 0,32 * 0,11
manpower (2,30) (2,67) (2,44) (2,49) (2,89) (1,14)
Convergence 0,81 ** 0,69 ** 0,70 ** 0,71 ** 0,71 ** 0,63 **
(5,42) (4,54) (4,72) (5,10) (5,32) (4,16)
Technology 0,51 ** 0,43 ** 0,41 ** 0,41 ** 0,41 ** 0,35 **
capital (3,37) (2,97) (2,88) (2,97) (3,22) (2,49)
Quality of 0,08 0,14 0,15 † 0,15 † 0,15 † 0,06
education (0,88) (1,53) (1,75) (1,77) (1,90) (0,73)
Social capital 0,38 ** 0,35 ** 0,36 ** 0,37 ** 0,37 ** 0,30 **
(4,3) (4,07) (4,31) (4,58) (4,72) (3,43)
”EU years” 0,30 ** 0,11 0,01 0,01
(2,68) (0,80) (0,10) (0,10)
Convergence* 0,25 * 0,04
EU-years (2,12) (0,24)

75
 EU transfers 0,28 0,32 * 0,33 **
(1,42) (2,63) (4,05)
EU net position 0,21 **
(3,09)
R-square, 0,86 ** 0,88 ** 0,88 ** 0,89 ** 0,89 ** 0,87 **
corrected

ß-values shown, t-values in brackets; ** p<0,01; * p<0,05; † p<0,1.

Sample: 33 countries (OECD countries and newly industrialized

countries); EU member countries without Luxembourg
Variables:

Economic growth d log Y = log Y 1998 – log Y 1980. Data source: World
Development Indicators 1999, World Bank, IMF.
Growth in capital stock(real capital) d log K = log K 1993 – log K 1985, data
compiled by Herkenrath and Gehrig/Gmünder.
Growth of manpower (labor force) d log L = log L 1997 – log L 1980. Source:
World Development Indicators 1999, World Bank.
Convergence log GDP per capita 1990 (real gross domestic product per capita
in international prices of 1985 (purchasing power parity
corrected). Data source: Summers and Heston (The Penn World
Table, Mark 5. 5).
Technology capital log technology capital, average for 1985-1995 (operational
definition: scientists and engineers in R&D per million
inhabitants during the period of 1985-1995. Data source: World
Development Report 1999/2000.
Education quality log education quality 1992, variable computed by
Leicht/Bornschier with data provided by World Competitiveness
Report, various years.
Social capital index social capital index = (log trust + log tolerance)/2, variable
computed by Leicht/Bornschier with data provided by World
Values Surveys, various years.
EU years log years of EU, EC or EEC membership, starting in 1958;
European Coal and Steel Community (ECSC) was excluded. .
The maximum number of membership years until 1997 is 40 and
the minimum is 3. Recoded: 1 was added to the original values
of all countries and, additionally, 6 to the values of the member
countries. Thus, non-members receive the value 0 and members
at least receive the value 1.
EU transfers log EU payments to member states (payments of the EAGGF
guidance section, regional and social funds, without the
payments of the EAGGF guarantee section, without the
reimbursement of levying costs of equities and other payments,
accumulated 1986-93, per capita). Recoded: lowest value set to

76
 1. All non-EU member countries have the value zero on this
variable. Data compiled by Ziltener on the basis of the Statistical
Yearbooks of the German Federal Bureau of Statistics, various
volumes.
EU net position Net position of member states (total EU payments to member
states minus total payments of member states to the EU
accumulated 1986-93, per capita). All non-EU member countries
have the value zero on this variable. Data compiled by Ziltener
on the basis of the Statistical Yearbooks of the German Federal
Bureau of Statistics, various volumes.

Source: Bornschier/Herkenrath/Ziltener (2002)

The general convergence effect, which has already been analyzed intensively and proven
to be quite stable (e. g. Bornschier 1989, 1996, 2000b, Barro and Sala-i-Martin 1991,
1995), turns out to be the most important factor in the model. Its contribution to
economic growth is even slightly bigger than the effect of capital growth. Growth of
manpower also shows a significant coefficient, controlling for the other growth factors.
Technology capital also seems to have a substantial effect on the dependent variable.
Furthermore, the growth enhancing contribution of social capital that has been discovered
in earlier studies (cf. Bornschier 2000b; Knack and Keefer 1997) proves to be significant.
The effect of the variable “quality of education” is slightly positive, but statistically
insignificant. This might be due to the fact that five of the 33 values had to be estimated.
The variable that is of particular relevance in this context is “EU years”, i. e. the indicator
of EU membership. Compared to the effects shown by the other predictors in the model,
the direct effect of EU membership on economic growth from 1980 until 1998 is
relatively small (beta 0,30 at the most). It is, nevertheless, highly significant (cf.
Bornschier 2001: 194). In addition, the effect remains constant even if the operational
definition of EU membership is modified (i. e., if the new members of the expansion
round in 1995—Finland, Austria and Sweden—are coded to have the same values as non-
members on this variable). This positive direct growth effect of membership in the EU
must be offset against possible indirect effects.
Adding the interaction term “EU-years*convergence” to the growth model, the variable
EU years looses its significance (column 2). The existence of a significant interaction
effect leads to the following conclusion: The process of convergence was faster and more
notable among EU members than among other nations. Less developed EU members
caught up faster than other poor countries. This finding of a significant effect pertains to
the time period 1980-1998.
There are two competing explanations that could account for the accelerated convergence
among EU members. On the one hand, faster convergence could be a result of market
integration from which the less developed EU member countries benefited. On the other
hand, it could also result from the transfers flowing to these countries. These two
explanations are not necessarily mutually exclusive but may be complementary. The

77
faster convergence of the poorer EU countries, which at the same time are also
characterized by relatively high agricultural production, could be the result of both,
politically motivated transfers (Common Agricultural Policy; structural and regional
funds) and the effects of market integration. If this were the case, then the interaction
shown in column 2 of Table 6 would become less significant if we considered the
structural policy transfers as an additional predictor. If the interaction disappeared
altogether, this would mean that the accelerated growth of poorer EU members (relative
to non-members) was exclusively caused by redistribution measures.
In column 3 of Table 6, where the structural policy transfers have been included in the
model, the interaction term is no longer statistically significant. As shown in column 4,
the variable ”EU transfers” exhibits a highly significant effect, and turns out to be an
even better predictor than the former variable ”EU years”, as soon as the insignificant
predictors are excluded from the equation (see column 5). This means that the ability of
the less developed EU members to grow faster than non-members can be attributed
exclusively to transfer payments.
The existence of a direct positive contribution of EU membership to economic growth,
indicated in column 1 of Table 6, has to be re-interpreted in the light of these new results.
It is not EU-membership per se that leads to increased growth of EU countries. Rather,
the poorer member states benefit from growth impulses that are created by convergence
policy measures. Hence, the benefits of EU membership are distributed asymmetrically:
The poorer member states are profiting, and the richer states—as far as they are net
payers within the European Union—are financing them. In column 6 of Table 6, the net
position is introduced as a predictor of growth, and the result clearly shows that net
recipients were enjoying a growth benefit.

VII. Lessons for Accession Countries

The results of empirical evaluations of the effects of European integration provide little
evidence supporting the channels of impact suggested by economic integration theory. In
fact, there are many facts that cast doubt on the validity of traditional economic
integration theory altogether.
There is no convincing empirical evidence that the Single Market has caused “dynamic
effects. ” Even as we go beyond the Single Market project and assess almost fifty years
of Western European integration, it is doubtful that there is something like a sustained,
long-term “growth bonus” of membership in regional integration. Up to now, the effects
of supranational policies and monetary transfers have been neglected in mainstream
theory and empirical research almost entirely, as has the whole issue of the distribution of
integration gains. The popular contention that European integration should lead to
enhanced growth perspectives in all the participating countries has to be rejected.
However, combining the evidence from recent research with the results of
Bornschier/Herkenrath/Ziltener, we can conclude that integration does profoundly change
the region in which it takes place, - but in a different way than economic integration
theory models it.

78
Effects of European Integration

Firstly, integration projects can be understood only in the context of contested world
markets and competitive processes of regionalization. European integration has been and
is part of the worldwide liberalization process. As the Commission (1996) emphasizes,
the EC has proved itself a building block, not a stumbling block. Implementing an agenda
suggested by an alliance of European big business representatives and the Commission,
the EC was at the forefront of this process for several years (1985-1990). In the 1990s,
the process was spearheaded mainly by the regions of North America and East Asia.
Usually the progress of regionalization sets the pace for worldwide liberalization under
the umbrella of one of the international institutions like the WTO. This process again has
its repercussions; it stimulates the proliferation and deepening of regional integration.
Secondly, European integration provided the European companies with what they have
been requesting: a large ‘home market,’ the necessary regulatory changes to grow to the
size of their American and Japanese competitors (cf. Bornschier 2000), and highly-
subsidized research and development, like their competitors. This is what I called the
“second agenda,” which was actually the main agenda. The following wave of mergers
and acquisitions that took place in the 1990s was transatlantic and transpacific.
Meanwhile, it hardly makes sense to try to define what a “European transnational
company” is. Competition now occurs between transregional strategic alliances of
companies.
Thirdly, it is highly probable that this process is—as the economists call it—suboptimal
with regards to economic growth and the creation of employment. One argument is that
liberalizing trade and unifying markets without a supranational regulatory framework,
especially a strong competition policy, do not create sound economic structures. This
view is shared by most scholars. More contested is the argument that economic
integration has to be supplemented by a coordinated, pro-active growth and employment-
oriented macroeconomic policy. The results of the analysis in this chapter strongly
supports this. There have been several initiatives at the EU level in favor of this
“completion of European integration,” which have been almost completely unsuccessful.
The only results were a few non-binding consultation and coordination mechanisms,
which have had no significant effects. More importantly, the Monetary Union and the
stability pact have not only further undermined the macroeconomic steering capacities of
the member states, but also largely abolished them by constitutional means. 25
TP PT

The EU as a Transfersystem

In the period from 1980 until 1998, the poorer EU member countries did grow faster than
comparable countries outside the EU. According to the results presented here, this over-
performance is exclusively attributable to the politically motivated transfer payments. In

25
TP PT This has been called the “New Constitutionalism,” Gill (1998).

79
other words: If EU countries grew faster in the 1980s and 1990s, this was due to transfers
within the Union, and these benefit the poorer EU countries. 26 TP PT

This has far-reaching significance for the prospect of catching up for the so-called
accession countries. Social, regional and cohesion transfers will be, as it looks now, less
generous than in the past enlargements. The EU is not planning to increase the spending
ratio for regional policy beyond the current figure of 34 % of its total spending, and the
contributions of the newcomers to the EU budget will be rather small. Thus, an only
„slightly bigger cake“ (Delhey 2001) has to be distributed among a significantly bigger
number of less developed regions. However, the main recipient countries of the EU with
15 member states seem to be unwilling to accept a cut back of their assistance. The
outbreak of the conflict over distribution will put an enormous pressure on the
enlargement processes. Its result will determine the prospects for convergence for the
new EU members.
It is unlikely that new members will profit from a „catch up effect“ similar to the one
experienced by Ireland, Spain and Portugal in the 1980/90s. Locational competition for
investment among peripheral regions—but also in the core—will increase sharply, far
beyond the level the EU countries were used to. Some regions in the accession countries
will, based on favorable locational factors, be among the winners in the coming new
international division of labor in Europe—many will not. As long as European
integration will not be flanked by an effective common growth- and employment-
oriented economic policy, and as long as the redistribution capability of the European
institutions—or the nation states—will not be increased significantly, regional and social
inequality as well as political tensions will grow, in the „united“ Europe.

26
TP The beneficiary countries of the EU transfers are relatively smaller, and thus the question arises
PT

as to whether the taxes paid by the bigger and richer countries in order to fund these transfers did
not create a loss for the EU taken as a whole. However, the net effect for the entire EU has to be
clarified by future research.

80
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88
Beyond the Washington Consensus. A quantitative reflection on the world economic and
world political conditions of Turkish EU-accession

Arno Tausch27 TP PT

Introduction

Conventional wisdom of the "Washington Consensus" has it that it is always the

periphery or semi-periphery country that got it all wrong during a crisis, like in East Asia,
Russia or recently in Turkey and that a good combination of economic freedom,
privatization, tight monetary policies and above all private foreign direct investment will
"fix" it, once the forces of the market are properly at work.

The "Washington Consensus" has been summarized by Raffer (pp. 305 - 323 in Tausch,
2003) as to represent the following policy priorities:

1. Fiscal discipline: a primary budget surplus of several percent of GDP

2. Public expenditure priorities: defined as re-directions of public expenditures towards
fields with high economic returns such as primary health and education
3. Tax reform: cutting marginal tax rates
4. Financial liberalization: moderately positive real interest rates and the abolition of
preferential interest rates (such as for developmentally useful or socially demanded
projects)
5. Exchange rates: unified and competitive
6. Trade liberalization: abolishing quotas (replacing them by tariffs) and reducing tariffs
to a uniform low level within three to ten years.
7. Foreign direct investment: equal treatment with domestic firms. The World Bank calls
this the elimination of barriers. This principle is also enshrined in the WTO treaties.
8. Privatization
9. Deregulation: abolishing regulations aiming at achieving developmental or social aims
10. Property rights: must be guaranteed.

The counter-position, advanced by globalization critics, environmentalists, liberation

theologians of all denominations, and - most recently - dissidents from the once
homogeneous neo-liberal camp would hold that unfettered globalization increases the

27
TP PT bibliographical references see interdisciplinary bibliography at the end of this book

89
social gaps between rich and poor both within countries as well as on a global scale. Most
of the adherents of this camp would share the view proposed by Cornia and Kiiski that
income distribution in the world system has worsened during the period of globalization.

The idea that economic and social progress is not linear has many implications for the
ascent and decline of nations in the world system. While debates abound, hard-core social
scientific evidence on the contradictory effects of globalization is needed more than ever
before.

So, while in objective terms the region of what the World Bank calls the “MENA
countries” (Middle East and North Africa) as well as “Central Asia” over the last years
had a very rapid human and social development (see Tausch’s other contribution to this
volume), more pessimistic views are commonplace. The US Government’s World
Factbook 2001 is a good example for such a kind of analysis that stresses the need for
tight monetary discipline, structural adjustment and continued and increased inflows of
foreign direct investments (http://www. bartleby. com/151/a61. html). The US State
TU UT

Department for its part says in its background notes on Turkey, 09/2002:

Turkey began a series of reforms in the 1980s designed to shift the economy from a
statist, insulated system to a more private-sector, market-based model. The reforms
spurred solid growth through the mid-1990s, with the exception of a sharp recession and
financial crisis in 1994. However, Turkey's failure to complete this reform effort,
combined with large and growing public sector deficits, resulted in high inflation,
increasing macroeconomic volatility, and a weak banking sector.

The Ecevit government, in place since June 1999, restarted structural reforms in line
with ongoing economic programs under the standby agreements signed with the
International Monetary Fund (IMF), including passage of social security reform, public
finance reform, state banks reform, banking sector reform, increasing transparency in
public sector, and also introduction of related legislation to liberalize telecom, and
energy markets. Under the IMF program, the government also sought to use exchange
rate policies to curb inflation.

By late 2000, a growing current account deficit, the weak banking system, and growing
concern over the failure to implement needed structural reforms resulted in a liquidity
crisis that led to a revised IMF program. In February 2001, a public dispute between the
president and prime minister triggered a run on the lira and a dramatic increase in
interest rates. The result was rapid inflation, a severe banking crisis, a massive rise in
domestic public debt, and a deep economic downturn (GNP fell 9. 4 % in 2001). The
government was forced to float the lira and adopt a more ambitious economic reform
program, including a very tight fiscal policy, enhanced structural reforms, and
unprecedented levels of IMF lending.

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Large IMF loans--tied to implementation of ambitious economic reforms--enabled
Turkey to stabilize interest rates and the currency and to meet its debt obligations
through the end of 2001. In early 2002, the reforms began to show results, as inflation
and interest rates fell significantly, the currency stabilized, and confidence began to
return. Nonetheless, the economy remains very weak, and continued implementation of
reforms is essential to restore growth and stability. (United States Department of State,
Background Note Turkey, available at: http://www. state. gov/r/pa/ei/bgn/3432. htm)
TU UT

And a publicly available US CIA study by Paul Jabber says about Turkey’s neighboring
countries:

Weak and continuously deteriorating macro-economic conditions in the region are

limiting the regimes in their ability to muster support from important constituencies. The
early and mid-1990's marked a period of economic promise. Several trends and events
combined to offer hope that a much-needed regional economic takeoff was finally under
way. They included the end of the Lebanese civil war; the onset of the Oslo peace process
with its promise of eventual peace and Arab-Israeli joint venturing in trade and
investment; relatively stable oil prices; significant progress on the part of important Arab
economies such as Egypt's in debt-restructuring and budgetary rationalization; and the
emergence of several viable local stock markets that encouraged private sector capital
formation and inflows of foreign investment on the back of a promised wave of
privatization of public enterprises.

Grim realities have reasserted themselves in recent years. Not only have peace prospects
been dealt a serious setback; continued military confrontations and terrorist activities
throughout the Levant and in Egypt have seriously constricted key revenues from tourism
and frightened foreign capital away; GDP growth rates have not kept pace with
population increases; educational systems and other infrastructural components have
deteriorated (with the partial exception of telecommunications); and, not least, the global
economic slowdown has seriously diminished oil revenues.

The looming possibility of a major influx of Russian and Central Asian oil and gas
supplies into world markets in the years ahead is exacerbating anxieties in the Arab Gulf
over future revenue prospects. Although in the past it was easy to draw a clear distinction
between Arab haves and have-nots in terms of oil revenues, per-capita income, economic
growth rates and other indicia of development, the picture has become significantly more
muddled. Saudi Arabia provides the prime example of the deteriorating trend in regime
stability. This is not because the overthrow of the House of Saud is in any way imminent.
In relative terms, however, of all pivotal Arab governments, in one short decade the
Kingdom has traveled the furthest down the road from unassailable stability and
unquestioned legitimacy into a social and economic landscape fraught with shadows and
potential pitfalls. (Jabber, 2001)

91
Turkey’s trajectory in the world system in the 1990s and beyond

Consensus strategists would point out that Turkey, for example, is largely to blame for
itself for the severe economic crisis that hit the country in recent years. They would point
out that there was far too little globalization in terms foreign direct investment, and that
state sector influence in Turkey is just too high. They would point out that fiscal
indiscipline – and not the workings of “global capitalism” are to blame for the misery that
has been created by the fall of the Turkish Lira in recent months:

Economist Country data Turkey 1998 1999 2000 2001

GDP per head ($ at PPP) 6,541 6,337 6,868 6,420
GDP ( % real change pa) 3. 09 -4. 71 7. 36 -7. 39
Government consumption ( % of GDP) 12. 70 15. 18 14. 08 14. 15
Budget balance ( % of GDP) -8. 40 -13. 02 -10. 64 -15. 75
Consumer prices ( % change pa; av) 84. 64 64. 87 54. 92 54. 40
Public debt ( % of GDP) 41. 42 53. 55 49. 94 54. 20
Labour costs per hour (USD) 1. 51 1. 51 1. 55 1. 22
Recorded unemployment ( %) 6. 80 7. 65 6. 60 8. 53
Current-account balance/GDP 0. 99 -0. 74 -4. 93 2. 29
Foreign-exchange reserves (m$) 19,489 23,346 22,488 18,879

compiled from: http://www. economist. com/countries/Turkey/

Our five year moving averages, compiled from the complete, freely accessible electronic
data set of the World Bank28 show that Turkey’s development from the 1960s onwards
TP PT

was a development by ‘leaps and bounds’ – as postulated by globalization critics, and,

above all, by the world systems approach, with both growth and foreign direct investment
declining until the crisis year 1981 – with a considerable recovery thereafter, and also
with a new decline in the 1990s:

28
TP PT http://www. worldbank. org/research/growth/GDNdata. htm

92
 Turkey's development since the 1960s

0,7 10

8
0,6
foreign direct investment
6 per GDP
0,5
4
GDP per capita growth
0,4 2

0 5 Per. Gleitender
0,3 Durchschnitt (foreign direct
investment per GDP)
-2
0,2 5 Per. Gleitender
-4 Durchschnitt (GDP per
capita growth)
0,1
-6

0 -8
60

63

66

69

72

75

78

81

84

87

90

93

96

99
19

19

19

19

19

19

19

19

19

19

19

19

19

19

Legend: left hand scale % foreign direct investment per GDP; right-hand scale: GDP per
capita growth rate (all EXCEL 5-year moving averages)

A downward social trend is also present, when we look at the data series of the human
development index29 and infant mortality in Turkey since the 1960s. So, when
TP PT

globalization until 2001 already increased development instability and inequality in

Turkey, will even more globalization in the wake of Turkey’s accession to the EU lower
societal inequalities?

Falling rates of human development increases over time as well as a stagnation in the
once rapidly falling trend of infant mortality are a clear indicator for the fact that Turkish
rapid industrialization indeed began to reach its limits in social terms.

29
TP compiled from UNDP, Human Development Report, Turkey, 2002, available at: http://www.
PT

un. org. tr/undp/hdr2002_eng. htm

93
 rise/decline of the Hum an Developm ent Index in Turkey

0,02
Turkey
0,015
increase/decrease per year

0,01

0,005

11

13

15

17

19

21

23

25

27

29

31

33
1

-0,005

-0,01
1965 to 1998

Turkey - infant m ortality

200,00 102,00

180,00 100,00
160,00 98,00 TRK - infant
mortality rate
140,00
96,00
120,00
94,00
rise/decline
100,00
over time
92,00
80,00
90,00
60,00

40,00 88,00

20,00 86,00

0,00 84,00

Legend: left-hand scale: infant mortality (World Bank Global Development Network
data); right-hand scale – rise or decline (preceding year = 100; our own compilations
from the original data).

94
Combining the theoretical and empirical power of such freely available Internet data-
bases as the World Bank “Global Development Network30”, the ILO’s “Laborsta31” data TP PT TP PT

bank and the “University of Texas Inequality Project32” we arrive at the followingTP PT

depressing picture of globalization, stagnation and inequality in Turkey:

Turkey's cirsis and globalization

20

Turkey globalization
15 (FDI/GDP*10)
ILO, World Bank, UTIP data

Turkey growth GDP

10

Turkey unemployment
5 (ILO)

Turkey UTIP-Theil*200
0
60

64

68

72

76

80

84

88

92

96

00
19

19

19

19

19

19

19

19

19

19

20

-5

-10

Legend: our own compilations from University of Texas Inequality Project, World Bank
Global Development Network, and ILO Laborsta. For a better visualization in one
combined graph, some indicators had to be multiplied by factors, indicated in the graph.
Globalization did not contribute to better growth (real GDP p. a. ) and lower inequality
(inequality of wages between economic sectors, measured by the Theil-coefficient), and
the effect on employment seems to be mixed at best.

Still, such comparisons have to be put into perspective. Turkey’s Human Development
Index in 2000 (0. 742) is way beyond the historic misery of so many countries of the

30
TP http://www. worldbank. org/research/growth/GDNdata. htm
PT

31
TP http://laborsta. ilo. org/
PT

32
TP http://utip. gov. utexas. edu/
PT

95
Mediterranean Basin, North and South, before the Second World War. Turkey’s still
deficient human development performance in 2000 has to be compared in the following
fashion with the values of richer countries in 1975 (HDI = Human Development Index):

measurement date Country Human

development
index (HDI) value

1975 Switzerland 0,874

1975 Canada 0,868
1975 Denmark 0,868
1975 Sweden 0,863
1975 United States 0,863
1975 Iceland 0,863
1975 Netherlands 0,861
1975 Norway 0,859
1975 Japan 0,854
1975 New Zealand 0,849
1975 France 0,848
1975 Belgium 0,844
1975 Australia 0,844
1975 United Kingdom 0,841
1975 Austria 0,840
1975 Finland 0,836
1975 Luxembourg 0,831
1975 Italy 0,828
1975 Spain 0,819
1975 Ireland 0,818
1975 Greece 0,808
1975 Israel 0,790
1975 Argentina 0,785
1975 Hungary 0,777
1975 Uruguay 0,757
1975 Hong Kong, 0,756
China (SAR)
1975 Romania 0,755
1975 Kuwait 0,753
1975 Costa Rica 0,745
2000 Turkey 0,742

96
 1975 Portugal 0,737

At a time, when leading protagonists of the “Consensus” proclaim that growth is simply
good for the poor, it is time to reckon by quantitative means the complicated relationships
between growth and the social and ecological dimensions of growth and their interaction
with the leading Consensus and other development determining variables.

With Turkey reaching the social development level of Portugal before its EU accession
began, the question of the proper future development strategy becomes all the more
important. In many ways, alternative development theories, especially Latin American
dependency theory and later world system research, have important lessons for countries
like Turkey, diving out from the abyss of a severe economic crisis.

Needless to say, such strategies will be studied with interest by the present Islamic-
democratic government in Turkey.

Theories explaining backwardness and disarticulation

After the "ultimate triumph" of the market economy on a global scale (Fukuyama) as the
result of the collapse of Communism in Eastern Europe, an intensive debate about the
development prospects of Europe's Southern and Southeastern neighbors set in.

On a global economy level, neo-liberal authors like Barro; Barro and associates; Crafts;
Dadush and Brahmbatt; Dollar and Kraay and Weede generally tend to think that with the
establishment of "economic freedom" positive patterns of development will prevail in
practically all countries.

Cultural theories of development tend to stress that at present development perspectives

for the large region between Morocco in the West and Iran in the East are not good. Their
principal spokesperson today is Huntington, but also such diverse sources as the UNDP's
Arab Human Development Report (2002) or the World Bank's MENA Report (2002)
tend to highlight the various development constraints in that region. While the UNDP
stresses the lack of democracy, human resource development and gender equality as the
main development blocks, the World Bank highlights the negative heritage of "Arab
Socialism" or past state sector influence, like under Kemalism in Turkey.

Dependency authors by contrast explain backwardness and stagnation by the ever-

growing dependent insertion of these countries into the world economy. Starting with the
writings of Perroux, Prebisch and Rothschild in the 1930s, their leading spokespersons,

97
like Addo; Baran; Bello; Cardoso; Cordova; Cordova and Silva - Michelena; Dubiel;
Feder; Flechsig; Frank; Frank and associates; Froebel et al.; Gonzales Casanova; Griffin;
Griffin and associates; Kent; Linnemann and Sarma; Müller et al.; Raffer; Senghaas;
Singer; So; Sunkel; and Woehlcke all would stress the unequal and socially imbalanced
nature of development in regions that are highly dependent on investment from the highly
developed countries. Short-term spurts of growth notwithstanding, long-term growth will
be imbalanced and unequal, and will tend towards high negative current account
balances. Many of these authors focused their attention on Latin America; their leading
spokesperson in the Islamic world is the Egyptian economist Samir Amin.

Later world system analyses - that started with the writings of the Austro-Hungarian
socialist Karl Polanyi after the First World War - tended to confirm and expand this
dependency argument. Capitalism in the periphery, like in the center, is characterized by
strong cyclical fluctuations, and there are centers, semi-peripheries and peripheries. The
rise of one group of semi-peripheries tends to be at the cost of another group, but the
unequal structure of the world economy based on unequal exchange tends to remain
stable. Authors from the world system approach, like Arrighi; Arrighi and associates;
Beaud; Bornschier; Chase - Dunn; Chase - Dunn and associates; Frank and associates;
Goldfrank; Goldstein; Hopkins; Hopkins and Wallerstein; Kiljunen; Modelski; Raffer;
Ross and Trachte; So; Tausch and associates; Walker; and Wallerstein tended to discard
the "culturalist" explanations, offered by Huntington, and rather would support the
argument that world economic position, and not culture, determines conflict. Wallerstein
comes clearly up in defense of the Arab/Islamic world and thinks that opposing forces
against the present world order will increase:

“This brings me to my very last theme. Can the West do without a demon? I doubt it at
the moment. The West is facing a massive crisis - not merely economic, but fundamentally
political and social. The capitalist world-economy is in crisis as an historical social
system. I cannot review here the crisis in detail, something I have done elsewhere on
several occasions, but I raise these issues to insist that the consequence is a great deal of
confusion and self-doubt in the West, a situation which always evokes the need for
demons. This same confusion and self-doubt pervades the Islamic world, as is evident
from the zigzagging tactics of all the main actors. The secularist forces are in disarray.
The Islamist forces are not very clear, and not at all agreed among themselves, what
their real political program is or ought to be. Once again, we should put this in the
context of the world-system as a whole, and not limit our attention to the Islamic world.
Systems that are in crisis enter into a chaotic period, out of which eventually emerges a
new order. Their trajectories bifurcate, and it is intrinsically impossible to predict the
branch that will prevail. In practice this means two things. Even small pressures in one
direction or another may be decisive, since the system is far from equilibrium. And the
social struggle is therefore extremely acute. The question that arises therefore is how the
sides in the struggle for shaping the successor social system will align themselves. When
the struggles were less acute, the lines seemed to be sharp. That is why we can speak of
antisystemic movements within the modern world-system. These movements thought they

98
knew what they were about and who their primary enemy was. So did the forces that
defended the existing system. What the last twenty-five years has taught us all - I think of
it as the lesson of the world revolution of 1968 - was that our vision of the struggle was
deeply flawed that opponents were not real opponents, and allies not real allies,
whichever side one was on. In this sense, the Islamists are profoundly correct in saying
that we have to recalibrate our understanding of what are the issues that divide the
existing historical system and what are the alternative historical possibilities of a
possible reconstructed world-system. Their critique is on the mark, but what of their
solution? As I have said, I do not believe they are sure of what solution they really intend.
Those of us who do not share some or most of their premises and are heirs of a more
secularist tradition find it difficult to accept most of what they offer as first steps to a
better future. What I do feel is that there is a need for a genuine dialogue, or multilogue,
about the essential limitations of our existing world-system, and the parameters of our
historical alternatives. Personally, I think the basic conflict is that between those who
seek to establish/reestablish a hierarchical world order in which some are privileged and
most others not and those who wish to construct a maximally democratic and egalitarian
order. I think that each requires different kinds of value-systems to undergird it, and that
the historic world religions may have much to teach us about what is crucial in such
value-systems. The real problem is that among the secularist and the fundamentalist
camps in all parts of the world, there are persons on both sides of what I anticipate will
be the great politico-social struggle of the coming fifty years. I think myself that posing
the issue as one of secularism versus fundamentalism is distracting us in a very major
way from clarity of vision. And clarity, not demons, is what we need most at the present
time. ” (Wallerstein, 1997: http://fbc. binghamton. edu/iwislam. htm)

Dependency and world system theory generally hold that poverty and backwardness in
poor countries - like Turkey - are caused by the peripheral position that these nations
have in the international division of labor. Ever since the capitalist world system evolved,
there is a stark distinction between the nations of the center and the nations of the
periphery. Former Brazilian President Fernando Henrique Cardoso, when he was still a
social scientist, summarized the quantifiable essence of dependency theories as follows:

* there is a financial and technological penetration by the developed capitalist centers of

the countries of the periphery and semi-periphery
* this produces an unbalanced economic structure both within the peripheral societies and
between them and the centers
* this leads to limitations on self-sustained growth in the periphery
* this favors the appearance of specific patterns of class relations
* these require modifications in the role of the state to guarantee both the functioning of
the economy and the political articulation of a society, which contains, within itself, foci
of inarticulateness and structural imbalance (Cardoso, 1979)

A rising degree of monopolization in the leading center countries over time determines
that, in order to keep the share of wages at least constant, a rising exploitation of the raw

99
material producers sets in to offset the balance. There is a massive, internationally
published evidence that speaks in favor of dependency theory. However, it would be
wrong to portray dependency simply in terms of MNC penetration, and to neglect other
aspects of that relationship. Such authors as Singer and Tausch have put emphasis on the
resource balance as an indicator of the weight of foreign saving. Other formulations of
dependency insisted on 'unequal exchange' which, according to one such formulation,
hampers development (i. e. double factorial terms of trade of the respective country are <
1. 0; see Raffer, 1987, Amin, 1975). Labor in the export sectors of the periphery is being
exploited, while monopolistic structures of international trade let the centers profit from
the high prices of their exports to the world markets in comparison to their labor
productivity.

Neo-dependency and world system schools (see Tausch and Prager, 1993) would fear in
addition that the most recent tendencies of world capitalism will strongly work against
high female employment and create female unemployment, and they would especially
expect two hypotheses to hold

(i) transnational capital marginalizes female labor power

(ii) the dynamics of growth turn away from those countries, where women still have a
strong position on the labor market.

The measurement scale, compatible with such hypotheses, would be the share of women
in total employment and its trade-off with growth rates. The gender empowerment
indicator series, first developed by the UNDP for the UNO-Women-Conference in
Beijing 1995, provides a further testing ground for the different feminist social theories of
world development.

However, neo-liberal thought would caution against such conclusions. Feminism per se
might positively affect development patterns, but it might also work like a 'distribution
coalition' that tries to influence - like all distribution coalitions - the results of the market
via political pressure. Instead of changing the sexist distribution of human capital
endowments, and thus changing the "starting capital" of women in society, feminism, the
argument would say, tries to directly influence distributive relations via politics alone.
The result could be - like with any distribution coalition - long-run stagnation and
worsening income and other inequality.

Our theory has to be qualified in one important further respective. Militarism will under
certain circumstances be a 'substitute' for a Keynesian strategy and might have positive
consequences for employment, and hence, perhaps also distribution issues. Apart from
that, it is not entirely clear whether - like it or not - a negative short term or middle term
relation between militarism and economic growth is to be ruled out entirely. Earlier
research by Tausch (1993 - 2002) replicated some of the surprising findings by Weede in
this respect.

100
Other schools of thought (Holzmann et al. ; European Roundtable of Industrialists) have
stressed recently the importance of pension reforms in a globally aging society as a
determinant of growth and development. Aging societies and inadequate pension
systems, and not culture, economic freedom or dependency alone, are to blame for the
negative development perspectives in many countries. Without adequate pension reform,
aging will be an increasing burden on the comparative growth and development
perspectives of the aging richer nations.

Ever since the writings of Colemann (1965), also education should be mentioned among
the determining variables of the development performance of a country. Education and
human capital formation figure prominently in the "Human Development Reports" of the
United Nations Development Programme as variables which determine positively the
development outcome. For the UNDP it has been self-evident over the last decade that
gender empowerment and the re-direction of public expenditures away from defense will
positively contribute to a positive development outcome.

However, neo-liberal thought would caution against such premature conclusions. Public
education expenditures are still public expenditures, and it is entirely conceivable that in
the long run public education expenditures might negatively affect the development
chances of a society, not because they are education expenditures, but because they are
still public expenditures. For such a theoretical understanding, University reform and
University privatization would be important political steps to achieve a more viable
development.

Developing the research design

The almost unlimited number of empirical studies on peripheral capitalism and

development on a world level in the B-phase of the Kondratieff cycle from 1965 onwards
go back, in a way, to the classic essay published by Johan Galtung in the Journal of Peace
Research (Galtung, 1971). For Galtung, income inequality, and hence, relative poverty in
the nations of the world system is linked to trade partner concentration of the peripheral
country and a trade structure that relies on the exports of raw materials and the imports of
finished products. Bornschier, Chase-Dunn, and their school later on reformulated the
argument: not only income inequality, but also long term economic growth are being
negatively determined by dependency from transnational capital, to be measured by a
weighted share of transnational investment penetration per the economic and
demographic size of a nation. Later essays extended the argument to other indicators of
human well-being, the environment as well as democratic stability. Macroquantitative
analyses modeled around the dependency/world system school generally have confirmed
dependency arguments. According to these quantitative data analyses, there are powerful
influences at work, which cause inequality and external imbalances in the periphery.
Flagship essays and book publications of this school were written among others by Beer

101
 and Boswell; Birdsall; Bornschier; Bornschier and associates; Boswell; Boswell and
associates; Bradshaw; Bradshaw and Huang; Bullock and Firebaugh; Chase - Dunn;
Chase - Dunn and associates; Crenshaw; Delacroix and Ragin; Dixon; Dixon and
Boswell; Evans and Timberlake; Fiala; Firebaugh; Juchler; Kentor; London; London and
Robinson; London and Ross; London and Smith; London and Williams; Moaddel;
Muller; Muller and Seligson; Nollert; Nollert and Fielder; Ragin and Bradshaw;
Robinson and London; Rubinson; Russell; Tausch; Tausch and associates; Timberlake
and Kantor; Timberlake and Williams; Trezzini and Bornschier; and Van Rossem.

There has been a tendency in more recent cross-national research to focus not only on
such variables as economic growth, income inequality and a few other indicators of social
well-being, but to interpret "well-being" more widely to include also democracy, the
environment, gender inequality and human development. Research results by Alderson
and Nielsen; Beer; Bullock and Firebaugh; Burns et al. ; DeSoysa and Oneal; Dixon, Fain
et al. ; Firebaugh and Beck. ; Firebaugh; Hertz et al. ; Kick et al. ; Korzeniewicz and
Moran; London and Williams; Meyer; Shen and Williamson; Shin, Smith; Tausch; Ward;
Wimberley; and Wimberley and Bello in general terms indicate that there is reason to
believe that the march of global capitalism not only negatively affects the distribution of
economic values in the world system, but also of democracy, human development,
gender equality and the quality of the environment.

The present essay is well placed within that tradition, but qualifies these results in
important respects. What are the negative social and ecological consequences of the
dependent insertion into the world economy on a global scale and in Turkey?

The choice of the 109 countries was determined by the availability of a complete data
series for the independent variables (if not mentioned otherwise, UNDP data):

• % population, aged >65y, 1998

• % women in government, ministerial level
• (I-S)/GDP (calculated from UNDP)
• state interventionism (absence of economic freedom) (Heritage Foundation and
Wall Street Journal website for economic freedom33, 2000)
TP PT

• EU-membership
• Islamic conference membership (OIC website34) TP PT

33
TP http://www. freetheworld. com/; also: http://www. heritage. org/research/features/index/. We
PT TU UT TU UT

used the latter website as the source of our data. The Heritage Foundation indicator records the
numerically highest values for Lao PDR, Iran and Uzbekistan, and the best (lowest) values for
Singapore, New Zealand and the United States. The variable is therefore to be interpreted as
“absence of economic freedom” or “state interventionism”.
34
TP http://www. oic-oci. org/ there the icon “members”
PT TU UT

102
• ln (GDP PPP pc)^2
• ln(GDP PPP pc)
• military expenditure as % of GDP
• MNC PEN 1995 (UNCTAD)
• public education expenditure per GDP
• unequal exchange (calculated from UNDP, concept: 1/ERDI)

The following dependent variables were used; with pair wise deletion of missing
values each time determining the number of countries entering into the 14 final
regression equations:

• % people not expected to survive age 60

• CO2 emissions per capita
• development stability (year with highest real income minus year with lowest real
income) since 1975 (calculated from UNDP)
• ESI-Index (Yale/Columbia environment sustainability index project website35) TP PT

• Factor Social Development (Tausch, 2001b, calculated from 35 UNDP social

indicators, SPSS factor analysis36) TP PT

35
TP http://www. ciesin. org/indicators/ESI/ We have chosen the 2001 data series at http://www.
PT TU UT TU

ciesin. org/indicators/ESI/archive. html. The general description of this indicator says that the
UT

‘Environmental Sustainability Index (ESI) is a measure of overall progress towards environmental

sustainability, developed for 142 countries. The ESI scores are based upon a set of 20 core
"indicators," each of which combines two to eight variables for a total of 68 underlying variables.
The ESI permits cross-national comparisons of environmental progress in a systematic and
quantitative fashion. It represents a first step towards a more analytically driven approach to
environmental decision making. ’
36
TP PTFemale life expectancy; life expectancy, 1995-2000; life expectancy, 1970-75; male life
expectancy; human development index; female literacy; male literacy; contraceptive prevalence;
daily supply of calories; immunization against measles; public health expenditure; doctors per
inhabitants; average cigarette consumption; female tertiary students as % of male tertiary students;
parliamentary seats held by women; gender empowerment; women's GDP per capita in purchasing
power; growth of female economic activity; public education expenditure; women in government,
ministerial level; women in government, all levels; female share in professional and technical
workforce; women in government, sub-ministerial level; female share in administrative and
managerial workforce; female economic activity rate as % of male economic activity rate; teen-
age mothers; food import dependence; share of top 20 % compared to bottom 20 % in income
distribution; female economic activity rate; TBC cases per 100,000 inhabitants; HIV rate; infants
with low birth-weight; maternal mortality rate; infant mortality rate; % of people not expected to
survive age 60.

103
• female economic activity rate as % of male economic activity rate
• female share in total life years (calculated from UNDP – share of female life
expectancy in the sum of male and female life expectancy)
• GDP output per kg energy use (“eco-social market economy”37) TP PT

• GDP per capita annual growth rate, 1990-98

• human development index
• life expectancy, 1995-2000
• Political rights violations (Freedom House, 200038) TP PT

• share of income/consumption richest 20 % to poorest 20 %

• unemployment (UN social indicators website)

The following countries featured in the comparative analysis: Albania; Algeria;

Argentina; Armenia; Australia; Austria; Azerbaijan; Bahrain; Bangladesh; Belarus;
Belgium; Belize; Bolivia; Botswana; Brazil; Bulgaria; Burkina Faso; Burundi;
Cambodia; Chad; Chile; China; Colombia; Costa Rica; Côte d'Ivoire; Croatia; Cyprus;
Czech Republic; Denmark; Egypt; El Salvador; Estonia; Ethiopia; Fiji; Finland; France;
Gabon; Gambia; Georgia; Germany; Ghana; Greece; Guatemala; Guyana; Honduras;
Hungary; India; Indonesia; Iran, Islamic Rep. of; Ireland; Israel; Italy; Japan; Jordan;
Kazakhstan; Kenya; Kyrgyzstan; Lao People's Dem. Rep. ; Latvia; Lebanon; Lesotho;
Lithuania; Luxembourg; Madagascar; Malawi; Malaysia; Mali; Malta; Mauritania;
Mexico; Moldova, Rep. of; Mongolia; Namibia; Nepal; Netherlands; New Zealand;
Nicaragua; Nigeria; Norway; Pakistan; Panama; Philippines; Poland; Portugal; Romania;
Russian Federation; Saudi Arabia; Senegal; Singapore; Slovakia; Slovenia; South Africa;
Spain; Sri Lanka; Sweden; Switzerland; Syrian Arab Republic; Tajikistan; Thailand;
Tunisia; Turkey; Uganda; United Kingdom; United States; Uzbekistan; Venezuela;
Yemen; Zambia; Zimbabwe

Our geographical presentation of the variables used in the analysis will be kept to a
minimum, since we mention the data in the appendix. Among the dependent variables,
we just mention MNC penetration, unequal exchange and the resource balance as the

37
TP This term is most probably an Austrian invention. The governing Conservative People’s Party –
PT

to be precise, its former Chairman Dr. Josef Riegler – seems to have invented this term in the late
1980s. For more on that debate: http://www.
TU nachhaltigkeit.
at/bibliothek/pdf/Factsheet110ekosozMarktw. pdf; and Michael Rösch, Tubingen University at
UT

http://tiss. zdv. uni-tuebingen. de/webroot/sp/spsba01_W98_1/germany1b. htm. As an indicator of

TU UT

the reconciliation between the price mechanism and the environment we propose the indicator
GDP output per kg energy use; the term ‘eco-social market economy’ neatly grasps all the aspects
of this empirical formulation
38
TP Taken here from Stiftung Entwicklung und Frieden, edition 2002. The political freedom data
PT

referring to the year 2000 can also be downloaded at: http://www. freedomhouse.
org/ratings/index. htm

104
three “master variables” of dependency. Unequal exchange is strongest in the periphery,
and weakest in the centers, with the semi-periphery showing medium levels of exposure
to unequal exchange. Our map might be even termed to be an update of this
Wallersteinean concept to the realities of the turn of the Century and Millennium. Each of
the following maps neatly shows that Turkey is typically a country of the semi-periphery:

Map 3: unequal exchange in the world system

Unequal exchange

1/ERDI
calculated from UNDP sources

3,78 bis 7,48 (31)

2,73 bis 3,78 (34)
2,16 bis 2,73 (36)
1,43 bis 2,16 (34)
0,63 bis 1,43 (34)

Foreign saving, for its turn, is strongest in many parts of Latin America, Southern
Africa, in the “new Europe” and in China and in several countries of Southeast Asia:

Map 4: foreign saving in the world system

105
 foreign saving

(I-S)/GNP
calculated from UNDP sources

3,4 bis 16 (32)

1,4 bis 3,4 (28)
0,6 bis 1,4 (29)
0,2 bis 0,6 (31)
-2,3 bis 0,2 (31)

In general terms, we observe today high levels of MNC penetration in the “dominion
economies” like Australia and Canada, in Western Europe, in some parts of Eastern
Europe, in Central Asia, other parts of the former USSR, in many parts of Latin America,
Southern and Western Africa, in Egypt, in Tunisia, and in China and Southeast Asia:

Map 5: MNC penetration in the world system

106
 MNC penetration, 2000

FDI per GDP 2000

UNCTAD data series

45 bis 272 (42)

27 bis 45 (32)
19 bis 27 (28)
13 bis 19 (27)
0 bis 13 (42)

Legend: missing values for Greenland, Suriname, French Guyana, West Sahara,
Bosnia/Herzegovina, Serbia, Montenegro, Libya, Iraq, Somalia, Afghanistan and North
Korea

107
 MNC penetration, 2000

FDI per GDP 2000

UNCTAD data series

45 bis 272 (42)

27 bis 45 (32)
19 bis 27 (28)
13 bis 19 (27)
0 bis 13 (42)

During the 1990s, penetration by transnational capital dramatically increased in many

parts of Europe (especially in what was described by Donald Rumsfeld39, US Secretary of TP PT

Defense, recently as “the new Europe”); in eastern Latin America, in Southern Africa, in
Central Asia and in South and Southeast Asia. However, there was a dramatic decrease
of MNC penetration in most countries of the Arab world during the second half of the
1990s:

Map 6: the increase of MNC penetration in the world system

39
TP PT See also: http://www. rferl. org/nca/features/2003/01/24012003172118. asp
TU UT

108
 DYN MNC PEN 1995-2000

calculated from the %-values

FDI per GDP 1995, 2000

17 bis 139 (49)

11 bis 17 (31)
9 bis 11 (11)
4 bis 9 (33)
-79 bis 4 (43)

Among the dependent variables perhaps only the environmental stability index might
be not so well known in the macro-quantitative research community. As it was stated, the
ESI Index is a measure of the overall progress towards environmental sustainability and
was developed for 142 countries. ESI scores are based upon 20 core indicators, each of
which combines two to eight variables for a total of 68 underlying variables. It is the first
time in the research literature that a single yardstick of sustainable development has been
developed:

Map 7: environmental stability in the world system

109
 environmental stability index

Yale/Columbia EPI Index

ranging from ... to

56,5 bis 73,9 (29)

51,3 bis 56,5 (28)
47,1 bis 51,3 (28)
42,1 bis 47,1 (27)
23,9 bis 42,1 (30)

The picture for the region of the MENA countries is rather mixed, with Turkey being
classified ahead of the United Kingdom and on an equal level with Italy:

environmental stability index

Yale/Columbia EPI Index

ranging from ... to

56,5 bis 73,9 (29)

51,3 bis 56,5 (28)
47,1 bis 51,3 (28)
42,1 bis 47,1 (27)
23,9 bis 42,1 (30)

110
The Yale/Columbia project also calculated a “capacity” variable that shows the
underlying chances of a country to realize an environment-friendly policy. The residuals
from the linear standard regression comparing environment political capacity and
environment policy (with capacity on the x-axis and the ESI index on the y –axis) shows
how several nations, including large parts of Latin America, but also many parts of East
Central and Eastern Europe and Turkey performed much better than might have been
expected on the basis of their limited capacities; while the United States, China, India and
states on the Arab Peninsula did not realize enough their existing policy potential for a
sustainable development strategy (interestingly also Germany, its red-green government
notwithstanding):

Map 8: environment policy capacity and environment policy outcomes

where the environment ...

is better than capacity variable

residuals from ESI/CAP Yale/Col data

5,7 bis 11,2 (26)

2,4 bis 5,7 (30)
-1 bis 2,4 (27)
-5,6 bis -1 (29)
-21,7 bis -5,6 (30)

Summarizing the main theoretical expectations, we could present the following

hypotheses:

111
• state interventionism (Heritage Foundation and Wall Street Journal website for
economic freedom, 2000). Effect on development: +
• MNC PEN 1995 (UNCTAD). Effect on development: +
• competitive exchange rates (calculated from UNDP, concept: 1/ERDI). Effect on
development: +

For the multivariate analysis, we will group our variables into the following dimensions
of development:

1 indicator political democracy

• Political rights violations (Freedom House, 2000 )

4 indicators human development

• % people not expected to survive age 60

• Factor Social Development (Tausch, 2001b, calculated from 35 UNDP social
indicators, SPSS factor analysis )
• human development index
• life expectancy, 1995-2000

3 indicators environmental quality

• CO2 emissions per capita

• ESI-Index (Yale/Columbia environment sustainability index project website)
• GDP output per kg energy use

1 indicator development stability

• development stability (year with highest real income minus year with lowest real
income) since 1975 (calculated from UNDP)

1 indicator growth

• GNP per capita annual growth rate, 1990-98

2 indicators social inclusion

• share of income/consumption richest 20 % to poorest 20 %

• unemployment (UN social indicators website)

2 indicators gender justice

112
• female economic activity rate as % of male economic activity rate
• female share in total life years (calculated from UNDP – share of female life
expectancy in the sum of male and female life expectancy)

These variables are explained by the following predictors:

3 indicators of dependency

• (I-S)/GDP (calculated from UNDP) (resource balance)

• MNC PEN 1995 (UNCTAD)
• unequal exchange (calculated from UNDP, concept: 1/ERDI)

1 variable adherence to the advice by international financial institutions

• State interventionism (Heritage Foundation and Wall Street Journal website for
economic freedom, 2000)

2 variables world political or world cultural identities

• EU-membership
• Islamic conference membership (OIC website)

1 variable aging society

• % population, aged >65y, 1998

1 variable political feminism

• % women in government, ministerial level

1 variable militarism

• military expenditure as % of GDP

1 variable public education effort

• public education expenditure per GDP

2 control variables for development level, interacting

• ln(GDP PPP pc)

113
• ln (GDP PPP pc)^2

We have to start here from the assumption that the basic tools of multivariate macro-
quantitative analysis in political science and sociology are known to the audience of this
article (for further literature on the subject, see Achen; Clauss and Ebner; Huang;
Jackman; Kriz; Krzysztofiak. and Luszniewicz; Lewis - Beck; Microsoft Excel; Opp and
Schmidt).

A sophisticated re-analysis of the tendencies of world development in the 1990s should

start from the assumption that the development level has a decisive, non-linear trade-off
with subsequent development performance: poor countries increase rapidly their average
life expectancy or economic growth and they quickly reduce their income inequality etc.

In general terms, we explain development performance by the following standard

multiple cross-national development research equation:

(Equation 1) development performance 1990 - end 1990s = a1 +- b1*first part curvilinear

B B B B B B

function of development level +- b2*second part curvilinear function of development

B B

level +- b3. . . *transnational investment per GDP (UNCTAD) mid 1990s +- b4. . . *unequal
B B B B B B

exchange (1/ERDI) +- b5. . . * foreign saving +- b6. . . * military expenditures per GDP
B B B B

+- b7. . . * aging +- b8. . . * public education expenditures per GDP +-b9 * membership
B B B B B B

in the Islamic Conference +- b10 * European Union membership +- b11 * state

B B B B

interventionism

In the following, we will present our results about the effects of globalization in a multi-
variate perspective.

The final results for 109 countries

In general terms, several but not all aspects of the presented theories are confirmed, while
other central assumptions of both the "Washington Consensus" and of its dependency
theory counterpart are rejected. Also, theories about aging; feminist theories; human
resource theories; military Keynesian theories/peace theories (i. e. theories maintaining
that militarism has a very bad effect on long-run development); globalization critique and
international economic integration theories have to tally with both positive and negative
effects of their key indicators on different measurements of social, environmental and

114
economic welfare, indicating that the time of the "quick fixes" has definitely gone and
that contemporary development realities are very complex indeed. It should be noted that
in this and in the following presentations, we already considered duly that "good effects"
are "good effects" and that "bad effects" are "bad effects" when presenting our results; i.
e. a development strategy that increases, say, under 60 mortality rates, is a bad strategy
and thus has negative effects.

As measured by some of the independent variables of our analysis, the position of Turkey
in the world system was the following:

world average EU average Turkey Turkey in % of EU

average

MNC PEN 1995 17,275 16,973 3,000 17,670

% women in government, 9,013 19,952 5,000 25,060
ministerial level
% population, aged >65y, 1998 7,637 15,423 5,560 36,050
public education expenditure per 4,757 5,493 2,200 40,050
GDP
ln (GDP PPP pc)^2 72,938 98,887 76,870 77,730
ln(GDP PPP pc) 8,469 9,941 8,770 88,220
State interventionism 2,982 2,200 2,750 125,000
unequal exchange 2,563 0,955 2,030 212,490
military expenditure as % of GDP 2,310 1,893 4,400 232,390

As measured by the dependent variables of our analysis, the position of Turkey in the
world system was the following:

world average EU average Turkey Turkey in % of EU

average

Factor Social Development 0,159 1,357 0,263 19,382

CO2 emissions per capita 4,963 9,213 2,900 31,476
GDP output per kg energy use 2,856 6,032 2,743 45,473
human development index 0,708 0,902 0,726 80,529
female economic activity rate as % 66,113 67,687 59,367 87,708
of male economic activity rate
life expectancy, 1995-2000 66,645 77,219 69,020 89,383

115
ESI-Index 51,482 55,686 50,800 91,226
female share in total life years 51,818 52,002 51,870 99,746
economic growth, 1975-98 0,771 2,180 2,251 103,251
development stability (year with 6,844 21,467 23,000 107,143
highest real income minus year
with lowest real income) since
1975
unemployment (UN) 8,307 6,340 7,300 115,142
GNP per capita annual growth rate, 0,781 1,916 2,798 146,055
1990-98
share of income/consumption 8,460 4,740 8,200 172,996
richest 20 % to poorest 20 %
% people not expected to survive 26,720 10,407 20,100 193,145
age 60
Political rights violations 3,147 1,000 4,000 400,000

Presumably, the independent variables will change in the following way during the EU
accession process:

% women in government, upward

ministerial level
(I-S)/GDP upward
MNC PEN upward
public education expenditure per upward
GDP
military expenditure as % of GDP downward
State interventionism downward
unequal exchange downward

Our results, significant at the 5 % level, can now be summarized briefly as follows:

Aging is part and parcel of the structure of industrialized societies, East and West. Aging
contributes to a generalized scarcity of labor, which in turn leads to improved distributive
relationships between the rich and the poor. However, several negative effects must also
be considered properly – especially the negative effects of an aging population structure
on the process of human development, which is basically the dire consequence of
unreformed pension systems (Tausch, 2003).

116
 aging % population, aged
>65y, 1998

GDP output per kg energy use (eco-social market positive

economy)
female economic activity rate as % of male economic positive
activity rate
share of income/consumption richest 20 % to poorest 20 positive
% (income redistribution)
unemployment (UN) (employment) positive
CO2 emissions per capita (Kyoto) negative
female share in total life years negative
% people not expected to survive age 60 (survival) negative
life expectancy, 1995-2000 negative
Factor Social Development negative
human development index negative

Political feminism has an aggregate positive effect on many phenomena of human and
ecological development, but it fails to transform political power into improved
employment and distribution structures. This is due mainly to the process of distribution
coalition formation, featuring so prominently in neo-liberal theories of economic growth
(see especially, the writings of Weede). Feminism in power - i. e. the share of women in
positions of political decision making - achieves to transform many aspects of
development, but as other "distribution coalitions" before it, creates certain aspects of
stagnation as well and thus is not free from the effects of the logic of "collective action",
and is answered by the patriarchic structures with distribution coalitions of their own that
lead to greater societal inequality.

political feminism %
women in government,
ministerial level

CO2 emissions per capita (Kyoto) positive

female share in total life years positive
% people not expected to survive age 60 (survival) positive
life expectancy, 1995-2000 positive
Factor Social Development positive
human development index positive
GDP output per kg energy use (eco-social market negative
economy)
female economic activity rate as % of male economic negative

117
activity rate
share of income/consumption richest 20 % to poorest 20 negative
% (income redistribution)
unemployment (UN) (employment) negative

As one of the three main indicators of dependency, the reliance on foreign savings eases
the distribution burden against the poorer segments of society during the accumulation
process, but it has several negative effects on a variety of other development processes,
including the environment and political democracy.

foreign saving (I-S)/GDP

share of income/consumption richest 20 % to poorest 20 positive

% (income redistribution)
CO2 emissions per capita (Kyoto) negative
human development index negative
ESI-Index (sustainability) negative
Political rights negative

State interventionism increases the performance of countries under the Kyoto process
and leads towards an improved development stability but it fails to resolve two basic
issues: overall environmental stress and societal sexism in the employment sphere.

state interventionism

CO2 emissions per capita (Kyoto) positive

GDP output per kg energy use (eco-social market positive
economy)
development stability (year with highest real income positive
minus year with lowest real income) since 1975
ESI-Index (sustainability) negative
female share in total life years negative
female economic activity rate as % of male economic negative
activity rate

Military expenditures have a certain Keynesian effect but they contribute towards a
worse environmental balance. Military expenditures lead towards a drying up of what
Marxists term “the reserve army of labor”, which, in turn, leads to a certain better social

118
cohesion and employment gender balance. But militarized structures consume large
amounts of fossil fuel, with advanced air forces especially contributing to that process.

female economic activity rate as % of male economic positive

activity rate
share of income/consumption richest 20 % to poorest 20 positive
% (income redistribution)
CO2 emissions per capita (Kyoto) negative
GDP output per kg energy use (eco-social market negative
economy)

MNC penetration contributes to an improved ESI Index and towards better female
employment, but it has negative consequences for human survival and life expectancy. In
addition, an interesting phenomenon worthy of further research is the interconnection
between decaying public services, decaying public transport and decaying public health
services in the host countries of transnational investment on the one hand and the
strategic policies of transnational corporations on the other hand, concentrated on the
private sector, private transport, private medical services and the private automobile. The
strengthening triple alliance between the MNCs, local capital and the state is a net result
of the globalization process, and it still has dire social consequences as well.

dependency on foreign
capital MNC PEN 1995

female economic activity rate as % of male economic positive

activity rate
ESI-Index (sustainability) positive
% people not expected to survive age 60 (survival) negative
life expectancy, 1995-2000 negative

Human resources and human development investments ever since the publication of the
first United Nations Human Development Reports in the early 1990s are regarded as the
key towards a socially equitable and sustainable development. However, as often happens
in development theory, the early optimism regarding the effects of one variable has soon
to be qualified.

In our sample, the countries with the best public education expenditure record were:

Namibia
Botswana

119
Lesotho
Sweden
Denmark
South Africa
Jordan
Tunisia
Uzbekistan
Israel
Finland
Poland
Saudi Arabia
Norway
New Zealand
Estonia
Zimbabwe
Yemen
Kenya
Latvia
France
Ireland

There are very surprising clear-cut negative interactions between public education
expenditure and an eco-social market economy and political democracy. Positive effects
exist as well, but they are not statistically significant. A plausible intervening variable,
which we did not as yet consider in our investigation, could be the years of experience of
a country as a centrally planned economy.

public education
expenditure per GDP

GDP output per kg energy use (eco-social market negative

economy)
Political rights negative

Unequal exchange has the most clear-cut negative results of all dependency indicators
on the process of development, as understood in this investigation; especially on
democracy, the environment, gender justice and employment. The positive effect on
income redistribution has to be seen in the context of the siphoning-off of the surplus
value from periphery countries that reduces the share of the richest 20 % in total income
distribution.

120
 unequal exchange

share of income/consumption richest 20 % to poorest 20 positive

% (income redistribution)
GDP output per kg energy use (eco-social market negative
economy)
Political rights negative
female economic activity rate as % of male economic negative
activity rate
ESI-Index (sustainability) negative
CO2 emissions per capita (Kyoto) negative
female share in total life years negative
unemployment (UN) (employment) negative

There are very diverse views nowadays on the European Union. As a recent paper,
published in the journal “Parameters” of the US Army maintains (Wilkie, 2003):

“Still, there are those on both sides of the Atlantic who believe that the European Union,
as an old-fashioned socialist bureaucracy, is “fundamentally unreformable” and also
culturally hostile to the United States” (Wilkie, 2003: 46)40 TP PT

There is a wide range of literature now available that highlights the negative effects of
European integration in a globalized world economy (for a survey of the literature and
politometric evidence, see Tausch and Herrmann, 2001). In the present research design,
the most considerable effect is the negative trade-off between EU membership and
political democracy, once you control for the other intervening variables that together
explain jointly 66. 1 % of political rights violations.

EU-membership

Political rights negative

Our results about the European Union might be considered more provocative still, when
we also consider that – contrary to popular assumptions – membership in the Islamic
Conference is not an impediment against political democracy. Our results clearly
contradict many of the expectations inherent in the writings of Professor Samuel
Huntington. 4 development indicators – 2 for the environment, 1 on human development,
and 1 on democracy – are positively and significantly determined by membership in the
Islamic Conference, once you properly control for the effects of the other influencing

40
TP PT http://carlisle-www. army. mil/usawc/Parameters/02winter/wilkie. htm

121
variables. However, gender justice and redistribution remain the “Achilles heel” of
today’s members in the Islamic Conference, strengthening the cause of those who
advocate – like in the United Nations Arab Human Development Report – more social
inclusion and more gender justice in the region.

Islamic conference
membership

Political rights positive

GDP output per kg energy use (eco-social market positive
economy)
CO2 emissions per capita (Kyoto) positive
life expectancy, 1995-2000 positive
share of income/consumption richest 20 % to poorest 20 negative
% (income redistribution)
female economic activity rate as % of male economic negative
activity rate

The well-known acceleration and maturity effects of development have to be qualified

in an important way. Ever since the days of Simon Kuznets, development researchers
have applied curve-linear formulations in order to capture these effects. However, the
results for equation 1 above are not as clear-cut as one might have expected; and – in
addition – the direction of the influence does hardly correspond with the equation. The
curve-linear function of growth, being regressed on the natural logarithm of development
level and its square, is sometimes called the 'Matthew's effect' following Matthew's (13,
12):

'For whosoever hath, to him shall be given, and he shall have more abundance: but
whosoever hath not, for him shall be taken away even that he hath'

Social scientists interpreted this effect mainly in view of an acceleration of economic

growth in middle-income countries vis-à-vis the poor countries and in view of the still
widening gap between the poorest periphery nations ('have-nots') and the 'haves' among
the semi-periphery countries (Jackman, 1982). Their hypothesis is only partially
confirmed here – there is no significant acceleration at low levels of development, but a
significant economic growth stagnation/saturation effect. The first expression - + b1* ln
(PCItn) – yields the following results:

acceleration effects
development ln(GDP PPP
pc)

122
female economic activity rate as % of male economic positive
activity rate

The second part of the “Kuznets-curve” - b2* (ln (PCItn))2 - has today the following
results:

maturity effects
development ln (GDP PPP
pc)^2

female economic activity rate as % of male economic positive

activity rate
life expectancy, 1995-2000 positive
share of income/consumption richest 20 % to poorest 20 positive
% (income redistribution)
ESI-Index (sustainability) positive
female share in total life years positive
human development index positive
Factor Social Development positive
GNP per capita annual growth rate, 1990-98 negative

Implications for Turkey’s accession policy

U

By far the most negative influence on development is wielded by unequal exchange,

followed by the aging process (especially without pension reform) and certain negative
aspects of feminist distribution coalitions in society:

% negative % positive effects % insignificant

effects effects

unequal exchange 50,0 7,1 42,9

aging % 42,9 28,6 35,7
population, aged
>65y, 1998
political feminism 28,6 42,9 28,6
% women in
government,

123
ministerial level
foreign saving (I- 28,6 7,1 64,3
S)/GDP
state 21,4 21,4 57,1
interventionism
military 14,3 14,3 71,4
expenditure as %
of GDP
dependency on 14,3 14,3 71,4
foreign capital
MNC PEN 1995
public education 14,3 0,0 85,7
expenditure per
GDP
Islamic 14,3 28,6 57,1
conference
membership
EU-membership 7,1 0,0 92,9
maturity effects 7,1 50 42,9
development ln
(GDP PPP pc)^2
acceleration 0,0 7,1 92,9
effects
development
ln(GDP PPP pc)

By far the most positive effects on social, ecological and economic development come
about by the maturity effects of development, followed by the positive aspects of
feminism, the aging process and membership in the Islamic Conference:

% negative % positive effects % insignificant

effects effects

maturity effects 7,1 50,0 42,9

development ln
(GDP PPP pc)^2
political feminism 28,6 42,9 28,6
% women in
government,
ministerial level
aging % 42,9 28,6 35,7
population, aged
>65y, 1998
Islamic 14,3 28,6 57,1

124
 conference
membership
state 21,4 21,4 57,1
interventionism
military 14,3 14,3 71,4
expenditure as %
of GDP
dependency on 14,3 14,3 71,4
foreign capital
MNC PEN 1995
unequal exchange 50,0 7,1 42,9
foreign saving (I- 28,6 7,1 64,3
S)/GDP
acceleration 0,0 7,1 92,9
effects
development
ln(GDP PPP pc)
public education 14,3 0,0 85,7
expenditure per
GDP
EU-membership 7,1 0,0 92,9

With all the talk about dependency, globalization or the “Washington Consensus”
notwithstanding, it is shown that feminism, pension reform, the maturity effects of
capitalism as well as unequal exchange open up new horizons of future development
strategy debates. The variables

• political feminism % women in government, ministerial level

• aging % population, aged >65y, 1998
• maturity effects development ln (GDP PPP pc)^2
• unequal exchange

are far more relevant in explaining our 14 development dimensions than the traditional
“stars” of the debate, the political and left and right, pro- and anti-globalization
movements, culturalist development theories etc. notwithstanding. The variables

• Islamic conference membership

• state interventionism
• foreign saving (I-S)/GDP
• military expenditure as % of GDP
• dependency on foreign capital MNC PEN 1995
• public education expenditure per GDP
• acceleration effects development ln(GDP PPP pc)

125
• EU-membership

on the other hand do not have so many significant effects (insignificant effects > 50 %) as
the “new” variables (insignificant effects < 50 %), which were analyzed in this article and
which will determine future development outcomes in a decisive way:

% negative % positive effects % insignificant

effects effects

political feminism 28,6 42,9 28,6

% women in
government,
ministerial level
aging % 42,9 28,6 35,7
population, aged
>65y, 1998
maturity effects 7,1 50,0 42,9
development ln
(GDP PPP pc)^2
unequal exchange 50,0 7,1 42,9
Islamic 14,3 28,6 57,1
conference
membership
state 21,4 21,4 57,1
interventionism
foreign saving (I- 28,6 7,1 64,3
S)/GDP
military 14,3 14,3 71,4
expenditure as %
of GDP
dependency on 14,3 14,3 71,4
foreign capital
MNC PEN 1995
public education 14,3 0,0 85,7
expenditure per
GDP
acceleration 0,0 7,1 92,9
effects
development
ln(GDP PPP pc)
EU-membership 7,1 0,0 92,9

126
The (meager) effects of the “Washington Consensus” variables on development are the
following. Relationships, contradicting the basic assumptions of the theory, are printed
in bold letters:

state dependency on
interventionism foreign capital
MNC PEN 1995

% people not expected to survive age 60 . . negative

(survival)
CO2 emissions per capita (Kyoto) positive ..
development stability (year with highest real positive ..
income minus year with lowest real income) since
1975
ESI-Index (sustainability) negative positive
Factor Social Development .. ..
female economic activity rate as % of male negative positive
economic activity rate
female share in total life years negative ..
GDP output per kg energy use (eco-social market positive ..
economy)
GNP per capita annual growth rate, 1990-98 ..
human development index .. ..
life expectancy, 1995-2000 .. negative
Political rights .. ..
share of income/consumption richest 20 % to . . ..
poorest 20 % (income redistribution)
unemployment (UN) (employment) .. ..

In addition, it should be noted that a central assumption of the “Washington Consensus”

– competitive exchange rates – could be operationalized by “1/ERDI” and amounts to
“unequal exchange”.

The results for the dependency explanation of world development are the following.
Relationships contradicting the theory are printed in bold letters:

foreign saving dependency on unequal

(I-S)/GDP foreign capital exchange
MNC PEN 1995

% people not expected to survive age 60 .. negative ..

(survival)

127
CO2 emissions per capita (Kyoto) negative .. negative
development stability (year with highest real .. .. ..
income minus year with lowest real income) since
1975
ESI-Index (sustainability) negative positive negative
Factor Social Development .. .. ..
female economic activity rate as % of male .. positive negative
economic activity rate
female share in total life years .. .. negative
GDP output per kg energy use (eco-social market . . .. negative
economy)
GNP per capita annual growth rate, 1990-98 .. ..
human development index negative .. ..
life expectancy, 1995-2000 .. negative ..
Political rights negative .. negative
share of income/consumption richest 20 % to positive .. positive
poorest 20 % (income redistribution)
unemployment (UN) (employment) .. .. negative

Development is a contradictory and dialectical process. There is no single strategy,

that has only positive results, and there is no strategy, that has only negative results. No
single development theory today captures all these negative and positive effects that
interact together. At this stage, perhaps, the question will arise – what are the real policy
implications, then, of this kind of analysis for Turkey? It should be clear that a reliance
on the “Washington Consensus” alone will not “fix” the performance of countries
beyond a better and more predictable “development stability”. The most consistent
consequence of the “dependency” analysis of this essay is the realization that a reliance
on foreign capital in the short term might bring about positive consequences for
employment – especially female employment – but that the long-term negative
consequences of dependence in the social sphere, but also for sustainable development,
outweigh the immediate, positive effects. Our three-fold empirical understanding of the
process of globalization – reliance on foreign savings, MNC penetration and unequal
exchange, - goes beyond the average analysis of the workings of dependency structures
and shows how different aspects of dependency negatively affect development
performance. Turkish integration into the Euro-zone – quite contrary to what the
“Washington Consensus” has to say about “competitive currencies” - will be one of the
most important tasks for Turkish EU-accession. Left alone in the capitalist world
economy, Turkey will always be victim of international currency instabilities. In the light
of earlier published analyses, it is no surprise that “unequal exchange” (1/ERDI; ERDI

128
being the exchange rate deviation index) is again established to be the most important
dependency variable, far more important in its negative effects on social and sustainable
development than the UNCTAD data series on MNC penetration.

European Union integration, this analysis again shows, on the other hand is not a quick
fix for many of the social ills of the periphery and semi-periphery. The EU under present
conditions fails to have sufficiently enough dynamic effects and its democratic deficits
become ever more clear. In terms of the size of the quantitative effects on the 14
dimensions of development under investigation here, it is shown that the new political
structures associated with political feminism that substituted patriarchic structures
inherent in practically all world regions for much of the 19th and the early 20th Century
P P P P

have a very considerable effect on the development outcomes of today. As we have

outlined above, feminism in power – i. e. the share of women in positions of political
decision making - achieves to transform many aspects of development, but, as other
“distribution coalitions” before it, creates certain aspects of stagnation as well and thus is
not free from the effects of the logic of “collective action” that is at the heart of the neo-
liberal doctrine of today (see especially the works Olson and Weede). In the 21st Century,
P P

the process of aging and the necessity of pension reform, closely linked to that process,
also cannot be overlooked anymore. In our analysis, unequal exchange, aging, and
political feminism achieve the majority of the significant effects on the 14 development
dimensions under investigation here, i. e. far more than the “master” variables of earlier
debates, like “economic freedom” versus “MNC penetration”. As has been argued
elsewhere, globalization critics especially must start to look at pensions and pension
funds seriously – because the way, in which you manage the savings of society for old
age, you also manage technological innovation and world systems position in general
(Tausch, 2003). It is also evident from the analysis presented in this article that for
Turkey her Islamic culture is not a development blockade, on the contrary. Membership
in the Islamic Conference has – ceteris paribus – a very positive effect on political
democracy, on life expectancy, and on our indicators of the Kyoto-process and the eco-
social market economy. Far from being a “religion of the Middle Ages” Islam has an
important message for the 21st Century. It is to be hoped that socially progressive forces
P P

in Turkey will achieve a better monetary distribution of incomes and a better gender
distribution of work in the societies concerned in the future.

This article shows some of the limitations of the contemporary optimism regarding the
overall early and only positive effects of EU-accession. According to one of the leading
authorities on the European Union in Turkey, Professor Sübidey Togan from Bilkent
University in Ankara, we can expect the following to happen:

Integration will be beneficial for Turkey as it will remove the distortions in the price
system, boosting the allocative efficiency in the economy, which in turn will make the
country a better place to invest. Furthermore, with accession Turkey will be eligible for
EU structural funds. The increase in infrastructural investments will contribute to
economic growth in Turkey. In addition, Turkey will reap benefits from monetary

129
integration, and finally, Turkey will benefit from migration of Turkish labor to the EU.
However, the welfare gains that will be derived by Turkey from integration will have a
price. The price will be the adjustment costs associated with the attainment of
macroeconomic stability, adoption of CAP, liberalization of services and network
industries, and complying with EU environmental directives.

According to Eurobarometer (2001) 59 percent of the Turkish population supports EU

membership and 68 percent of the population declares that it would support the country’s
membership to the EU if a referendum were to be held on this issue. This high percentage
of support for EU membership could partially be explained by the economic benefits that
Turkey expects to derive from membership. Equally important is the recognition in
Turkey that the system of governance of a rule-based society, as in the EU with its
institutions, may provide a better system for meeting the demands of various groups in
the society. Furthermore, the support for EU membership stems also from the process of
Westernization and geo-strategic considerations.

The Turkish accession will also affect the welfare of current members of the EU. With
Turkish accession current members will derive welfare gains from standard comparative
advantage sources and also from growth effects of integration. Furthermore, migration
of Turkish labor to the EU will affect the welfare level in member countries. The
empirical research on the economic effects of immigration indicates fairly small and on
the whole positive effects; employment opportunities are not affected much, the wage of
low skilled labor is depressed somewhat but that of skilled labor is raised, and the net
present value of public transfers is positive. In addition to these effects, the EU will have
to incur the net annual budgetary cost of Turkish membership to the EU. Estimates
indicate that this cost will be quite high unless the rules on CAP and structural funds are
changed over the next few years. There will also be political gains for the EU. Turkey is a
large and fast expanding market (Togan, 2002).

But it is shown in this article, that transnational integration is and remains to be a

contradictory process that does not lead 1:1 to a greater amount of social cohesion and
sustainable development in Turkey. So, in the words of Osvaldo Sunkel:

‘The advancement of modernization introduces, so to speak, a wedge along the area

dividing the integrated from the segregated segments (…) The effects of the disintegration
of each social class has important consequences for social mobility. (. . . ) Finally, it is
very probable that an international mobility will correspond to the internal mobility,
particularly between the internationalized sectors (. . . ) The process of social
disintegration which has been outlined here probably also affects the social institutions
which provide the bases of the different social groups and through which they express
themselves. Similar tendencies to the ones described for the global society are, therefore,

130
probably also to be found within the state, church, armed forces, political parties with a
relatively wide popular base, the universities etc. ’ (Sunkel, 1972: 18-42).

This picture, drawn more than 3 decades ago, will – in the light of this empirical analysis
– correspond much more to the trajectory of countries like Turkey over the next decades
than optimistic analyses, which are shared by the majority of decision makers on a
European level.

131
The original independent variables
U

Country % % (I- State military MNC public unequal EU- Islamic ln(GDP ln (GDP
code populatio women in S)/GDP interventi expenditu PEN education exchang members conferenc PPP pc) PPP
n, aged governme onism re as % of 1995 expenditure e hip e pc)^2
>65y, nt, GDP per GDP
1998 ministeria
l level

Albania 5,83 10,53 22,68 3,70 1,10 8,70 3,10 3,46 0,00 1,00 7,94 63,03
Algeria 3,69 0,00 -0,08 3,45 3,90 3,50 5,10 3,09 0,00 1,00 8,47 71,82
Argentina 9,61 8,33 2,51 2,10 1,40 10,80 3,50 1,50 0,00 0,00 9,39 88,24
Armenia 8,12 0,00 33,14 3,10 3,60 1,20 2,00 4,51 0,00 0,00 7,64 58,32
Australia 12,10 14,29 0,57 1,90 1,90 27,90 5,50 1,09 0,00 0,00 10,02 100,38
Austria 14,66 20,00 0,57 2,05 0,80 7,50 5,40 0,86 1,00 0,00 10,05 101,01
Azerbaijan 6,47 10,00 34,37 4,20 2,70 6,10 3,00 4,53 0,00 1,00 7,68 59,05
Bahrain 2,83 0,00 -36,07 1,80 5,00 41,10 4,40 1,72 0,00 1,00 9,48 89,89
Banglades 3,18 5,26 5,09 3,75 1,60 0,50 2,20 3,89 0,00 1,00 7,22 52,07
h
Belarus 13,18 2,78 5,97 4,10 1,00 0,50 5,90 2,90 0,00 0,00 8,75 76,59
Belgium 16,40 3,33 -4,53 2,10 1,50 40,80 3,10 0,92 1,00 0,00 10,05 101,06
Belize 4,33 0,00 4,99 2,80 1,50 25,80 5,00 1,72 0,00 0,00 8,43 71,00
Bolivia 3,93 5,88 9,17 2,65 1,80 23,40 4,90 2,25 0,00 0,00 7,73 59,71
Botswana 2,45 14,29 -1,21 2,95 3,50 23,00 8,60 1,99 0,00 0,00 8,72 75,98
Brazil 4,95 4,17 2,66 3,50 1,40 6,00 5,10 1,43 0,00 0,00 8,80 77,41
Bulgaria 15,43 15,00 1,06 3,40 2,50 3,40 3,20 3,94 0,00 0,00 8,48 71,88
Burkina 2,63 10,00 16,24 3,40 1,50 3,40 3,60 3,62 0,00 1,00 6,77 45,81
Faso
Burundi 2,72 7,69 11,53 4,00 5,80 3,40 4,00 4,07 0,00 0,00 6,35 40,26
Cambodia 3,07 8,33 9,51 3,00 2,70 12,10 2,90 4,83 0,00 0,00 7,14 50,93
Chad 3,41 0,00 12,41 3,80 1,40 24,40 1,70 3,72 0,00 1,00 6,75 45,60
Chile 6,95 13,70 1,33 2,00 1,90 23,80 3,60 1,76 0,00 0,00 9,08 82,46
China 6,55 2,63 -4,35 3,40 1,90 19,60 2,30 4,14 0,00 0,00 8,04 64,66
Colombia 4,62 17,65 5,66 2,90 2,60 6,90 4,40 2,43 0,00 0,00 8,70 75,70
Costa Rica 4,91 15,00 1,85 2,85 0,60 23,30 5,40 2,16 0,00 0,00 8,70 75,64
Côte 2,87 3,13 -6,35 3,45 0,90 16,20 5,00 2,28 0,00 1,00 7,38 54,42
d'Ivoire
Croatia 14,04 12,00 9,00 3,50 6,20 2,50 5,30 1,46 0,00 0,00 8,82 77,74
Cyprus 11,41 0,00 6,49 2,55 4,40 17,80 4,50 1,47 0,00 0,00 9,77 95,43
Czech 13,44 16,67 1,41 2,20 2,10 14,10 5,10 2,40 0,00 0,00 9,42 88,78
Republic

132
Denmark 15,22 40,91 -3,35 2,25 1,60 13,20 8,10 0,73 1,00 0,00 10,09 101,91
Egypt 4,04 6,25 6,46 3,50 2,90 23,40 4,80 2,36 0,00 1,00 8,02 64,32
El 4,84 6,25 12,65 2,00 0,90 3,10 2,50 2,18 0,00 0,00 8,30 68,94
Salvador
Estonia 13,40 11,76 9,66 2,20 1,20 14,10 7,20 2,29 0,00 0,00 8,95 80,04
Ethiopia 2,87 5,00 11,85 3,50 3,80 2,90 4,00 5,74 0,00 0,00 6,35 40,35
Fiji 4,29 9,52 -1,29 3,30 1,40 41,20 5,40 1,91 0,00 0,00 8,35 69,73
Finland 14,62 28,57 -8,85 2,20 1,50 6,50 7,50 0,86 1,00 0,00 9,94 98,90
France 15,61 11,76 -3,94 2,50 2,80 12,30 6,00 0,85 1,00 0,00 9,96 99,21
Country % % (I- State military MNC public unequal EU- Islamic ln(GDP ln (GDP
code populatio women in S)/GDP interventi expenditu PEN education exchang members conferenc PPP pc) PPP
n, aged governme onism re as % of 1995 expenditure e hip e pc)^2
>65y, nt, GDP per GDP
1998 ministeria
l level

Gabon 5,89 3,45 -10,93 3,10 0,30 15,20 2,90 1,52 0,00 1,00 8,76 76,68
Gambia 3,00 28,57 10,95 3,40 1,10 48,40 4,90 4,27 0,00 1,00 7,28 53,01
Georgia 12,15 3,85 13,97 3,65 1,00 1,70 5,20 3,46 0,00 0,00 8,12 65,89
Germany 15,86 8,33 -1,51 2,20 1,50 7,80 4,80 0,83 1,00 0,00 10,01 100,13
Ghana 3,09 9,38 9,70 3,10 0,80 12,70 4,20 4,45 0,00 0,00 7,46 55,63
Greece 17,14 4,55 8,27 2,75 4,80 11,20 3,10 1,19 1,00 0,00 9,54 91,06
Guatemala 3,49 0,00 8,33 2,70 0,70 15,00 1,70 2,14 0,00 0,00 8,16 66,62
Guyana 4,13 15,00 11,65 3,20 0,90 57,40 5,00 4,36 0,00 1,00 8,13 66,14
Honduras 3,32 11,11 6,21 3,35 0,80 16,50 3,60 3,29 0,00 0,00 7,80 60,79
Hungary 14,47 5,26 2,56 2,55 1,30 26,70 4,60 2,27 0,00 0,00 9,23 85,25
India 4,82 7,89 2,73 3,80 2,10 1,60 3,20 4,72 0,00 0,00 7,64 58,35
Indonesia 4,54 3,45 -10,10 3,50 1,00 25,00 1,40 4,14 0,00 1,00 7,88 62,14
Iran, 4,24 0,00 1,61 4,55 3,10 2,60 4,00 3,10 0,00 1,00 8,54 72,95
Islamic
Rep. of
Ireland 11,36 21,05 -17,78 1,85 0,80 14,40 6,00 1,15 1,00 0,00 9,97 99,50
Israel 9,71 0,00 11,11 2,75 8,70 7,10 7,60 1,07 0,00 0,00 9,76 95,23
Italy 17,59 13,04 -4,33 2,30 2,00 5,80 4,90 1,02 1,00 0,00 9,93 98,65
Japan 16,10 0,00 -1,18 2,15 1,00 0,60 3,60 0,72 0,00 0,00 10,05 101,09
Jordan 2,86 1,61 21,17 2,90 9,60 9,20 7,90 2,91 0,00 1,00 8,12 65,87
Kazakhsta 6,95 5,00 4,46 3,70 1,00 14,60 4,40 3,27 0,00 1,00 8,38 70,30
n
Kenya 2,99 0,00 7,70 3,05 2,30 8,10 6,50 2,80 0,00 0,00 6,89 47,43
Kyrgyzsta 5,90 4,35 16,12 3,60 1,40 9,70 5,30 6,10 0,00 1,00 7,75 60,03
n
Lao 3,25 0,00 1,15 4,60 2,40 11,60 2,10 5,42 0,00 0,00 7,46 55,62
People's
Dem. Rep.
Latvia 13,83 6,67 13,22 2,65 0,70 12,50 6,30 2,37 0,00 0,00 8,65 74,88

133
Lebanon 5,72 0,00 40,42 3,20 3,20 1,00 2,50 1,22 0,00 1,00 8,37 70,10
Lesotho 4,13 6,25 91,24 3,55 3,20 143,80 8,40 2,85 0,00 0,00 7,39 54,67
Lithuania 12,87 5,56 11,90 2,90 1,30 5,80 5,50 2,53 0,00 0,00 8,77 76,91
Luxembou 14,11 25,00 -16,05 1,80 0,80 40,80 4,00 0,74 1,00 0,00 10,42 108,57
rg
Madagasc 2,93 18,75 7,97 3,20 1,40 5,40 1,90 2,91 0,00 0,00 6,63 43,93
ar
Malawi 2,67 4,17 13,32 3,65 0,80 17,50 5,40 2,49 0,00 0,00 6,26 39,19
Malaysia 4,00 15,63 -21,80 2,70 1,70 32,30 4,90 2,22 0,00 0,00 9,00 81,08
Mali 3,66 20,83 10,83 2,90 1,90 6,60 2,20 2,73 0,00 1,00 6,52 42,56
Malta 11,44 0,00 5,40 2,95 0,80 28,40 5,10 1,63 0,00 0,00 9,71 94,24
Mauritania 3,23 4,35 13,02 3,80 2,30 8,60 5,10 3,81 0,00 1,00 7,35 54,09
Mexico 4,54 5,00 1,96 3,00 0,60 14,40 4,90 2,01 0,00 0,00 8,95 80,09
Moldova, 9,60 0,00 28,76 3,20 0,60 6,50 10,60 5,12 0,00 0,00 7,57 57,36
Rep. of
Mongolia 3,89 0,00 5,80 3,15 2,20 4,20 5,70 4,05 0,00 0,00 7,34 53,88
Namibia 3,83 8,33 0,17 2,90 2,60 74,00 9,10 2,67 0,00 0,00 8,55 73,13
Nepal 3,57 3,12 11,23 3,60 0,90 0,90 3,20 5,51 0,00 0,00 7,05 49,75

Country % % (I- State military MNC public unequal EU- Islamic ln(GDP ln (GDP
code populatio women in S)/GDP interventi expenditu PEN education exchang members conferenc PPP pc) PPP
n, aged governme onism re as % of 1995 expenditure e hip e pc)^2
>65y, nt, GDP per GDP
1998 ministeria
l level

Netherland 13,55 27,78 -7,01 2,05 1,80 28,00 5,10 0,89 1,00 0,00 10,01 100,14
s
New 11,64 8,33 -0,65 1,70 1,30 43,10 7,30 1,18 0,00 0,00 9,76 95,21
Zealand
Nicaragua 3,06 5,00 32,35 3,60 1,20 19,20 3,90 5,79 0,00 0,00 7,67 58,82
Nigeria 2,99 6,45 8,23 3,30 0,70 50,00 0,70 2,65 0,00 1,00 6,68 44,60
Norway 15,66 20,00 -7,06 2,30 2,30 12,80 7,40 0,77 0,00 0,00 10,18 103,61
Pakistan 3,14 7,14 4,42 3,40 4,20 9,10 2,70 3,65 0,00 1,00 7,45 55,46
Panama 5,41 5,88 9,30 2,40 1,40 41,00 5,10 1,76 0,00 0,00 8,57 73,37
Philippine 3,53 9,52 4,26 2,85 1,40 8,20 3,40 3,39 0,00 0,00 8,18 66,85
s
Poland 11,61 17,24 5,17 2,80 2,10 6,20 7,50 1,95 0,00 0,00 8,94 79,90
Portugal 15,35 10,00 8,70 2,30 2,20 17,10 5,80 1,38 1,00 0,00 9,60 92,08
Romania 12,70 7,69 8,48 3,30 2,20 3,20 3,60 4,15 0,00 0,00 8,64 74,63
Russian 12,27 7,50 -4,94 3,70 3,20 1,60 3,50 2,86 0,00 0,00 8,77 76,97
Federation
Saudi 2,81 0,00 -5,22 2,95 12,80 17,50 7,50 1,47 0,00 1,00 9,23 85,12
Arabia
Senegal 2,49 3,33 4,71 3,05 1,40 8,30 3,70 2,51 0,00 1,00 7,18 51,48
Singapore 6,81 0,00 -17,79 1,45 5,10 71,50 3,00 0,80 0,00 0,00 10,09 101,90

134
Slovakia 11,16 19,05 11,17 3,00 2,00 4,40 5,00 2,62 0,00 0,00 9,18 84,27
Slovenia 13,17 0,00 1,45 3,00 1,50 9,40 5,70 1,46 0,00 0,00 9,57 91,54
South 3,51 14,81 -1,24 2,90 1,60 9,90 8,00 2,56 0,00 0,00 9,05 81,84
Africa
Spain 16,47 17,65 -1,20 2,40 1,40 18,70 5,00 1,15 1,00 0,00 9,69 93,96
Sri Lanka 6,39 13,33 6,45 2,90 4,20 10,00 3,40 3,68 0,00 0,00 8,00 63,99
Sweden 17,45 43,50 -7,01 2,35 2,20 12,90 8,30 0,81 1,00 0,00 9,94 98,72
Switzerlan 14,54 16,67 -4,44 1,90 1,20 18,60 5,40 0,64 0,00 0,00 10,15 102,96
d
Syrian 3,04 7,50 11,17 4,00 6,30 8,00 3,10 2,83 0,00 1,00 7,97 63,51
Arab
Republic
Tajikistan 4,43 6,45 -0,59 4,00 1,20 7,00 2,20 2,81 0,00 1,00 6,95 48,27
Thailand 5,48 4,00 -16,50 2,70 2,10 10,40 4,80 2,53 0,00 0,00 8,60 74,04
Tunisia 5,74 3,23 3,20 3,00 1,80 61,00 7,70 2,62 0,00 1,00 8,59 73,87
Turkey 5,56 5,00 3,47 2,75 4,40 3,00 2,20 2,03 0,00 1,00 8,77 76,87
Uganda 2,16 13,16 9,41 3,00 2,20 4,70 2,60 3,46 0,00 1,00 6,98 48,71
United 15,96 23,81 0,47 1,90 2,70 17,60 5,30 0,95 1,00 0,00 9,92 98,41
Kingdom
United 12,53 26,32 1,40 1,80 3,20 7,30 5,40 1,01 0,00 0,00 10,30 106,00
States
Uzbekista 4,49 3,33 0,24 4,40 1,40 1,00 7,70 2,16 0,00 1,00 7,63 58,17
n
Venezuela 4,30 3,23 0,06 3,30 1,30 9,00 5,20 1,65 0,00 0,00 8,67 75,12
Yemen 2,39 0,00 19,15 3,85 6,50 44,80 7,00 2,57 0,00 1,00 6,58 43,27
Zambia 2,24 3,33 9,01 2,90 1,80 43,70 2,20 2,18 0,00 0,00 6,58 43,28
Zimbabwe 2,81 12,00 1,83 3,90 2,60 4,80 7,10 4,31 0,00 0,00 7,89 62,25

135
The dependent variables of the final model:
U

Country % CO2 develop economi ESI- Factor female female GDP GNP per human life Political share of unemplo
code people emission ment c growth, Index Social economi share in output capita developme expectan rights income/c yment
not s per stability 1975-98 Develop c activity total life per kg annual nt index cy, 1995- violation onsumpti (UN)
expected capita (year ment rate as % years energy growth 2000 s on
to with of male use rate, richest
survive highest economi 1990-98 20 % to
age 60 real c activity poorest
income rate 20 %
minus
year with
lowest
real
income)
since
1975

Albania 13,900 0,600 -10,000 -0,786 57,900 0,361 72,534 52,022 2,345 -0,484 0,708 72,750 4,000 .. 9,100
Algeria 18,500 3,300 -9,000 0,178 49,400 0,069 36,272 51,034 1,634 -0,876 0,661 68,890 6,000 6,100 29,800
Argentina 16,500 3,700 8,000 0,641 61,500 0,945 44,398 52,418 4,775 4,909 0,824 72,890 1,000 .. 15,000
Armenia 19,800 1,000 -3,000 -6,608 54,800 0,373 85,865 52,266 1,750 -6,510 0,718 70,470 4,000 .. ..
Australia 8,900 17,000 23,000 1,861 60,300 1,237 74,898 51,802 3,841 2,672 0,927 78,250 1,000 7,000 6,600
Austria 10,900 7,300 23,000 2,166 64,200 1,399 64,303 52,093 8,699 1,605 0,901 77,020 1,000 3,200 3,600
Azerbaija 22,100 4,000 -8,000 -9,765 41,800 0,216 73,452 53,034 0,259 -10,736 .. 69,860 6,000 .. 1,300
n
Bahrain 14,600 18,600 -7,000 -1,440 .. 0,579 36,956 51,448 0,687 1,381 0,803 72,860 7,000 .. ..
Banglade 37,900 0,200 23,000 2,366 46,900 -1,723 76,166 50,051 1,709 3,209 0,441 58,130 3,000 4,900 3,300
sh
Belarus 26,100 6,000 -6,000 -1,322 .. 0,735 81,283 54,313 0,827 -2,187 0,778 67,980 6,000 2,900 2,300
Belgium 10,100 10,500 23,000 1,913 39,100 1,380 64,495 52,156 4,998 1,690 0,921 77,210 1,000 3,600 7,000
Belize 13,700 1,600 17,000 2,277 .. 0,459 30,731 50,928 .. 0,536 0,754 74,690 1,000 .. 12,700
Bolivia 32,800 1,300 -8,000 -0,201 59,400 -0,481 57,041 51,366 1,721 2,098 0,631 61,390 1,000 8,600 7,400
Botswana 68,300 1,400 23,000 5,172 61,800 -0,886 77,632 51,086 .. 1,350 0,584 47,390 2,000 .. 15,800
Brazil 26,800 1,700 22,000 1,153 59,600 0,332 52,329 52,930 4,341 1,268 0,736 66,780 3,000 25,500 9,600
Bulgaria 18,300 6,500 -9,000 0,179 49,300 0,886 86,741 52,491 0,531 -2,039 0,769 71,050 2,000 4,400 19,400
Burkina 64,300 0,100 23,000 1,223 45,000 -2,007 90,588 50,893 .. 1,712 0,290 44,390 4,000 10,000 ..
Faso
Burundi 67,800 (. ) -6,000 -0,403 41,600 -1,793 88,661 51,585 .. -4,155 .. 42,440 6,000 5,300 ..
Cambodia 46,600 (. ) 9,000 1,986 45,600 -1,024 95,657 51,742 .. 1,785 .. 53,360 6,000 6,900 ..
Chad 56,100 (. ) -4,000 -0,393 45,700 -1,527 76,186 51,581 .. 0,058 .. 47,190 6,000 .. ..
Chile 13,800 3,400 23,000 4,237 55,100 0,555 47,061 51,987 2,980 6,635 0,812 74,940 2,000 17,400 7,900
China 18,000 2,800 22,000 7,494 38,500 0,363 86,158 51,481 0,750 9,227 0,700 69,830 7,000 7,900 3,100
Colombia 20,700 1,800 22,000 1,731 59,100 0,340 59,071 52,403 3,183 1,524 0,760 70,430 4,000 20,300 14,700
Costa 11,600 1,400 15,000 0,993 63,200 0,867 44,580 51,525 3,492 2,049 0,789 76,030 1,000 13,000 6,100
Rica
Côte 63,400 0,900 -16,000 -0,992 43,400 -1,503 50,298 50,611 2,022 1,261 0,401 46,720 6,000 6,200 ..
d'Ivoire
Croatia 16,400 3,900 -3,000 -1,418 62,500 0,974 71,561 52,651 2,781 -1,489 0,790 72,640 2,000 .. 15,800
Cyprus 10,000 7,100 23,000 5,666 .. 0,834 61,589 51,445 4,448 2,558 0,877 77,760 1,000 .. 3,900
Czech 14,200 12,400 -4,000 0,402 50,200 1,098 84,426 52,392 1,336 -1,604 0,841 73,880 1,000 3,500 8,100
Republic
Denmark 12,800 10,800 23,000 2,145 56,200 1,524 83,642 51,749 9,138 2,529 0,909 75,650 1,000 3,600 4,600
Egypt 23,000 1,500 23,000 3,528 48,800 -0,153 43,169 51,181 1,684 2,586 0,604 66,270 6,000 4,000 8,100
El 23,400 0,700 -4,000 -0,157 48,700 0,191 52,616 52,157 2,459 2,970 0,693 69,130 2,000 16,600 7,000
Salvador
Estonia 23,800 11,200 -5,000 -0,099 60,000 0,947 82,155 54,091 0,991 -1,774 0,798 68,680 1,000 6,700 12,600
Ethiopia 65,500 (. ) -9,000 -0,391 41,800 -1,843 67,264 51,067 0,396 1,036 0,297 43,320 5,000 6,700 ..
Fiji 14,600 1,000 9,000 0,640 .. 0,316 42,436 51,482 .. -0,063 0,755 72,660 6,000 .. 5,400
Finland 11,300 11,600 21,000 2,049 73,900 1,529 85,651 52,469 4,180 1,206 0,913 76,830 1,000 3,600 9,100

136
France 11,300 6,200 23,000 1,759 55,500 1,403 75,210 52,473 6,444 1,190 0,914 78,120 1,000 5,600 8,800
Gabon 48,600 3,300 -11,000 -1,451 54,900 -0,970 75,179 51,268 3,277 0,535 .. 52,420 5,000 .. ..
Gambia 53,700 0,200 -12,000 -0,038 44,700 -1,300 77,735 51,696 .. 0,053 0,388 47,000 7,000 12,000 ..
Georgia 17,500 0,600 -9,000 -3,980 .. 0,233 76,872 52,819 1,619 -11,749 .. 72,730 4,000 .. 11,000
Germany 10,700 10,500 5,000 1,226 52,500 1,454 68,689 52,020 7,160 .. 0,905 77,210 1,000 4,700 7,900
Ghana 34,900 0,200 -5,000 -0,129 50,200 -0,757 98,351 51,431 1,021 1,543 0,552 60,000 2,000 5,000 ..
Greece 8,900 7,700 23,000 1,640 50,900 1,265 56,820 51,617 4,796 1,420 0,869 78,110 1,000 5,400 10,200
Guatemal 31,100 0,600 -6,000 0,488 49,600 -0,481 39,564 52,254 2,796 1,658 0,603 64,040 3,000 30,000 ..
a
Guyana 28,200 1,100 -14,000 -0,249 .. 0,246 48,359 52,583 .. 8,904 0,698 64,410 2,000 7,400 11,700
Honduras 22,800 0,700 4,000 0,707 53,100 0,085 45,722 51,713 1,355 1,354 0,644 69,400 3,000 17,100 4,200
Hungary 21,600 6,000 14,000 1,391 62,700 1,103 71,513 52,815 1,871 0,211 0,813 70,870 1,000 4,500 5,700
India 29,700 1,100 22,000 3,048 41,600 -1,001 49,268 50,319 0,889 3,770 0,545 62,590 2,000 5,700 ..
Indonesia 26,700 1,200 22,000 4,112 45,100 -0,191 66,200 51,433 1,644 2,405 0,664 65,130 3,000 5,600 5,500
Iran, 21,300 3,800 -12,000 -1,012 44,500 0,220 35,227 50,597 0,717 2,279 0,691 69,220 6,000 .. ..
Islamic
Rep. of
Ireland 10,000 9,800 22,000 4,450 54,800 1,196 50,478 51,828 6,293 5,953 0,896 76,350 1,000 6,400 3,700
Country % CO2 develop economi ESI- Factor female female GDP GNP per human life Political share of unemplo
code people emission ment c growth, Index Social economi share in output capita developme expectan rights income/c yment
not s per stability 1975-98 Develop c activity total life per kg annual nt index cy, 1995- violation onsumpti (UN)
expected capita (year ment rate as % years energy growth 2000 s on
to with of male use rate, richest
survive highest economi 1990-98 20 % to
age 60 real c activity poorest
income rate 20 %
minus
year with
lowest
real
income)
since
1975

Israel 9,300 9,300 21,000 1,792 50,400 1,217 66,023 51,304 5,241 2,000 0,877 77,750 1,000 6,200 9,300
Italy 9,000 7,100 23,000 2,162 47,200 1,111 57,344 51,978 6,807 0,994 0,895 78,170 1,000 4,200 9,500
Japan 8,200 9,300 22,000 2,604 48,600 1,088 66,409 51,910 10,631 1,143 0,916 79,960 1,000 3,400 5,000
Jordan 19,500 2,500 11,000 1,783 51,700 0,214 32,396 50,972 1,389 1,498 .. 70,150 4,000 5,800 ..
Kazakhst 25,800 10,400 -7,000 -4,743 46,500 0,382 80,196 53,478 0,530 -5,943 .. 67,640 6,000 .. 13,700
an
Kenya 56,300 0,300 14,000 0,461 46,300 -1,278 84,018 50,848 0,680 -0,329 0,503 52,040 6,000 10,000 ..
Kyrgyzsta 25,400 1,400 -5,000 -3,429 51,300 0,195 82,733 53,109 1,401 -6,937 .. 67,640 6,000 7,500 ..
n
Lao 44,900 0,100 10,000 4,345 56,200 -1,372 83,996 51,163 .. 3,475 0,469 53,230 7,000 4,200 ..
People's
Dem.
Rep.
Latvia 25,000 3,700 -4,000 -0,100 63,000 0,835 81,437 54,284 1,234 -5,536 0,770 68,420 1,000 5,300 12,800
Lebanon 19,000 4,600 9,000 1,994 43,800 0,428 37,472 51,298 2,293 5,278 0,718 69,920 6,000 .. ..
Lesotho 43,300 .. 22,000 3,499 .. -0,790 55,776 51,086 .. 0,940 0,556 56,020 4,000 21,500 ..
Lithuania 23,300 3,700 -4,000 -1,542 57,200 1,026 79,331 53,921 0,879 -4,846 0,785 69,890 1,000 5,200 17,000
Luxembo 10,600 20,200 23,000 3,388 .. 1,088 56,564 52,143 5,540 1,883 0,895 76,670 1,000 3,900 2,700
urg
Madagasc 38,800 0,100 -21,000 -1,836 38,800 -0,975 77,872 51,295 .. -1,519 0,478 57,510 2,000 10,200 ..
ar
Malawi 72,500 0,100 -15,000 0,249 47,300 -1,977 90,276 50,364 .. 0,891 0,375 39,270 3,000 .. ..
Malaysia 16,100 5,800 22,000 3,935 49,500 0,403 59,697 51,504 2,103 3,786 0,762 72,000 5,000 12,000 3,900
Mali 43,200 (. ) -9,000 -0,011 .. -1,620 80,503 51,211 .. 0,785 0,371 53,300 2,000 12,200 ..
Malta 8,400 4,800 23,000 8,268 .. 0,691 35,390 51,427 7,152 12,137 0,848 77,160 1,000 .. 6,500
Mauritani 44,400 1,300 -16,000 -0,601 38,900 -1,599 73,621 51,484 .. 1,287 0,441 53,500 6,000 7,400 ..
a
Mexico 18,900 3,700 23,000 1,212 45,900 0,467 46,063 52,062 2,882 1,228 0,775 72,180 2,000 16,200 1,700
Moldova, 25,700 2,700 -9,000 -4,671 54,500 0,605 82,828 52,915 0,651 .. 0,697 67,520 2,000 6,000 7,300
Rep. of
Mongolia 25,900 3,500 -4,000 -0,130 54,200 0,033 87,049 51,137 .. -1,811 .. 65,850 2,000 5,600 5,700

137
Namibia 52,400 .. -10,000 -0,615 57,400 -0,780 67,069 50,507 .. 1,121 0,624 52,410 2,000 .. ..
Nepal 39,100 0,100 17,000 1,646 45,200 -1,162 66,360 49,784 0,678 2,302 0,449 57,320 3,000 5,900 ..
Netherlan 9,300 10,000 23,000 1,823 55,400 1,400 65,198 51,818 5,684 2,119 0,919 77,920 1,000 5,500 3,300
ds
New 11,100 8,300 20,000 0,696 59,900 1,312 77,178 51,830 3,764 0,974 0,900 76,900 1,000 17,400 6,000
Zealand
Nicaragua 24,300 0,700 -16,000 -3,389 51,800 -0,114 54,236 51,744 0,809 0,915 0,624 67,860 3,000 13,100 9,800
Nigeria 52,200 0,700 -7,000 -0,706 36,700 -1,439 55,665 51,395 0,343 0,558 0,425 50,080 4,000 12,700 ..
Norway 9,100 15,400 23,000 2,911 73,000 1,507 83,100 51,884 6,602 3,414 0,932 78,140 1,000 3,700 3,400
Pakistan 26,700 0,700 21,000 2,744 42,100 -1,053 40,546 50,877 1,145 1,749 0,489 63,950 6,000 4,300 7,800
Panama 15,100 2,500 9,000 0,954 60,000 0,564 53,909 51,547 3,648 2,879 0,770 73,600 1,000 14,700 11,800
Philippine 21,800 0,900 -3,000 0,501 41,600 0,273 60,183 51,329 2,157 0,993 0,739 68,300 2,000 9,700 9,800
s
Poland 17,300 9,300 16,000 1,564 46,700 1,063 79,337 52,975 1,360 3,679 0,811 72,520 1,000 5,300 16,100
Portugal 12,600 4,900 23,000 2,917 57,100 1,203 70,036 52,303 5,489 2,356 0,858 75,290 1,000 5,900 4,000
Romania 20,700 5,300 11,000 0,380 50,000 0,627 76,138 52,702 0,722 -2,572 0,767 69,950 2,000 4,200 7,100
Russian 29,700 10,700 -9,000 -0,771 49,100 0,667 80,792 54,550 0,556 -7,019 0,769 66,560 5,000 12,200 13,400
Federatio
n
Saudi 16,800 14,200 -18,000 -1,696 34,200 0,488 24,853 51,223 1,342 -1,794 0,715 71,420 7,000 .. ..
Arabia
Senegal 47,000 0,400 -17,000 -0,210 47,600 -1,249 71,766 51,772 1,792 0,546 0,405 52,320 3,000 7,500 ..
Singapore 10,600 19,500 22,000 5,689 .. 0,680 63,901 51,423 3,611 5,994 0,876 77,100 5,000 .. 3,400
Slovakia 16,400 7,400 -4,000 0,572 61,600 1,051 84,539 52,578 1,146 -0,114 0,822 72,950 1,000 2,600 18,600
Slovenia 14,600 6,800 6,000 1,213 58,800 0,987 79,559 52,537 3,181 .. 0,857 74,450 1,000 4,200 7,400
South 50,500 6,900 -12,000 -0,671 48,700 -0,281 58,702 52,793 1,505 -0,379 0,689 54,730 1,000 22,300 5,400
Africa
Spain 10,100 5,900 23,000 1,947 54,100 1,349 54,889 52,221 5,529 1,796 0,891 78,000 1,000 5,400 10,500
Sri Lanka 15,300 0,400 23,000 3,278 51,300 0,070 54,382 51,534 2,010 3,653 0,727 73,110 3,000 5,400 8,200
Sweden 8,700 6,200 21,000 1,179 72,600 1,723 88,808 51,446 4,590 0,484 0,923 78,550 1,000 3,600 4,700
Switzerla 9,800 6,100 14,000 0,947 66,500 1,426 65,201 52,033 11,924 -0,160 0,910 78,650 1,000 5,800 2,700
nd
Syrian 20,700 3,100 23,000 1,259 43,600 0,129 35,547 51,665 1,202 0,926 0,636 68,890 7,000 .. 11,200
Arab
Republic
Tajikistan 25,300 1,000 -8,000 -6,660 42,400 0,217 77,335 52,201 0,576 -11,637 0,659 67,180 6,000 .. 2,700
Thailand 25,800 3,500 21,000 4,901 51,600 0,212 84,606 52,252 2,191 3,378 0,741 68,810 2,000 7,600 2,400
Country % CO2 develop economi ESI- Factor female female GDP GNP per human life Political share of unemplo
code people emission ment c growth, Index Social economi share in output capita developme expectan rights income/c yment
not s per stability 1975-98 Develop c activity total life per kg annual nt index cy, 1995- violation onsumpti (UN)
expected capita (year ment rate as % years energy growth 2000 s on
to with of male use rate, richest
survive highest economi 1990-98 20 % to
age 60 real c activity poorest
income rate 20 %
minus
year with
lowest
real
income)
since
1975

Tunisia 19,600 1,800 23,000 2,234 50,800 0,252 45,919 50,845 2,983 2,730 0,688 69,500 6,000 7,800 15,600
Turkey 20,100 2,900 23,000 2,251 50,800 0,263 59,367 51,870 2,743 2,798 0,726 69,020 4,000 8,200 7,300
Uganda 76,300 (. ) 12,000 2,167 48,700 -1,748 88,132 50,984 .. 3,850 0,401 39,640 6,000 7,000 ..
United 9,800 9,500 23,000 1,938 46,100 1,330 73,183 51,714 5,136 1,595 0,914 77,180 1,000 6,500 5,500
Kingdom
United 12,600 19,700 23,000 1,874 53,200 1,526 79,936 52,164 3,572 1,758 0,927 76,700 1,000 8,900 4,800
States
Uzbekista 25,100 4,100 -7,000 -2,037 41,300 0,257 83,607 52,339 0,545 .. 0,683 67,520 7,000 5,500 0,400
n
Venezuel 17,000 6,500 -12,000 -0,786 53,000 0,455 51,922 51,978 1,423 0,538 0,763 72,410 1,000 14,400 14,900
a
Yemen 38,000 1,100 -4,000 -0,590 .. -1,204 36,224 50,428 1,211 -1,457 0,389 57,990 5,000 7,600 ..

138
Zambia 79,500 0,300 -19,000 -2,163 49,500 -1,692 76,158 50,678 0,638 -1,338 0,413 40,090 5,000 13,000 ..
Zimbabw 74,500 1,600 13,000 0,110 53,200 -1,231 78,011 50,536 0,808 -0,487 0,551 44,130 6,000 15,600 ..
e

139
Appendix
U

Legend: In our tables, very small decimal numbers are abridged according to established
mathematical conventions, contained in the EXCEL routine. For example, a number
0,000141972 will be abridged to 1E-04, i. e. a decimal number rounded to 0,0001 and
starting at the fourth number after the decimal point with three zeros after the comma. A
number 9E-10 equals thus a decimal number with 9 zeros after the comma, i. e.
0,0000000009.

The multivariate results in detail:

U

Legend: as in all EXCEL 5. 0 outprints in this work, first row: unstandardized regression
coefficients, second row: standard errors, last row: t-Test. The values immediately below
the standard errors are R^2 (third row, left side entry), F, and degrees of freedom (fourth
P P

row).

% % (I- State military MNC public unequa EU- Islamic ln(GDP ln constan
populat women S)/GD interve expendi PEN educati l membe confere PPP pc) (GDP t
ion, in P ntionis ture as 1995 on exchan rship nce PPP
aged govern m % of expend ge pc)^2
>65y, ment, GDP iture
1998 ministe per
rial GDP
level
Politica 0,050 -0,832 1,371 0,099 0,198 -0,089 0,018 0,218 1,340 -0,032 -0,012 -0,069 2,038
l rights
violatio
ns
0,139 2,184 0,346 0,544 0,162 0,078 0,008 0,075 0,327 0,012 0,019 0,055 8,401
0,661 1,328
15,618 96,000
330,40 169,24
7 5
T-Test 0,359 -0,381 3,968 0,182 1,221 -1,141 2,399 2,901 4,094 -2,577 -0,654 -1,270 0,243

% % (I- State military MNC public unequal EU- Islamic ln(GDP ln constan
popula women S)/GDP interve expendi PEN educati exchan membe confere PPP pc) (GDP t

140
 tion, in ntionis ture as 1995 on ge rship nce PPP
aged govern m % of expendi pc)^2
>65y, ment, GDP ture per
1998 ministe GDP
rial
level
% 3,199 -65,554 -3,004 -1,500 -0,789 1,541 0,039 -0,692 1,793 -0,167 0,070 -0,749 345,82
people 4
not
expecte
d to
survive
age 60
1,159 18,176 2,876 4,525 1,352 0,646 0,064 0,624 2,725 0,102 0,156 0,454 69,912
0,664 11,050
15,828 96,000
23190, 11720,
174 882
T-Test 2,759 -3,607 -1,045 -0,332 -0,584 2,386 0,609 -1,108 0,658 -1,631 0,449 -1,650 4,947

% % (I- State militar MNC public unequa EU- Islamic ln(GDP ln constan
popula women S)/GD interve y PEN educati l membe confere PPP pc) (GDP t
tion, in P ntionis expend 1995 on exchan rship nce PPP
aged govern m iture as expendi ge pc)^2
>65y, ment, % of ture per
1998 ministe GDP GDP
rial
level
CO2 1,466 -21,178 1,389 -3,431 0,761 0,076 0,002 0,421 -0,588 -0,081 0,007 0,144 74,866
emissio
ns per
capita
0,303 4,842 0,744 1,088 0,342 0,158 0,021 0,154 0,698 0,030 0,038 0,109 19,111
0,747 2,630
21,688 88,000
1799,6 608,50
48 7
T-Test 4,831 -4,373 1,867 -3,154 2,225 0,478 0,073 2,728 -0,843 -2,678 0,191 1,322 3,917

% % (I- State military MNC public unequal EU- Islamic ln(GDP ln constan
popula women S)/GDP interve expendi PEN educati exchan membe confere PPP pc) (GDP t
tion, in ntionis ture as 1995 on ge rship nce PPP
aged govern m % of expendi pc)^2
>65y, ment, GDP ture per
1998 ministe GDP
rial
level
Factor -0,161 3,252 0,008 -0,044 -0,006 0,005 -0,003 0,017 -0,085 0,006 0,003 0,075 -15,996
Social
Develo

141
pment
0,043 0,669 0,106 0,166 0,050 0,024 0,002 0,023 0,100 0,004 0,006 0,017 2,571
0,857 0,406
48,130 96,000
95,389 15,855
T-Test -3,781 4,865 0,079 -0,264 -0,124 0,218 -1,117 0,758 -0,843 1,617 0,481 4,470 -6,221

% % (I- State militar MNC public unequa EU- Islamic ln(GD ln constan
popula women S)/GDP interve y PEN educati l membe confere P PPP (GDP t
tion, in ntionis expend 1995 on exchan rship nce pc) PPP
aged govern m iture as expendi ge pc)^2
>65y, ment, % of ture per
1998 ministe GDP GDP
rial
level
female 3,163 -62,600 -3,215 -14,187 3,716 1,597 -0,095 -1,324 -1,177 -0,203 0,406 2,578 337,17
econo 5
mic
activity
rate as
% of
male
econo
mic
activity
rate
1,337 20,956 3,315 5,217 1,559 0,745 0,074 0,720 3,142 0,118 0,179 0,523 80,606
0,514 12,740
8,468 96,000
16493, 15580,
255 810
T-Test 2,366 -2,987 -0,970 -2,719 2,384 2,145 -1,289 -1,839 -0,374 -1,724 2,267 4,927 4,183

% % (I- State militar MNC public unequa EU- Islamic ln(GDP ln constan
popula women S)/GDP interve y PEN educati l membe confere PPP pc) (GDP t
tion, in ntionis expend 1995 on exchan rship nce PPP
aged govern m iture as expend ge pc)^2
>65y, ment, % of iture
1998 ministe GDP per
rial GDP
level
GDP 0,712 -10,464 0,107 1,000 -0,433 -0,041 -0,026 -0,220 -0,126 0,034 -0,027 -0,086 42,440
output
per kg
energy
use
0,166 2,688 0,442 0,580 0,189 0,087 0,013 0,081 0,396 0,016 0,022 0,058 10,879
0,721 1,377
16,816 78,000
382,73 147,93

142
 0 7
T-Test 4,281 -3,893 0,242 1,724 -2,293 -0,471 -2,016 -2,706 -0,318 2,097 -1,186 -1,476 3,901

% % (I- State military MNC public unequal EU- Islamic ln(GDP ln constan
populat women S)/GDP interve expendi PEN educati exchan membe confere PPP pc) (GDP t
ion, in ntionis ture as 1995 on ge rship nce PPP
aged govern m % of expendi pc)^2
>65y, ment, GDP ture per
1998 ministe GDP
rial
level
GNP 0,254 -2,130 -0,788 1,506 0,087 -0,353 0,021 -0,104 -0,902 0,005 0,009 -0,533 8,206
per
capita
annual
growth
rate,
1990-
98
0,341 5,339 0,848 1,358 0,413 0,216 0,019 0,188 0,832 0,030 0,048 0,133 20,532
0,302 3,222
3,310 92,000
412,40 955,14
0 8
T-Test 0,745 -0,399 -0,930 1,109 0,212 -1,635 1,132 -0,550 -1,083 0,176 0,192 -4,001 0,400

% % (I- State military MNC public unequal EU- Islamic ln(GDP ln constan
popula women S)/GD interve expendi PEN educati exchan membe confere PPP pc) (GDP t
tion, in P ntionis ture as 1995 on ge rship nce PPP
aged govern m % of expendi pc)^2
>65y, ment, GDP ture per
1998 ministe GDP
rial
level
human -0,023 0,497 -0,031 -0,013 -0,012 -0,004 0,000 -0,002 0,000 0,000 0,000 0,007 -1,846
develo
pment
index
0,006 0,092 0,015 0,022 0,007 0,003 0,000 0,003 0,014 0,001 0,001 0,002 0,354
0,918 0,053
80,005 86,000
2,682 0,240
T-Test -3,913 5,421 -2,015 -0,597 -1,613 -1,295 -0,027 -0,572 -0,009 0,759 -0,152 3,239 -5,213

% % (I- State military MNC public unequal EU- Islamic ln(GDP ln constan
popula women S)/GDP interve expendi PEN educati exchan membe confere PPP pc) (GDP t
tion, in ntionis ture as 1995 on ge rship nce PPP
aged govern m % of expendi pc)^2
>65y, ment, GDP ture per

143
 1998 ministe GDP
rial
level
life -1,752 36,595 0,562 0,735 0,201 -0,689 -0,034 0,332 -0,987 0,098 -0,059 0,429 -
expecta 113,47
ncy, 2
1995-
2000
0,612 9,588 1,517 2,387 0,713 0,341 0,034 0,329 1,437 0,054 0,082 0,239 36,880
0,735 5,829
22,226 96,000
9061,7 3261,6
09 83
T-Test -2,864 3,817 0,370 0,308 0,281 -2,022 -1,022 1,009 -0,687 1,808 -0,718 1,791 -3,077

% % (I- State militar MNC public unequa EU- Islamic ln(GDP ln constan
popula women S)/GD interve y PEN educati l membe confere PPP pc) (GDP t
tion, in P ntionis expend 1995 on exchan rship nce PPP
aged govern m iture as expendi ge pc)^2
>65y, ment, % of ture per
1998 ministe GDP GDP
rial
level
share -0,758 14,380 -4,267 -0,771 -1,944 -0,384 0,010 -0,633 0,349 0,146 0,056 -1,049 -42,642
of
income
/consu
mption
richest
20 %
to
poorest
20 %
0,446 7,008 1,139 1,581 0,526 0,253 0,027 0,288 1,102 0,048 0,058 0,169 27,240
0,604 3,715
9,262 73,000
1534,2 1007,6
29 37
T-Test -1,701 2,052 -3,746 -0,488 -3,695 -1,520 0,373 -2,197 0,316 3,003 0,976 -6,192 -1,565

% % (I- State military MNC public unequa EU- Islamic ln(GD ln constan
populatwomen S)/GD interve expendi PEN educati l membe confere P PPP (GDP t
ion, in P ntionis ture as 1995 on exchan rship nce pc) PPP
aged govern m % of expendi ge pc)^2
>65y, ment, GDP ture per
1998 ministe GDP
rial
level
ESI- -0,837 15,394 -3,537 -4,608 -0,947 0,973 -0,004 -0,837 -0,297 0,104 0,209 0,246 -19,840

144
Index
0,694 10,839 1,730 2,552 0,807 0,369 0,052 0,362 1,718 0,076 0,092 0,261 41,705
0,507 6,032
7,102 83,000
3101,2 3020,2
34 46
T-Test -1,205 1,420 -2,044 -1,806 -1,173 2,640 -0,074 -2,315 -0,173 1,367 2,272 0,942 -0,476

% % (I- State military MNC public unequa EU- Islamic ln(GDP ln constan
popula women S)/GDP interve expendi PEN educati l membe confere PPP pc) (GDP t
tion, in ntionis ture as 1995 on exchan rship nce PPP
aged govern m % of expendi ge pc)^2
>65y, ment, GDP ture per
1998 ministe GDP
rial
level
female -0,228 3,749 0,105 -0,702 0,019 0,011 -0,005 -0,063 -0,046 0,003 0,006 0,145 35,855
share
in total
life
years
0,070 1,098 0,174 0,273 0,082 0,039 0,004 0,038 0,165 0,006 0,009 0,027 4,222
0,495 0,667
7,835 96,000
41,866 42,745
T-Test -3,257 3,416 0,604 -2,569 0,230 0,294 -1,187 -1,678 -0,282 0,423 0,651 5,277 8,492

% % (I- State military MNC public unequal EU- Islamic ln(GDP ln constan
populat women S)/GDP interve expendi PEN educati exchan membe confere PPP pc) (GDP t
ion, in ntionis ture as 1995 on ge rship nce PPP
aged govern m % of expendi pc)^2
>65y, ment, GDP ture per
1998 ministe GDP
rial
level
develo 0,803 -4,819 -4,497 8,897 0,371 -1,118 0,040 0,499 0,314 0,107 0,090 -0,796 -4,580
pment
stabilit
y (year
with
highest
real
income
minus
year
with
lowest
real
income

145
) 1975 -
^1998
1,348 21,138 3,344 5,263 1,573 0,751 0,074 0,726 3,169 0,119 0,181 0,528 81,306
0,330 12,850
3,937 96,000
7801,5 15852,
09 839
T-Test 0,596 -0,228 -1,345 1,691 0,236 -1,488 0,541 0,687 0,099 0,900 0,499 -1,509 -0,056

% % (I- State military MNC public unequa EU- Islamic ln(GDP ln constan
women S)/GDP
popula interve expendi PEN educati l membe confere PPP pc) (GDP t
tion,
in ntionis ture as 1995 on exchan rship nce PPP
aged
govern m % of expendi ge pc)^2
>65y,
ment, GDP ture per
1998
ministe GDP
rial
level
unempl -3,794 65,612 3,076 0,208 0,340 0,309 -0,028 0,672 -1,748 0,035 -0,001 0,217 -
oyment 273,18
(UN) 4
0,761 13,217 1,848 1,920 0,876 0,334 0,044 0,374 1,512 0,069 0,075 0,201 57,545
0,371 4,444
3,098 63,000
734,00 1244,0
6 20
T-Test -4,986 4,964 1,665 0,109 0,388 0,925 -0,640 1,795 -1,156 0,507 -0,018 1,079 -4,747

146
E The world system and Dar al Islam

Globalization and Islam. An economist’s perspective

S. Mansoob Murshed* TP PT

Introduction

The term globalization is one of the most commonly employed phrases in contemporary
social science. It has a variety of connotations in diverse disciplines, and to different
individuals, making it a rather vague concept. There are as many opinions regarding
globalization as there are people. In economics it is mainly used to describe the increase
in international trade and financial flows that haven taken place since 1960, but especially
in the post-1980 era. Yet this phenomenon has historical precedents, as argued, for
example in Murshed (2002b). The period between 1870-1913 also saw a comparable, if
not greater intensity in the international exchange of goods and finance, measured by the
ratio of the value of trade to national income to give one example. The inter-war period
(1919-39) especially, and the immediate aftermath of the Second World War witnessed a
retreat from “globalization”. The world became globalised once more after 1960, a
process that accelerated in the post-1980 period, culminating with the ultimate triumph of
capitalism with the demise of the Soviet Union in 1991. Globalization also implies
single-power political hegemony, British in the 19th century and American at present.
P P

The central argument of the paper is that globalization in the past created the present-day
third world, and contemporary globalization perpetuates this marginalisation of the
developing world (see, Murshed, 2002b). The difference lies in the fact that global
disparities and inequities are far more transparent and visible in our virtually uncensored
information age; in the past information may not have been transmitted with such
alacrity, certainly the visual aspect was less acute. Throughout the paper, I mainly refer to
the “increased trade” aspect of globalization, particularly the policy imperative to
engineer increased trade, which is so keenly advocated by economic development
specialists from both the North and the South. I will also stress the hegemonistic and
coercive aspect of globalization, which governs the asymmetric and unequal interaction
between the North and the South.

The next section is concerned with the process of marginalisation of the third world
during the two historical phases of globalization. As will be indicated there are striking
historical similarities. In section 3, I describe the backlash to globalization in our digital
age, along with historical parallels. The rise of radical Islam as an alternative to the

*
TP PT I am grateful to Branko Milanovic for stimulating discussions on this topic.

147
world’s dominant ideology (western capitalism), the growth of transnational terrorism,
and civil war in Muslim and non-Muslim countries are examples of such manifestations.

Globalization and Marginalisation: Then and Now

As already stated, globalization implies increased international economic integration. To

reiterate further economic globalization is not unique to the late 20th century, but also
P P

occurred in the 1870-1913 period. The two crucial differences between the two historical
episodes of globalization lie in the fact that at present free international migration is
severely restricted by Draconian OECD consular practices, and in the nature of trade
which is increasingly in varieties of the same good (intra-industry trade) rather than in
different goods (inter-industry trade).

Globalization is meant to be beneficial for the world’s poorer nations, the proponents of
globalization or unfettered capitalism (neo-liberals in the language of non-economics
social science) will have us believe. Participation in international trade and reforms
aimed at attracting foreign finance will narrow the gap between rich and poor nations,
and the pull the world’s chronically poor up by their bootstraps. In an influential paper,
Sachs and Warner (1995) claim to demonstrate that countries with more open policies
towards trade and finance grew faster than countries that did not. Rodriguez and Rodrik
(1999) claim that it is not openness per se that contributes to growth, but rather other
optimal policies that foster growth along with trade. Since exports are a component of
national income, a fraction that is generally larger the smaller the country, economic
growth cannot take place without some export expansion.

In an even more influential paper, one that has gone through several versions, Dollar and
Kraay (2001) argue that successful globalisers do better at poverty reduction. By
successful globalisers they refer to those countries, mainly in Asia, who have achieved
greater export expansion. The poor are defined as the bottom fifth (quintile) in terms of
income. By excluding the unsuccessful globalisers from their exercise on the impact of
globalization on poverty, they are guilty of sample-selection bias. Moreover, given that
the world’s two most populous nations China and India have been successful in
globalization, their size and population weight biases the results in favour of
globalization with poverty reduction. Two remarks are in order here. First, the success of
China and India mask massive internal spatial inequalities; as some regions are the main
beneficiaries of recent national gains. Secondly, India and China did not liberalise in the
sense of neo-liberalism (Milanovic, 2002b). In India controls were lifted steadily, and
only after growth commenced. In China, a huge state-owned sector survives to this day,
property rights are unclear and governance far from transparent, features that would make
any proponent of globalization and neo-liberal reform blush.

Be that as it may, the trump card in the hand of the pro-globalisers is that globalization
offers opportunities that must be seized upon. Ultimately, it is a failure of the national

148
policy regime that more open policies in a globalised context are not made to work to
secure growth and poverty reduction. This is akin to saying that the poor are poor because
they made the wrong choices. Any episode of growth and expansion in a market
(capitalist) economy producers winners and losers, unless the winners can compensate
the losers. This potential inequity can be compounded if the losers did not have a fair
chance at the roll of the dice determining the outcomes. Is the globalization game played
on a level playing field? Or does greater power confer an advantage? Who has greater
voice in determining the rules of the game? My argument is that 19th century P P

globalization set the stage for the second act, which is our contemporary experience of
globalization, notwithstanding the fact that a few actors or countries experienced role
reversals (there is entry and exit from the developed-developing nation categorisation).

It is worth examining historical income gaps between the richest and poorest nations.
UNDP (1999) reproduces figures to show that this gap was only 3:1 during the dawn of
the industrial revolution in 1820, rising to 11:1 by the end of the first episode of
globalization in 1913. More recently, it grew to 35:1 in 1950, rising slightly to 44:1 by
1973. More recently, after the commencement of the present round of globalization, this
figure has acquired a staggering magnitude of 72:1. This is the most conclusive evidence
of the process of marginalisation of developing countries during the two great phases of
globalization.

19th century globalization was preceded by an industrial revolution in the UK and some
P P

other parts of North-Western Europe and the colonialisation of the present-day third
world. Colonialisation was accompanied by the de-industrialisation of the then
industrialised part of the South, India and China. Moreover, the colonial contract, as
Milanovic (2002b) calls it, ensured trade policies favourable to the export of
manufactured goods from the colonial power to the colony, stifling any nascent
indigenous manufacturing capacity. Tariffs on imports from the colonial power were
severely restricted. Five other points in the creation of the proto-third world deserve
mention (see Murshed, 2002b for further elaboration).

The first is the integration of the peasant producer into global primary product markets.
There was a switch from food production for domestic consumption to cash or food crops
for export. In other parts of the world, in Africa and Latin America minerals production
commenced or was expanded. This shift in production patterns was, more often than not,
induced by 'subsistence adversity': the combination of debt, tax, famine, drought, loss of
common resources and the disappearance of traditional safety nets. Secondly, the burden
of taxation and debt. In India which was under British rule the burden of taxation was
succinctly summarised by the great nationalist economist Dadabhai Naoroji in 1876 (see
Naoroji 1901; also Dutt 1902 and 1904). He put the average tax burden in India at twice
that of contemporary England, although average income there was fifteen times greater at
that point in time. Thirdly, the burden of taxation was not counterbalanced by
expenditure on infrastructure or human development. This specially applies to irrigation
works in India and China, but also to public health and education. Rather, as Davis

149
(2001) and others point out taxes in India were used to finance imperial wars. Among
them were numerous campaigns in Afghanistan, the siege of Beijing (1860), the
Ethiopian war (1868), the suppression of the revolt in Egypt (1882) and the conquest of
the Sudan (1896-98). Fourthly, the operation of the international payments and currency
systems under the gold standard militated against developing countries. Much has been
written on this. Naoroji (1901) analysed the famous colonial drain of resources from
India to Britain. The combined effect of the hefty home charge levied on Indian taxpayers
by the India Office in London, and the lodgement of other financial surpluses in London
meant that Britain enjoyed a surplus in her total financial transactions with India.
Similarly she had a surplus in financial dealings with China. India's role as a major
market for British manufactures is well-known (Davis 2001and references therein), but
crucially trade with India allowed the continuation of the policy of free trade in Britain,
and the ability of British foreign investment to be diversified and untied to British
exports. During the late 19th century industrial depression in the UK, caused by a decline
P P

in competitiveness of her manufacturing sector relative to new rivals, she nevertheless

imported heavily from, and had trade deficits with the USA, Germany, Scandinavian
countries, Australia and other white dominions. This fostered the latter group's
industrialisation and growth behind tariff walls in many cases. Moreover, since India was
on the silver standard and Britain operated under the gold standard the monetary terms of
trade continually depreciated for India. The home charges were paid in gold, and as silver
depreciated in value British export prices to India appreciated, while her imports from
India declined in value. Fifthly, there are the attitudes to free market forces that can
explain the marginalisation of much of the third world from globalization both at present
and in the past. A good example to consider would be attitudes to famines that raged
through much of the tropical world in Africa, Latin America and Asia (especially China
and India) in the last quarter of the 19th century, extensively documented in Davis (2001).
P P

In Africa, drought induced famine aided colonial expansion by assisting military victories
over debilitated native powers, such as the defeat of the Zulus in South Africa and the
Mahdists in the Sudan. It also aided the nascent mining sector by providing it with labour
displaced from traditional herding activities. In India famines coincided with periods of
massive grain exports. There was a marked reluctance, in virtually all of the famine
episodes in India and elsewhere, to interfere with global grain markets for the sake of
humanitarian relief. Food was exported at the time of famine. In contrast, the earlier
Afghan and Mughal emperors in India not only provided famine relief without any quid
pro quo but also had no hesitation in intervening in grain markets to ensure price
stability, and prevent excessive price escalation (Davis, 2001).

In summary, globalization in the 19th century did not benefit the South, causing its real
P P

income to diverge greatly from European industrial powers. Globalization assisted the
convergence of incomes towards higher levels within the Atlantic economy, comprised of
countries in North-Western Europe and North America.

TABLE 1A
GDP PER CAPITA (1995 CONSTANT US$) GROWTH RATES

150
Area/Country Annual average Annual average Annual average Annual average
GDP growth % GDP growth % GDP growth % GDP growth %
1960-1970 1970-1980 1980-1990 1990-2000
Low & middle 3. 1 3. 3 1. 2 1. 9
income
Least developed - - - 1. 1
countries (UN
classification)
East Asia & 2. 9 4. 5 5. 9 6. 0
Pacific
South Asia 1. 8 0. 7 3. 5 3. 2
Latin America & 2. 6 3. 4 -0. 8 1. 7
Caribbean
Sub-Saharan 2. 6 0. 8 -1. 1 -0. 4
Africa
Source: World Development Indicators (2002), World Bank.

TABLE 1B
GDP PER CAPITA LEVELS (1995 CONSTANT US$)
Area/Country GDP per GDP per GDP per GDP per GDP per
capita level capita level capita level capita level capita level
in 1995 US$ in 1995 US$ in 1995 US$ in 1995 US$ in 1995 US$
1960 1970 1980 1990 2000
Low & middle 535 725 999 1129 1356
income
Least developed n. a. n. a. n. a. 264 293
countries (UN
classification)
East Asia & 194 256 396 705 1252
Pacific
South Asia 186 221 236 332 456
Latin America & 1983 2549 3548 3275 3856
Caribbean
Sub-Saharan 473 609 658 587 564
Africa
Source: World Development Indicators (2002), World Bank.

Globalization at present (the post-1980 period) has also marginalised much of the third
world and low-income developing countries. Table 1 attests to that fact. Apart from East
and South Asia, all the world’s less-developed regions grew faster in the less globalised
era of the 1950s and 1960s. Yet all regions have expanded their exposure to international
trade (Table 2). While it is true that some middle-income developing countries as well as

151
the most populous countries, India and China, are doing well out of globalization, the
benefits of globalization are far more being widespread in the South (Murshed, 2002b).
The best example of that is the pattern of foreign direct investment (FDI) flows. Three
nations, China, Mexico and Brazil receive 50 per cent of total FDI flows to the
developing world as a whole. In Africa, in particular, the era of globalization is
associated with huge development failure. Not only have incomes declined, but also other
indicators of inclusion and well being have deteriorated. This includes the return of old
diseases such as tuberculosis, the AIDS pandemic, stagnating maternal mortality and
literacy rates.

TABLE 2: THE SUM OF EXPORTS AND IMPORTS AS A PERCENTAGE OF GDP

IN SELECTED REGIONS AND COUNTRIES
Country 1980 1985 1990 1995 2000
Low income countries 34. 4 29. 2 37. 6 47. 6 55. 9
UN Least developed countries 42. 2 37. 5 36. 5 44. 8 52. 9
East Asia and the Pacific 44. 7 43. 9 51. 7 63. 5 79. 7
South Asia 21. 6 19. 2 22. 0 29. 5 33. 4
Latin America and the 26. 5 26. 5 26. 1 30. 8 35. 7
Caribbean
Sub-Saharan Africa 62. 7 54. 2 52. 8 58. 7 64. 3
Source: World Development Indicators (2002), World Bank.

As far as the instruments of hegemony within a globalised context are concerned, three
points deserve mention. They are the modern day counterpart of earlier colonial
arrangements. First, there is the experience of structural adjustment programmes in many
developing countries in the post-1980 period. These were instituted following the
macroeconomic difficulties encountered by non-oil producing developing countries after
the two oil price shocks of the 1980s. Structural adjustment was not confined to
macroeconomic issues but an entire raft of reforms was imposed and instituted under its
guise. It provided an opportunity to force the tenets of the Washington Consensus
(economic conservatism) on hard-pressed developing countries in urgent need of
financial assistance. These measures included unilateral trade liberalisation, the removal
of subsidies and fiscal exigency, amounting to the reduction of social-sector expenditure.
Moreover, structural adjustment programmes set developing countries well and truly on
the route to indebtedness to multilateral and bilateral donors. It also inculcated the culture
of dependence on aid for budgetary support. This is the second instrument of coercion.
The crippling debt burden of most developing countries precludes much needed
expenditure on social protection to promote an inclusive society. Debt forgiveness will
cost the ultimate creditor, the ordinary taxpayer in OECD countries very little. It is not
fully forgiven, despite the HIPC initiatives, as it will release a major lever of power on
developing countries. Lastly, there is protectionism in the North, which prevents the
South from gaining market access in the North. Much has been written on this subject,
see Murshed (2002b) for a brief survey, and Murshed (1992) for an outline of the

152
macroeconomic effects of Northern protectionism towards the South. But it is worth
emphasising that protectionism in the North towards the goods of the South is selective
and invidious, as it covers those areas where the South has greatest competitive
advantage such as agriculture and textiles. It also incorporates areas where the South is
most vulnerable, such as the transfer of technology and the openness to entry by the
OECD service sector. The process of WTO negotiation and rule setting is also very
excluding to the South; that in an organisation committed to the notion of one country
one vote.

The non-globalised eras of the inter-war period and the immediate post-war era offer
interesting contrasts. As Milanovic (2002c) points out income convergence between the
richer countries of the world, the Atlantic economy, continued unabated. Moreover, there
was a different economic ideology current at that time: one that extolled national autarky,
and not dependence on international trade. In the inter-war period protection, bilateral
trade agreements, currency non-convertibility and capital controls were rife. Even after
the Second World War they continued to prevail and were only gradually relaxed after
the 1960s. The 1950s and 1960s, a non-globalised era, was an extraordinary period of
growth and progress for all countries and human beings.

Milanovic (2002a and 2003) presents more evidence that global inequality is increasing
in our present age of globalization, and for the polarisation of the world between rich and
poor. Not only has inequality risen when we treat individuals as the unit of the analysis,
but inequality with nation states as the reference point has widened. In particular, the
number of countries with between a third and two-thirds of the average income in the
poorest OECD country has sharply fallen, when we compare the year 2000 to 1960. This
is akin to the eradication of the middle class. As can be imagined the number of poor
countries, those with an average income of a third or less of the poorest OECD country,
have risen dramatically from 25 in 1960 to 67 in 2000.

Is rising global inequality, or inequality for that matter, cause for concern? Or should we
only worry ourselves with absolute levels of poverty whether based on national standards
or the international dollar a day measure of abject poverty. Clearly, this depends on our
notion of justice. The current development-donor focus is on poverty alleviation. While
this is a lofty ideal, citizens of the globe, including those residing in poor nations are
more aware of the differences in their own circumstances and capabilities compared to
those of fellow human beings in rich nations. This is all the more so in a digital age,
where satellite television and the Internet are widespread. I have argued elsewhere,
Murshed (2002a) that a viable social contract with agreed upon rules for redistribution is
necessary to contain dissent, open conflict and civil war in developing countries. This
concept has its international counterpart, one that is needed to sustain world peace.

3 Globalization, Marginalisation and Backlash

153
This paper has argued that the two historical waves of globalization have widened the gap
between developed and developing countries. Indeed, 19th century globalization can be
P P

argued to have created the proto-third world of the present, and late 20th century P P

globalization can be said to have further cemented this process of marginalisation of the
third world. Globalization has increased international inequality and the disparity
between nations. Therein lie the seeds of conflict. Even within developed countries,
especially in the Anglo-Saxon world, inequalities and wage dispersion have risen. The
relatively unskilled have become marginalised. All of this coincides with the demise of
the development contract governing North-South interaction since about 198041, the TP PT

beginning of the current phase of accelerated globalization. It has been replaced instead
with a strategy of containment. This strategy is reflected, inter alia, in the donor
obsession with poverty reduction solely, instead of placing equal emphasis on reducing
global disparities. Poverty reduction policies are laudable. True development, however,
comes from the parallel reduction of global inequalities, without which the process of
exclusion cannot be arrested. Evidence that a strategy of containment is not working
comes from developments such as transnational terrorism, international crime and illegal
migration.

Tthe marginalisation of the third world during 19th century globalization produced
P P

nationalism and rebellion. Examples of the former include the founding of the Indian
National Congress, which later led the vanguard of the independence movement, as well
as home-grown critics of immiserization such as the economists Dutt (1902, 1904) and
Naoroji (1901). The uprising in India in 1857 (described as a Sepoy mutiny), presaged
the resistance to globalization. In it, Muslims, particularly the Muslim citizenry of Delhi,
Lucknow and Kanpur played a leading part. The Boxer revolt in China is another good
example of an armed rebellion against the effects of globalization.

Direct action against globalization can be seen at present in the form of violent protests at
the Seattle WTO meeting in 1999, the wrecking of the Davos summit in 2001, the
disruptions during the G-8 meeting in Genoa in 2001 and from radical Islam. Even the
tragic destruction of the World Trade Centre on 11th September 2001 may have, in part,
P P

contained an anti-globalization message.

Critics of 19th century policies included disenchanted officials such as Allan Octavian
P P

Hume, formerly of the Indian Civil Service, just as today's globalization policies attract
rebukes from the likes of Joseph Stiglitz, formerly of the World Bank. The development
NGOs (non-governmental organisations) of today had their counterparts in Victorian
philanthropists (Florence Nightingale), and above all in the Socialist International, and
other socialist parties.

41
TP PTIt also approximately coincides with the coming to power of two conservative Anglo-Saxon
leaders, Margaret Thatcher in the UK in 1979 and Ronald Reagan in the USA in 1981.

154
Globalization has always produced winners and losers, and both historical episodes of
globalization produced a backlash, involving both intellectual opposition as well as direct
action. The intellectual critics of globalization came from the radical-left, then and know.
The alternative ideology a century ago was socialism, something no longer viable, as it is
widely regarded as a system that has been tried and failed. Islam is the only truly self-
contained ideological opposition to the forces of globalization and hegemonistic Anglo-
American capitalism. This is not to say that the leadership in Muslim states (except Iran)
resist the economic and political forces of globalization. Ideological Islam, nevertheless,
has replaced socialism in its role as the principal challenger of the capitalist/globalist
dogma, the case during 19th century globalization, see Milanovic (1999). Other
P P

movements, environmentalism for example, oppose globalization on single issues. At

another level, other religions, Hinduism, Buddhism and Confucianism have better
adapted themselves to globalization and capitalism.

This is not the first time in history that a religion has challenged hegemonic power. As
pointed in Milanovic (1999), early Christianity played an important role in opposing
Roman imperialism. The Roman Empire was, however, not global, as other parts of the
civilised world, China, India and the Parthian/Sassanian realms were outside its sphere of
influence.

Islam, particularly Shia Islam42, has a very long tradition of direct action against injustice
TP PT

and oppression, and this continues to motivate systemic dissent amongst Muslim groups
worldwide. The Islamic community (millat) is in many ways collective, and its
grievances against global hegemonic powers are also collective. Thus, injustices
perpetrated in Palestine, Kashmir or Bosnia are felt by Muslims worldwide including far
flung places such as Indonesia. Any Muslim, even from a seemingly unaffected part of
the Muslim world may undertake direct action against these injustices. In many cases,
these have resulted in acts of transnational terrorism, as the ordinary peaceful channels of
protest and resistance have proved so ineffective. In this connection, it has to be pointed
out that the quarrel of many Muslim groups is with governments of Muslim countries
who are seen to be the agents of hegemonistic economic and political globalization. The
(apostate) state is also seen to have an outside (Western) sponsor. Acts of terrorism are
often against the Western sponsor of the even more despised domestic government. In
that sense, international terrorism reflects somebody else’s civil war (Doran, 2002). The
intrinsic motivation43 of the terrorist has to be borne in mind. Acts of deterrence against
TP PT

them may backfire and produce more terrorism unless political grievances are addressed.

42
TP The party of Ali (R), the first Shia Imam, has always included the relatively excluded: the less
PT

affluent and non-Arabs. Syedana Ali was the cousin and son-in-law of the Prophet Muhammad
(peace be upon him). He did not cause any religious schism within Islam nor found Shiaism; in
fact distinct religious (as opposed to political) differences between Sunnis and Shias did not
appear until much later on. .
43
TP Extrinsic motivation, by contrast, is something pecuniary or tangible and can be altered by
PT

changing incentives.

155
Islam is not against capitalism, many authors such as Rodinson (1978) have closely
identified Islam with mercantile capitalism. This is perhaps most true of traditional Sunni
Islam. In that connection, it may be stated that Islam is not against private ownership or
profit, but may have a different perception about an individual’s just deserts and his
exercise of choice or free will in determining outcomes. Nor is Islam wedded to complete
equality. Individuals are, however, enjoined upon to be charitable, not just in the sense of
forgiving other’s trespasses but more in the sense of “ my brothers keeper”. 44 A certainTP PT

(small) portion of individual wealth must be given up to the poor. Thus, there is an
element of primitive redistribution built into religious duty. This also makes Islam “pro-
poor”.

Another aspect of globalization where Islam may have something to say on is with regard
to international debt problems. Interest payments, particularly usury is forbidden to
believing Muslims. Profit sharing, rents and dividends are, however, permissible. In an
Islamic world economy debt crises would be extremely unlikely, and odious debt
incurred by unrepresentative leaders but paid for by the (unconnected) ordinary citizenry
would be virtually impossible.

The above refers to the theological tenets of Islam, and as with every ideology practice is
often at variance with principle. Islamic states and societies have not been exceptions to
the human rule in creating inequality, accompanied by poverty. Yet the principles of
dignity and the imperative of justice form the essence of Islam and Islamic society. This
is because the distinction between the sacerdotium and imperium are much less clear cut
in Islam compared to Christianity. It is, relatively speaking, more difficult to be moral for
an individual Muslim, unless societal functioning around him, particularly if it is a
Muslim society he resides in, is also not just. His religious duty would be to set it right
through direct action, or speak out against it, or inwardly disagree with it. 45
TP PT

Islam represents the most formidable intellectual challenge to globalization and

consumerism in the sense of Jihad vs. McWorld (Barber, 1996). This is because,
ultimately it is a complete ideology, and not a single issue movement. Expressing
vitriolic diatribes against Islam is permissible even within otherwise liberal circles in the
West. Many of the major areas of difference with Islam, such as with gender issues, are a
product of prejudice and misunderstanding. Dialogue with Islam is necessary, without it a
true clash of civilisations is possible in the sense of Huntington (1998). The clash that
exists is brought about by one civilisation (Islam) reacting defensively to an onslaught by
another civilisation (Western) that has run out of visible enemies to pursue and eradicate.

44
TP One of the more repeated phrases in the Quran is: As Salatahu waz Zakathu: Be dutiful in pray
PT

and be charitable.
45
TP Based on a saying (hadith) of the Prophet Muhammad (peace be upon him) of Islam.
PT

156
 References:

Barber, Benjamin R (1996) Jihad versus McWorld: How Globalism and Tribalism are
Reshaping the World, Ballantine Books.
Davis, Michael (2001) Late Victorian Holocausts: El Niño Famines and the Making of the
Third World, London: Verso.
Dollar, David and Aart Kraay (2001). Trade, Growth and Poverty, Presented at the
UNU/WIDER Conference on Growth and Poverty, Helsinki, 25-26 May 2001, www. TU

wider. unu. edu.

UT

Doran, Michael S (2002) ‘Somebody Else’s Civil War’, Foreign Affairs, 81(1), 22-42.
Dutt, Romesh Chunder (1902, 1904). Economic History of British India, 2 volumes, London:
Kegan, Paul.
Huntington, Samuel P (1998) The Clash of Civilisations and the Remaking of the World Order,
Touchstone Books.
Milanovic, Branko (1999) ‘On the Threshold of the Third Globalization: Some Historical
Angles’, unpublished manuscript.
Milanovic, Branko (2002a) ‘True World Income Distribution, 1988 and 1993. First Calculations
Based in Household Surveys Alone’, Economic Journal, 112.
Milanovic, Branko (2002b) ‘The Two Faces of Globalization: Against Globalization as We
Know It’, www. worldbank. org/reseearch/inequality.
TU UT

Milanovic, Branko (2002c) ‘Unexpected Convergence: Disintegration of the World Economy

1919-39, and Income Convergence Among Rich Countries’, www. worldbank.
TU

org/reseearch/inequality.
UT

Milanovic, Branko (2003) Notes on Inter-National Inequality.

Murshed, S. Mansoob (1992) Economic Aspects of North-South Interaction. London:
Academic Press.
Murshed, S. Mansoob (2002a) 'Conflict, Civil War and Underdevelopment', Journal
of Peace Research, 39, 387-93.
Murshed, S. Mansoob (2002b) ‘Perspectives on Two Phases of Globalization’ in S
Mansoob Murshed (ed), Globalization, Marginalization and Development,
London: Routledge.
Naoroji, Dadabhai (1901) Poverty and Un-British Rule in India, London: Swan Sonnenschein.
Rodinson, Maxime (1978) Islam and Capitalism. Translated by Brian Pearce, University of
Texas Press.
Rodriguez, Francisco and Dani Rodrik (1999) Trade Policy and Economic Growth: A Skeptic's
Guide to the Cross-National Evidence, National Bureau of Economic Research (NBER)
Working Paper 7081.
Sachs, Jeffrey and Andrew Warner (1995) Economic Reforms and the Process of Global
Integration, Brookings Papers on Economic Activity, No. 1, 1-118.
UNDP (1999) Human Development Report-1999, New York: United Nations Development
Programme.
World Bank (2002) World Development Indicators. Washington DC: World Bank.

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158
Growth, Institutions and Poverty: The MENA Perspective

Syed M. Ahsan

1. Motivation
This study focuses on the interface between economic growth and the quality of
“institutions” (as interpreted in the New Institutional Economics, NIE) especially as these
relate to poverty alleviation. In other words, we would discern and evaluate the process
by which economic growth leads to poverty alleviation, and attempt to identify the role of
institutional capital in that process. Do institutions matter in determining the poverty
performance of economic growth?
The topic proposed here dwells on several broad themes. First is the identification and
validation of the apparent slow growth in the MENA region (vis-à-vis say South Asia)
over the past two decades, which would be the time period under examination. Has the
slow pace of economic progress hampered poverty alleviation in the region? Secondly, it
explores how the selected countries46 differ in the design, delivery and endowment of
TP PT

“institutions”. Finally, we measure how the differences in the stock of “institutional

capital” of a nation have affected the growth trend as well as poverty profile of the
countries in question.
The term “institutions” here encompasses the somewhat separately developed ideas of (a)
institutions as “rules of the game”(as in Williamson [1984 and 1998], North, [1990 and
1997], (b) social capital (e.g., as developed by Arrow [1970], Coleman, [1988] and
Collier [1998]), and the more diffused notions of (c) governance. Mutual interactions
between civil society as a facilitator and both (informal) social capital and formal
institutions also figure prominently in this literature. Indeed one of the conceptual
advances of the paper would be in laying out a unified framework where all these
concepts seem capable of being arranged and explained in a hierarchical order, such that
all components fit in as special cases (or sub-categories) of more general ideas. The
resulting construct would serve as a general framework of “institutional capital” (IC) as
relevant for analysing the process of economic development, or more generally of
economic exchanges.
The subject matter of the proposed here is of profound significance to the MENA region
especially in view of relatively high unemployment (at double digit rates even in the

46
TP PTThe methodology behind the selection countries is that we seek the largest set for which
comparable data is available. This initially leads us to ten countries, namely, Algeria, Egypt,
Jordan, Iran, Lebanon, Morocco, Saudi Arabia, Syria, Tunisia and Yemen. Unfortunately, when it
comes to income poverty, the sample further shrinks to six, as no reliable data is available for Iran,
Lebanon, Saudi Arabia, and Syria.

159
more diversified economies), the current trend in population and labour force growth,
and, of course, due to substantial incidence of poverty. The latter is presumably
exacerbated by a widespread decline in real wages. Indeed the Ali-Elbadawi (2002) study
indicates that poverty in the MENA region (specifically, Algeria, Egypt, Jordan,
Mauritania, Morocco and Tunisia) is about 21. 5 percent (by the headcount measure),
which is not much lower than that in Asia (24. 7). 47 TP PT

A substantial literature posits the principal premise of the poverty discussion in the
following terms. 48 The global growth experience (possibly disproportionately influenced
TP PT

by the Asian experience) points to some key features of the linkage between growth and
poverty that are relevant to this study. 49 These may be outlined as a series of interrelated
TP PT

(by a feedback process, often occurring after a lag) hypotheses.

(a) Relative Labour Intensity (RLI) Hypothesis: For the overall employment growth to
accelerate one needs rapid growth in sectors where the labour intensity is relatively high;
experience shows that the high labour intensity sector is indeed the non-farm (small
scale) consumer goods and services sector, typically located in small towns and rural
areas. 50 The latter sector may primarily serve the domestic non-urban market, though an
TP PT

export potential may exist, which may vary substantially among countries. An
implication of this hypothesis is that possible growth momentum originating in
manufacturing is unlikely to propel widespread gains in employment in the primary or
non-farm sector, and thus unable to pull up the country by the former’s bootstraps.
(b) Agriculture Led Growth (ALG) Hypothesis: To the extent, the output of the local non-
farm sector is destined for the domestic (non-urban) market, the primary sector of the
economy must provide the bulk of the growth leadership. To quote Mellor “it is the
expenditure of this increased [primary sector] income on locally produced, labour
intensive, non-tradable goods and services that drives the employment creation, that in
turn, explains the poverty reduction” (2000, p18).
(c) Lagged Urban Growth (LUG) Hypothesis: Growth of local non-farm sector has the
added benefit in alleviating poverty in more ways than one. First we have already noted
the direct effect on own sector employment growth. Second, and indirectly, the latter
growth has the capability of stemming the flow of migration from rural to urban areas,
which would lead to a tightening of the urban labour market (especially, the informal and
service component). Evidently a tight urban labour market would lead to rising
productivity and real wages there. Clearly this process would take time to unravel; the
short term effect may be discernible in a few years, while the full effect may take as long
as a decade or longer. We have now come a full circle, namely that growth spurt in the

47
TP The above figure for the Arab countries differs from the results of Chen-Datt-Ravallion (1994)
PT

quite markedly.
48
TP The measurement issues are reviewed below.
PT

49
TP See for example the studies by Mellor (2000), Ravallion and Datt (1996), Timmer (1997) and
PT

others.
50
TP Evidently some portion of this sector may reside in urban areas too, but the focus in this
PT

literature is the potential of the rural and semi-rural areas to attract such enterprises. Hence the
latter component will be refereed to as the “local non-farm sector”.

160
key non-farm sector, itself fuelled by steady agricultural growth, would lead to growth of
the urban sector as well. But as already noted, no sustainable chain of events ensue if one
tried to jumpstart the urban manufacturing sector.
(d) The Non-Income Poverty (NIP) Hypothesis: Before we move on, it should be noted
that two potentially significant elements of the poverty story have been left unattended
thus far in the discussion. First is the non-income measure of poverty, such as health and
educational attainment, longevity and other components of human capability set such as
voice and freedom (Sen, 1999). These additional dimensions have been inadequately
examined in the current literature. But we believe that here the institutional forces may
play a significant role in shaping the poverty outcome for a given level of income growth.
We may refer to this as the fourth hypotheses, the non-income poverty hypothesis.
The remaining element of poverty is the distributional issue (e.g., social safety net),
which clearly determines the final outcome. However, the focus of the research is in
discerning the contribution of economic growth itself, and whether the latter contribution
is enhanced or abated by the existing stock of institutional capital. The further
(distributional) element shall therefore remain unexplored in this study.
In short then, our goal is first to assess the validity of the above hypotheses on the
growth-poverty nexus in the MENA context. In the process, we explore how the selected
countries differ in their institutional capital as construed here. For concreteness, elements
of the institutional matrix would include those itemised below. Further, specific empirical
magnitudes would be designed and compiled in order to measure the extent and depth of
the institutional endowment of a nation:
(a) Quality of the political decision making process at both central and the local level in
selected countries (e.g., level of decentralisation of political and fiscal authority,
accountability and transparency).
(b) The information regime (e.g., information technology at public’s disposal, adequacy
and timeliness of health and climate advisories, communication of active public
intervention measures).
(c) The regulatory framework, bureaucracy and the justice system (e.g., corruption and
law enforcement).
(d) The institutions of social capital (e.g., the scope of micro credit, measure of NGO
activities).
(e) The quality of physical infrastructure (e.g., utilities and communication in smaller
towns and rural areas).

Given the empirical evidence, we would explain the observed MENA growth experience
(1980-2000) in terms of the stylised fable of growth-poverty linkage depicted above. We
would seek an explanation of the country differences (especially as these relate to the
four hypotheses advanced earlier) in terms of institutional capital. The latter factor may
directly impact the non-income poverty performance of a nation, but the premise remains
that it may also affect the income poverty profile (directly and via inducing additional
growth).
The rest of the paper proceeds as follows. In section 2, we provide a brief outline of the
recent literature on growth and poverty. Section 3 is devoted to an examination of the

161
conceptual construction of institutional capital (IC) as an integral factor that allows
economic (and other) exchanges to take place, thus alleviating market failure. We also
explore the scope of differing level of IC among countries in explaining the observed
difference in their performance over time and contemporaneously. In section 4, we
discuss methodological issues of measurement, especially in light of data availability.
Section 5 reviews the empirical findings, while section 6 concludes.
2. Growth and Poverty
The received theory of growth and poverty has been outlined very briefly (namely in the
form of the first three testable propositions) already. However, this is only a partial, if
stylised, part of the diverse global experience (World Bank, 2000, Ch3). Significant
country specific differences exist, which are often explained away by the initial
inequality level (both in income/expenditure dimension and in terms of non-income
attainments of health, education, and gender aspects). Most of the latter are again
analysed as weaknesses of the public policy tools at play. The important point however is
that in spite of the anomalies of individual experiences, in the long run, globally speaking
growth (witness the period 1980-2000) does lead to declining poverty, both in money
terms as well as in human capability components. In other words, growth would seem
necessary in order to attain poverty alleviation.
The extant literature is generally silent on the idea of institutional capital except to note
some obvious, perhaps significant, elements, such as political/fiscal decentralisation.
Even Mellor’s extensive review does not identify a single contribution dealing with the
interface between development and governance in over one hundred references. He does
in the concluding stages however, note without elaboration that ‘democratisation at the
village level opens up far greater potentials for raising local resources and managing
them better” (p27). Likewise in terms of the institutional issues, most authors refer to
transaction costs, but by that they essentially mean transportation costs. As we shall see
below, transaction cost (TC) is a much wider phenomenon than has been appreciated in
the main stream writings in economic development.
The view of institutions as mitigating transaction costs and thus making economic
exchanges possible is the domain of new institutional economics (NIE). The economic
development literature does not yet appear to have integrated the advances of NIE in
describing growth and development, although modern analysts appear to have discovered
the links of late. And we shall have occasion to relate to this literature in due course. 51
TP PT

(a) Measuring Poverty: The literature on how to define and measure poverty is extensive.
While for poor counties, many agree with Sen (1976) that absolute poverty is what
matters. Accepting the latter view leads to the idea of expenditure (or income) required to
maintaining a socially minimal level of nourishment, which in turn leads to the
benchmark of a poverty line. Thus all those who fall below the line are declared poor.
Indeed this logic has led the World Bank to introduce in 1990 the metric of “dollar a day”
(and then the two-dollar a day) per person as being a rough and ready poverty line.
Indeed the acceptance of this view of poverty measurement provides a foundation for the

51
TP PT See for example a recent paper by Rodrik, Subramanian and Trebbi, (2002).

162
logic that economic growth matters.
That the concept of a socially acceptable minimum nourishment would vary from
location to location and indeed over time, and that so even within a country, is well
understood. Consequently the necessary cost-of-living adjustment may be easily made
given any starting benchmark. Accounting for intra-household differences is another
matter, however (see Kanbur, 1999). Question does remain if the middle-income
countries of MENA should be so concerned with absolute poverty, which by some
measures are quite low (below five percent, as in Chen et al, 1994, at dollar-a-day). We
have already noted that recently, Ali and Elbadawi (2002) find a much higher figure of
over twenty-percent. Both the studies cited above deal with the headcount method of the
poverty line.
Indeed it would be opportune to come up with household survey data that may allow one
to compute the comparable poverty figures using a common methodology. This would
help reconcile alternative poverty figures found in the literature. The authors cited above
also derive two other measures of poverty, each based on the poverty gap ratios. 52 Indeed TP PT

it is advised that one work with several (alternative) measures of the poverty index (even
within the poverty line framework), at least to allow for the fact that one may err in
pinpointing the actual level of the line. Comparability of the underlying data must
however be kept in mind.
Finally, note that current thinking on poverty highlights non-income dimensions most
prominently. Starting from human development indicators, we have the conceptual
construct of the capability approach à la Sen (1999), whereby poverty implies the limited
capability to enjoy freedom such as the basic health and education, longevity, quality of
life, and the freedom to generally function within society. Indeed Datt and Ravallion’s
(1998) study of the Indian states revealed the scope of non-income variables. It is seen
that after controlling for the trend in farm yield, that states’ initial endowments of
physical infrastructure and human resources, such as higher initial irrigation intensity,
literacy, and lower initial infant mortality, all contributed to higher long-term rates of
rural poverty reduction.
The finding of the role of non-income arguments in poverty reduction is similar to the
theme discussed in Kanbur and Squire (1999). The latter authors document the
progressive broadening of the definition and measurement of poverty from income-based
criteria to other dimensions of living standards, and to more recent concern with risks and
vulnerability, and powerlessness and the lack of voice. The latter paper argues that a
broader definition of poverty not only expands the set of policies that are relevant to
poverty reduction but also requires that the interactions among such policies be
recognised. It argues that the various dimensions of poverty interact in important ways,
such that “policies do more than simply add up” (p. 2). For example, improving health of
people increases their income-earning potential, and increasing their education leads to

52
TP PTIt is interesting to record that even on the two latter measures, for the six Arab countries
examined by Ali-Elbadawi, the indices remain pretty comparable between the Arab countries and
the Asian average. Thus all three measures consistently rank these six countries roughly as “poor”
as Asia.

163
better health outcomes, and so on. Thus poverty-reducing strategies must recognise the
interactions among policies.
(b) High Unemployment and Falling Real Wages in MENA: The high unemployment
figures (between ten and twenty percent in most cases) are exceptionally high for the
developing world, save sub-Saharan Africa (ERF, 2000). Moreover, in view of the large
role of the public sector (as a sort of “the employer of last resort”), there is likely to be
significant under-employment hidden in the official figures. Total public employment in
this region is estimated at 16. 5 percent vs. the world figure of 11 percent (Ali, 2002).
Only Lebanon and Morocco have lower than the average figures. But in more populous
Egypt, the share is 35 %, reaching 50 % in Jordan and then 60 % in Algeria. More than
that, the above do not even include employment in the state owned enterprises! It would
be useful to explore if slow growth itself is the primary reason for the slow rate of private
job creation, or that the recent human capital strategies of the Arab society may also have
a role to play. It is disturbing also to notice that there appears to be widespread and
secular decline in real wages in most MENA countries. While an examination of the
extent and consequence of this phenomenon is a matter of high social priority, it remains
beyond the scope of the present effort.
(c) Institutions and Growth: North makes a general point that the structure of transaction
costs vary between political and economic markets in any society whereby “high
transaction costs issues gravitate to the polity” (1990b, p362). To the extent developing
countries suffer from incompleteness of their democracies, the following quote from
North is a useful reminder. “It is political markets in non-democratic polities that urgently
need such transaction cost analysis. The far greater imperfections of such markets . . are
the root cause of their economic performance since it is polities which devise and enforce
the property rights that are the incentive structure of economies” (1990b, 364). One may
extend this farther and argue that extensive public control (e.g., via SOEs), cumbersome
regulatory framework and possibly weaknesses of the judiciary all combine to render the
TC structure obtaining in developing countries a fertile ground where the stated pattern of
selection (from economic to the political arena) becomes a dominant process.
Note that the conceptual aspects of the idea of institutional capital would be explored
fully in the next section. While the mainstream papers on poverty and growth have
largely ignored the “institutional” issues, there are attempts within the MENA literature
that addresses selected aspects of the phenomenon. 53 But no specific references were
TP PT

found there that deal with poverty, employment and real wages.
3. Conceptual Framework: Institutional Capital
The concept of institutional capital developed here is of central focus in this study. Not
only does it directly relate to the validation of several hypotheses to be tested here, very
few studies exist that seek to conceptualise or operationalise the concept in any detail,
especially in the analysis of broader poverty. 54 In this section we review the conceptual
TP PT

53
TP ERF (2000), for example, cites two studies by Atiyas and Tohamy who discusses some
PT

institutional elements such as transaction costs and transparency aspects of complying with and
administering the tax system in Turkey and Egypt, respectively.
54
TP Of course, we may refer to recent papers by Ahsan (2003) and Ahsan and Oberoi (2003).
PT

164
construction of the idea, while the operationalisation is discussed under the
“methodology” section. As noted already, our construction of the concept of institutional
capital is one that encompasses the existing notions of its constituent parts, with some
unavoidable overlap. The principal components are taken up in turn.
(a) Costs of Transactions: In this paper, we shall refer to all human interactions of an
economic nature, i. e. , an economic exchange, as a “transaction”. Given this primary
notion, the central focus of “new institutional economics” (NIE), which is also described
by many of the proponents as “transaction costs economics” (TCE), is that transactions
are costly to execute. 55 Recall that the standard general equilibrium analysis in the
TP PT

Arrow-Debreu fashion embrace the parable of the Walrasian auctioneer, a device that
smoothes the co-ordination of economic exchanges in a timeless and cost-less manner.
Market failures are viewed as sort of exceptions created by large externalities and/or by
significant non-convexities in production technologies (Arrow, 1970). NIE makes a clear
break from the tradition by asserting that co-ordination of transactions are never as easily
accomplished as in the Walrasian fable. Why?
Perhaps we should at this stage define what transactions costs (TCs) are, before exploring
why they arise. Matthews interprets these as “the costs of arranging a contract ex ante and
monitoring ex post, as opposed to production costs, which are costs of executing the
contract” (1986, p906). There are various ways of accounting for the rationale for the
non-trivial costs of co-ordination, which is necessary to the realisation of mutually
beneficial transactions. Williamson (1984) enumerates the following as important. First,
“the organisational man is cognitively less competent (being subject to bounded
rationality) but motivationally more complex (being given to opportunism) than his
economic man counterpart” (p200). These behavioural attributes in turn demand that one
“organise transactions so as to economise on bounded rationality while simultaneously
safeguarding them against the hazards of opportunism” (ibid. ).
Douglass North (1997), on the other hand, cites four variables that make for costliness in
exchange. To us these seem to corroborate the above. First he cites “the cost of
measuring the valuable attributes of goods and services or the performance of other
agents in exchange”, which can be seen as a consequence of bounded rationality à la
Simon, as already cited above. Second “is the size of the market, which determines
whether personal or impersonal exchange occurs”, where those based on kinship would
be an example of personal exchanges. Third is the absence of a “third party impartially
(and costlessly) evaluating disputes”. The latter two may be viewed as elements arising
out of opportunism. The fourth element offered by North deals with ideology that
“individuals possess to explain and evaluate the world around them”, which matters in
exchange due to the costs of measurement and enforcement. While North appears not to
elaborate further, presumably ideological differences may call for different responses
from different agents in a given environment, with the consequence that certain

However, for a more general investigation of economic development and institutions, we cite
Rodrik et al (2002) where additional references can also be found.
55
TP Hence we shall use the acronyms NIE or TCE interchangeably. Coase (1984) attributes the
PT

origin of the term “new institutional economics” to Oliver Williamson.

165
exchanges may be difficult to complete. Interpreted in this manner, the tenets of bounded
rationality and opportunism combine to allow a role for ideology in the economic
exchanges.
(b) “Institutions” and Co-ordination: Practically all scholars in the NIE mode of analysis
argue that “institutions” exist so as to enable co-ordination of exchanges, and thereby
minimise the costs of exchange. Matthews had observed that transaction costs may affect
economic exchanges individually (hence incremental in nature) or may appear in the
form of altering the overhead (i. e. , the fixed cost). Further, the choice of institutions (as
well as the choice of technique) may affect both the TCs and production costs, where
agents would seek to minimise the sum of the latter two, and thus trades-off may arise. In
this set up, efficiency of an economic system (i. e. , a system of institutions) is gauged by
the efficacy with which the rules at play succeed in minimising the transaction costs for
given technologies. What are these institutions?
Matthews conceives of institutions rather generally as a “set of rights and obligations
affecting people in their economic lives” (p905). To North, institutions are the “rules of
the game”. Indeed he goes farther: “institutions must not only provide low-cost
enforcement of property rights, bankruptcy laws, but also provide incentives to encourage
decentralised decision making and effective competitive markets” (1997, p4). Among
“formal rules”, he enumerates the polity, the judiciary, and the laws of contract and
property. These are complemented by what is generally referred to as “informal rules”.
To North, “they are extensions, elaborations and qualifications of rules that ‘solve’
innumerable exchange problems not completely covered by formal rules. . . Routines,
customs, traditions, and culture are words we use to denote the persistence of informal
constraints” (1997, p4). Williamson defines the concept of “societal embeddedness” as
“antecedent to the polity and refers to societal features (norms, customs, mores, religion)
which differ among groups and nation states and operate as societal supports, or lack
thereof, for credible contracting” (1998, p77). Indeed von Hayek (1945) collectively
described conventions, “as part of cultural evolution of mankind”.
The informal rules are what in a related branch of literature are known as social capital,
SC (à la Putnam). It would appear that Kenneth Arrow (1970) might have been the first
economist to highlight the role of informal rules as facilitating economic interactions. In a
rather illuminating, though short, section of his 1970 paper on the choice of market vs.
non-market allocation, Arrow remarked that “norms of social behaviour, including ethical
and moral codes”, may be interpreted as, “reactions of society to compensate for market
failures” (p70). Arrow singled out the norm of mutual trust as one capable of serving the
non-market allocative power alluded to above. He noted that “in the absence of trust, it
would have been very costly to arrange for alternative sanctions and guarantees, and
many opportunities for mutually beneficial co-operation would have to be foregone”
(ibid. p70). In this context, one may recall the focus given by Putnam (1993) and others
on trust as a primitive but powerful example of social capital.
It must be clarified here that Arrow focused on only an essential aspect of the benefit of
social norms, namely that relating to “improving the efficiency of the economic system
(in the broad sense of satisfaction of individual values) by providing commodities to
which the price system is inapplicable” (p71). Indeed, he believed that “there is a whole

166
set of customs and norms” which would allow a similar interpretation.
Civil society, we note, are voluntary associations of individuals (much like Putnam’s
amateur choirs) designed to interact socially, which may have an avowed mandate to seek
certain economic or political benefits (e.g., fair local elections) for the benefit of its
members (and due to externality, other non-participants). The chosen means of behaviour
is non-market, typically lobbying and networking. These may well be activist groups. But
essentially, while the nuances vary, it is civil social capital (see Collier) by another name.
Hence our view of informal institutions would also encompass the civil society
interventions.
(c) Properties of Formal and Informal Rules: First note that discussion by both Arrow and
North suggests that formal rules by themselves may not suffice. Leibenstein, who also
contributed to this literature echoes: “the market exists as a powerful co-ordinating
mechanism, but only when supported by other co-ordination mechanisms of a non-market
character” (1984, p75). Matthews (1986) points out why this is a plausible view; playing
by social norms do not typically incur formidable transaction costs. 56 By contrast, to
TP PT

focus on formal institutions, Coase (1960) had maintained that any complete system of
rights was in principle capable of leading to Pareto efficiency. Here completeness is
defined where all rights and benefits are attributed to someone, and these rights were
fully tradable. Clearly transaction costs (chiefly in political markets) may render the
observed system of rights incomplete. Hence the norms and conventions may be seen as
alleviating market failure; in their absence, market failure would have been a more
pervasive phenomenon than it already is.
It is therefore interesting to observe that the norms of society, while costly to achieve and
perhaps to modify, provide for low cost transacting once these are in place. Arrow had
observed “the arrangement of these agreements and especially their continued extension
to new individuals entering the social fabric can be costly” (p71). Kaufer (1984) notes a
likely rationale for the costs; norms and conventions arise as the result of human action
but not of human design. And, perhaps as a way out of the costly co-ordination
mechanism, “as an alternative, society may proceed by internalisation of these norms to
the achievement of the desired agreement on an unconscious level” (Arrow, ibid. ).
The emphasis by Collier and sociologists that social capital arises out of non-economic
interactions is not of consequence when one judges the efficiency of an allocative device.
The benefit of social interactions, an economic externality, fulfils a hitherto unsatisfied
demand. Thus it is now abundantly clear that SC does help in overcoming market failure,
and hence it is very much a part of the institutions that lower transaction costs (à la
North) either by rendering market transactions feasible (as in Leibenstein) or by
providing a non-market medium of exchange. At one level, therefore, this is a rather
interesting dimension of the externality issue, albeit with a happy outcome, namely that a
non-market allocation may become feasible (and thus overcome market failure).

56
TP If all agents perceive their personal gain from following a convention, then compliance would
PT

not require any monitoring.

167
(d) Governance: Williamson (1998) offers the following interpretation of the linkage
between the concepts of “institutions” and “governance”. If institutions are seen as laying
down the rules of the game, governance, on the other hand, conducts the “play of the
game”. However, the plays must also be governed by means of rules or institutions,
hence the usage of the term “governance institutions”. Not only are rules needed ex ante,
one also has to monitor the ex-post performance, and make up for any necessary
restitution. 57 We have already noted the incompleteness of the system of property rights
TP PT

introduces an element of tension in an exchange. Another area of potential conflict is that

the allocation of authority embodied in a contract, and consequently the distribution of
payoffs need not be symmetric (chiefly due to asymmetric asset specificity) among the
parties involved (Matthews).
Williamson expands on this theme. He views governance as “the means by which order is
accomplished in relation to which potential conflict threatens to undo or upset
opportunities to realise mutual gains” (p76). Conflicts in exchange may occur due to asset
specificity of agents (“bilateral dependency”) or wherever contractual hazards may arise.
He goes on to elaborate that “most of the governance action works through private
ordering, with courts being reserved for purposes of ultimate appeal. . . . Contracts albeit
incomplete, are interpreted in a farsighted manner, . . Economic actors…perceive
potential hazards, and embed transactions in governance structures that have hazard
mitigating purpose and effect” (ibid. ).
The scope of “governance” as construed by Williamson is both broad and specific. The
broadness is in the inclusion of all means of keeping the ball in play, private and
coercive. The notion is restrictive in that it accords to conflict resolution among private
parties to an exchange contract. For instance, firms are viewed as a “governance
structure” here. In the more applied context, say economic development, the term
virtually focuses on actions within the public domain and those carried out by the
processes and institutions deliberately designed by the polity to safeguard the rights and
obligations of individual and groups in private as well as other exchanges. Examples of
the latter would include exchanges between private parties on the one hand, and
government bodies (including the state-owned enterprises), corporations, NGOs and civil
society, on the other. Consequently, the domain of governance for our purposes is
extremely broad and would cover all that the polity has committed to deliver (from
provision of law and order to regulation of monopolies, basic rights and freedom,
including rights to information relevant to private decisions as in health matters). The
quality of governance then has to be measured by how well the polity has performed in
the execution and monitoring the institutions and remedying the losses appropriately.
It is important to recognise that governance as construed here must extend to the role of
norms and conventions. Clearly some of the latter institutions may not be formally coded

57
TP Thus property rights (e.g., relating to arable land) coded in legal statutes and the designation of
PT

the judiciary to safeguard the same would be part of the formal institutions. Social norms may also
help in sustaining the rights by aiding courts (via witnesses) or otherwise. Governance would
involve in evaluating how well the judiciary has fulfilled the mandate, and in monitoring the
process of any restitution.

168
in the laws of society and hence unenforceable by the polity. However, human interaction
may evolve in delivering an informal structure of governance that, for example, carried
out by a village arbitration body (however loosely defined). The latter would work so
long as both parties in a conflict agree to abide by the verdict or face social sanctions,
even whence none of which (the verdict nor the consequent sanctions) may be part of the
formal legal statues of the land. Again the adequacy of these informal governance
structures may be judged in similar terms as they apply to the case of governance of the
formal nature (either stipulated in private contracts or in the public domain).
It may be noted that North’s characterisation of the institutional requisites of low cost
transacting calls for a large menu. From transparent lawmaking as well as its
enforcement, one may articulate the need for political (and fiscal) decentralisation,
intervention in factor and capital markets to make them perform more efficiently (i. e. ,
competitive), and seek means of weakening the rent seeking interest groups. Was one to
embrace these all as equally desirable, both the range of institutions (rules) and of
governance mechanisms (conduct of the game) widen considerably. By contrast, much of
what goes under the rubric of “governance’ in current economic development parlance is
clearly selective. In principle, however, the performance of the entire set of institutional
elements aimed at lowering the transaction costs would be the conceptual benchmark for
"governance". And it is this totality of institutions (both rules and conduct of the game)
that we shall refer to as the institutional capital of a society.
We shall argue that a poorly functioning system of formal institutions (say, due to the
inadequacy of the set of rules and/or of governance thereof) can lead to a loss or
weakening of the social capital embedded in various institutions, formal and informal. Or
worse, it may induce the formation of a variety of social capital that generates negative
externalities. Negative externalities can arise, for example, when collusion among (local)
government officials, business lobbies, and their minions enable them to control the
bidding for government contracts, interfere with the delivery of social spending programs
(e.g., health and education) and/or to disrupt NGO activities in health, education and
micro credit. The primary goal of these alliances may be to engage in rent seeking in
general and possibly further political goals in the process. Of course, the latter alliance is
an extreme form of corruption, and can operate at all levels of society, if purposely
patronised by elected officials along the chain. These alliances effectively endow society
with social capital of a negative variety, and may even destroy “good” social capital that
may be embodied in extant alliances represented by groups such as teachers’
associations, gender based activist groups (including NGOs), doctor’s groups, chambers
of commerce, small trade lobbies, farm lobbies, consumer groups, and others.
(e) Evolution of Institutions and Economic Growth: Given that informal institutions (e.g.,
of the social capital variety) seem to evolve rather than being designed by man, it
becomes inherently difficult to explain how changes occur over time. While the self-
interests of economic agents may exert some tendencies to “seek out and find
institutional arrangements that are mutually advantageous and to adjust old ones in light
of changing circumstances” (Matthews, p912), this path need not resemble a Pareto
enhancing evolution. North essentially echoes the above view. To him, not only would
the real world institutions be incomplete, their adaptation over time would also remain

169
sub-optimal. He goes on to establish “the incremental character of institutional
change…as a preliminary to showing how such inefficient paths of change can persist
through time” (1989, p665). Among reasons for such an impasse, Matthews identifies the
following: (i) non-benign state interventions, (ii) transaction costs (broadly interpreted),
(iii) inertia (due to costs of co-ordinating a change), and (iv) complexity [due to the
unavoidable inter-twined nature of institutional and non-institutional (e.g., technological)
forces]. As a result the process of adaptation of institutions may mimic a random walk. 58 TP PT

A key ingredient in the analysis of institutional change is that of path dependence59 as TP PT

used by North. The best description of his thesis here is captured thus: “. . If the process
by which we arrive at today’s institutions is relevant and constrains future choices, then
not only does history matter but persistent poor performance and long-run divergent
pattern of development stem from a common source “ (p93, 1990a). In this context,
North distinguishes between the concepts of “stability” and “efficiency” of institutions,
and finds institutions to be generally stable. Stability is explained by the hierarchical
nesting of institutions, where “each level is more costly to change than the previous one”
(p666). The above description applies to both formal and informal rules. Viewed in the
light, persistence or stability does not necessarily make for efficiency. He now gives a
more complete interpretation of efficiency: “efficiency would entail both stability
conditions and institutions that provide incentives to organisations to become more
productive” (666).
However institutions do change! He cites two factors that may influence changes; one is
relative prices and the other change in preferences. 60 Moreover, the agents of change
TP PT

must be political and economic entrepreneurs. If the rules and their enforcement were to
minimise the payoff to opportunism, and induce economic decisions even when
rationality has constraints, mode of behaviour would lead to alteration of both formal and
informal rules. However, one has to stand guard against pitfalls of the process, especially
in the political arena.
Matthews believes it would be hard to do a Denison type of econometrics and isolate the
contribution of institutional capital to growth as distinct from the standard sources. He
does note however that in spite of the inherent confounding of formal measurement, the
qualitative question is more reasonable to pose. He argues that certain forces tend “to
make technological change more difficult than institutional change. For example,
technological change may need to be embodied in expensive capital equipment”. Besides,
the state’s coercive powers do not extend to the laws of nature, “so that there is every
reason to suppose that the state’s involvement serves to speed up and facilitate

58
TP We may also record that Arrow had earlier talked about likely retrogression in the adaptation of
PT

social norms! However, Matthews' remark is general, and thus would apply to all institutions,
including formal ones.
59
TP Schotter’s (1981) observation that conventions that actually emerge depend on history, and that
PT

different histories will lead to different conventions appears analogous to North’s theory of “path
dependence”, except to note that North refers to the totality of institutions not just the informal
ones.
60
TP In the latter instance he cites the abolition of slavery as an example.
PT

170
institutional changes relative to technical change. Sometimes this may be synonymous
with facilitating the emergence of institutions that conduce to economic growth; but
sometimes it may be the reverse. ” (p. 916).
A major verifiable implication of the North-Schotter view of the evolution of institutions,
(namely “path dependence”) is that the past history foretells the kind of institutions one
inherits at any point in time. Consequently, even if any two countries have similar formal
rules (e.g., constitution, parliamentary democracy etc), the informal rules (being slow to
evolve) would make a difference in the economic performance over time. Clearly one
need to reduce the concept of norms and conventions to empirically verifiable analogues
which can then be measured in a quantitative as well as in qualitative terms before being
able to say much. Even among formal rules, the nature of judiciary (which often
depended on the colonial background of the present day developing nations) may be a
relevant factor explaining differences in observed growth. It is also clear that one would
ideally require a large sample of countries to make much of progress on the empirical
validation of such ideas. We do pursue the measurement issues, albeit within the limited
set namely the MENA region, in the next section.
Does the addition of IC shed light into the working of the growth-poverty nexus? Note
that possible linkages may work along different routes; (a) either directly, [e.g., by
affecting both income and the non-income dimensions of poverty] or, (b) by materially
influencing the efficacy of the traditional linkage theories, namely three hypotheses, RLI,
ALG, and LUG? The first linkage, i. e. , part (a) above, is somewhat intuitive, though
possibly poorly documented, at least in any systematic fashion. Many believe that the
peer-monitoring model of micro lending pioneered in BGD succeeds due to the social
capital (e.g., trust within the group, and between the group and the lender) brought about
in an NGO type of setting. Micro lending by essentially NGOs, over and above direct
income gains, may also allow additional benefits in health and education contributing to
alleviation of non-income poverty.
As for the second part, this is complex. One may hypothesise that the growth of the RLI-
sector is facilitated by the fact that the potential workers do not have to relocate far, if at
all, to be engaged in high productivity (vis-à-vis alternatives in the surplus labour farm
sector or in the credit constrained rural informal sector) employment. The proximity to
the home base allows them to draw on the familiar network of social capital (e.g., via the
civil society units). By contrast, such access would be severed were the same individuals
to move to the “city”. However, we are not aware of any detailed study corroborating
such eventualities. Similarly one may also advance that growth in agricultural income
may sustain the RLI sector growth, as the products are more familiar to their perceived
demand, making transactions easier to accomplish. (Clearly this would hinge on the
relevance of the bounded rationality arguments advanced by Williamson and North. ) In
other words, the rural folks do not relate as easily to the attributes of goods produced by
the urban sector. The explanation here is therefore very much an institutional one, i. e. ,
one based on the cost of transactions among different quality of goods produced by
different sectors of he economy.
From our perspectives, the broad conclusion of the preceding discussion is that low cost
transacting is essential for economic growth. Figures 1 and 2 provide a schematic view

171
of the components of IC and of governance institutions, respectively. They also illustrate
the nature of possible interaction among the components as well as with the external
world. In the next section we would enumerate how precisely one may select and
practically measure the indicators of institutional capital.
4. Data and Methodology
Below we deal with the issues of putting the conceptual structure into operation as well
as the empirical questions.
(a) Operationalisation of IC: The empirical analogues of the elements of transactions
costs may be enumerated under three broad headings as follows.
Information and Communication costs: One can estimate the trend in the real costs of
communication, in terms of indicators of the transportation network, especially in the
rural areas and around the main market centres (e.g., major freight terminals, either by the
air, road, railway or waterways). Then there is the telecommunication system, both
wireless and conventional, where the penetration rates (especially rural) may be used.
Spread of information technology may be gauged by variables such as the degree of
computerisation in the public sector and the autonomous bodies, number of diploma
holders of a certain skill level, export value of software from the county and the like.
Decentralisation (especially, fiscal) of government allows rural residents easier access to
local public goods, and this may be viewed as lowering the communication costs than in
a unitary system of government.
(i) Effective Competition: Institutions that may render markets to perform better,
especially the labour market and that for credit are easy to discern. Incentives to job
seeking, training and skill acquisition incentives, easier hiring/firing rules, bankruptcy
procedures, anti-monopoly measures, extent of corruption, independence of the central
bank, the judiciary and the securities commission (SC), prudent central bank supervision
of the banking system are among examples.
(ii) Social Capital: Variables that may reflect the availability of social capital (both
civil and government provided) may be indicated by micro credit availability, density of
NGO and other voluntary agency activities (e.g., NGO and voluntary workers per capita),
and wireless telephony (critical to rural group co-ordination).
(b) Operationalisation of Non-Income Poverty (NIP): Often only a limited number of
variables are explored (Kanbur, 1999). We plan to focus on female education (two
indicators, enrolment and primary completion rate), relative female longevity, and health
status of very young (infant mortality, nutrition, and birth weight). The choice of the
particular elements of non-income human well being is motivated by its comparability
with the list of items enumerated for example by Sen in describing the capability space,
as well as their relative ease of availability. The World Bank’s millennium development
goals embrace many of these, and are readily reported in WDI 2002. See below for
additional data information.
(c) Data Issues: The first task is to compile a comparable data set for the sample
countries. Recall that the study period covers the past two decades (1980-2000). At this
time, and unless expressly stated otherwise, all data used in this paper are taken from
World Bank sources, namely the World Development Indicators database for 2002 as

172
well as the poverty-inequality data obtainable from the poverty monitoring research site
of the bank.
IC: We note that many of the IC ingredients identified above are not available for the
MENA countries. Presently, however, we are led to relying on available data, and in that
context, select four out of six indicators proposed by the WBI project on "Governance"
(WB2002b). 61 The six clusters are motivated to capture three aspects of governance that
TP PT

the authors characterise. First, “voice and accountability” and “political stability” are
intended to evaluate the process by which those in authority are selected and replaced
(media independence is also included here). The second set, “government effectiveness”
and “regulatory quality” represent the “ability of the government to formulate and
implement sound policies” (p7). The final set, “rule of law” and “control of corruption”
relate to the “respect of citizens and the state for the institutions that govern economic
and social interactions” (p6). 62
TP PT

For the present, we have chosen (i) control of corruption and the (ii) rule of law as
measuring the quality of formal institutions, while (iii) political stability/lack of violence,
and (iv) voice and accountability proxy for social capital indicators. 63 We devise the
TP PT

aggregate IC indicator by first assigning a rank (from one to four, the lowest being the
normative best) to the individual country score on each of the four element cited above. The
assignment of ranks is primarily based on the nature of the dispersion in each category,
which differs quite a bit among the four elements, and follow margins that should allow for
a fair degree of measurement errors. Kaufmann and Kraay (2002) have argued that errors
may be inherently built-in by the manner that these are constructed in the first place. The
aggregate is then the sum of the ordinal rank attached to the individual country score on
each of these four components, as seen in Table A. 6. We believe that by using ordinals as
well as by aggregating the four indicators together overcomes the difficulty in creating
confidence intervals using any one indicator. Since a lower value is indicative of higher
quality institutions, we name the index, DIC (“decrease in institutional capital”).
5. Empirical Evidence
(a) Growth Facts: Focussing on annualised GDP growth rates (see Table A1), several
observations follow. Over the reference period, 1980-2000, MENA average growth has
been less than half of the South Asian figure. However, several of the countries
highlighted in this study did significantly better than the average, though none was able
to match the overall South Asian record. While Egypt growing at an average rate of 5 %
has the best record overall, focussing on the decade of the 1990s, Lebanon (6. 0), Yemen
(5. 8), Syria (5. 8) and Jordan (5. 0) had grown rapidly. 64 If we adjust for population
TP PT

61
TP Indeed two papers by Kaufmann et al (1999a, b) elaborate on the ideas and methodology behind
PT

the selection.
62
TP Note that the sense in which the term “governance” is used in the above construction differs
PT

significantly from the NIE concept reviewed above. Indeed one may argue that the WB term
captures aspects of all forms of institutions, not merely those engaged in a monitoring capacity.
63
TP In choosing the above, we follow Ahsan and Oberoi (2003), who leave out of consideration the
PT

two remaining WBI indicators, namely, (v) regulatory effectiveness and (vi) government
effectiveness for the simple reason that they appear a little too broad in scope.
64
TP The Lebanese figure as noted in Table A1 is problematic. It could not have grown at 6 % over
PT

173
growth, then Egypt (net rate of growth being 2. 8 %) alone performs well vis-à-vis the
LMI average of 2. 6 %. Tunisia follows closely at 2. 0 %. Indeed several show negative
net growth, led by Saudi Arabia (-3. 2 %).
In terms of sectoral output, note that agriculture has failed to provide any sustained
pattern of growth. While the decade of the 1980s had been optimistic (growing at 5. 2 %
vs. 3. 2 % in South Asia), agriculture stagnated in the following decade. Several countries
(e.g., Jordan and Morocco) have posted actually negative figures. However, the overall
MENA growth of 2. 6 % in the1990s is not totally out of place judged against a figure of
2. 1 % in the LMI group or 3. 1 % in South Asia. However, given the low share in GDP
value-added (of 14-15 %), the evidence is suggestive of the fact that the agricultural
sector could not have served as the engine of growth in these economies, especially in the
1990s.
Looking at the industry data (inclusive of manufacturing), we observe that the overall
MENA average as reported in the WDI, Table 4. 1 is out of sync with the experience of
the ten sample countries under focus here. The reported average growth of less than one
percent is even worse than that in agriculture vis-à-vis the South Asian/LMI record.
Individual countries such as Egypt, and Tunisia have grown at the rate of about 4. 0
percent. Several more recorded a combined rate of around 3. 0 percent over the 1980-
2000 period. Surely this pales when contrasted with 6. 5 percent in South Asia or 5. 0
percent in LMI. Syria however is an exception here, performing well ahead of the two
comparator groups over the entire period. Overall for the sample however, relative
performance is therefore weak vis-à-vis the comparator groups we have chosen, but not
nearly as dismal as the reported all-MENA average. One bright note is of course the
indication that the 1990s were quite a bit better than the previous decade for the industrial
sector. Egypt, Jordan Syria, Tunisia and Yemen have all performed better than the LMI
group average. The evident diversity both in the structure of many of these economies as
well as their growth performance have also been recorded by other authors (e.g., Ali and
Elbadawi, 2002).
There is evidence that the high industrial growth in South Asia resulted in part due to
rapid growth of the small-scale non-tradable sub-sector. The latter in turn was sustained
by growing indigenous demand arising out of steady agricultural incomes. We do not yet
have access to the composition of MENA industry data into sub-sectors, which prevents
us from saying very much regarding a possible validation of the agriculture led growth
hypotheses that we had discussed earlier. However, given the weak agricultural income
growth, not much can be expected on this front. The former possibly dampened the
overall growth in these economies.
(b) Poverty and Inequality Performance: Here we shall use the income poverty figures
based both on the national poverty line as well as the international measure (i. e. , the WB
guide of two dollars a day). 65 The appendix (Tables A2 and A3) presents the poverty
TP PT

the decade if all constituent sectors grew at much lower rates, even though it has about the highest
share of service in its GDP (at 66 %).
65
TP These measures were introduced in the World Development report of 1990, and the actual dollar
PT

benchmarks are actually adjusted periodically in light of changes in international prices. Thus in

174
performance in the late 1980s and early 1990s. 66 In these tables, we focus on the change
TP PT

in poverty between the two most recent survey dates (a time gap that varies between four
to seven years). 67 As is shown in table A2, poverty declined in Jordan in the 1990s, and
TP PT

over the late 1980s in Morocco and Tunisia. It is also highly plausible that poverty also
declined in the 1990s in Yemen. 68 During the first half of the 1990s, poverty rose in
TP PT

Algeria (though modestly), but by a large margin in the case of Egypt (by over 20 %),
which also had the highest incidence of poverty to begin with. The largest percentage
decline (over the late 1980s) was in Morocco. The poverty gap also rose in Egypt, but
declined everywhere else, and again rather dramatically in Morocco.
We should note that purchasing power (over non-tradables) can vary a great deal among
countries, and hence the $2-a-day (even adjusted for international price changes and
converted to PPP) need not adequately describe the underlying differences in poverty
among countries. For the present group, though, such anomalies are unlikely to be
serious. Hence the dramatic differences in the actual $2-dollar poverty rate for Egypt (at
53 % in 1995) vis-à-vis the rest remain a matter of serious concern. Both Jordan and
Morocco reported poverty rates in the single digit in 1997 and 1990, respectively. Looked
at 2000 per capita income (in purchasing power parity), Egypt, Jordan, and Morocco all
have a figure in the same range (about $3500). Only Tunisia is significantly higher at
$5,700.
Turning now to the national poverty data, we must obviously note that the poverty lines
not being generally comparable across countries, one has to exercise caution in making
inferences. Using corroborative evidence (see Table A3), we conclude that national
poverty has risen between the survey dates in Algeria and Egypt, and rather vigorously so
for Algeria (about 60 % increase). But it declined everywhere else (i. e. , for the sub-
sample of six countries for which we have data). This conclusion is consistent with the
evidence based on the international comparison cited above. Table A3 also reports excess
rural poverty, both absolutely, and as a share of national poverty (for the five countries as
available). Here we observe that in both Egypt and Yemen, there is no real difference;
poverty is evenly distributed between urban and rural centres. But very large differences
persist in Algeria, Morocco and even more dramatically in Tunisia, where the rural
poverty is nearly double that of national poverty. This evidence surely suggests that in the
latter set of countries, policies must be directed for the rural sector job creation and
possibly safety net interventions especially targeted to rural residents.
The overall picture is thus a mixed one; there is strong evidence of poverty having

1993 for example, the values stood at $1. 08 and $2. 15, respectively. The dollar-a-day poverty is
negligible in most MENA countries, and hence we focus on the two-dollar measure. Also note that
we will not distinguish, in spite of its significance, between the $2-a-day poverty figures based on
the income as opposed to consumption data.
66
TP Unfortunately, WB sources do not report any poverty data for Iran, Lebanon, Saudi Arabia and
PT

Syria.
67
TP In the case of both Morocco and Tunisia the latest survey dates to 1990, and hence here we are
PT

forced to explain the poverty performance over the late 1980s, which is quite out of date.
68
TP While actual data appears to missing in establishing the point, the corroborative evidence points
PT

to a drop both in poverty as well as in the poverty gap. See notes under Table A2.

175
worsened over the past decade in Egypt and modestly in Algeria. Poverty has declined in
Jordan, Morocco, Tunisia and Yemen, but for Morocco and Tunisia the data relates to the
second half of the 1980s. Further note that in Algeria, Morocco and Tunisia, poverty is
primarily a rural phenomenon. Using the Gini measure of inequality, we note that
inequality has declined in all five countries (i. e. , all except most likely Egypt), but only
in the case of Yemen has it declined a lot (falling by 57 %).
Before turning to individual country experiences, let us briefly remind ourselves of the
labour market features that were cited above. The salient features appear to be (a) high
unemployment (ranging from 10 to 30 % of the labour force), (b) high share of direct
public employment in whatever employment that is available, and (c) declining real
wages. While the MENA share of public employment (not including the state-owned
enterprises!) is on average 16. 5 %, in Egypt, the figure is 35 %, reaching 50 % in Jordan
and to 60 % in Algeria. Another paper notes that the decline in rural wages has been
largely due to the failure of public sector wages from keeping up with inflation. Very
steep declines are reported for Jordan, Morocco, Egypt, and to a lesser extent Algeria (Ali
& Elbadawi, 2002).
We will now analyse the above evidence in terms of the pattern of changes in inequality,
population growth, and output growth on a country-by-country basis. Starting with
Algeria, we have already noted the modest increase in poverty, though moderated by a
modest decline in inequality. 69 As seen in Table A5, in view of population growth, the
TP PT

net per capita output growth has been marginally below par. Hence it is obvious that
growth did not offer a helping hand in the fight against poverty. Falling inequality was
still not enough to hold the line on poverty. It is clear that absent more vigorous growth,
the welfare of the very poor may only be enhanced by targeted measures, and then again
possibly more in rural areas. A more moderate population growth would also help
matters, especially rurally, if the fertility there were much higher than in urban areas as is
probable.
While rural poverty is much higher than urban, it is the urban poverty that has grown
more in the 1990s (Table A3), and there is evidence that this is largely due to faster
decline in urban pubic sector jobs. Overall, unemployment has been reported at about 20
% in Algeria in the period under review. However, the rise in poverty in this context is
also related to a possible reduction in various transfers and subsidies, i. e. , an overall
tightening of the public purse. Given the moderate level inequality, it would follow that
faster growth (led by the private sector) would have a major impact on poverty and
employment. However an exploration of the sources of poor private investment remains
beyond the scope of this paper.
Turning now to Egypt, we face an apparent paradox, since Egypt had grown the most in
the sample, both with and without the population growth correction. Poverty here remains
high and also grew strongly in spite of growth! Policy issues must then turn on how to
make growth more equalising (or pro-poor). Here the labour market features have to be

69
TP The very high level of national poverty in Algeria must be indicative of a much higher level of
PT

poverty line than the $2-dollar-a-day.

176
noted. While unemployment is moderate at about 10 % (in 1993), a mere 3 % of the
labour force are employed in the formal private sector (El-Mahadi, 1999). Informal
private sector employees 28 % of all employed, the rest being in agriculture and the
public sector. In view of falling real wages, the utmost priority would be in enhancing
productivity all around. Below we return to the human capital arguments related to these
observations. Here and for the whole region, an investigation into the capital market
constraints, the efficacy of the government regulatory apparatus and the overall
institutional framework would be relevant. But most of that is again outside the scope of
this paper, except that we examine some of the institutional aspects below.
El-Mahdi also notes that reduction in food subsidy programs have been the main source
of rising poverty in Egypt in the early 1990s. And poverty here is endemic, not just
located in the rural sector. Given the inability of the public employment to keep up with
inflation, poverty reduction must embrace some form of targeted public distribution, but
clearly this is not a sustainable poverty reduction strategy. However, whatever funds are
being put in this area, it must be ensured that they reach the hardcore poor. Here the
modalities of the distribution programme become relevant (e.g., via NGO/civil society
mediation).
Jordan’s output growth was also poor, where a relatively faster GDP growth was fully
negated by an even faster population growth. Evidently, if the authorities prefer a high
population growth, efforts must be undertaken to foster growth. If the latter were not
forthcoming, population policy would require a rethink. Inequality did however fall, and
in its wake bring about a modest relief on the poverty front. Some of the measures may
have been of the targeted transfer and public distribution variety. Indeed some evidence is
available from various web sources that point out the role of food subsidies, cash
transfers (in the late 1990s), and community based employment programs (of the targeted
type). While these may be necessary in the interim, as noted above, they are not
sustainable in the absence of more vigorous per capita output growth. Further, given the
high share of public employment, a restructuring the labour market and policies
commensurate with that strategy (i. e. more privatisation) are obvious goals to pursue.
The impressive poverty reduction in Morocco in the second half of the 1980s must have
been helped by robust growth in the decade of the 1980s when it grew at a fast clip (5. 4
% per annum) far ahead of the MENA average. Given the moderate inequality of the
region, poverty reduction would be relatively easy, though rural poverty remained
relatively high. Thus one may infer that even fast growth was not able to reach out to the
rural poor. And the reason need not be the absence of public sector jobs in the rural areas,
for at least in the Moroccan case public sector is rather small, indeed smaller than the
average of the region. It would be important to explore the reasons for the persistence of
high rural poverty. Faster growth should have been able to afford public interventions
targeted precisely at the rural poor.
Morocco’s growth has faltered in the 1990s, which must have slowed down the fight
against poverty in the decade of the 1990s. However moderate population growth has
contributed in containing poverty. Note that inequality did not change at all between the
two survey points in time.
Tunisia has grown the most after Egypt, and here the growth momentum was better in the

177
1990s than in the 1980s, a feature also shared by Jordan. Unfortunately the poverty data
only related to the second half of the 1980s. But it is easy to observe that if the lid on
inequality had remained tight, poverty must have continued to decline through the decade
of the 1990s. Here then poverty decline in the 1980s may well be explained by an appeal
both to growth (per capital output growth being still conformably in the positive) and, to
an extent, declining inequality. But as we commented earlier, rural poverty would appear
to be the central issue of concern. Public sector employment is also moderate in Tunisia
vis-à-vis other countries of the region. Rural job creation and transfer programs would
have to go hand in hand to ameliorate the situation. Clearly here past growth has not been
able to address the issue.
Yemen offers an interesting case, where over the decade of the 1990s the economy
(indeed all sectors) grew at a robust pace, but no data is available for the 1980s.
Consequently, we are not sure if there had been much per capita output growth over the
combined period, 1980-2000 as reviewed in Table A5. However, we know that it
witnessed a large decline in inequality. The resulting poverty decline, though not
precisely estimated at this time, must have been substantial, where clearly growth had
perhaps a modest role to play. The reduction of inequality must have been engineered
mainly by pubic policy of transfers and one would suppose (direct?) taxation aimed at the
relatively well off. Indeed the relative income shares of all deciles increased, except for
the top two! Lacking more details of the structure of the Yemen labour and capital
markets, or indeed of the public intervention measures actually in place, would not allow
a much more informed discussion of policies that may generate further poverty reduction.
To summarise the above findings very briefly, we note that over the 1980-2000 period,
there has been little growth in per capita real output in the region as a whole. Major
exceptions were Egypt, Tunisia and Morocco. Population growth over the same period
has been twice the rate of the lower middle income group, which would then stand out as
a factor that slows down the improvement in material living standards. Inequality, while
moderate compared to other regions, there has not been much of a pattern of a decline in
the same except for Yemen and to a smaller degree in Algeria. In such an environment it
then follows that robust per capita growth would be essential to allow sustainable poverty
reduction. Severe weaknesses in the private sector are evident in most cases, except
possibly in Lebanon, Morocco and Tunisia. Addressing the latter would require major
restructuring of the labour market, the quality of training and human capital strategies and
the capital market. What about self-employment? Do local institutions (e.g., credit and
regulations) prevent such opportunities from being realised?70 TP PT

Policies must also focus on the needs of the rural sector, where poverty is more serious
(especially in Tunisia, Morocco and Algeria). We have also noted the scope for a possible
re-design of the delivery of targeted public transfer and distribution measures so as to
render them more effective in reaching the poor.
(c) Non-Income Poverty: Table A4 of the appendix provides a summary of the
performance of the sample countries along the non-income dimensions of well being over

70
TP PT See below for a fuller discussion of institutions.

178
the reference period (1980-2000). Here we have a larger sample of countries. We start
with female primary and secondary enrolment, where there have been sizeable advances
in practically all countries of the region. Lebanon boasts of the best record (100 percent
enrolment), but most countries in this sample exceed the MENA or even the LMI
average. Indeed, in addition to Lebanon, Algeria, Egypt, Jordan, Saudi Arabia, Syria and
Tunisia all appear to have equalled or bettered the LMI average. On the primary
completion rare, an index of the efficiency of the education system, unfortunately no one
exceeds the LMI average, though Jordan comes pretty close. Still the record is most
impressive, except for Morocco (47 % completion rate) and presumably Yemen, where
the information is not complete. Unfortunately in spite of high basic educational skills,
these gains have not translated to success in the job market. Indeed the first entrants into
the labour market appear to be most at disadvantage. 71 One may thus conclude that the
TP PT

human capital that has been produced has not been in demand. It is plausible that the
nature of training and the curriculum has something to do with it, or, as we reviewed
above, that the economy simply has not learned to create jobs, or both. 72 TP PT

Judging by the incidence of low birth weight of babies (1992-98, Table A. 4), the picture
is very mixed. While this is the largest health risk globally (as the World Health Report,
2002, argues), we see that Jordan had the near perfect record, at two percent, while the
MENA and LMI averages were nine and ten, respectively. Morocco, Saudi Arabia and
Syria (in that order) are also ahead of the MENA figure, while Egypt, Lebanon, Tunisia,
and of course, Yemen have a lot of catching up to do.
Turning to infant mortality figures, again there has been a sizeable reduction in all
countries. Here the pattern is pretty much the same as in the low birth weight case. Saudi
Arabia here has the best record, but Egypt, Morocco, and Yemen have substantially
higher incidence than the LMI average.
On longevity, we examine a novel figure. We measure the gender balance, i. e. , the
expectancy of females minus that of males, both as ratio of the similar LMI statistic. The
next column under “life expectancy” expresses the female expectancy only, again as a
ratio of LMI average. The idea here is that the differential longevity is a sign of human
progress, as biologically women tend to live a few years longer than men do. 73 On the TP PT

second of the two indicators, the sample countries do well; indeed most perform as well
as the LMI average. On gender balance itself, there is a significant gap, and only Syria
matches the LMI figure. Similar remarks can be made on child nutrition indicators also
shown in Table A4.
We next focus on the aggregate non-income poverty indicator shown in the last column,
Table A4. This is constructed so as to give equal weight to both heath and educational
indicators, but since there are only two educational items against four in health, we apply

71
TP Ali and Elbadawi (2002) report that nearly 50 % of the unemployed are the first time job seekers
PT

in Jordan, Morocco, and Tunisia. The latter figure rises to 80 % when it comes to Egypt and Syria.
72
TP Ali (2002) does question the quality of education in the region, and cites available writings,
PT

which point to politicisation and a reduced emphasis on critical thinking in the curriculum design
(p32).
73
TP Recall the “missing women” argument advanced by Sen (1999).
PT

179
half weight to each of the latter indicators. Finally, note that the positive indicators (i. e. ,
where the higher figure is more desirable) are added while the negative ones (i. e. , a
higher figure indicating a worse outcome) are subtracted to obtain the aggregate. Here
quite a few countries do better than the LMI average (normalised to 100), led by Jordan,
Syria and Tunisia (in that order). Yemen does rather poorly. Can this pattern be explained
by the per capita income growth and income poverty experience of the region?
Examining Table A5, we see that growth is not much related to the achievement in the
general well-being area, however the level of PPP income does to an extent, though not
quite (which is reported in the table itself). Both Saudi Arabia (in spite of incomplete
information) and Tunisia do rather well and these are the two richest countries in the
sample. Jordan, the leader here actually ranks at number 6 of the ten countries discussed
above. Similarly Syria does well in NIP, but ranks at number 9 on the income scale. One
may relate the rather poor performance of Yemen to its very low level of income,
however (about an eighth of the MENA average). Similarly countries that do poorly in
the NIP category, need not do so merely because the rural areas lack amenities. As Table
A5 shows several of the countries doing well here suffer from high rural poverty (e.g.,
Tunisia), and vice versa for Yemen (i. e. , no excess rural poverty but poor NIP). Below
we examine whether a possible link may exist with the quality of institutions.
(d) The Role of Institutional Capital: First note that the individual IC variables
themselves as well as the aggregate indicator are described in Table A6 (the last five
columns). The actual data is described in the http site referenced below. 74 Based on the TP PT

differences in these indicators between the 1998 and 2001 and their dispersions, we rank
all ten countries on a scale from one to four (around a reasonable confidence band), and
the results are given in Table A6 (the first four columns under IC Indicators).
Political Stability: Most MENA countries are, at least by measured indicators, politically
stable. Tunisia, Egypt, Jordan and Saudi Arabia come out ahead of the pack.
Rule of Law: Jordan and Tunisia appear to beat the MENA average in this category. But
here none is close to the first quartile of the range of figures, i. e. , no one is given the
rank of one (out of four possible ranks).
Corruption: Control of corruption may be seen as helping markets to function (e.g., in the
process of bidding and allocation of public contracts, allocation of public sector
employment, career advancement and the like). Here Tunisia and Jordan come ahead of
others in our sample.
Voice and Accountability: On a global scale, only Jordan breaks out of the pack, but
again none is found in the first quartile.
The last column merely adds up these ordinals, which serves as our measure of aggregate
IC indicator. 75 Can we relate these IC indicators with the pattern of poverty either in the
TP PT

74
TP PT(http://info. worldbank. org/governance/kkz/gov2001map. asp)
75
TP PTFor a more direct measure of social capital, we were expecting to obtain some data on NGO
participation and the access to micro credit for these countries, but it has proved difficult to do so
at this point. It is widely perceived that the viability of micro credit depends in part on the level of
social cohesion. Another observation, already noted above, is that civil society and NGO activities
permit individuals (especially in rural communities) to harness social capital and benefit from it.

180
income/ consumption or in the non-income dimensions? The very small size of the
sample does make it difficult to make any inference based on the presumed association.
In any event, given the available information, and comparing columns 3 and the last in
Table A6, we do not see any plausible pattern. However along the non-income
dimension, we have a slightly larger number of observations. This series appears to relate
to the aggregate IC-indicator to an extent. While estimation with such a small sample is
awkward, we nevertheless ran a few simple regressions attempting to explain the NIP
achievement in terms of both the level of development (measured by the logarithm of
income) and the IC variables. While the logarithm of income is typically significant, the
IC variables, though yielding a correct sign in each case, were not generally statistically
robust.
A summary of the results is outlined in Table 1 below. Note that all IC variables are
measured such that smaller figures denote better outcomes, as was the NIP aggregate.
Hence these coefficients are each expected to be positive (as is the case) while the
logarithm of income is expected to have a negative effect, which is indeed the case.
While the above is highly speculative, nevertheless equation (2) indicates that rule of law
may be closely associated with achievement in the non-income dimension of poverty.
Further once this variable is controlled for, logarithm of income does not exert any
appreciable effect on the non-income well-being measure. Of course one may rightly
propose that institutions also work indirectly by allowing better income opportunities to
be realised, and indeed issues of cause and effect are of vital importance before one can
claim to have understood the process. To attempt to do that would require a much larger
data set, and must be left for another occasion.

Table 1: Explaining NIP

Independent Eq (1) Eq (2) Eq (3) (4)
Variable
Constant 8. 97 5. 79 11. 33 11. 39
(2. 02) (1. 47) (2. 79) (3. 07)
Log Income -2. 14** -1. 61 -2. 47* -2. 80*
(-2. 04) (-1. 78) (-2. 31) (-2. 66)
Aggregate IC 0. 13
(1. 13)
Rule of Law 0. 93*
(2. 31)
Control of 0. 11
Corruption (0. 45)
Voice & 0. 47
Accountability (0. 95)

The latter need not just be in accessing micro credit, more broadly NGO mediation may help in
gaining access to literacy/numeracy skills, health advisories, and more generally in being able to
assert their voice on potential public policy issues.

181
 R-Square 0. 53 0. 68 0. 46 0. 51
(Adj. R-sq. ) (0. 39) (0. 59) (0. 30) (0. 36)
F-value 3. 89 7. 52 2. 93 3. 56
Note: The values beneath the coefficient estimate are the t-value. The single asterisk
denotes a 5 % level of significance (or very nearly so, as for t–value equalling 2. 31),
while the double asterisk indicates significance at the 10 % level.

6. Conclusion
This paper had set two primary goals. First was to review the MENA growth experience
(1980-2000), for the sample of ten countries, and attempt to discern the interface between
economic growth and poverty in terms of the stylised views of growth-poverty nexus
depicted above (section 1). The growth hypotheses in question relate to the significance
of the growth in the high labour intensity sector, the dominant role of sustained
agricultural advances fuelling demand for the non-tradable sector, and finally to the
lagged urban growth via an easing of the urban migration pressures. Our second goal was
to focus on the observed record in both income and non-income dimensions of poverty,
and to reflect on the differences among countries in terms of the underlying institutional
capital. The latter factor, we observed, may directly impact the non-income poverty
performance of a nation, but it may also affect the income poverty profile (directly and
via inducing additional growth).
To date we have been unable to compile the data required to carry out the empirical
analysis with satisfaction. Particularly for the first task, the readily available information
at our disposal is very limited, which allows us only a limited range of observations. We
noted that over the 1980-2000 period, there has been little growth in per capita real output
in the region as a whole. Major exceptions were Egypt, Tunisia and Morocco. Given
Egypt’s clear lead in growth, and presumably with moderate inequality (which is likely to
have increased in the 1990s), one would have expected better poverty performance. By
contrast, Egyptian poverty in the 1990s is the highest in the sample of countries under
review, and it had increased the most it has one of the worst increases in poverty. It is not
easy to explain this phenomenon. The mediocre rating we see of its institutions (Table
A6) may only partly explain the failure. It may also have to do with the modalities of
disbursing transfers and subsidies to the needy. Greater NGO/civil society intermediation
may achieve better targeting and less corruption.
Broadly speaking however, faster growth is necessary for greater poverty reduction. The
scope of redistribution is severely limited in an environment of little real per capita
growth of output. Policies must also focus on the needs of the rural sector, where poverty
is more serious (especially in Tunisia, Morocco and Algeria).
A preliminary analysis of the non-income poverty reveals that while the level of
development (as measured by the logarithm of per capita income in PPP terms) is a
consistent predictor, we find a possible role for the “rule of law” measure as compiled by
the World Bank project on governance. While much too preliminary an observation given
this limited data set, the prominence of institutional variables had been noted in the recent

182
literature on poverty and growth (Ahsan, 2003, Ahsan and Oberoi, 2003, and Rodrik et
al, 2002).
What does this discussion suggest for the direction of future policy insofar as poverty
reduction strategies are concerned? A recent study by Ali and Elbadawi (2002) suggested
that for most of these counties, growth alone will not deliver poverty reduction, and a
dual approach to both distribution and growth were necessary. We should hasten to add
that faster growth is only likely to occur if the private sector were to take the growth
leadership. To the latter end, public policy must ensure that the state undertake the correct
approach to encourage investment in modern skill acquisition and training, maintaining
the stability of the macroeconomic framework, and measures to liberalise the functioning
of the labour and capital markets.
We must also note the potentially important role of institutional variables in the MENA
poverty discussion. Surely higher growth is conducive to poverty reduction, but there is
little automaticity in the process, especially when growth is less than vigorous. We
witnessed the case of Egypt, which having grown the most over the past twenty years
(among the six who reported income poverty figures) performed much poorer than both
Jordan and Tunisia in the battle against poverty. Morocco's predicament, as we see it, is
conditioned both by the anaemic growth as well as the ambivalence of its institutional
capital. It is indeed Algeria and Jordan, who have had no per capita growth over the past
two decades, where one may claim that growth alone is the bottleneck to faster poverty
reduction. Certainly Jordan (along with Tunisia) seems to have as good institutions as any
in the region. In any event, the essential point is that progress on the institutional front is
lacking in many of these countries, and that indeed the latter is likely to be important in
reducing poverty when growth has been less than stellar.

183
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Employment and Productivity. Abt Associates Inc. , Bethesda, MD.
17. Mellor, John W. (2000), “Faster More Equitable Growth: The Relation between
Growth in Agriculture and Poverty Reduction. ” CAER II Discussion Paper No. 70.
(HIID: Cambridge, MA).
18. MENA (2000), Economic trends in the MENA Region, 2000 (www. erf. org. eg/html)
19. North, Douglass, (1989), “ A Transaction Costs Approach to the Historical
Development of Polities and Economies”, J. of Institutional and Theoretical Economics
(JITE), 661-668.

184
20. North, Douglass, (1990a), Institutions, Institutional Change and Economic
Performance, Cambridge University Press.
21. North, Douglass, (1990b), “ A Transaction Costs Theory of Politics”, J. of
Theoretical Politics, 2(4), 355-367.
22. North, Douglass C. (1997): “The Contribution of the New Institutional Economics to
an Understanding of the Transition Problem”, WIDER Annual Lectures 1, UNU/WIDER,
Helsinki.
23. Putnam, R. (1993), Making Democracy Work: Civic Traditions in Modern Italy,
(Princeton)
24. Ravallion, Martin and Gaurav Datt, (1996) “How Important to India’s Poor is the
Sectoral Composition of Economic Growth. ” The World Bank Economic Review Vol.
10, No. 1.
25. Rodrik, D. , A. Subramanian and F. Trebbi, (2002), “Institutions Rule: The Primacy
of Institutions over Geography and Integration in Economic Development”, NBER WP #
W9305, November.
26. Sen, A. K. (1976), Poverty: An Ordinal Approach to Measurement”, Econometrica,
46, 437-46.
27. Sen, A. K. (1999), Development as Freedom, (New York: Knopf)
28. Timmer, C. Peter. (1997) “How Well do the Poor Connect to the Growth Process?”
Discussion Paper No. 178, Harvard Institute for International Development (HIID),
Cambridge, MA.
29. World Bank (2000), Fighting Poverty, World Development Report, 2000/2001.
30. World Bank (2002a), World Development Indicators 2001.
31. World Bank (2002b), World Bank Institute, Governance web site.

185
Appendix
Figure 1: Institutional Capital and Co-ordination Flows

World
History & Knowledge
Social

Evolution of Mutual Recognition and Evolving

Social Polity
Sustenance
Capital and

Evolution of Formal
Institutions: Legal, Political,
Economic and of Go ernance

Coordination
of Economic &
other
E h

Preferences & Technology

Legend:

Dotted Arrow: Inevitable, if informal, process

Broken arrow: Informal linkage
Double-headed arrow informal mutual linkage
(broken)
Solid arrow: Indicates formal linkage
Block arrow: Element of design

186
Figure 2: Governance Structure

Mutual Recognition and

Social Polity
Sustenance
Capital

(Two-way flow)

Bureaucrac
Legal Legal and
y&
Institutions Regulatory
Law

Civil Society

Legend:
Broken arrow: Informal linkage
Double-headed arrow Informal mutual linkage
(broken)
Solid arrow: Formal linkage
Block arrow: Element of design
Double-headed arrow Collaboration mandated
(solid) by polity

Note that even informal interactions between the civil society and the set of social values and norms are
capable of endowing the society with good governance by keeping contests of legal edicts /law enforcement
to a minimum!

187
Table A1: Growth Performance: 1980-2000 (annual average over each decade)

GDP Growth Agriculture* Industry (incl. Services

Country Manufacturing)
1980-90 1990-00 T =1 T=2 T=1 T=2 T=1 T=2
Algeria 2. 7 1. 9 4. 1 3. 6 2. 6 1. 8 3. 0 1. 9
Egypt 5. 4 4. 6 2. 7 3. 1 3. 3 4. 9 7. 8 4. 5
Iran 1. 7 3. 5 4. 5 3. 8 3. 3 -3. 8 -1. 0 9. 2
Jordan 2. 5 5. 0 6. 8 -2. 01. 7 4. 7 2. 3 5. 0
Lebanon# - 6. 0 - 1. 8 - -1. 6 - 4. 1
Morocco 4. 2 2. 3 6. 7 -0. 93. 0 3. 2 4. 2 2. 8
Saudi Arabia 0. 0 1. 5 13. 4 0. 7 -2. 3 1. 5 1. 3 2. 0
Syria 1. 5 5. 8 -0. 6 5. 3 6. 6 9. 9 1. 6 4. 6
Tunisia 3. 3 4. 7 2. 8 2. 4 3. 1 4. 6 3. 5 5. 3
Yemen - 5. 8 - 5. 1 - 7. 9 - 5. 1
MENA 2. 0 3. 0 5. 2 2. 6 0. 3 0. 9 2. 2 4. 5
South Asia 5. 6 5. 6 3. 2 3. 1 6. 8 6. 2 6. 5 7. 1
Lower Middle
4. 1 3. 6 4. 2 2. 1 5. 9 4. 1 5. 5 4. 3
Income
MENA GDP Shares
- - 15 14 39 37 47 48
(Value Added)¤
Source: 2002 World Development Indicators, World Bank, Table 4. 1
* For brevity, the t = 1 denotes the first period, 1980-90, while t = 2 the second decade.
¤ Here period-1 denote the year 1990, while the second period is 2000.
# The Lebanese data is problematic; it could not have grown at 6 % over the decade if all components grew at
much lower rates, even though it has about the highest share of service in its GDP (at 66 %).

188
Table A2: Change in Poverty and Inequality(a): International Poverty Measures
P P

Country (Period) %∆ ($2 Poverty %∆ (Gini)

%∆ (Below $2)
Gap)
Algeria 8. 2 - 0. 001 -12. 7
(1995 – ‘88)
Egypt 21. 1 20. 3 Positive(b)
P P

(1995-‘91) (1991: 32)

Jordan -36. 0 -46. 6 -17. 4
(1997 – ‘92)
Morocco -74. 8 -1. 08 0
(1990- 85)
Tunisia -32. 8 -34. 7 -7. 6
(1990- 85)
Yemen Negative(c)
P P negative(c)
P P -57. 6
(1998-’92)
Source: 2002 World Development Indicators, World Bank, Table 2. 6 and the WB research site on poverty
monitoring.
The figures in this table are the percentage change format, i. e. ; we subtract the earlier headcount poverty
rate from the one for the latest survey date available, and then divide by the average of the two poverty rates.
This corresponds to the “arc measure” of change while the derivative idea applies to infinitesimal changes.
The arc measure is more satisfactory in the present context since some of the changes are indeed pretty large.
Similarly we also calculate the percentage change in the $2-poverty gap and the Gini index.
Give the rise in both poverty and the poverty gap, it is easy to conjecture that the Gini index must have
increased in Egypt as it has for every country in the sample where poverty had risen.
Over the 1992-98 period, there has been marked decline in poverty in Yemen, where by the Gini has declined
from 39. 5 to 21. 8. Income shares of all bottom eight deciles had risen, while the top two had fallen, and
rather dramatically for the top decile.

189
Table A3: Changes in Poverty(a): National Poverty Line
P P

Country %∆ (Urban) %∆ (Rural) %∆ (National) Excess Rural Poverty

[share of National
poverty] (latest year)
Algeria 67. 2 58. 4 59. 7 15. 6
(1995 – 88) [69. 0]
Egypt(b)
P P Positive? Positive? Positive? 0. 8
(1995-96) (22. 5 in 95-96) (23. 3 in 95-96) (22. 9 in 95-96) [3. 4]
Jordan ? ? -24. 7 ?
(1991 – 97) [?]
Morocco -77. 9 -57. 7 -65. 9 10. 4
(1990/91 - 84/85) [79. 3]
Tunisia -29. 6 -29. 9 -34. 1 12. 7
(1990- 85) [90. 0]
Yemen Negative(c)
P Negative(c)
P Negative(c)
P 0. 6
(1998 - 92) (18. 6 in 1992) (19. 2 in 1992) (19. 1 in 1992) [3. 1]
Source: 2002 World Development Indicators, World Bank, Table 2. 6 and the WB research site on poverty
monitoring.
The figures in this table are the percentage change format, i. e. ; we subtract the earlier headcount poverty
rate from the one for the latest survey date
available, and then divide by the average of the two poverty rates. This corresponds to the “arc measure” of
change while the derivative idea applies to infinitesimal changes. Only one survey is available for Egypt.
However we do know that poverty had been on the rise in the 1990s (based on
the international poverty measure reviewed in Table A2).
(c) Over the 1992-98 period, there has been marked decline in poverty in Yemen, as seen in Table A2, which
relied on the
international poverty measure ($2/day).
 192

Table A4: Non-Income Poverty (or, Social) Indicators

Country Female Primary Life expectancy Infant Child Malnutrition

Enrolment (FE)1 P P Completion at Birth (LE), 2000 Mortality (IM) (CM)2 P P

Rate, PC
1990 1998 LMI (female) Gender LMI 2000 LMI 1990 2000 LMI
Ratio(c)
P P 1992-2000 Balance RatiodP P Ratiod P P Ratio(c
P

(LMI Ratio) RatioeP (female) )

P

Algeria 80 91 103 88 (88) 80 102 39 95 9 13 118

Egypt 78 88 100 75 (75) 60 97 52 126 10 4 36
Iran 80 - 97 89 (89) 40 100 41 100 - 11 100
Jordan 93 96 109 - (a) (98)
P P 60 104 30 73 6 5 45
Lebanon - 100 113 70(b) (70)
P P 60 101 30 73 - 3 27
Morocco 58 79 89 47 (47) 60 97 60 146 10 - 55
Saudi 82 89 101 69 (69) 60 105 23 56 - - -
Arabia
Syria 82 88 100 86 (86) 100 101 29 70 - 13 118
Tunisia 82 93 105 90 (90) 80 104 30 73 10 4 36
Yemen - 47 53 - 20 81 95 231 30 46 418

MENA 79 84 95 80 (80) 60 98 54 131 - 15 136

LMI 82 88 100 99 (100) 100 100 41 100 18 11 100
Source: World Development Indicators, 2002, Tables 1. 2, 1. 5, 2. 13, and 2. 20, except as noted below. All
ratios have been multiplied by 100.
1: Ratio of female to male enrolments in primary and secondary school.
2: Child malnutrition measure of weight for age in children under five i. e. , those below two s. d. of the
median of the reference population (WHO statistic).
3. The birth weight figures are taken form different issues of World Development Indicators, Tables 2. 17
(2000) and 2. 18, 2002.
4. Here we add the scores on the first three ratios (last column under each heading) and subtract the last three,
but the four health indicators are each given a half weight.
(a): No recent figure is available, but in the early 80s, this was about 98 percent, which is used in computing
the ratio.
(b): The Lebanese figure is for all students, no gender specific figures are available.
(c): The 2000 (1998) figure as a ratio of the similar statistic for LMI group of countries; where the latest
figure is missing we compute the ratio for 1990 instead.
(d) The LMI average for longevity as of 2000 had been 69 years.
(e) Here we look at the gender difference as a ratio of LMI difference (which was 5 years, i. e. , 72 vs. 67
years).
(f) Here the ratio is the available LB figure as a ratio of the 1992-98 average for LMI obtained from 2000
WDI.
(g) If we let the LMI figure stand here for the missing category, the indicator would be 179. The actual figure
may well be higher.

192
Table A5: Poverty Comparison (Income and Non-Income)

Indicators → Annual Growth,

Population Per capita Change in Income Excess Rural Aggregate
Growth Growth Poverty Poverty Poverty In
Country ↓ 1980-2000 ( %)
(1980-2000) (1980-2000) (a) (b) (c)
Algeria
2. 3 2. 4 -0. 1 small increase High 91

Egypt
5. 0 2. 2 2. 8 large increase Negligible 83

Iran
2. 6 2. 4 0. 2 ? ? 86

Jordan
3. 8 4. 0 -0. 2 Decrease ? 190

Lebanon
≥ 3. 0 1. 8 ≥ 1. 2 ? ? 89

Morocco
3. 3 2. 0 1. 3 Decrease High 64

Saudi Arabia 170 less

0. 8 4. 0 -3. 2 ? ?
CM(g) P P

Syria
3. 7 3. 1 0. 6 ? ? 118

Tunisia
4. 0 2. 0 2. 0 Decrease Very high 113

Yemen
≥ 2. 9 3. 6 ≈0 Decrease Negligible Negative

MENA Group
2. 5 2. 6 -0. 1 ? ? 46

LMI Group
3. 9 1. 3 2. 6 ? ? 100
Source: Tables 2. 1 (WDI 2002) plus the preceding tables A. 1, A. 3, and A. 4. The ordinals in the last four
columns are derived
from the unadjusted (for any confidence interval) figures given in Tables A. 5 an A. 6, while those in the
third column are implied
by Table A. 3 as well as the related discussion available online at the WB site on poverty.
Using the international measure, see Table A2.
Using national poverty data. Table A3, last column.
Last column of Table A4 above.
 194

Table A6: Poverty and Institutional Capital

Indicators → Per capital Annual Income/ Non-Income

Growth Ordinals Consumption Indicator(c)
P P
Institutional Capital Indicators(d)
P P

1980-2000(a)
P P Poverty
Performance(b)
P P

Political Rule of Control of Voi

Country ↓ Law
Stability Corruption Acc
4
Algeria 4 3 3 4 4 4
Egypt 3
1 4 3 2 3 3
Iran 3
3 ? 3 3 4 3
Jordan 2
4 2 1 2 2 2
3
Lebanon 2 ? 3 4 4 3
Morocco 3
2 1 4 3 2 3
Saudi Arabia 3
5 ? 2 2 4 4
3
Syria 3 ? 2 3 5 4
2
Tunisia 1 2 2 1 1 3
4
Yemen 3 3 5 4 4 3
Source: (a) This ordinals in this column are based on column 4 (Table A. 5).
This column of ordinals is based on columns 5 of Table A5.
This column is based on the last column of Table A5 (see also Table A4).
The figures in the last five columns are based on material available at the WBI site on "Governance". The
first four to these columns provide a rank on a 1-to-5 scale (1 begin the best) of the country score available
form the WB site. These scores are expressed as deviations around the mean. The final column is a summary
of the rank pattern of individual categories.

194
Fukuyama’s Dream, Huntington’s Nightmare and a Grassroots Reverie76 TP PT

David Skidmore

For more than a decade now, various thinkers have sought to define the nature of
the post-Cold War international order. What is its structure? What are the characteristic
lines of conflict and cooperation? What are the driving forces of change? Much of the
ensuing debate has focused on the phenomenon of globalization. While no consensus
view has emerged, one thing seems clear: the convergence of the Cold War’s demise with
the growing political, economic and cultural integration of the world has touched off a
struggle among varied actors, including states, global corporations, terrorists,
international drug cartels and transnational social movements, over who gets to define the
terms of a new global order. More difficult to foresee is where this struggle will lead -
toward a world of greater peace, justice and cooperation or one of violence, inequity and
conflict.
This essay discusses and critiques three positions in the recent debate: liberal
universalism (Fukuyama’s dream), cultural dystopianism (Huntington’s nightmare) and
grassroots globalism (a grassroots reverie). Each represents both a vision of the future
and a blueprint for action. Each perspective is rooted in a longstanding tradition of
thought and action. Each will be analyzed here with respect to a representative text.
Liberal Universalism
Perhaps the best-known representation of the liberal universalist vision is Francis
Fukuyama’s widely discussed essay, “The End of History,” which appeared in 1989 and
was later expanded into a book (Fukuyama, 1989, 1992). Although the fall of the Berlin
Wall was still months away, Fukuyama anticipated the end of the Cold War and sought to
understand its meaning. For guidance, he looked to the 18th and 19th century German
P P P P

philosopher Geog Wilhelm Freidrich Hegel. Hegel believed that history was driven by
the clash of ideas. The search for a social order structured around the principles of pure
reason provided a deeper meaning to the disordered jumble of daily events. For
Fukuyama, the end of the Cold War represented the final destination in that search for
universal reason. The victor in the Cold War was not the United States, but the ideals
represented by liberal democratic capitalism. In Fukuyama’s own words: “What we may
be witnessing is not just the end of the Cold War … but the end of history as such; that is,
the end point of mankind’s ideological evolution and the universalization of Western
liberal democracy as the final form of human government (Fukuyama, 1989). ”
As a blueprint for social order, liberalism rests upon two pillars: democracy in

76
TP This essay is adapted from the 2002 Stalnaker Lecture, delivered by the author on September,
PT

25, 2002 at Drake University in Des Moines, Iowa, USA.

 196

the political sphere and market capitalism in the economic sphere. Democracies offer the
benefits of popular sovereignty, individual rights, rule of law and representative
government. Markets offer the most efficient mechanisms for allocating resources toward
human wants. Fukuyama argued that the combination of democracy and market
capitalism had, over the course of two centuries, proved superior to and overcome a
series of competing social orders. Feudalism, fascism and communism had each in turn
been vanquished by liberalism and its defenders. With the end of the Cold War, there
remained no competing ideology of universal scope to challenge the hegemony of
liberalism. Although the everyday flow of human events would continue, History with a
capital H as the human search for the most ideal social order had reached its end.
The consequences of this development for international relations would be
profound. Following earlier thinkers such as Immanuel Kant (1983), Norman Angell
(1972) and Woodrow Wilson, Fukuyama argued that liberalism offered a solution to the
age-old problem of war. 77 In a liberal world, commerce replaces conquest as the surest
TP PT

route to prosperity. Sharing common norms and institutions, liberal democracies resolve
conflicts through diplomacy, a growing body of international law and the establishment
of multilateral institutions. Fear and rivalry give way to trust and cooperation. A liberal
world would be a peaceful world. This is Fukuyama’s dream: the universal victory of a
rational liberal social order.
Cultural Dystopianism
In the wake of 9/11, Fukuyama’s assumptions about the universal appeal of liberal ideas
might now appear more like wishful thinking than a realistic appraisal. In fact, as pundits
sought to make sense of the terrorist attacks on New York and Washington, D. C. , many
turned to another thinker whose perspective on the post-Cold War order serves as a polar
opposite to that of Fukuyama. In 1993, political scientist Samuel Huntington published an
essay titled “The Clash of Civilizations. ” This rather terrifying label aptly characterized
the pessimistic prophesies that Huntington offered within his article and subsequent book
(Huntington, 1993, 1996a, 1996b). Yet the phrase itself was borrowed from historian
Bernard Lewis, who wrote of a coming “clash of civilizations” in his essay “The Roots of
Muslim Rage” that appeared in 1990. 78 Both Huntington and Lewis hark back to an older
TP PT

tradition associated with thinkers such as Oswald Spengler (1991) and Arnold Toynbee
(1987) who each viewed history through the prism of the rise and decline of competing
civilizations.
Huntington’s dystopian vision posits that the principle political cleavages of the
post-Cold War world will center along the fault lines dividing civilizations from one
another. Although states will remain the central actors in world politics, the alliance
behavior of states will be largely dictated by civilization politics. Similarities and
differences in core cultural values will serve as the main litmus test for distinguishing

77
TP See Doyle (1986) for a discussion of the liberal tradition in international politics.
PT

78
TP Robert Kaplan (1996) offers a somewhat similar vision, arguing that the forces of fragmentation
PT

are likely to overcome the forces of integration in world politics. Benjamin Barber (1995)
contrasts “Jihad” versus “McWorld,” while emphasizing the interrelated nature of the two sets of
forces.

196
friend from foe. Unity among countries sharing the same overarching cultural values and
commitments will rise while conflict across civilization boundaries will grow. Fault-line
wars along the borders where civilizations come into contact will threaten to expand
through “kin country rallying. ”
While the clash of civilizations will be multifaceted, the most important dividing
line will separate Western societies from the competing civilizations that Huntington
identifies. Western cultural penetration and political domination has prompted both
resentment and heightened attachment to non-Western cultures in other parts of the
world. At the same time, the declining relative economic and demographic power of the
West will bring growing political challenges to Western hegemony on the part of rising
states representing rival civilizations. The result will be heightened civilization-
consciousness among non-Western societies. The continued pursuit of technological and
economic modernization will be accompanied by efforts to resist cultural Westernization
and restore traditional values.
Huntington’s thesis can best be characterized as “The West against the Rest. ”
Most significantly, Huntington predicts a future anti-Western alliance uniting the
growing power of China with the rising fundamentalism of the Islamic world. Huntington
rejects the idea that globalization will lead to cultural convergence and holds out little
hope that cultural conflict can be dampened through multiculturalism or other efforts to
foster mutual understanding. The best hope for peace is the possibility that a stable
balance of power among the major civilization blocks might deter aggression. For this to
happen, however, the states and peoples of the Western world must recognize and unite
together against the external dangers that they face. Thus Huntington offers us a stark
nightmare: a violent world of seething cultural conflict and hatred.

Grassroots Globalism

Our third global vision, which I label grassroots globalism, rests upon a
distinction between globalization from above and globalization from below. According to
this view, globalization has thus far been a top down process managed by corporate elites
and their political allies. The results have been predictable: a proliferation of third world
sweatshops, corporate pillaging of the environment, the growing international
indebtedness of poor states, a weakening of social safety nets and the creation of
increasingly powerful global regulatory institutions that serve the interests of capital
without democratic oversight (Brecher and Costello, 1998; Greider, 1997).
The antidote, from a grassroots globalist perspective, is globalization from
below. This project involves forging ties of transnational solidarity among citizens of
different countries to serve as a counterweight to the power of corporations and states.
The ultimate objective is the creation of a global civil society based upon voluntary,
transnational networks of individuals and groups seeking to realize common interests and
values (Brecher, Costello and Smith, 2000).
The best discussion of this vision can be found in a book by Margaret Keck and
Kathryn Sikkink titled Activists Beyond Borders (1998). Keck and Sikkink trace the
historical development of transnational social movements back to their origins in the 19th P P
 198

and early 20th centuries, when causes such as opposition to slavery, the struggle for
P P

women’s voting rights and the campaign to end foot-binding in China brought together
reformers from various countries. More recently, the social and cultural changes of the
sixties served to launch the contemporary peace, environmental, human rights, women’s
and indigenous people’s movements. Over the past two decades, lowered barriers to
communication and travel have allowed these nationally-based social movements to link
up with one another while globalization and the increasing significance of international
institutions have provided the necessary incentives to do so.
The result has been the emergence of a potent transnational force for global
reform. Grassroots globalists seek not to reverse globalization, but to redirect it along
lines that are more democratic, more inclusive and that serve a broader range of interests.
Grassroots globalism offers a vision of bottom-up, multicultural populism.
Critique of Fukuyama
Which of these global visions holds the most descriptive and explanatory power
as we try to understand the present and future evolution of the international system?
Fukuyama’s liberal dream certainly seems plausible. History itself has shown the
advantages of liberal democratic capitalism over fascism or communism. Globalization
has been driven by the rush of countries everywhere over past two decades to privatize
state-owned industries, deregulate their economies and remove barriers to trade and
investment. A truly global marketplace appears within reach. The recent wave of
democratization has spread across Latin America, the former Soviet bloc and parts of
Africa and Asia. From a handful of countries fifty years ago, more than sixty percent of
the world’s people now enjoy democratic government – the highest proportion ever
(Diamond, 1993). Research into the so-called democratic peace thesis has confirmed that
democracies rarely if ever go to war with other democracies. Scholars have also found
support for the claim that higher levels of economic interdependence are associated with
a lower incidence of war between nations. 79 TP PT

And yet, from our vantage point a decade after Fukuyama’s book appeared, it is
difficult to sustain his optimistic perspective on liberal universalism or his estimate of its
staying power. Critics have pointed to many shortcomings of the liberal worldview,
including the wretched environmental consequences of the liberal faith in unlimited
economic growth and the threat that commercialism and westernization pose to cultural
diversity. Perhaps most damning, however, is evidence that the globalization of market
capitalism is producing growing economic inequalities within and among nations while
concentrating political power in the hands of those who control a small group of global
corporations. This reality threatens to produce rising social instability while corrupting
democratic processes of government. In response, new forms of resistance to
globalization and its inequitable consequences have arisen, as evidenced by the street
protests first witnessed at the 1999 World Trade Organization (WTO) meeting in Seattle
and since then at virtually every major global meeting of political and economic leaders.

79
TP The literature on this topic is large, but Russett (1993) and Brown, Lynn-Jones and Miller,
PT

(1996) may serve as representative examples.

198
 This populist backlash against globalization and its consequences is already forcing a
rethinking of liberal assumptions and values.
The reconcentration of wealth and power at the national and global levels began
in the late 1970s. Figures for the United States illustrate a pattern that is beginning to
emerge in other developed countries. In his book, Wealth and Democracy (2002: xiii,
114, 125, 137, 153), Kevin Phillips cites the following data:
• From mid-1970s to mid-1990s, the top 1 % of income earners captured 70 % of
all income growth; real income rose 72 % within this small group while falling for the
bottom 60 % of the income distribution.
• If we examine overall net worth rather then income, an even more startling
picture emerges: between 1982 and 1999, the net worth of the 400 wealthiest Americans
grew by 500 %; the same figure for the top 1 % of wealth holders was 75 % real growth
while the net worth of those located in the middle of the distribution fell by 10 % over
this period.
• As a result of these shifts, the share of household wealth belonging to the top 1 %
doubled from 20 % in 1976 to 40 % in 1997.
• In 1968, the ratio of average CEO total compensation to the average annual pay
of hourly production workers was 25-1. By 1999, the gap had risen to 419-1.
A similar pattern is evident at the global level. The gap between the rich
countries of the North and the developing world has grown over the past two decades
(Milanovic, 2002b). The major exceptions are in Asia, where China and a handful of
other countries in the region have experienced rapid growth rates. Even here, however,
the catch-up effects are mitigated by the facts that internal inequality has grown rapidly in
China during this same period, while the 1997 Asian financial crisis and its after-effects
have stolen back some of the earlier gains made by a number of Asian developing
countries. The United Nations Development Programme reports that “The income gap
between the fifth of the world’s people living in the richest countries and the fifth in the
poorest was 74-1 in 1997, up from 60-1 in 1990 and 30-1 in 1960 (Human Development
Report, 1999: 3). ” Over a longer time period, the growing gap between rich and poor
nations is captured in the fact that in 1870 average GDP per capita in 17 wealthiest
countries was 2. 4 times that of combined average for all remaining countries; by 1990,
the ratio had grown to 4. 5-1 (“Survey of the 20th Century,” 1999: 27).
P P

Whether in absolute or relative terms, the global gap in income, wealth and standards
of living is alarming:
• High income countries comprise 20 % of the world’s population, but account for
86 % of world income, 82 % of world exports and 68 % of direct foreign investment
(Human Development Report, 1999: 3).
• Among 4. 4 billion people in developing world: 3. 5 billion live in communities
lacking basic sanitation; 1/3 lack access to safe drinking water; 1/4 lack adequate
housing; 1/5 are undernourished (Speth, 1999: 14).
• In the past 15 years, per capita income has declined in more than 100 countries
and individual consumption has dropped by about one percent annually in more than 60
(Speth, 1999: 13).
 200

Why has inequality increased so much in recent years and what are the possible
consequences? To answer these questions, we have to examine how globalization has
historically altered the balance of power among various social forces in the global
economy. Ours is not the first era of globalization. The free market liberalism of the late
19th century produced levels of international economic integration rivaling those of today.
P P

Yet the laissez-faire policies of that period were accompanied by growing inequality,
imperialism, the concentration of industry and intense class conflict. This first liberal
order proved unsustainable and ultimately collapsed, ushering in a half century of war,
revolution, nationalism and economic instability.
A second liberal international order emerged from the ashes of World War II. Its
architects sought to avoid the mistakes of the 19th century. The great social theorist Karl
P P

Polanyi (1944: 249) attributed the collapse of the first liberal order to “the conflict
between the market and the elementary requirements of an organized social life. ”
Liberals of the post-World War II era had no intention, of course, of abandoning the
market or international economic exchange. They did, however, seek to circumscribe the
social space in which markets, both domestic and international, operated and to embed
the market in a social compact among the state, capital and labor. Capitalism had to be
tamed to render it compatible with social peace and international stability. 80 TP PT

Domestically, the post-war order was built upon social democracy, which
entailed Keynesian macroeconomic management, the creation of the welfare state,
progressive taxation, public ownership of key industries, regulation of big business and
recognition of labor unions and collective bargaining. Internationally, a commitment to
multilateralism and the gradual lowering of trade barriers was coupled with mechanisms
designed to insure against the transmission of negative economic shocks from one nation
to another, including exchange controls, protection for strategic and politically sensitive
sectors, restrictions on international capital flows and safeguards against import surges
that threatened established national producers. These arrangements created the basis for a
substantial degree of class peace, social stability, economic growth and the consolidation
of liberal democracy in the advanced industrial world.
The post-war order depended, however, on the maintenance of some degree of
national economic autonomy, particularly in terms of financial flows. The economist
John Maynard Keynes argued that social democracy was compatible with free trade, but
not with the uncontrolled flow of capital across national borders, which undermined state
control over a country’s macroeconomic fundamentals. 81 Yet large corporations and
TP PT

banks chafed at the restrictions on their freedom to invest abroad. When the economic
troubles of the 1970s hit, business argued that it was time to unleash capital from the
confines of the national market and loosen the regulatory grip of states.

80
TP This paragraph and the next two draw upon arguments found in Ruggie (1983).
PT

81
TP Once the Second World War was concluded, Keynes feared that: “Loose funds may sweep
PT

round the world disorganizing all steady business. ” To obviate this possibility, Keynes felt that:
“Nothing is more certain than that movements of capital funds must be regulated; - which in itself
will involve far-reaching departures from laissez-faire arrangements. ” Cited in Moggridge (1992:
673).

200
 The elections of Ronald Reagan and Margaret Thatcher in the early 1980s
ushered in the transition from social democracy to neo-liberalism. Under neo-liberalism,
the role of the state has shrunk and national economic autonomy has given way to
globalization.
The political effect of this development has been to disrupt the social pact that
lay at the core of the social democratic order (Ruggie, 1994). The balance among the
state, labor and capital has shifted decidedly in favor of the latter. With capital controls
and other sorts of restrictions lifted, capital has become internationally mobile to a greater
degree than ever before. The same is not true of labor, whose movement across national
borders remains heavily regulated, or of states, which remain territorial entities. The
unilateral capacity of capital to exit the national economy produces an asymmetry. As
capital is a key ingredient of economic growth, business can pit workers and states in
different countries against one another in a bidding war for investment. As a result, labor
movements everywhere have lost clout and the ability of states to regulate capital in the
public interest has been compromised (Andrews, 1994).
In the United States, for instance, organized labor today represents only about 14
% of the labor force as compared with 35 % in the mid-1950s. A Cornell University
study recently found that 62 % of labor organizing drives prompted threats by business
owners to relocate production to low wage countries (Phillips, 2002: 264). The threat of
exit has also allowed corporations to win concessions from governments. Across the
industrialized world, average tax rates on capital declined from 42 % to 33 % between
1986 and 1995 while taxes on the income of middle class workers grew dramatically
(“World Economic Survey,” 1997: 33). In the United States, the share of federal revenue
accounted for by corporate taxes fell from 26. 5 % in 1950 to 10. 2 % in 2000 (Phillips,
2002: 149).
It is not surprising then, that the current era of neo-liberal globalization has seen
the returns to capital rise and those to labor decline, producing unprecedented levels of
inequality, both within particular nations and globally. Between 1987 and 1995, for
instance, average productivity in the American economy grew by 15 %. Yet during the
same period, pre-tax corporate profits grew 80 % while hourly wages in private industry
grew by only 3 % (Phillips, 2002: 156). Increased inequality might be tolerable if it were
accompanied by increased rates of overall economic growth. In fact, however, economic
growth rates have been lower over the past two decades than in the preceding two
decades almost everywhere. 82 Financial liberalization has also produced greater
TP PT

economic instability, particularly in developing countries, where repeated financial crises

have rocked the economies of Latin America, Africa and Asia.
The spread of democracy over the past two decades has been a welcome
development, but some have described the new political regimes that have arisen in many
developing countries as “low intensity” democracies. In Latin America, for instance, not
only have neo-liberal reforms enfeebled the state, but perpetual debt problems have

82
TP PTMilanovic (2002a: 14-15) notes that out of a group of 124 examined, 95 experienced higher
rates of economic growth during the period of 1960-1978 than during the two decades of 1978-
 202

forced states to place themselves under the effective control of the International Monetary
Fund (IMF). Crucial economic decisions are dictated not by the preferences of electoral
majorities at home but by technocratic elites at international agencies such as the IMF,
the World Bank and the World Trade Organization which are, according to Nobel Prize
winning economist Joseph Stiglitz, “dominated not just by the wealthiest industrial
countries but by commercial and financial interests in those countries (Stiglitz, 2002: 18).
” Indeed, the growing power of such international economic institutions reflects in no
small degree a desire to create new global rules that will safeguard the interests of capital
as it ventures beyond the relatively safe confines of home markets in the industrialized
world.
If these trends continue, it does not take a crystal ball to foresee a terrific social
and political backlash that will bring an end to the end of history. Unless brought under
the control of democratic forces, today’s neo-liberal international order may prove no
more sustainable than its 19th century predecessor, transforming Fukuyama’s dream into a
P P

nightmare.
Critique of Huntington
Or is the nightmare already here in the form of Huntington’s clash of
civilizations? Any assessment of Huntington’s thesis must ultimately turn on the question
of whether globalization produces convergence or divergence across various cultures or
civilizations. Huntington, of course, argues that globalization accentuates conflict by
bringing people of fundamentally differing values into more frequent contact with one
another. Moreover, he argues that non-Western civilizations view globalization as a
Western scheme to control their economies and marginalize their traditional religious and
cultural ideas.
These conclusions rest upon two crucial assumptions: 1. That members of each
civilization respond to globalization in a uniform way. 2. That the dominant response to
new cultural practices and ideas is rejection. Neither of these claims can withstand
scrutiny. 83
TP PT

Each major religious or cultural tradition has historically included some elements
that tend toward pluralism, inclusiveness, tolerance and openness to the broader world
and other elements that tend toward orthodoxy, insularity, intolerance and closure toward
outsiders. And in each case, both the balance and the intensity of conflict between these
tendencies have varied over time. In general, the tendency toward insularity is strongest
when a society faces external threat and the tendency toward openness is greatest when
cooperation with others offers rewards and opportunities. 84 TP PT

The central reality of globalization is that it presents a threat to some and an

opportunity to others. Within each civilization, there are those who possess the right
skills and assets to gain from globalization and others who will be further marginalized.

1998.
83
TP For a more extended critique of Huntington’s thesis, see Skidmore (1998).
PT

84
TP This theme is emphasized and illustrated in essays on diplomatic traditions in three major
PT

civilizations by Hassan Hanafi (Islamic world), Satish Chandra (India) and Hongying Wang
(China) in Cox (1997).

202
The most important effect of globalization, therefore, is not to pit united civilizations
against one another, but to deepen divisions within each civilization between those who
favor openness and cultural pluralism and those who favor insularity and cultural
uniformity. It is from among the latter group, those marginalized by globalization, that
we find the raw material for the rise of fundamentalist religious and cultural movements,
whether Christian, Jewish, Islamic or Hindu.
While Huntington is correct, then, to note a rise in cultural conflict, he errs in
portraying the primary cleavage as dividing one civilization from another. Instead, the
crucial clashes are occurring within civilization clusters between those who are open to
cultural exchanges and cooperation and those who reject them. 85 TP PT

This is evident, for instance, if we examine the Islamic world, which is portrayed
by Huntington and others as united in its hostility to the West. Islam as a religion is not
inherently insular or xenophobic. The Holy Koran teaches Muslims that “We created you
from a single pair of a male and female and made you into nations and tribes, that you
may know each other, not that you may despise each other (Koran, 49:13). ”
Huntington offers the Bosnian war as a prototype for the clash of civilizations.
Yet it is worth noting that among the three combatants in this conflict, it was the Bosnian
Muslim government that most clearly defended the values of tolerance, democracy and
ethnic and religious pluralism. As an example of “kin-country rallying,” Huntington cites
Saddam Hussein’s appeal to Islamic solidarity against Western imperialism on the eve of
the 1991 Persian Gulf War. Yet Huntington neglects to mention that this cynical bit of
propaganda failed miserably and that the majority of Arab states, as well as countries
representing each of the other major civilizations, supported coalition efforts to reverse
Iraqi aggression against Kuwait.
While Osama bin Laden and the Taliban claimed to speak on behalf of the entire
Islamic world in their denunciations and attacks upon the West, less noted is the fact that
a majority of Afghanis welcomed the overthrow of the Taliban and the ousting of Al
Qaeda from their country. It is true, of course, that anti-Americanism runs strong on the
streets of the Arab world. Yet surveys in the Arab countries show that majorities reject
the notion that Islam and the West are engaged in a clash of civilizations. Consider, for
instance, a recent survey of 5,000 young people aged 15-25 in nine Muslim Arab
countries who were asked to name “the country you think most highly of. ” The most
frequent response by far was the United States (The British Council, 2002). Another
survey of Muslims in nine Middle Eastern nations found that large majorities had
favorable views toward American culture, but seven out of ten disapproved of American
policies toward Arab countries (PEW Research Center, 2002). Whatever Osama bin
Laden’s own motivations, anger toward the United States among average people in the
Arab world stems from what we do, not who we are. 86 TP PT

85
TP This may help explain Oneal and Russett’s (2003) findings in this volume that conflict within
PT

civilization clusters is often more frequent than conflict across civilizations.

86
TP Note that a large majority of Americans interviewed in one post-9/11 survey also rejected the
PT

notion that the West and the Islamic world were locked in a “clash of civilizations. ” 67. 6 %
agreed that it was possible for America and the Islamic world to find “common ground,” while
 204

None of this is to deny the fact that there exist minorities in the Islamic world
who seek to impose a fundamentalist interpretation of Islam on their fellow citizens and
to use violence to combat unwanted external political, economic and cultural influences.
Under conditions of economic stagnation, extremes of inequality and repressive political
regimes, it is perhaps not surprising that such movements would arise. Less noted in the
West is that there also exist in that part of the world popular movements that are pushing
for greater democracy and openness, as, for example, in Iran. Unfortunately, these
movements have received little support from the United States government, which has
overlooked the undemocratic character of many of its allies in the region as long as they
pursue pro-American policies. In sum, the processes of globalization and modernization
are creating intense and conflicting pressures within the Islamic societies of the Middle
East. This complexity defies the simplistic “clash of civilizations” thesis offered by
Huntington.
In answer to the question of whether globalization produces cultural convergence
or divergence across civilizations, we must say that both phenomena are occurring
simultaneously. Each civilization contains elements that are open to cultural exchange
with others as well as elements that seek to preserve cultural purity. Globalization
intensifies the internal conflict within each civilization between these two sets of forces.
Grassroots Globalism
If cultural fundamentalism represents one form of response to neo-liberal
globalization, then grassroots globalism represents another. 87 The principal agents of this
TP PT

vision are transnational non-governmental organizations such as Amnesty International

and Greenpeace. The growth of transnational non-governmental organizations (NGOs)
over the past two decades has been impressive: from 1,000 in 1980 to 5,500 in 1996
(Simmons, 1998: 89; also see Mathews, 1997). So too has been their impact on
international politics. Transnational advocacy networks have played a major role in
laying the groundwork for a number of important international agreements, including the
Kyoto global warming treaty, the International Criminal Court, the Landmine Ban treaty
and recent multilateral debt relief initiative for poor countries. NGOs have also pushed,
with some success, for international financial institutions and global corporations to adopt
reforms designed to address the problems of poverty, worker’s rights and the
environment.
Joseph Stiglitz, former World Bank economist, has argued that “it is the trade
unionists, students, environmentalists – ordinary citizens – marching in the streets of
Prague, Seattle, Washington, and Genoa who have put the need for reform on the agenda
of the developed world (Stiglitz, 2002: 9). ”
NGO campaigns are typically organized through decentralized cooperation
among hundreds of independent groups. The non-hierarchical structure of transnational

only 26 % agreed that “violent conflict” was inevitable because Islam is “intolerant and
fundamentally incompatible with Western culture (Program on International Policy Attitudes,
2001). ”
87
TP For additional background on transnational social movements such as those discussed in this
PT

section, see Smith, et. al. (1997) and Broad (2002).

204
advocacy networks is both a strength and a weakness. On the one hand, dispersed
networks possess enormous surge capacity. Over the short to medium term, NGO
networks can mobilize considerable information, expertise, money and labor once a
shared objective has been identified. Networks are flexible, resilient and efficient.
On the other hand, the shifting coalitions of NGO politics do not allow for the
accumulation of long-term power in institutionalized form. Once an immediate objective,
such as passage of an international treaty, has been realized, coalitions typically disband
or re-form in different configurations around new goals. Groups often differ over
ideology, goals and tactics and also compete with one another for money, volunteers,
media attention and government favor. These organizational realities can detract from the
effectiveness of the movement – particularly since the credibility of groups that base their
appeal on the commitment to high moral principle can be easily compromised by public
displays of narrow and self interested behavior (Cooley and Ron, 2002). Diversity and
decentralization also make it possible for governments or other power-holders to divide
popular coalitions through strategies of co-optation.
Grassroots globalism also faces contradictions at the level of overarching
objectives. The goal of creating a global civil society in which strong communities of
identity transcending national borders become an everyday reality for most people
remains a distant dream. Beyond a small but significant body of core activists and their
close sympathizers, most people in most societies continue to privilege various local
identities over global ones. This is why transnational movements are most effective when
they can forge plausible connections between global issues and diverse sets of local
problems that engage the active concerns of average people.
Perhaps the most important overarching objective of grassroots globalists is to re-
embed the global marketplace within a framework of democratic accountability. Yet the
pursuit of this goal presents a paradox. States have historically served as the principal
institutions for exercising democratic forms of governance. Yet in a global economy,
capital has partially freed itself from the control of national authorities. The obvious
solution is to create new forms of regulation at the global level. Yet this requires
successful collective action among a group of almost 200 states, each of which will face
incentives to attract renegade capital by cheating or defecting from any system of global
regulation. Multilateral governance also faces resistance from the world’s most powerful
state, the US government, which has recently embraced a unilateralist foreign policy that
is openly hostile toward the construction of strong global institutions.
Moreover, there presently exists no system for the direct representation of
popular interests at the level of global institutions, which are the creations of states and
have to date proven more responsive to corporate and elite interests than to popular
pressures. Proposals to democratize global institutions by giving direct representation to
NGOs face the problem that such groups themselves are seldom democratic. Most NGOs
lack internal systems of democratic representation that would hold leaders accountable to
those on whose behalf they claim to speak. How to overcome this democratic deficit in
the creation of global institutions remains an unresolved puzzle.
The alternative to global regulation is to reassert control over capital at the
national level by reconstituting the power of individual states. While there surely exists
 206

considerable scope for action at the national level, this solution also presents problems.
States acting alone run the risk of capital flight and retaliation from other states whose
interests might be harmed by re-regulation. Widespread but uncoordinated movements to
reassert national level controls could carry enormous costs by tearing at the essential
fabric of global commerce that has been created through the mechanisms of
globalization.
Most likely, re-embedding the global economy in systems of democratic
accountability will require a multi-level approach: the vigorous engagement of civil
society in monitoring corporate and state behavior, revitalized state controls at the
national level where feasible and architectural innovation at the global level to create a
denser set of institutions that are more open, inclusive and democratic in nature.
In principle, glassroots globalism promises to reestablish a balance among
contending social forces through globalization from below while providing a
multicultural alternative to nationalist, ethic and religious fundamentalism as responses to
the pressures of globalization and modernization. Clearly, this is the most hopeful vision
of the three reviewed here, but just as clearly its realization will require a long and
difficult journey.

Conclusion

Running through all three visions is an attempt by various authors to come to

grips with the complex and multi-faceted consequences of globalization and
modernization. Globalization is, at heart, tied up with the expansion of capitalism. In
contemporary discourse, when we use the term capitalism, we tend to think about the
market – which conjures up benign images of voluntary exchange among equals. But this
formulation obscures the continuing class character of capitalism. Those who own and
control the means of production are given a privileged place in capitalist society. As a
result, capitalist orders typically produce a concentration of economic and political
power.
But the hegemony of capital has never gone unchallenged. Popular movements
have always sought to counter the power of capital, largely through collective self-
organization and the fight for democracy. After more than a century of struggle, the
social democratic governments that emerged in North America and Western Europe after
World War II served as relatively successful vehicles for taming the abuses of capitalism
and creating fairer, more balanced societies.
Globalization has now freed capital from the social compacts that constrained its
power during the post-war era. As a result, we are passing through a period of relatively
untamed capitalist expansion. This too has not gone uncontested. Popular movements
against globalization have taken two characteristic forms: fundamentalist cultural
movements seeking insularity and transnational social movements seeking more
democratic control over capital at both the national and global levels.
One thing seems evident. A globalization project based upon the subordination of
all competing human values to market imperatives is not sustainable. One alternative
would be the continued growth of nationalist, ethnic and religious fundamentalist forces,

206
leading to a violent dismantling of the globalization project in ways reminiscent of the
first half of the 20th century. The surest way to avoid this nightmare is to stop dreaming
P P

and get on with the task of building a more just and democratic global order based upon
globalization from below. We must, in other words, begin to think of ourselves as global
citizens who are individually and collectively responsible for our shared future.
 208

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210

210
Arab Unemployment as a World-System Problem

Gernot Köhler

December 2002

1. Introduction

A recent report by the United Nations Development Programme calls for the mobilization
of "the full productive capacities and human capital of all citizens" of the Arab countries,
in order to fight unemployment and to accelerate economic growth ( UNDP 2002, p. 95).
The report emphasizes domestic reforms within Arab societies. In contrast, my article
examines Arab economies from a world-system perspective. Whereas, undoubtedly, Arab
economies (like most other economies) must overcome various internal problems in order
to achieve full employment and high economic growth, my article shows some of the
ways in which the world-system is also responsible for, and contributes to, high
unemployment and inadequate economic growth in the Arab world.

2. CIA and UNDP Data on Unemployment

There is a relative shortage of data on unemployment in Arab economies. Here are

available unemployment estimates reported by two different sources, namely, the World
Factbook 2002 by the CIA (CIA 2002) and the Arab Human Development Report 2001
by UNDP (UNDP 2002) - see, Table 1. The CIA estimates shown in Table 1 range from
under two percent unemployment in Kuwait (1996) to 50 % in Djibouti (2000), followed
by West Bank and Gaza with 40 % (end of 2000), and so on. The average is 23 percent
unemployment. These estimates by the CIA are, on average, twice as high as those
reported by UNDP (2002).

Table 1 CIA and UNDP Statistics on Arab Unemployment

CIA Factbook2002 ArabHDR2002 stat annex T24 p158

Algeria 30 1999 26. 4 1997

Bahrain 15 1998 3. 1 1997
Comoros 20 1996 na
Djibouti 50 2000 na
 212

Egypt 11. 5 2000 8. 7 1996

Iraq na na
Jordan 27. 5 1999 14. 4 1999
Kuwait 1. 8 1996 7. 1 1999
Lebanon 18 1997 8. 5 1997
Libya 30 2000 11. 2 1995
Mauritania 23 1995 na
Morocco 23 1999 15. 1 1999
Oman na 17. 2 1996
Qatar na 5. 1 1997
Saudi Arabia na 15 2001
Somalia na na
Sudan 4 1996 17 1996
Syria 20 2000 6. 5 1999
Tunisia 15. 6 2000 15. 6 1999
UAEmirates na 2. 6 1995
West Bank 40 2000 11. 8 1999
and Gaza
Yemen 30 1995 8. 2 1998

average 22. 5 11. 4

median 21. 5 11. 2

Sources: CIA (2002); UNDP (2002)

Note:”na”= not available

Table 1 shows significant discrepancies between the unemployment rates reported by the
CIA and UNDP. The UNDP figures appear to stay close to officially reported statistics,
whereas many of the CIA figures are described as "estimates" in the source. After
working with these estimates, I find the CIA data (estimates) more plausible, with the
exception of the figure given for Sudan. The figure of 4 percent unemployment for Sudan
given by the CIA appears unrealistic, considering that Sudan has a protracted civil war.
The CIA Factbook 2002 reports: “Over the past two decades, a civil war pitting black
Christians and animists in the south against the Arab-Muslims of the north has cost at
least 1. 5 million lives in war- and famine-related deaths, as well as the displacement of
millions of others. ”

3. Long-term Trends in Unemployment

Some usable data for longer-term trends of unemployment rates are available from ILO
for four of the 22 Arab economies - see, Table 2.

212
Table 2 Long-term Changes in Unemployment Rates

unemployment rates ( %)
earliest available most recent available
from ILO from ILO from CIA
% year % year % year

Algeria 16. 9 1989 29. 8 2000 30 1999

Egypt 2. 4 1970 8. 1 1999 11. 5 2000
Morocco 14. 7 1987 22 1999 23 1999
Tunisia 15. 3 1989 15. 6 2000 15. 6 2000

Sources: ILO (2002), CIA (2002)

Table 2 shows that unemployment increased substantially over a decade (from the late
1980s to 2000) in Algeria - from 17 to 30 percent, and in Morocco - from 15 to 23
percent. The unemployment rate of Tunesia remained stable near 15 percent from 1989 to
2000. Egyptian unemployment increased substantially over three decades (from 1970 to
2000) from 2. 4 to 11. 5 percent.

4. Oil and Unemployment

4. 1 Oil Exports and Unemployment

For some Arab countries energy exports are a major source of revenue, while others are
importers of oil and gas. Energy-exporting Arab economies have, on average, about 20
percent unemployment (based on CIA estimates - Sudan omitted, due to doubts about
data validity), as compared with an average of 27 percent unemployment in Arab
economies that are energy importers. While these averages differ, the difference is not as
large as one might expect. (For details, see, Table 4 in the Appendix).

4. 2. Oil Price and Unemployment

The world price of petroleum has changed widely, sometimes dramatically, over the past
four decades. Some longitudinal unemployment data are available for four countries -
Algeria, Egypt, Morocco, and Tunisia. An examination of these unemployment data in
connection with the changing world oil price suggests that changes in the world oil price
do not appear to have affected the unemployment rates of these four countries in a direct
way - see, for example, Figure 1 (Egypt 1970 - 1999), but may have had an indirect effect
via geopolitics. .
 214

Figure 1 - World Oil Price and Unemployment in Egypt, 1970 - 1999

Legend:
Blue = world oil price (constant U. S. dollars, 1985 = 100)
Purple = unemployment rate in Egypt ( %). Note that the definition of unemployment for
the years 1997 – 99 differs from the definition for 1970 – 95

Sources: ILO (2002); EIA (2002), my conversion to constant U. S. dollars

5. Violence and Unemployment

5. 1 Armed Civil Violence and Unemployment

Contemporaneous with our unemployment data (Table 1) there were four cases of armed
civil violence and civil war, including intifada. They were (are): (1) Algeria - domestic
armed violence since the elections in December 1991 (ongoing in 2002) between

214
fundamentalists and government; (2) Somalia - turmoil, factional fighting, and anarchy,
1991 - 2000; (3) Sudan - The CIA's World Factbook 2002 reports: “Over the past two
decades, a civil war pitting black Christians and animists in the south against the Arab-
Muslims of the north has cost at least 1. 5 million lives in war- and famine-related deaths,
as well as the displacement of millions of others. ” (4) West Bank and Gaza (Occupied
Palestinian Territory) - intifada since year 2000 (ongoing in 2002). The unemployment
data for these four cases are shown in Table 3 and are compared with unemployment in
Arab economies without armed political violence. Even though the unemployment data
are incomplete and questionable, they support the opinion that armed civil violence
exacerbates unemployment.

Table 3 Unemployment in Four Arab Economies with Contemporaneous Intifada, Civil

War, or Similar

Unemployment Rate ( %)
Source CIA year UNDP year

Algeria 30 1999 26. 4 1997

Somalia na na
Sudan 4 1996 17 1996
West Bank and Gaza 40 2000 11. 8 1999

Average of above [a] 35 19

Average of 18 other Arab 22 10

economies

Note [a]: This average is without Sudan, see text

Source: Table 1

5. 2 Gulf War 1991 and Unemployment

The Gulf War of 1991 and the subsequent UN embargo against Iraq resulted in severe
damage to the Iraqi economy. However, there are no statistical data available to
document the impact on unemployment.

6. Economic Growth and Unemployment

The Arab Human Development Report 2002 attributes unemployment across the Arab
region, to slow or negative economic growth and some other factors (UNDP 2002, p. 92)
and calls for a strategy of mobilization of "the full productive capacities and human
 216

capital of all citizens" through reforms of the public and private sectors. The statistical
evidence concerning the relationship between GDP growth and unemployment in the
Arab world varies with the data set used. When we use CIA estimates of unemployment,
the relationship is very strong with a correlation of r = -0. 84. (When Sudan is omitted
from the calculation, the correlation is r = -0. 81 ) This correlation means that the higher
the GDP growth rate, the lower will be the unemployment rate and, conversely, the lower
the GDP growth rate, the higher will be the unemployment rate. The correlation is based
on six-year averages of the GDP growth rate; i. e. , five years prior to the unemployment
data plus the year including the unemployment data. This statistical finding supports the
observation by the Arab Human Development Report 2002 that unemployment across the
Arab region is attributable to slow or negative economic growth. See, Figure 2 for the
growth - unemployment correlation.

On the other hand, when we use the unemployment data reported in the Arab Human
Development Report 2000, the relationship between growth and unemployment all but
disappears and the correlation is r = -0. 16.

216
Figure 2 Correlation of GDP growth and Unemployment, Arab countries, 1990s

Legend
X-axis = GDP growth rate ( %), 6-year average, up to and including the year of the
unemployment data
Y-axis = unemployment rate ( %), CIA estimates, most recent available year, between
1995 and 2001 (see, Table 1)
Correlation r= -0. 84 (or, without Sudan, r= -0. 81)
Sources: CIA (2002), World Bank (2001)

7. Economic Growth, 1961 - 1999

Long-term data on economic growth in Arab economies are presented in Figure 3. Figure
3 shows the average GDP growth rate of the Arab economies for four decades, from 1961
to 1999. The first major peak of 15. 7 % is for year 1968; the first major trough of 0. 5 %
is for 1973; the second major peak of 13. 2 % is for 1976; the second major trough of
negative 1. 0 % is for 1981. The series exhibits a major shift in the trend rate of growth
around 1980 - 81. This shift in Arab economies appears to be related to a shift in the
world political economy.
 218

Figure 3 GDP growth ( %), 1961-99, average of Arab economies

Source : World Bank (2001)

N = 22 or less, depending on data availability

As Figure 3 shows, during the first two decades average growth rates were significantly
higher than during the last two decades - namely, the average for the period 1961 - 1980
is 7. 2 %, while the average for the second period (1981- 1999) is 2. 4 %. This constitutes
a decrease in the trend level to one third of the original level. There are also important
variations within those two sub-periods, but let us examine the change that occurred
between the two sub-periods - namely, around the years 1980 - 1981.

The years 1979-81 are the time when - (1) the so-called second oil price shock took place
- the oil price was pushed to historically high levels by OPEC, with a peak in 1981 (see,
Figure 4). This fueled inflation around the world. (2) Margaret Thatcher began her eleven
years as Prime Minister of Britain on May 4, 1979 and launched her neoliberal revolution
(”Thatcherism”). (3) Ronald Reagan took office as President of the United States on
January 20, 1981 and launched his neoliberal revolution (Reagan Revolution,
Reaganomics). (4) These years are frequently cited as the beginning of the era of global
neoliberalism. (5) In response to oil price shock and inflation, the United States and other
countries increased their interest rates to unprecedented levels, in order to fight inflation.
For example, average U. S. real interest rates were 1. 9 % between 1961 and 1980; they
increased to an average of 6. 0 % between 1981 and 1999. (See Figure 5) It appears that
the high interest rates choked off economic growth and reduced GDP growth rates around
the world, including the Arab world.

218
Figure 4 World Oil Price and Arab Economic Growth 1970 - 1999

Legend:
blue line = world oil price, constant U. S. dollars (1985=100)
brown line = GDP growth ( %), average of 22 Arab economies
Sources: EIA (2002), World Bank (2001)

-----------------------

Figure 5 U. S. Real Interest Rate and Arab Economic Growth

 220

Legend:
blue line = GDP growth ( %), average of Arab economies (N=22 or less, depending on
data availability)
brown line = U. S. real interest rate ( %)
Source: World Bank (2001)

Figures 4 and 5 suggest that the slowdown of Arab economic growth, starting around
1981, may have been induced by the policies of global neoliberalism, including high real
interest rates in the United States and other OECD countries for the purpose of fighting
inflation (Thatcherism, Reaganomics). It can be claimed, therefore, that the world-system
has an impact on Arab economic growth rates, and that these, in turn, have an impact on
unemployment in Arab countries.

8. Foreign Direct investment

By comparison with other regions of the world, the interest of global investors and
transnational corporations to invest in the Arab world is limited. Whereas foreign direct
investment (FDI) as a percent of GDP increased, on average, to 3. 9 % in 1999 for the
world as a whole, it stayed at a lower level in the Arab world. See, Figure 6.

Figure 6 Foreign Direct Investment (FDI) as % of GDP, 1979 - 1999, Arab and World
Averages

Legend:
blue line = average of Arab economies
brown line = world average
Source: World Bank (2001)

220
9. Exchange Rates

Another development that is characteristic of the past two and a half decades is the
intensification of global competition or, as critics of global neoliberalism call it, a global
race to the bottom. Intensified global competition has had the effect that developing
countries have exported more and more, but at sinking world prices, so that the increased
export activity did not necessarily benefit them. This has been observed and criticized by
UNCTAD (2002). One could also say that global exploitation of the South by the North
increased during that period. One facet of the increase in global exploitation is related to
exchange rates. The value of Third World currencies against OECD and U. S. currencies
has deteriorated significantly since the beginning of the global neoliberal era. The
average value of the currencies of the Arab countries in relation to the U. S. dollar also
declined from 1980 on, as Figure 7 shows.

Figure 7 - Value of Arab Currencies In Relation to U. S. Dollar, 1975 - 1998

Source: own calculations, based on World Bank (2001)

Unit of measurement = a ratio, which measures exchange rate deviation, where 1. 0
means that the currency is as strong as the U. S. dollar. Less than 1. 0 means that the
currency is weaker than the U. S. dollar. The values shown are an average of the national
quotients (GDP in U. S. dollars / GDP in PPP “international” dollars). N = 22 cases or
less, depending on data availability.
 222

10. Conclusion

Singh and Zammit (1995) have pointed out that unemployment in the North and South of
the world is not only influenced by national factors and policies, but also by the
institutions of the world economic system. My article shows that Singh and Zammit's
general proposition is also valid with respect to unemployment in the Arab economies.
The following can be observed.

First, war and armed violence tend to increase unemployment in Arab economies, but
they account only for some portion of the existing unemployment. The effect is, partly,
direct - through destruction of economic assets and reduction of economic activity, and,
partly, indirect. For example, the low rate of foreign direct investment (FDI) in the region
may be influenced by the actual and perceived political-military instability of the region.
Secondly, the natural wealth of some Arab countries with respect to oil and gas is no
guarantee for full employment. High unemployment rates can be found in both oil
exporting and oil importing Arab economies. Thirdly, unemployment rates in Arab
economies have a strong correlation with GDP growth rates. The correlation between a 6-
year average of the national GDP growth rate with the national unemployment rate is r=-
0. 8. Global economic policies affect unemployment in Arab economies through their
effect on national GDP growth rates.

The impact of the world system and of global economic policies on GDP growth in the
Arab region can be described, as follows. From 1961 to 1980 the Arab region had an high
average GDP growth of 7. 2 percent per annum. This trend rate dropped, around 1980-81,
to a much lower trend rate. From 1981 to 1999, average GDP growth of the region was 2.
4 percent per annum. This historical shift in the economics of the Arab region is closely
related to the restructuring of the world political-economic regime around that time.
Margaret Thatcher became prime minister of Britain in 1979; Ronald Reagan president of
the United States in 1980; both launched their neoliberal revolutions in domestic and
international economics. This was also the time of the second oil price shock, causing
high rates of inflation. Inflation fighting rose to the top of the agenda of U. S. and OECD
economic policies. One of the main instruments of inflation fighting was high interest
rates. For example, U. S. real interest rates were, on average, 1. 9 percent between 1961
and 1980. In contrast, the average U. S. real interest rate between 1981 and 1999 was 6
percent. These radical changes in global economic policy, known as Thatcherism,
Reaganomics, New World Order, or global neoliberalism, induced the observed
slowdown in Arab economic growth after 1980 (and in other countries as well). Another
effect of global neoliberalism on Arab (and other developing) economies was a rapid
deterioration of the value of their currencies after 1980, which affects the export earnings
of these countries.

The Arab Human Development Report 2002 recommends a mobilization of the human
potential of the Arab world. My analysis suggests that, in addition to that, unemployment

222
in the Arab world is also a world-system problem - as is unemployment in Europe
(Köhler 2002). It follows that the fight against unemployment in Arab economies could
be strengthened by a reform of the world political economy - in the sense of, moving
away from global neoliberalism to global or regional Keynesianism (Köhler 1999; Köhler
and Tausch 2002).
 224

11. References

CIA (2002) [= United States Central Intelligence Agency] The World Factbook 2002.
Available from the internet.

ILO (2002) [=International Labour Office], ” LABORSTA” (= online database on labour

statistics operated by the ILO Bureau of Statistics), online at: http://laborsta. ilo. org/

Köhler, Gernot (1999) ‘Global Keynesianism and Beyond’, Journal of World-Systems

Research, 5: 225-241, online: http://csf. colorado. edu/wsystems/jwsr. html

Köhler, Gernot (2002) “European Unemployment as a World-System Problem”, in:

Ryszard Stemplowski (ed. ), The European Union in the World System Perspective.
Warsaw, Poland: The Polish Institute of International Affairs, pp. 121-132.

Köhler, Gernot and Arno Tausch (2002) Global Keynesianism: Unequal Exchange and
Global Exploitation. Huntington, USA: Nova Science.

EIA (2002) [=Energy Information Administration, USA] “World Oil Market and Oil
Price Chronologies, 1970 - 2001” (January 2002), online at: http://www. eia. doe.
gov/emeu/cabs/chron. html

Singh, A. and A. Zammit (1995) “Employment and Unemployment, North and South”,
in: J. Michie and J. Grieve Smith, eds. , Managing the Global Economy. New York,
USA: Oxford University Press, pp. 93-110.

UNCTAD (2002) [=United Nations Conference on Trade and Development] Trade and
Development Report 2002.

UNDP (2002) [=United Nations Development Programme] The Arab Human

Development Report 2002.

World Bank (2001), online database concerning economic growth research, at:
http://www. worldbank. org/research/growth/GDNdata. htm

224
12. Appendix

NOTE TO EDITOR - Table 4 is written as text in Times New Roman point 10

Table 4 Arab Economies: Energy, Income, Unemployment

Legend:
Pop = population (millions), from World Bank (2001)
Eprod, Econs = energy production, energy consumption (quadrillion btu), from UNDP
(2002), Statistical Annex Table 13, p. 151
Eexp = energy export (quadrillion btu), my calculation EExp = (Eprod - Econs)
Eexpcap = energy export per capita (million btu per capita), my calculation
EExpcap = (EExp/Pop)*1000
GDPcap = GDP per capita (current US dollars), from World Bank (2002)
UEcia = unemployment rate ( %), from CIA (2002)
UEundp = unemployment rate ( %), from UNDP (2002), Statistical Annex Table
24, p. 158

Pop Eprod Econs EExp EExpcap GDPcap UEcia UEundp

1995 1999 1999 1999 1995 note (b)
col. (A) (B) (C) (D) (E) (F) (G) (H)
(J)

Group A - Energy exporting economies

Qatar 0. 7 2. 44 0. 7 1. 74 2656 12424 na 5.

1
Kuwait 1. 6 4. 58 0. 68 3. 90 2461 16756 1. 8 7.
1
U. A. Emirates 2. 3 6. 25 1. 88 4. 37 1867 18286 na 2.
6

Oman 2. 1 2. 12 0. 3 1. 82 853 5668 na

17. 2
Saudi Arabia 19. 0 19. 64 4. 34 15. 3 806 6735 na
15. 0
Libya 4. 3 3. 10 0. 58 2. 52 587 5088(c) 30
11. 2
Iraq 18. 1 5. 48 1. 16 4. 32 239 2692(c) na
na
Algeria 29. 1 6. 06 1. 31 4. 75 164 1420 30
26. 4

Bahrain 0. 6 0. 41 0. 37 0. 04 69 9508 15 3.
1
Syria 14. 1 1. 51 0. 81 0. 70 50 1173 20 6.
5
Yemen 15. 3 0. 85 0. 14 0. 71 47 263 30 8.
2
Egypt 58. 2 2. 72 2. 02 0. 70 12 1034 11. 5 8.
7
 226

Sudan 26. 6 0. 13 0. 07 0. 06 2 270 4

17

Average (A) Energy Exporting Economies 17. 8 10. 7

Average (A) without Sudan 19. 8 10. 1

Group B - Energy importing economies

Comoros 0. 5 0 0 0 0 436 20 na
Somalia 0. 8 0 0. 01 -0. 01 -1 118(c) na
na
Tunisia 9. 0 0. 25 0. 29 -0. 04 -5 2008 15. 6
15. 6
Morocco 26. 4 0. 02 0. 41 -0. 39 -15 1250 23 15. 1
Mauritania 2. 3 0 0. 05 -0. 05 -22 459 23 na
Djibouti 0. 6 0 0. 02 -0. 02 -33 817 50
na
Jordan 4. 2 0. 01 0. 22 -0. 21 -50 1551 27. 5
14. 4
West Bank
and Gaza 2. 4 na na na na 1349 40 11. 8
Lebanon 4. 0 0. 01 0. 23 -0. 22 -55 2776 18 8.
5

Average (B) Energy Importing Economies 27. 1 13. 1

Sources: UNDP (2002), World Bank (2001), CIA (2002)

Notes: (a) economies arranged in order of their energy exports per capita; (b) years for unemployment data vary, same as in
Table 1; (c) GDP per capita for three countries from other years - Libya=1989, Iraq and Somalia = 1990

226
Does the ‘War against Terrorism’ Prove the ‘Clash of Civilizations’ Right? Some
i
Evidence TP PT

John R. Oneal88 and Bruce Russett89

T T T T

For some observers, the ‘war against terrorism’ illustrates just what Samuel
Huntington predicted as ‘the West vs. Islam’ in his The Clash of Civilizations and the
Remaking of World Order. That book has proven to be one of the most influential recent
works on international relations, and gained a new life after September 11, 2001.
Responses to that book range from laudatory to scathing. ii Like Huntington’s other work,
TP PT

it is smart, never dull, and states a provocative thesis. It is intended (p. 14) to offer ‘a
more meaningful and useful lens through which to interpret international developments
than any alternative paradigm. ’ It demands attention. It seems to make sense of some
very important current conflicts, such as those between the United States and Iraq. It fits
part of the story for the war between Serbia and NATO, though not the significant part
that found NATO aligned with Serbia’s Muslim Albanian minority. It is tempting to see
the contemporary ‘war on terrorism’ as confirming Huntington’s dire prediction, but to
do so ignores the wide diversity of views among Islamic peoples emphasized, for
example, by President Bush. Even for those conflicts that it seems to fit, there may be
better explanations. No scientific hypothesis can be judged alone, without confronting it
with plausible competing hypotheses.
Huntington’s core claim (p. 321) is that ‘clashes of civilizations are the greatest
threat to world peace’, and that: ‘In the post-Cold War world the most important
distinctions among peoples are not ideological, political, or economic. They are cultural’
(p. 21). Huntington’s thesis is all too plausible. Fear and hatred of those who are different
is familiar, within societies as well as internationally. Yet, Huntington’s thesis is not
obviously right. Nations with different ethnic populations co-exist peacefully in many
regions of the world, and many countries include diverse groups that mix freely. Indeed,
before the mid-twentieth century, interstate conflict was particularly prevalent within the
Western world. This was most dramatically the case during the two World Wars when
tens of millions died. Conflict among the Western states declined during the cold war,
when so much of the world was caught in the tensions between the communist bloc and
the West. The once popular classification of states into the first, second, and third worlds
also indicates that hostilities in the post-World War II period involved diverse groups, the
North versus the South as well as East versus West. But this characterization, appropriate
for an era in which conflicts were based primarily on ideology or differences in economic
development, became less relevant with the end of the cold war. Huntington proposes to
replace it by a perspective based on differences between cultures or civilizations.

88
TP PT Professor of International Relations, University of Alabama
89
TP PT Dean Acheson Professor of Political Science and Director of United Nations, Yale University
 228

His central theme is that ‘culture and cultural identities, which at the broadest
level are civilizational identities, are shaping patterns of cohesion, disintegration, and
conflict in the post-Cold War world’ (p. 20). Thus his argument is less about the distant
past and applies only partially to the early decades of the cold war. But after the Iranian
revolution of 1979, ‘an intercivilizational quasi-war between Islam and the West’ opened
up (p. 216; also p. 185), and in the 1980s conflicts between civilizations increasingly
replaced those between communists and capitalists. In the future, many of the most
violent, prolonged international conflicts will be across civilizational cleavages or fault
lines (p. 253). ‘The interplay of power and culture will decisively mold patterns of
alliance and antagonism among states in the coming years’ (Huntington, 1999: 46, our
italics).
The clash of civilizations perspective is a big idea with immense policy
implications. Like other big ideas, it has the potential to become not just an analytical
interpretation of events, but--if widely believed--a shaper of events. Huntington’s theory
could become a self-fulfilling prophecy, intensifying conflicts or bringing about some
that otherwise would not have occurred. After a century wracked by great wars and now
deep into an era of weapons of mass destruction, “Nothing would be more dangerous for
the nations of the West and East than to prepare for a supposed confrontation between
Christianity and Islam” (Herzog 1999, also see Holmes 1997 and Walt 1997 ). TP PT

Alternatively, if the fundamental thesis is correct, Huntington’s book constitutes early

warning that policymakers could also use to defuse coming conflicts. Either way, before
trying to apply it to the war against terrorism and other conflicts, one must ask simply
whether it is correct. What is the evidence that civilizations clash?
In this chapter, we use the best scientific methods to assess the validity of
Huntington’s idea. iii We conclude that there was not a general “clash of civilizations” in
TP PT

the past and that its application to current events is dangerously misleading. Civilization
differences add little to existing realist and liberal explanations of violent interstate
conflict. Consequently, the theory does not offer a sound guide to the past, the present, or
the future.

Civilizations and Identity

U

Huntington’s thesis that cultural differences produce conflict has deep roots in
social psychology (p. 67). At its heart is the distinction between the in-group and the
outsider, with in-group cohesion attained by nurturing conflict with those that are
different. Huntington asserts that ‘identity at any level—personal, tribal, racial,
civilizational—can only be defined in relation to an ‘other,’ a different person, tribe, race,
or civilization’ (p. 129). The sociological version of this view is commonly associated
with Simmel (1898); it was interpreted and expanded by Coser (1956). It has been widely
applied—with mixed results—in international relations theory and research (Heldt 1997).
The focus of much of this work is on the conditions under which intra-group cohesion
may be enhanced or fractured by confrontation with others. One version asserts that
humans are essentially hardwired for social conflict based on an in-group/out-group
distinction. Shaw & Wang (1988: 207), for example, claim that: ‘Humanity’s propensity

228
for war is the outcome of thousands of years of evolution during which cognition and
intolerance of out-group members have been shaped by priorities of gene-culture
coevolution. ’
Social psychologists are interested in how people form their social identity
(Tajfel and Turner 1986), and their theories have been applied to international relations
by the constructivist school. The constructivist turn is intriguing, because, as Mercer
(1995) notes, these theorists foresee the broadening of group identities to include a
variety of others with whom it is possible to identify and live in peace. Yet social identity
theory postulates that this broader identity can only be achieved vis-à-vis some newly
defined ‘other’. iv In this view, then, the vision of Deutsch and his colleagues of a
TP PT

pluralistic community ‘of mutual sympathy and loyalties; of ‘we-feeling,’ trust, and
mutual consideration, of partial identification in terms of self-images and interests; of
mutually successful predictions of behavior’ (Deutsch et al. , 1957: 36; also see Adler &
Barnett, 1998) implicitly leaves others on the outside.
For Mercer, this is a critical flaw in the constructivist project. Risse-Kappen
(1995) also notes that the sense of mutual identity among democrats, based on a political
culture of peaceful conflict resolution, may give rise to a perception of otherness and
threat regarding those (non-democrats) who do not demonstrably share that culture.
Similarly, non-democracies may see democracies as threatening. v A concern with the
TP PT

clash of civilizations is therefore part of a larger concern with the implications of identity
for theories of the democratic peace and of international relations generally.
The dilemma posed by the politics of identity is relevant only to cultural but not
institutional theories regarding the separate peace among democracies. Insofar as the
cultural (or normative) interpretation of the democratic peace is true, there is danger that
democracies will see other states as outside their cultural and normative boundaries, and
hence potential if not actual enemies. In the normative interpretation of the democratic
peace, democracies think that they abide by an ethic of non-violent conflict resolution,
but they must always fear that autocracies will exploit their inherent peacefulness
(Russett, 1993). This may exacerbate the destructive features of the Hobbesian self-help
system with regard to those ‘others’.
Concern that democracies may demonize non-democratic states is allayed,
however, both by evidence and by theory about the influence of democratic institutions
on foreign policy. In our most recent analyses (Russett & Oneal, 2001) we find that, over
the full sweep of the twentieth century, democracies not only are much more peaceful
with each other than are other kinds of states but that they are not more dispute-prone
with autocracies than autocracies are with each other. Institutional (or structural) accounts
of the democratic peace, which do not rely on reference to common identity, are
consistent with that empirical result. They rest principally on the consequences of rational
self-interested behavior by political leaders who want to retain power, and on the
electoral consequences in democratic states of fighting costly wars, especially in a losing
effort (Bueno de Mesquita, Morrow, Siverson, and Smith, 1999, Reiter & Stam 2002).
A similar distinction regarding the importance of identity applies to competing
interpretations of the influence of economic interdependence on interstate relations. The
Deutschian account regards economic transactions as means of communicating
 230

perceptions and interests in ways that generally strengthen the sense of mutual
identification. In contrast, rational choice theorists focus on the economic self-interest of
parties to these transactions in maintaining and intensifying commercial exchange. And
the distinction arises yet again in theories about the pacifying effects of international
organizations. Constructivists emphasize their role in expanding states’ conceptions of
their self-interest, socializing and shaping norms, and generating narratives of mutual
identification. Rational choice analysts focus on some IGOs’ ability to coerce norm-
breakers, to mediate among conflicting parties, and to reduce uncertainty by conveying
information (see Russett & Oneal, 2001, chs. 4, 5). The Clash of Civilizations and the
Remaking of World Order therefore is relevant to the debate about the merits and
implications of constructivist analyses of international politics.
Huntington opens a window onto questions about the relation of culture to the
material and ideological expressions of civilizations. Perhaps civilizations, rather than
directly influencing the likelihood of interstate violence, instead shape the patterns of
security arrangements, political institutions, and economic practices that constitute much
of international behavior and condition who fights whom. Do the boundaries of
civilizations largely define the broad characteristics of the international behavior of states
within them? If so, the effect of culture on the likelihood of military conflict might be an
indirect one through these important intermediary influences.
Certainly this possibility is evident in Huntington’s work. His greatest worry
regards the civilizational divide between the West and all other civilizations—the ‘West
and the rest,’ as he puts it—that can be traced largely to Western acceptance of the
principles of democracy and human rights and their more precarious standing elsewhere.
He sees particular danger for the West from Islamic states. In his view, fundamental
differences between these two cultures concerning the source of governmental
legitimacy—whether the will of the people or scripture and religious authority—are
largely insurmountable. If, however, Islamic societies are capable of becoming more
democratic, then the division between the West and Islam should become less
acrimonious. Much the same would apply to the West’s other major adversary in
Huntington’s crystal ball: China and the Sinic civilization (p. 238).
Treating civilizations in this way is problematic. As Huntington acknowledges,
the political cultures of Germany and Japan changed radically after 1945 from their pre-
war fascism, in both cases becoming democratic and substantially anti-militarist. Yet
both Germany and Japan remain deeply rooted in their distinctive civilizations (Berger,
1996). States, and their citizens, can learn from their own experience and the history of
others that international conflict is more costly than it is worth (on learning in
international relations, see Tetlock, 1991; Reiter, 1996). It is important to determine,
therefore, whether civilizations are the root cause of interstate conflict, or whether the
causes of conflict are primarily political and economic institutions, norms, and practices
that are amenable to change. It is also relevant to consider whether civilizational
differences account for variation in these phenomena.
A subordinate theme in Huntington’s work is the importance of ‘core’ or
dominant states within civilizations and their ability to attract countries of similar culture
and organize collective security to repulse those that are culturally different (p. 155).

230
When integrated around such a pole, countries develop a more cohesive identity that
minimizes their potentially antagonistic relations; those without such a stabilizing
influence are candidates for greater intra-civilizational conflict. This is a vision of a world
comprised of spheres of influence, in which core states foster harmony and reduce
violence within their civilizations. vi Through negotiations and the exercise of power
TP PT

politics with the core states of other civilizations, strong cores can provide a degree of
order even across civilizations (p. 208). Thus Huntington declares, ‘The components of
order in today’s more complex and heterogeneous world are found within and between
civilizations. The world will be ordered on the basis of civilizations, or not at all’ (p.
156).
The argument that a big state can dominate the relations of smaller states under
its hegemony—both pacifying relations among them and controlling their relations with
outsiders—is found in many realist discussions. It is also central to Kupchan’s (1998)
prescription for order in a multipolar international system. Kupchan, like Huntington,
regards a multipolar international system as potentially peaceful, providing that each of
the major regional poles is itself ordered as a benign hegemony based on mutual consent.
In his view, peace within the regions cannot be secured by empire, unfettered power, or
exploitative behavior. For a region organized on sounder bases, the peace characteristic
of its internal relations can be extended to other benignly organized regions. ‘Securing
peace within regions is an essential first step toward securing peace globally’ (Kupchan,
1998: 42). According to Kupchan, a modern hegemon must moderate its realist impulses
if it is to be effective and accept the institutional and normative constraints characteristic
of democracy.

Exploring the Effects of Civilizational Differences

U

To evaluate Huntingon’s thesis it is critical--but not simple—to identify the

world’s major civilizations and their boundaries. Although he sometimes uses the terms
‘culture’ and ‘civilization’ interchangeably, he emphasizes their differences. Cultures and
civilizations do share common elements, such as religion, language, customs, history, and
institutions; but ‘civilization’ is the key to understanding interstate conflict because it is
‘the highest cultural grouping of people and the broadest level of cultural identity people
have’ (p. 43). Despite admonitions that civilizations are dynamic and have no fixed
boundaries, he believes that in the short term most states or groups of states can be
grouped into eight civilizations: the Western, Sinic, Islamic, Hindu, Slavic-Orthodox,
Latin American, Buddhist, and African. The composition of these groups may change
over time, but slowly.
Huntington’s view that the world is divided into identifiable civilizations is open
to many of objections. His list of civilizations is somewhat arbitrary, and, to the extent to
which he acknowledges intra-civilizational differences, the image of civilization as a
source of international order begins to dissolve. The criteria for assigning states to
civilizations are not always clear, as we note below. Huntington also privileges broad
loyalties to civilizations over more specific cultural or ethnic identities, including those
that operate at the level of the nation-state. He claims in effect that civilizational
 232

identities are more decisive than nationalism in accounting for sources of conflict. This is
particularly doubtful in the case of the Islamic civilization, where interests tied to
particular states have repeatedly triumphed over Islamic or pan-Arab sentiments. His
discussion of malleability and change within civilizations, along axes of westernization
and modernization (pp. 72 ff. ), is too simple.
These conceptual critiques suggest specific empirical analyses by which to
evaluate his arguments. Yet despite the attention Huntington’s theory has received,
systematic statistical analyses of his propositions are rare. The most substantial work
regarding interstate relations is by Henderson (1998; also see Henderson, 1997), who
finds only a modest role for cultural differences in explaining conflict. Henderson does
not specifically consider civilizations, but he carefully assesses the ability of religious,
ethnic, and linguistic similarity to reduce the frequency of interstate wars in the 1950-89
period. He finds that religious similarity does contribute to peaceful relations and,
conversely, differences in religion increase the incidence of war. But he also reports that
ethnic and linguistic similarity increase the likelihood of war between states—just the
opposite of what a cultural or civilizational perspective predicts. Indeed, the harmful
effects of ethnic and linguistic similarity counterbalance the peace-promoting effects of a
common religion.
Henderson also reports that geographical proximity has a greater impact on the
likelihood of conflict than do any of his cultural measures. Indeed the tendency of
countries, like individuals, to fight their neighbors is probably the strongest, most
consistent result in international relations research. vii This is hardly surprising:
TP PT

neighboring countries potentially have many reasons to fight (e.g., irredentism, border
disputes, access to natural resources), and the ability to strike each other with military
force (even small and poor states can attack their immediate neighbors). For these
reasons, it is crucial to consider the role of proximity in evaluating Huntington’s thesis.
Many of the conflicts he identifies at the fault lines of civilizations are between
neighboring states where conflict would be expected whether or not there were
civilizational or cultural differences.
We focus here on interstate conflict, but Gurr (1993, 1994) and Fox (2002) have
done systematic analyses to assess the validity of Huntington’s perspective for explaining
violence within states. Is conflict between people from different civilizations common, or
becoming so? Their answer is ‘no’. Of the 50 most serious ethnopolitical conflicts being
fought in 1993-94, only 18 fell across Huntington’s civilizational divides. viii In the
TP PT

Middle East, for instance, only one active internal conflict (Palestinians in the occupied
territories) was waged between peoples from different civilizations, while five (two in
Iraq, and one each in Iran, Morocco, and Turkey) were within a single civilization. The
proportion of internal conflicts involving groups from different civilizations is virtually
identical before and after the cold war. Moreover, while internal conflicts involving
civilizational differences were typically more severe during the cold war than those that
did not, this was not true of conflicts that began in 1988 or later: their intensity typically
declined. What many imagine to be a recent increase in ethnically based civil wars
actually began in the 1960s—and has dropped precipitously from its peak in the early
1990s. Cultural conflicts also became less intense, and most were ‘fratricidal’ rather than

232
occurring across civilizations. Violent intrastate nationalist conflicts did not become more
intense or inflict more casualties from 1989 to 1996 than before, and while 17 new
conflicts began during that period, 21 ended. Most ethnic, linguistic, and religious
diversity is not destabilizing. Only a small fraction of potential ethnic conflicts escalate
into violence, even in Africa and the former Soviet Union. In sum, Gurr’s analyses and
others raise serious doubts about the validity of civilizational explanations of conflict
within states. ix TP PT

In this chapter we examine the effect of civilizations on conflict between states.

We use a variety of tests to determine whether there is a clash of civilizations. First, we
evaluate Huntington’s thesis in isolation. We ask simply: does a difference in
civilizations increase the likelihood that a pair of states will become involved in a
militarized interstate dispute? Second, we add key influences from the realist tradition to
the model, assessing the effect of cultural differences controlling for the balance of power
and alliances. This test tells us whether Huntington’s hypothesis makes a contribution
beyond realist theory in predicting the frequency of militarized conflict. Third, we add
variables from the liberal tradition: shared democracy, economic interdependence, and
shared membership in international organizations. Previous research has shown that these
influences have substantial power, like the realist variables, to explain patterns of
international conflict. Thus we confront Huntington’s account of interstate relations with
prominent alternatives. Do civilizational differences explain conflicts that are not
accounted for by liberalism and realism? Is the clash of civilizations distinguishable from
the account of international politics they offer?xTP PT

We conduct several other tests of Huntington’s thesis as well. We estimate the

peacefulness of pairs of states within each of the eight civilizations relative to one another
and to pairs of states split across civilizational lines, controlling for the realist and liberal
influences. If Huntington is right, dyads within each of the civilizations will be more
peaceful than pairs of states split across a civilizational boundary. Then we evaluate the
West vs. the rest hypothesis. We identify pairs of states composed of one Western state
and one from any other civilization, and then estimate the probability of conflict for these
dyads relative to all other pairs. Similarly, we test whether there is particular animosity
between the West and Islam or between the West and the Sinic civilization. Next we
determine whether civilizations with a large ‘core state’ (or hegemon) benefit from more
peaceful relations, and whether democratically organized hegemonies are particularly
peaceful.
We test these hypotheses with data from the 1950-92 period. This is appropriate
because Huntington addressed events in these years when he first presented his argument
in 1993. xi He does not believe that the effects of civilizational differences are limited to
TP PT

the post-cold war era, but he does argue that they have recently gained importance. Of
course, if the clash thesis is simply a prophecy about what may happen in the twenty-first
century, that would immunize it to any current empirical test. But we can determine now
whether there was any indication of an increase in cross-civilizational disputes as the cold
war waned, or as radical Islamic forces gained control in some countries. We ask if the
incidence of conflict between civilizations increased over the period of our analysis, and
 234

then whether it has been greater since the Iranian revolution, or since the end of the cold
war in 1989.
Finally, we consider the possibility that even if civilizational differences have an
insignificant indirect effect on conflict, they may have powerful indirect influences
through important realist and liberal variables. If civilizational identities substantially
predict which states become allied, have high levels of trade, share memberships in
intergovernmental organizations, and govern themselves similarly, then it could be
argued that civilizations are the prime movers behind these political and economic factors
and account for their influence on international conflict. But if civilizational identities do
not predict alliances, trade, IGOs, or political systems well, this argument fails.

Our Method of Analysis

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To test these propositions we consider all pairs of ‘politically relevant’ pairs of

states (or dyads) in the international system for which data are available, observed
annually from 1950 through 1992. The focus on dyads is appropriate for a theory, such as
Huntington’s, that posits that the probability of interstate conflict varies with states’
military, political, or cultural characteristics. By the term politically relevant we mean
pairs of states that are either geographically contiguous or of which one or both of the
states is a major power.
As noted earlier, it is essential to control for geographical proximity when testing
any theory of interstate conflict. This is the most fundamental of realist variables because
the potential for interstate violence exists only when at least one member of a dyad can
reach the other with military force. We ask whether the two states are directly or
indirectly contiguous (including via colonies or other dependencies), either sharing a land
boundary or separated by less than 150 miles of water; this variable equals 0 if the
members of a dyad are not contiguous.
The major powers in this period were China, France, Soviet Union/Russia,
United Kingdom, and United States. Major powers have wide-ranging interests and the
power to use force even far from their borders. For other pairs of states, not contiguous or
including a major power, the incentive and possibility of violent conflict is very much
less. Politically relevant dyads run a risk of incurring a militarized dispute that is 24 times
higher than for dyads that are not politically relevant as we define the term. So it makes
sense to focus on them. Doing so gives us over 28,000 cases (dyad-years) from which to
make generalizations.
We also use distance as a control, as the natural logarithm of the great-circle
distance between the two states’ capitals. This recognizes the increase in cost and
difficulty of exerting military force across space even for major powers, but for which the
cost grows more slowly as distance increases. It is important also as a control for ties of
international trade, which we introduce below. Trade also becomes more expensive over
distance. Nearby countries are likely to have both more disputes and more trade, but not
necessarily because trade causes disputes.
To test Huntington’s thesis we created a variable we label SPLIT, which
indicates whether a dyad is culturally heterogeneous or not. It is coded 1 if the states

234
belong to different civilizations, and 0 if they are from the same one. In making this
determination, we considered the eight civilizations noted above: the Western, Sinic,
Islamic, Hindu, Slavic-Orthodox, Latin American, Buddhist, and African. Testing
Huntington’s theory requires, therefore, that one classify each state according to the
civilization of which it is a member. For this we relied primarily on the map that appears
on pages 26-27 of The Clash of Civilizations. Identifying the civilization of a country is
not always easy, however; and the criteria underlying the classificatory scheme are
somewhat unclear. In most cases religion seems to be Huntington’s primary criterion, but
geographical location plays a major part in defining a few civilizations, notably Africa
and Latin America. Three ‘lone states’ are not identified with any civilizations. Many
countries do not fit comfortably in a single group and are considered ‘cleft’ or ‘torn. ’xii
TP PT

As a measure of conflict we use the Correlates of War (COW) data on militarized

interstate disputes, identifying each year that one or both states in a dyad threatened to
use force, made a demonstration of force, or actually used military force against the
other. The variable DISPUTE equals 1 in these cases, and 0 otherwise. xiii Unfortunately,
TP PT

systematic data regarding interstate disputes unfortunately do not yet exist for more
recent years.
Huntington is concerned not only with frequency of conflict, but also with the
‘most pervasive, important, and dangerous conflicts’ and with those that have the
potential to engulf others: ‘Violence between states and groups from different
civilizations. . . carries with it the potential for escalation as other states and groups from
these civilizations rally to the support of their ‘kin countries’ (p. 28). Fault line wars (p.
253) are ‘protracted conflicts’. It is not clear how Huntington would assess pervasiveness,
importance, and danger. With the dyad as the unit of analysis, however, our tests give due
weight to broad, spatially extended conflicts. A dispute limited to a single pair of states in
one year counts once in our data. Conflicts involving two states on either side in one year,
however, lead to four dyad-years being coded positively. And counting each year of a
temporally extended dispute or series of disputes gives greater weight to protracted
conflicts, as Huntington’s perspective requires. Disputes that last several years often
involve many casualties.
We estimate the influence of civilizational differences and the realist and liberal
variables on the likelihood of conflict using logistic regression analysis. This enables us
to estimate the independent effect of each factor while holding all others constant. In
essence, we assess the relative contributions of various influences on the risk of conflict
in the same manner as medical researchers, using large databases on the experience of
many patients, estimate the independent impact of hereditary, environmental, or life-style
factors on the risk of disease. Just as they can estimate risk factors for disease, so we can
estimate how much each influence actually raises the risk of having a militarized dispute.
It is important to ensure that the factors used to explain a dispute are not
themselves influenced by that conflict. So we lag all the independent variables by one
year. Thus we explain the onset of a dispute in a year by reference to conditions in the
previous year. We make appropriate statistical corrections for analyzing cross-sectional
time-series data. xiv
TP PT
 236

Basic Tests of Civilizational, Realist, and Liberal Influences

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Our first analysis is a very simple one. We treat the likelihood of a dispute as a
consequence only of civilizational differences as indicated by SPLIT, and the essential
realist influences: contiguity, distance, and whether the dyad contains a major power. In
this test the measures of geographical proximity are, as usual, important determinants of
the likelihood of conflict. SPLIT, too, is important. If a dyad is split between
civilizations, the risk of a dispute is 84 percent greater than for a pair of states that is not
divided across a civilizational boundary. All of these influences were statistically
significant at the . 001 level. (All the significance tests are one-tailed, since each
hypothesis clearly specifies an expected sign, positive or negative. )
The next step, however, is to compare the simple clash of civilizations hypothesis
with a more complex explanation that takes into account other realist influences. One
constraint on the use of military force emphasized by realists is relative power. The idea
that an equal balance of military capabilities deters conflict has deep roots, as does the
idea that a preponderance of power, by reducing uncertainty as to which side would win a
contest of arms, is more likely to preserve the peace. Recent work suggests that it is
P
P

preponderance that deters military action (Kugler & Lemke, 1996). To assess the effect
of military capabilities on the likelihood of conflict, we use the natural logarithm of the
ratio of the stronger state’s military capability index to that of the weaker member in each
dyad. This measure (CAPRATIO) is calculated from data on population, industry, and
military preparedness (Singer & Small, 1995).
The other important realist variable reflects the expectation that allies will fight
less with each other than with other states, because by forming an alliance they have
indicated that they share concerns regarding their security. Allies often have other
political and economic interests in common. We control for this using a variable (ALLY)
that equals 1 if the members of a dyad were linked by a mutual defense treaty, a
neutrality pact, or an entente; it equals 0 otherwise.
The results of estimating this regression equation are in column 1 of Table I. In
the presentation we start with a “typical” politically relevant dyad: contiguous, its
members not allied, and with average values for all the other influences. For such a dyad,
the annual probability that it will experience a military dispute is about . 06—six chances
in a hundred. Then we change each of those influences, one at a time, by making the dyad
allied or adding a comparable measure of change (one standard deviation) to each of the
continuous measures. This allows us to compute the change in the risk of conflict induced
by each alteration in the dyad’s characteristics. It is intuitively more accessible than the
regression coefficients and standard errors. That more technical information is in the
Appendix to Russett & Oneal (2001). We do not report the effect of the control variables,
as they are not subject to policy intervention.

Table I: Simple Tests for Changes in Probability of Militarized Disputes with

Hypotheses from Clash of Civilizations, Realist, and Kantian Theories

236
 SPLIT plus SPLIT plus SPLIT plus realist
realist variables Kantian variables & Kantian variables

All variables at baseline values except: 1 2 3

SPLIT equals 1 +56 % +34 % +12 %

ALLIES equals 1 -49 % -50 %

POWER RATIO increased by 1 st. dev. -28 % -38 %

DEMOCL increased by 1 st. dev.

B B -27 % -26 %

DEMOCL decreased by 1 st. dev.

B B +35 % +34 %

DEPENDL increased by 1 st. dev.

B B -22 % -36 %

IGOs increased by 1 st. dev. -30 % -34 %

 238

The two new realist influences are very significant statistically (at the . 001 level)
and substantively important. Making the states allied reduces the probability of a
militarized dispute by 49 percent; increasing the balance of power by one standard
deviation lowers it by 28 percent. Allies are less likely to fight, and a preponderance of
power inhibits conflict. There is still evidence in this specification that states split across
civilizations are prone to conflict. The measure for SPLIT is not so significant
statistically as before (. 03 level), but it nonetheless is associated with a 49 percent
increase in the likelihood of conflict. For the ‘clash of civilizations,’ so far so good.
Next we add three variables to the simplest specification in order to evaluate the
clash of civilizations in competition with the liberal perspective. xv These three are those
TP PT

commonly associated with Immanuel Kant’s (1795 [1970]) essay on perpetual peace:
‘republican constitutions’ (representative democracy), the ‘cosmopolitan law’ of
interdependent trade and commerce, and international law and organizations.
For democracy we use the Polity III data (Jaggers & Gurr, 1995) giving a score
from –10 for an extreme autocracy to +10 for the most democratic states. Because a
dispute can result from the actions of a single state, the likelihood of conflict depends
primarily on the degree of constraint experienced by the less constrained state in each
dyad. So we expect that the less democratic state (DEM ) in a dyad most strongly
B

L B

influences the danger of interstate violence: the more democratic that state, the more
constrained from engaging in a dispute it will be.
For economic interdependence we use IMF’s data on bilateral trade. Since we
expect trade to influence relations only when it is economically important, we divide the
sum of a country’s exports and imports with its dyadic partner by its GDP. xvi As with the TP PT

influence of democratic institutions, we expect the likelihood of a dispute to be primarily

influenced by the freedom of action available to the state less constrained from using
force. This is the state with the lower bilateral trade/GDP ratio (DEPEND ), because it is
B

L B

less dependent economically on the other member of the dyad.

For the third Kantian influence we use common membership in inter-
governmental organizations: the number of multilateral IGOs to which both members of
the dyad belong. The index ranges from zero (e.g., some members of NATO with
mainland China before 1971) to 130, with the densest network of IGOs found in Western
Europe. Lacking a persuasive theoretical basis for weighting different kinds of IGOs
(global, regional, or functional; security-oriented, economic, environmental, etc. ) we
counted all equally. A more nuanced index would produce stronger results, but even this
simple one shows a reduction in militarized disputes.
In column 2, we evaluate Huntington’s thesis in the presence of just the Kantian
variables and the essential controls. We do not include our measures of alliances or the
balance of power in this test. SPLIT still brings a 34 percent increase in the risk of
conflict, but its effect is not quite statistically significant (. 11 level). This suggests that
civilizational differences matter a lot in some cases, but not in others: the average effect
(increasing conflict by 34 percent) is not trivial but the effect is variable (hence, the lack

238
of statistical significance). By contrast, democracy is highly significant (. 001 level). If
we increase the lower democracy score so that both states are democratic, the risk of a
dispute drops by 24 percent; if we decrease the lower democracy score so that at least one
state is autocratic, the danger of a dispute is 35 percent above the baseline rate. If the
number of IGO memberships shared by the two states is high, the risk of a dispute drops
by 30 percent (also significant at the . 001 level). The effect of trade is somewhat smaller
(a 22 per cent reduction in the risk of conflict), but still substantial and significant (. 05
level). In the presence of the Kantian variables, then, the contribution of civilizational
differences to explaining the incidence of militarized disputes declines.
Finally, column 3 reports the independent effect of civilizational differences on
the likelihood of dyadic conflict in the presence of all the realist and Kantian influences.
All entries in the table except SPLIT are highly significant (at the . 001 level for all but
economic interdependence, which reaches the . 03 level). Alliances and relative power
make big differences as usual (50 percent and 38 percent reductions respectively) in the
annual likelihood that an otherwise average dyad will experience a dispute. So, too, do
democracy (a 26 per cent reduction in the risk of conflict if both states are democracies,
or a 34 percent increase if one is autocratic), economic interdependence (36 percent
reduction), and international organizations (34 percent risk reduction). In competition
with all the realist and liberal influences, SPLIT is associated with just a 12 percent
increase in risk; and it is far from statistical significance (. 30 level). xvii Thus, any one of
TP PT

the realist or Kantian variables has a far greater impact on interstate conflict than does
the clash of civilizations.

What are the patterns of conflict within and between particular civilizations?
U

One important test of the thesis advanced in The Clash of Civilizations is to ask whether
interstate disputes are less common within particular civilizations than they are among
dyads that are split across civilizational lines. Huntington has argued that conflict is more
likely between states from different civilizations than it is for states from the same
cultural group. In the tests we have reported thus far, we compared the incidence of
conflict for split dyads to the average for all eight civilizations. But with a test only
slightly more complex, we can compare the likelihood of conflict for a pair of states from
any one, particular civilization to the risk for two states from each of the other
civilizations and for two states that are split.
For this test we created a variable for each civilization that distinguishes dyads from that
civilization from all other pairs. Thus, WESTERN equals 1 if both states in a dyad are
from the Western civilization; it is 0 for all other pairs. We did this for each of the eight
civilizations, and add the eight indicators to all the realist and Kantian variables. If
Huntington is right that dyads within the same civilizations are more peaceful, the risk of
conflict should be less for dyads in any one of the civilizations than for the split pairs of
states.

Table II: Tests on the Frequency of Militarized Disputes within Civilizations

 240

All variables at baseline values except:

ALLIES equals 1 -48 %

POWER RATIO increased by 1 st. dev. -37 %

DEMOCL increased by 1 st. dev.

B B -18 %

DEPENDL increased by 1 st. dev.

B B -20 %

IGOs increased by 1 st. dev. -23 %

WESTERN equals 1 -74 %

SINIC equals 1 +179 %

ISLAMIC equals 1 +9 %

HINDU equals 1 +55 %

ORTHODOX equals 1 -71 %

LATIN equals 1 -8 %

AFRICAN equals 1 -14 %

BUDDHIST equals 1 +184 %

240
 ----------------

Table II shows our new results. There is little evidence that civilizations clash. First, notice that
the realist and Kantian variables perform much as they did in column 3 of Table I. All are
statistically significant at the . 04 level or better. The risk factors for each civilization in
Table II indicate the difference in the likelihood of conflict for a dyad within that
civilization from that for the pairs of states that are split across some civilizational line. If
Huntington were right, each of the influences would be negative, indicating that the risk
of conflict is lower within that civilization. The percentages that are reported allow us to
compare the peacefulness of the eight civilizations one to another: the most peaceful
civilization has the greatest risk reduction. In fact, only two of the eight civilizational
effects are negative and statistically significant.
The West has been the most peaceful of the eight civilizations. There was 74 percent less conflict
for Western pairs of states than for split states, which otherwise had identical
characteristics. Internally, the West was the most pacific, reflecting the regularization of
peaceful relations among the industrialized democracies since the bloodletting of World
War II. This result also undoubtedly indicates the influence of the cold war. The internal
peacefulness of the West does not mean that it is especially dispute-prone toward other
civilizations. We shall see below that it is not. The Orthodox civilization also was
significantly more peaceful (71 percent) than split pairs of states; again the consequences
of the cold war are manifest. A common Eastern Christian culture may help explain the
peacefulness of Huntington’s Orthodox civilization, but it is obviously true that the
Soviet Union kept a peace of sorts in the region until 1989. Given events since then, it is
apparent that the countries of Eastern Europe prefer the peace conferred by democracy
and free trade. Both of these findings are highly significant statistically as well as being
very impressive substantively.
The risk reductions reported for Latin America and Africa also indicate slightly less
conflict for the dyads located in these regions when compared to split pairs, but neither
effect is remotely significant: the probability that these results would have occurred
purely by chance is . 44 and . 32 respectively. The other four civilizations, however, had
greater conflict among their members than the dyads split across civilizational
boundaries. For the Sinic and Buddhist groups, this effect is very significant statistically
and huge substantively (179 and 184 percent increases in risk). Huntington characterizes
the Islamic civilization as being in conflict with ‘its Orthodox, Hindu, African, and
Western Christian neighbors’ (p. 183) – a region with ‘bloody borders’ (p. 254). If so, it
also has bloody innards. Pairs of Islamic states were more dispute-prone than the split
dyads as a group, though this difference is not statistically significant.
In sum, the evidence from looking at the incidence of conflict for the eight civilizations
individually provides little support for Huntington’s thesis. Only two of the eight groups
are clearly more pacific internally than are the split pairs of states that he expects to be
conflict prone. Half of the civilizations were actually more conflictual than this reference
group during the post-World War II period, and two of these were strongly so. This
 242

spread--from a statistically significant benefit for two civilizations, an insignificant

reduction for two, an insignificant increase in conflict for two, and a statistically
significant increase for two other civilizations—is just what would be expected if there
were in fact no relation between civilizations and interstate violence. These dramatic
differences among the eight groups explain why SPLIT was not statistically significant in
the test reported in column 3 of Table I.

Table III: The West vs. Others

1 2 3 4 5

All variables at baseline values except

WEST vs. REST equals 1 +27 %

WEST vs. ISLAM equals 1

+19 % -15 %

ISRAEL vs. ISLAM equals 1

+246 %

WEST vs. ORTHODOX equals 1 +96 %

WEST vs. SINIC equals 1 +150 %

ALLY equals 1 -48 % -50 % -46 % -50 % -51 %

POWER RATIO increased by 1 -37 % -37 % -37 % -39 % -33 %

standard deviation

DEMOCL increased by 1 standard

B B -27 % -26 % -28 % -26 % -25 %
deviation

DEPENDL increased by 1 standard

B B -35 % -35 % -31 % -36 % -40 %
deviation

IGOs increased by 1 standard -35 % -35 % -34 % -37 % -30 %

deviation

242
 What about the contention that the sharpest and most dangerous division is
between the “West and the rest”? Column 1 of Table III provides an initial answer. All
the realist and Kantian variables continue to do well in predicting conflict (all are
significant at the . 001 level except for DEPENDL, at the . 04 level). There also is some
support for Huntington’s view that the West is confronted by states from other
civilizations. The risk of a militarized dispute for dyads that contain one Western state
and one state from any other civilization is 27 percent greater than for all other dyads,
though the effect is only marginally significant (. 10).
The remaining columns of Table III break down this general “West vs. rest”
distinction. In column 2, we use an indicator to assess the risk of violence between the
West and Islam. There is a tendency for Western and Islamic states to fight more often,
all other things being equal; but the impact--only 19 percent—is weaker than might be
expected given the prominence with which these incidents have been reported. The West-
versus-Islam effect, in any event, is weaker that any of the other influences in the model;
and it is not statistically significant (. 24 level). With a closer look even this effect fades.
For the reasons explained earlier, we included Israel in the West, though Huntington did
not. In column 3 we show what happens when we remove from the Western-versus-Islam
group all the dyads that include Israel and re-estimate the level of conflict between the
West and Islam, controlling for the Arab-Israeli conflict separately. The risk of military
conflict for pairs of states (excluding Israel) split between the West and Islam is less than
for other pairs of states, though the effect is not statistically significant (. 25 level). The
effect reported in column 2 is, therefore, the result of the animosity between Israel and its
Arab neighbors throughout the post-World War II period. Not surprisingly, the risk of
conflict between Israel and an Islamic state is much higher than for other dyads: a 246
percent increase. The essence of the purported clash between the West and Islam is
simply the familiar Arab-Israeli conflict. For other Western countries, there is no effect.
We did find two groups with which the West experienced significantly more frequent
disputes. Column 4 shows that there was great conflict between the Western and
Orthodox groups during the 1950-92 years, and column 5 indicates significantly greater
interstate violence between the Western and Sinic countries. This is what the “West vs.
the rest” hypothesis reduces to. Rather than link either of these results to differences
between civiliations, however, it is much more plausible to interpret them as evidence of
cold war conflict across the old iron curtain in Europe and the bamboo curtain in Asia.

Do regional hegemonies reduce the likelihood of conflict?

U

Can a strong core state, or hegemon, keep the peace within its own civilization?
Some civilizations have powerful cores—single states with the vast majority of economic
 244

strength and military capabilities. These include India with about 99 percent of the
resources of the tiny Hindu group, the Soviet Union with 86 to 90 percent of the
Orthodox group’s capabilities during the cold war years, and China, usually with 70
percent or more of the Sinic group’s capabilities. In the middle is the West, which might
be characterized as having two cores, the United States and a Franco-German one. The U.
S. core is much stronger than the continental one, usually possessing more than 40
percent of all Western capabilities.
The other four civilizations cannot be characterized as having strong cores.
Thailand is the strongest member of the rather small Buddhist group; its capabilities as a
fraction of those of the whole civilization were usually in the 40-65 percent range. But
Thailand is not a strong state, and it is geographically situated at the intersection of two
much more powerful civilizational hegemonies, those of China and India. The Thais,
consequently, are in no position to be hegemonic. Brazil is by far the strongest power in
the Latin American group; but it held only a modest amount (usually about 30 percent) of
the capabilities of the region, corresponding to Huntington’s view that the group lacks a
strong core. He also characterizes the Islamic and African groups as lacking a core. Our
simple measure of the capabilities held by the largest state in a civilization reflects that
conclusion, too.
South Africa held more than 85 percent of the capabilities of all independent
African states during the 1950s; but with the subsequent decolonization of Africa, that
dropped quickly to about 40 percent. During the apartheid years, South Africa tried
unsuccessfully to be a regional hegemon and impose peace in its part of the continent.
Turkey was the strongest Islamic country in most years, with about 20 percent of that
group’s capabilities, though occasionally Egypt or Iran slipped ahead. But with its
internal cultural divisions, South Africa was hardly in a good position to lead the African
states; nor, as a “torn” country divided between two civilizations, was Turkey.
Consequently, the share of militarily relevant capabilities held by South Africa or Turkey
may exaggerate their strength as core states; but they are already toward the low end of
the scale. Using the share of capabilities held by the largest state seems, therefore, a
reasonable way to gauge how strong any civilization’s core is.
The idea that a strong state is able (and willing) to pacify interstate relations
within a civilization can be tested in a fashion similar to that in Table II. To do that, we
used the variables identifying each of the eight civilizations and the eight measures of the
leading state’s share of a civilization’s total capabilities. xviii For just three of the eight
TP PT

civilizations did we find any support for the proposition that a strong core reduces
conflict; and the result was statistically significant for only in Africa. For the other five
civilizations, the strength of the hegemon was related to greater conflict, not less; and for
three of them, the result was statistically significant. In short, a strong core state is not
associated with more peaceful regional politics. If anything, the domination of a
civilization by a strong core state makes the group more prone to internal conflict. This
result is consistent with our discovery (Russett & Oneal, 2000, ch. 5) that hegemony in
the international system as a whole does not reduce international conflict.
A related hypothesis, which we noted above, is that a democratic core state,
acting as a benign sort of hegemon, can pacify relationships within its own civilization.

244
Of the four civilizations that might be characterized as regional hegemonies, only two
were led by states that were consistently democratic. America's leadership of NATO
during the cold war, which relied fairly heavily on persuasion and consensus-building
(Chernoff 1995), seems to fit Kupchan’s hypothesis, accounting in part for peaceful
relations within the West; but India’s domination of the Hindu group had no peace-
inducing effects. Of the two autocratic hegemonies, one—China’s—produced a high rate
of conflict within the civilization, and the other—the Soviet Union’s influence over the
Orthodox group—produced internal peace, though one would not describe the Soviet’s
influence as terribly benign. Thus, there seems to be no relationship between the
democratic character of the largest state and its success in maintaining peace in its group.
It is not that democracy is unimportant, hegemony is.

Does the clash of civilizations grow over time?

U

As noted earlier, Huntington’s thesis is meant to apply more to recent times than to the
more distant past. xix In fact, he suggests that the cold war suppressed civilizational
TP PT

conflicts. The East-West conflict was so crucial, involving the threat of a nuclear world
war, that all other rivalries were forced into the background. It is possible, therefore, that
our analyses of the years from 1950 through 1992 are distorted by the effects of the cold
war and do not represent the pattern of conflict that should be expected as the cold war
faded. To assess this possibility, we conducted four tests, each designed to reveal in a
different way whether the effect of civilizational differences on the likelihood of dyadic
conflict increased as the cold war waned.
Our first test involved simply noting the passage of time from 1950 to 1992, and
determining statistically whether the effect of being split across a civilizational boundary,
as indicated by the variable SPLIT in the specification in column 3 of Table I increased
over time, as the cold war waned. xx In this test, we are assuming that the intensity of the
TP PT

cold war declined steadily in the post-World War II period. What we found, however,
when we estimated this model was that the danger of a dispute decreased, not increased,
as time passed.
Our second test used the same basic technique, but with a better measure of the intensity
of the cold war. We know that the cold war did not decline steadily from year to year.
The end of the Korean war and the death of Stalin in 1953 had very big effects; in other
years, there was little change in the status quo. And in some years, the intensity of the
East-West confrontation increased. This occurred notably with the escalation of U. S.
involvement in the war in Southeast Asia in the late 1960s and during the Reagan years,
when the U. S. re-confronted the “evil empire. ” What we need, therefore, is a measure
that more accurately reflects the hostility of the Western and Soviet blocs. One measure
that has proved useful is the size of the United States’ defense burden in each year:
military expenditures divided by its gross domestic product. When U. S. policy makers
and the American people devoted more resources to the military, it was because they felt
insecure, that the level of international tensions and the risk of war had increased. During
the cold war, the source of that insecurity was the Soviet bloc. Consistent with subjective
interpretations, the trend in the defense burden was downward over time; but there were
 246

dramatic rises as the wars in Korea and Vietnam escalated and in the 1980s. In the post-
cold war era, the U. S. defense burden declined sharply precisely because the military-
political tensions associated with the East-West division diminished so dramatically.
In our second test, then, we determined whether the effect of civilizational differences
increased as the U. S. defense burden declined. The test is the same as the one before,
except that the U. S. defense burden replaces a simple indicator of time. Again the answer
proved contrary to expectations: conflicts among split dyads became less common as the
intensity of the cold war diminished. The cold war seems to have fanned cultural
differences, not suppressed them.
Next, we determined whether the effect of civilizational differences was greater
after two great transitional events, either of which may have demarcated the cold war
period, when East-West rivalries prevailed, from a period when the clash of civilizations
was important. The first possible turning point is 1979, the year of the Iranian revolution.
Huntington marks this dramatic event, which was immediately followed by the seizure of
the American embassy in Teheran and the onset of the hostage crisis, as a point at which
civilizational conflicts became more prominent. Iran was the first state to be ruled by
Islamic fundamentalists; the revolution there was quickly followed by strong
fundamentalist movements throughout the region, most notably in Afghanistan and
Algeria. Although the cold war was not over for another decade, the rise of Islamic
fundamentalism reduced the significance of the East-West divide, as the Soviets found
out in the course of their war in Afghanistan in the early 1980s.
We started again with the basic specification indicated in column 3 of Table I;
that is, all of the realist and Kantian variables were included in our model of interstate
conflict. We distinguished disputes that occurred in the years 1950-78 from those that
came afterward in order to determine if the frequency of conflict for split dyads was
greater after the Iranian revolution, as Huntington has suggested. Instead, the frequency
of conflicts across civilizational boundaries dropped rather than rose after the Iranian
revolution. Finally, we asked whether the dispute-inducing effect of SPLIT became
stronger after the cold war was effectively over. We used 1988 as the last year of the cold
war, as in earlier chapters, and distinguished disputes that occurred in the years 1950-88
from those in the post-cold war period. Once again, disputes between civilizations
became less common over time, dropping after the cold war ended. Many old conflicts
were resolved or reduced—notably in Afghanistan, El Salvador, Cambodia, the Middle
East, and Namibia—when the cold war ended and the superpowers no longer had an
incentive to meddle in regional conflicts.
However one asks the question, the answer is the same: disputes across
civilizational boundaries did not increase over time as the cold war waned. Quite the
opposite is true: they became less frequent. The cold war did not suppress conflict
between civilizations. It exacerbated regional violence.

Are civilizations the prime mover?

U

We consider one final question. If civilizational differences are not an important

cause of conflict directly, do they have important indirect effects through the variables

246
that we have repeatedly found to be significant? Perhaps civilizational identity is the
prime mover behind the important realist and Kantian influences in our analyses,
explaining who allies with whom, who trades with whom, which countries share many
common IGO memberships, and which have democratic political systems.
We used four paired sets of equations to explore this possibility, one for each of
the four variables that could plausibly be influenced by civiliational differences. The first
equation in each pair was used to predict dyads’ alliances, political systems, trade, or
IGO memberships by our collection of variables: whether they were part of different
civilizations (SPLIT), distance, contiguity, and whether one state was a major power, and
the three other variables (among alliance, trade, IGOs, and the lower democracy score)
not being predicted in that equation. Thus, allies, interdependence, IGOs, and democracy,
one by one, were explained by all the other variables. This tells how much of the
variation in each variable can be accounted for by the bundle of other variables. Then, the
second equation for each pair used only SPLIT as predictor, to see how much it could
account for by itself. By comparing these two measures of the variance explained, we get
an indication of how important civilizations are in accounting for each of the predicted
variables. If civilizational differences can account for much of the variance in alliances,
trade, IGOs, and political institutions, they might have important indirect influences on
the likelihood of conflict. This test is very generous to the civilization hypothesis,
because SPLIT is the only variable tested alone; therefore, it receives credit for any
predictive power it really shares with all the other variables in the full specification. xxi
TP PT

Alliances prove easiest to predict this way. The full equation explained 32
2
percent of the variance; or to state this in the usual terms, the R was . 32, meaning that
all the variables together accounted for just under a third of the total variation in the
incidence of alliances across all dyads. Pairs of states split by civilizations were less
likely to become allied, and this effect was significant at the . 001 level. Alliances are
most common within Huntington’s civilizational boundaries, but there are many
exceptions. The Arab League is composed entirely of Islamic states; but the Warsaw Pact
included states from both the Western and Orthodox civilizations. NATO is mostly
Western, but Greece is Orthodox and Turkey is Islamic. Contiguity and IGO
memberships were also strongly associated with the pattern of alliances. States are more
apt to ally with neighbors than with more distant states, and alliances are often
themselves IGOs and associated with other international organizations. Shared
democracy and the level of trade had little effect on the propensity of states to ally with
2
one another. For the equation predicting alliances from SPLIT alone, the R was . 22.
Comparing this to the . 32 with the complete set of variables shows that civilizational
identities are important in shaping states’ alliance commitments, but most of the variation
in alliance patterns remains unexplained.
Civilizational differences are much less successful in explaining the Kantian
variables.
 248

1) The attempt to predict IGO memberships using all other variables worked well
(producing an R2 of . 45). But the strongest contributions to the prediction were by, in
P P

order, democracy, alliances, and distance, with SPLIT in fourth place. With only SPLIT
as a predictor, the R2 dropped by more than half to . 21.
P P

2
2) The full equation for explaining bilateral interdependence showed an R of .
26; this was accounted for primarily by IGOs, distance, and states’ political systems, in
that order. xxii SPLIT was not significantly related to the economic importance of dyadic
TP PT

2
trade; and when it was the only variable in the equation, the R was just . 07.
Interdependence, as manifested in decisions by states and entrepreneurs, does not closely
correspond to the boundaries of civilizations.
3) The equations predicting shared democratic political systems explained even
2
less of the variance. The R for the equation with all the variables was only . 03, mostly
2
attributable to their joint IGO memberships. With SPLIT alone as the predictor, the R
was . 00. Civilizational differences are not useful at all in predicting joint democracy.
There can be no indirect effect, therefore, on the incidence of disputes through this
variable. Democracies can be found in all of Huntington’s civilizations.
To summarize this set of results, civilizational borders do play a substantial,
though limited, role in shaping the pattern of alliances: SPLIT alone accounts for more
than a fifth of the variance in the variable ALLIES. Many allies are from the same
cultural group, but there are also numerous exceptions. Civilizational boundaries also
affect memberships in international organizations, but less significantly. They have little
impact on interdependence or democracy. Overall, being split between civilizations does
not exert enough influence on the Kantian variables to support a claim that it is a major
indirect influence on who engages in militarized disputes. Civilizations do not make the
difference; the Kantian and realist influences do.

The insignificance of civilizational differences

U

In The Clash of Civilizations, Huntington argues plausibly that fundamental

cultural identities play an important role in shaping interstate relations. He bolsters his
argument with illustrative historical examples but does not subject it to scientific tests. In
this chapter, we assessed the clash of civilizations systematically, using a variety of
empirical tests with data over the period 1950-92. These analyses of states’ involvement
in militarized disputes during the post-World War II era show that differences in
civilization tell us little about the likelihood that two states will become involved in
conflict. Knowing whether a pair of states is split across civilizational boundaries does
not improve our ability to predict whether their relations will be marked by violence
beyond what we know about the elements of realist power politics and the Kantian
influences. In our complete model, each of these variables is significantly related to the
likelihood of a dispute, but civilizational differences are not. Moreover, states in four of
the eight civilizations fought more among themselves than did split states.

248
 Nor is Huntington’s warning of impending conflict between the West and the rest
of the world supported by the evidence. Conflicts involving the West and other states in
the post-World War II years primarily reflect the cold war rivalry between East and West
across the iron curtain in Europe and the bamboo curtain in Asia. There is no evidence of
a clash between the Western states and Islam except as it involves Israel and Islam. The
dominance of a civilization by a strong core state, democratic or not, does not inhibit
conflict within a civilization. Conflicts between civilizations became relatively less
common, not more so, as the cold war waned. The cold war exacerbated regional
disputes, rather than suppressing them. Thus there is reason to hope that the violence that
worried Huntington will become less common as the cold war recedes in history. Finally,
civilizational similarities and differences help predict alliance patterns; but they make
little contribution to understanding countries’ political institutions, membership in
international institutions, or commercial interactions. Consequently, there is no reason to
believe that they have major indirect effects on the likelihood of conflict through these
variables. xxiii
TP PT

Huntington challenged policy makers and scholars to consider the role that basic cultural identity
plays in international relations. We can be grateful that it is more benign than he
suggested, because civilizations represent a highly aggregated form of human cultural
characteristics that would be difficult to alter. Policies adopted over the course of a few
years could not be expected to change the nature of civilizations that have evolved over
centuries. Fortunately, the evidence we have assembled strongly indicates that national
leaders need not attempt such a Herculean task. Civilizations do not define the fault lines
along which international conflict occurs. More relevant are the Kantian and realist
influences. Common bonds of democracy, economic interdependence, and international
organizations unite many states, but separate them from others. The realist influences are
more important for states that do not share Kantian ties. For them, Realpolitik still
determines the incidence of conflict. Consequently, policy makers should focus on what
they can do: peacefully extending democracy, economic interdependence, and IGOs to
the parts of the world still excluded. These are the more important and more malleable
determinants of interstate relations. Strengthening them can mitigate what might
otherwise appear to be clashes of civilizations.
The absence of significant cultural conflict is encouraging for another reason. A
sense of shared identity among peoples who govern themselves democratically
constitutes a form of in-group feeling, one that might foster animosity toward those who
govern themselves differently. Bonds of international commerce and international
organizations might have similar effects. That is the potentially dangerous aspect of the
Kantian prescription for peace. But if such a strong cultural factor as civilizational
identity has so little impact on the probability of conflict between pairs of states, perhaps
the sense of identity that emerges from a shared political and economic systems will not
be threatening either. What we have in common with others need not be a threat to
peaceful relations with those outside the group.
Nor is Kant’s prescription for “perpetual peace” justified only by shared liberal
values of tolerance and the non-violent resolution of conflict. Cultural explanations of the
liberal peace are but part of the justification for confidence that democracy,
 250

interdependence, and particpation in IGOs can bring about a more peaceful world.
Rather, the Kantian view is promising precisely because it does not depend solely on
intangible values, norms, and shared identity. It is equally supported by the self-interest
of citizens and policy makers alike. If it is in the interest of political elites to avoid
unnecessary wars and so retain political office, and if commercial interests have an
interest in maintaining and promoting the ties that make them richer, they will do so.
Peace does not depend upon moral conversion, therefore, but is ultimately derived from
calculations of self-interest. Civilizations play little role in this.

Provoking what we fear?

U

Is this evaluation too sanguine? The events of September 2001, the subsequent
invasion of Afghanistan, and the impending war between the United States and Iraq may
appear to strengthen Huntington’s case: if he was premature in finding a clash of
civilizations, did he take the auguries correctly? We do not think so. Taliban-ruled
Afghanistan was controlled by Islamic fundamentalists. It was also—by its own choice--a
viciously oppressive regime, cut off from the world economy, and isolated from global
and regional networks of international organization. It was an extreme example of a state
operating outside of the Kantian system. The United States did not invade Afghanistan
because it was Islamic, but because its government gave aid and protection to those who
attacked the United States. Post-Taliban Afghanistan, while still far from stable
democracy, is very different in terms of the three Kantian principles.
Most countries with Islamic majority populations are governed by authoritarian
regimes, but not necessarily fundamentalist ones. Nor are they authoritarian simply
because they are Islamic. Many are so because they are ‘blessed’ by the geological fates,
with oil wealth that supports corrupt rulers who can stay in power by paying off the army,
security forces, and cronies. Other authoritarian governments (e.g., Egypt) would vanish
instantly if not maintained in power by massive U. S. economic and military assistance.
Especially in its fundamentalist variants (Saudi Arabia as well as Taliban Afghanistan),
Islam may not favor democracy, but Indonesia, Mali, Senegal, and Turkey have
reasonably democratic governments. All score 6 or higher on the –10 to +10 Polity scale
in 2000. (www. cidcm. umd. edu/inscr/polity/report. htm). Islamic political thought is
TU UT

anything but monolithic. Many scholars contend that, despite formidable cultural barriers
to liberal democracy in Islamic societies, an Islamic version of democracy which
guarantees political rights is possible (Esposito, 1995; Esposito & Voll, 1996; Halliday,
1996; Midlarsky, 1998, Weede, 1998, and several chapters in Beinin and Stork, 1997 and
Garnham & Tessler, 1995). And many Islamic countries with authoritarian governments
are nevertheless well-integrated into the global economy.
The confrontation between the United States and Iraq illuminates how dangerous
the clash of civilizations notion can become. Iraq, like Taliban Afghanistan, is ruled by a
vicious dictatorship that is isolated from the rest of the world. It is certainly a military
threat to its neighbors, but it is neither fundamentalist nor an exporter of Islamic
theocracy. It is thus hard to see the U. S. -Iraq confrontation as one of ‘civilizations’.
Previous American administrations successfully dealt with far stronger and more

250
dangerous states during the cold war by a policy of deterrence and containment. But
abandoning deterrence for an American allegedly ‘preventive’ war on Iraq—one
launched before an overt act of Iraqi aggression—may precipitate so much sympathy for
Iraq throughout the Islamic world as to make the clash of civilizations into a self-
fulfilling prophecy. Such over-reach by the United States and consequent reaction,
impelled by spreading the war on terrorism to Islamic states in the so-called ‘axis of evil’,
must be just what Osama Bin Laden hoped to provoke.
 252

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256
F. Laying the groundwork for a common future: The First Declaration of Alexandria –
in the name of God who is Almighty

First Declaration of Alexandria of the Religious Leaders of the Holy Land

In the name of God who is Almighty, Merciful and Compassionate, we, who have
gathered as religious leaders from the Muslim, Christian and Jewish communities, pray
for true peace in Jerusalem and the Holy Land, and declare our commitment to ending the
violence and bloodshed that denies the right to life and dignity.
According to our faith traditions, killing innocents in the name of God is a desecration of
his Holy Name, and defames religion in the world. The violence in the Holy Land is an
evil which must be opposed by all people of good faith. We seek to live together as
neighbours, respecting the integrity of each other's historical and religious inheritance.
We call upon all to oppose incitement, hatred, and the misrepresentation of the other.
The Holy Land is holy to all three of our faiths. Therefore, followers of the divine
religions must respect its sanctity, and bloodshed must not be allowed to pollute it. The
sanctity and integrity of the Holy Places must be preserved, and the freedom of religious
worship must be ensured for all.
Palestinians and Israelis must respect the divinely ordained purposes of the Creator by
whose grace they live in the same land that is called Holy.
We call on the political leaders of both parties to work for a just, secure, and durable
solution in the spirit of the words of the Almighty and the Prophets.
As a first step now, we call for a religiously sanctioned cease-fire, respected and observed
from all sides, and for the implementation of the Mitchell and Tenet recommendations,
including the lifting of restrictions
and return to negotiations.
We seek to help create an atmosphere where present and future generations will co-exist
with mutual respect and trust in the other. We call on all to refrain from incitement and
demonization, and to educate our future generations accordingly.
As religious leaders, we pledge ourselves to continue a joint quest for a just peace that
leads to reconciliation in Jerusalem and the Holy Land, for the common good of all our
peoples.
We announce the establishment of a permanent joint committee to carry out the
recommendations of this declaration, and to engage with our respective political
leadership accordingly.
 258

Signatories:

His Grace the Archbishop of Canterbury, Dr. George Carey

The Sephardi Chief Rabbi Bakshi-Doron

The Deputy Foreign Minister, Rabbi Michael Melchior

Rabbi David Rosen, President of the WCRP

The Rabbi of Savyon, Rabbi David Brodman

Minister of State for the Palestinian Authority, Sheikh Tal El Sider

Representative of the Greek Patriarch, Archbishop Aristichos

The Melkite Archbishop, Archbishop Boutrous Mu'alem

Representative of the Armenian Patriarch, Archbishop Chinchinian

The Bishop of Jerusalem, the Rt. Revd. Riah Abu El Assal

258
G Document and Data Appendix

Towards a Wider Europe

http://europa.eu.int/comm/external_relations/we/intro/ip03_358.htm

The European Commission today adopted a Communication setting out a new

framework for relations over the coming decade with Russia, the Western NIS and
the Southern Mediterranean - countries who do not currently have a perspective of
membership but who will soon find themselves sharing a border with the Union. As
the Copenhagen European Council confirmed, enlargement is an opportunity to
promote stability and prosperity beyond the new borders of the Union. The
Communication proposes that, over the coming decade, the EU should therefore
aim to work in partnership to develop a zone of prosperity and a friendly
neighbourhood – a ‘ring of friends’ - with whom the EU enjoys close, peaceful and
co-operative relations. It suggests that, in return for concrete progress
demonstrating shared values and effective implementation of political, economic
and institutional reforms, all the neighbouring countries should be offered the
prospect of a stake in the EU’s internal market. This should be accompanied by
further integration and liberalisation to promote the free movement of persons,
goods, services and capital (four freedoms). President Prodi said "With
globalization and the creation of a trans-national civil society, the Union’s external
relations can no longer be distinguished from its internal development, particularly
when it comes to our neighbourhood. Instead of trying to establish new dividing
lines, deeper integration between the EU and the ring of friends will accelerate our
mutual political, economic and cultural dynamism." Commissioner Patten noted
"Over the past decade, the Union’s most successful foreign policy instrument has
undeniably been the promise of EU membership. This is not sustainable. For the
coming decade, we need to find new ways to export the stability, security and
prosperity we have created within the enlarged EU. We should begin by agreeing on
a clearer vision for relations with our neighbours."

The Communication, put forward by President Prodi and Commissioner for External
Relations Chris Patten, suggests that the European Union and the neighbouring countries
are already mutually dependent when it comes to achieving stability, security and
sustainable development within our respective borders. It proposes that the Union set out
an ambitious vision for where relations with the Eastern and Southern neighbours should
be heading over the coming decade.

The Communication notes, at the same time, that differences between the Eastern and
Southern neighbours – both in terms of progress already made in reform and their
differing hopes and aspirations when it comes to EU membership – should lie at the heart
 260

of a new neighbourhood policy. It therefore proposes that further measures to enhance

integration and liberalisation should be implemented gradually and progressively,
responding to positive action on the part of the neighbouring countries.

These measures are:

Extension of the Internal Market and Regulatory Structures

Preferential Trading relations and Market Opening
Perspectives for Lawful Migration and Movement of Persons
Intensified Co-operation to Prevent and Combat Common Security Threats
Greater EU Political Involvement in Conflict Prevention and Crisis Management
Greater Efforts to Promote Human Rights, Further Cultural Co-operation and Enhance
Mutual Understanding:
Integration into Transport, Energy and Telecommunications Networks and the European
Research Area
New Instruments for Investment Promotion and Protection
Support for Integration into the Global Trading System
Enhanced Assistance, Better Tailored to Needs
New Sources of Finance

This New Neighbourhood Policy would be taken forward via country and/or regional
strategic Action Plans developed by the Commission in partnership with the
neighbouring countries. Action Plans would include political and economic benchmarks
by which to judge progress. The Communication suggests that, once agreed, these Action
Plans could supersede common strategies to become the Union’s main policy document
for relations with the neighbouring countries over the medium term.

When it comes to reflecting integration and liberalisation in contractual relations, the

Communication also opens the prospect of new Neighbourhood Agreements,
supplementing, where needed, the existing Partnership and Co-operation Agreements and
Association Agreements.

The European Council in Copenhagen on 12 and 13 December welcomed the

Commission’s intention to develop proposals for enhancing the Union’s relations with
Russia, Ukraine, Moldova, Belarus and the Southern Mediterranean countries (Algeria,
Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Palestinian Authority, Syria and
Tunisia). The Council suggested this should be based on a long-term approach promoting
democratic and economic reforms, sustainable development and trade.

260
 Background

The Barcelona Partnership

The Euro-Mediterranean Partnership, agreed by the Foreign Ministers of the EU and

the twelve Mediterranean partners* at Barcelona in November 1995, is founded on the
TU UT

mutual recognition of the value of developing a comprehensive policy of close

association in a large number of sectors of common interest resulting form the proximity
of the two regions. The objectives of the Partnership have been confirmed at all the
various Foreign Ministers meetings held since Barcelona, even if the rate of progress in
achieving them has been slower than originally hoped. The Barcelona Process was
endorsed by the Common Strategy for the Mediterranean Region adopted by the
European Council in Santa Maria da Feira in June 2000. The most recent Euro-
Mediterranean Foreign Ministers’ Meeting took place in Valencia on 22-23 April 2002
and agreed on an Action Plan for the development of the partnership.

The objectives of the Barcelona Declaration are to

• create a zone of peace and stability based on shared fundamental values,
particularly respect for human rights and democracy;
• build a region of shared prosperity through the gradual establishment of a free
trade area between the EU and the partners on the one hand, and among the partners
themselves on the other by the target date of 2010; this process is accompanied by
substantial financial assistance from the EU (principally the MEDA programme) and
through European Investment Bank loans to promote economic transition and to help the
partners meet the social and economic challenges implied by these changes;
• contribute to better understanding among the peoples of the region and to support
an active civil society.

Co-operation in the field of justice and home affairs, particularly the fight against
organised crime and terrorism, as well as dealing with the issues related to migration, is
mentioned briefly in the Barcelona Declaration and has acquired greater importance over
the years since 1995 as the EU has extended its acquis in this area.

The partnership is implemented bilaterally through the Association Agreements

negotiated between the EU and the partners, and multilaterally through regional bodies,
notably the Euro-Mediterranean Committee and the regular Senior Officials’ Meetings on
the Political and Security Dialogue. The Association Agreements establish, over a
transitional period, free trade in industrial goods and progressive liberalisation of
agricultural trade and a ‘rendezvous’ to open negotiations on liberalisation of trade in
services; they also contain provisions for cooperation in political, economic, social and
cultural matters, justice and home affairs and a ‘suspension’ clause which allows either
 262

party to suspend the agreement if an essential element of the Association Agreement

(notably respect for human rights and democracy) is breached.

As far as financial assistance from MEDA is concerned eight of the partners (Algeria,
Egypt, Jordan, Lebanon, Morocco, Palestinian Authority, Syria and Tunisia) are covered
by National Indicative Programmes, which account for the bulk of MEDA assistance (up
to 90%). The remainder is the subject of the Regional Indicative Programme, which
finances multilateral activities for which all twelve Mediterranean Partners are eligible.
The Mediterranean partners have also benefited from assistance from the European
Initiative for Democracy and Human Rights (EIDHR). The European Investment Bank
provides loans on its own resources to all Mediterranean partners principally for
investment in infrastructure but also for environmental projects, for which an interest rate
subsidy is provided. These resources have been supplemented through the creation of the
Facility for Euro-Mediterranean Investment and Partnership (FEMIP) launched in
October 2002, primarily intended to increase the support available for the private sector.
A decision is due to be taken by the Council in October 2003 on whether to convert the
Facility into an EIB subsidiary Euro-Mediterranean Bank.

Libya is not a Mediterranean partner but currently has observer status at certain meetings
and could become a full member if it accepted all aspects of the Barcelona Partnership as
currently constituted.

The Commission has delegations in all countries of the Partnership and a representative
office in the Palestinian territories. It has no representation in Libya.

Relations with Russia, Ukraine, Moldova and Belarus

From 1992, the 1989 Agreement on Trade and Cooperation (TCA) which the
European Community had concluded with the USSR was applied to govern relations with
each of the Newly Independent States. The TCA provided inter alia for Most Favoured
Nation (MFN) treatment for trade and the possibility to hold joint committees. For
Russia, Ukraine and Moldova, the TCA was superseded by the entry into force of the
Partnership & Cooperation Agreements (PCAs) in 1997 and 1998. A PCA with
Belarus was signed in 1995, but was neither fully ratified nor concluded.

The Partnership and Cooperation Agreements are comprehensive, covering political

dialogue, trade in goods and services, economic environmental, scientific and cultural
matters. Cooperation in justice and home affairs is also covered, specifically the
prevention of illegal activities and to cooperation against drug trafficking and money
laundering.

262
While the PCAs are evolutionary, foreseeing the development of trade and trade-related
provisions from the MFN treatment currently applied towards establishment of a bilateral
free trade area, they do not establish further trade concessions beyond those the EU
accords to its WTO partners. In return, the partner countries agree to apply MFN or
national treatment terms, whichever is most favourable.

The PCAs include a ‘suspension’ clause, which allows either party to suspend the
agreement if the essential elements of partnership (respect for democratic principles and
human rights) are breached. PCAs are valid for 10 years with tacit annual renewal
thereafter. The operation of PCA dispute settlement provisions is currently being
improved, in the case of both Russia and Ukraine.

Implementation of the agreements is overseen by a Ministerial Cooperation Council, a

senior official level Cooperation Committee and a Parliamentary Cooperation
Committee, in which the relevant European Parliament delegation represents the EU. In
addition, the EU holds Summits with Russia (biannual) and Ukraine (annual).

In 1999 and 2000, the Council adopted common strategies on Russia and Ukraine,
which update the list of desired cooperation activities with the aim of focussing bilateral
relations on implementing strategic priorities.

Separately, the EC has concluded textile agreements with all four countries, a steel
agreement with Russia, as well as agreements on nuclear safety research and
thermonuclear fusion with Ukraine. With Russia, the EC is currently renegotiating an
agreement on science and technology cooperation and is negotiating agreements for
nuclear clean up in north-west Russia, readmission and fisheries cooperation.

The principal financial assistance foreseen in the PCAs is that provided under the Tacis
regulation. Beyond Tacis, the EU has provided further assistance to Moldova through the
Food Security Programme (FSP). Russia and Moldova have benefited from humanitarian
programmes administered by ECHO. Moldova and Ukraine have received macro-
economic assistance. Russia received special programmes of food aid in 1992 and
between 1998 and 2000. In 2001, the European Investment Bank was granted a mandate
to lend up to a ceiling of €100 million for environmental projects in north-west Russia.
All four countries have benefited from assistance from the European Initiative for
Democracy and Human Rights (EIDHR).
 264

Human Development Efficiency

DYN HDI efficiency

Indonesia 0,085
Nepal 0,084
Egypt 0,076
Tunisia 0,070
Korea, Rep. of 0,069
China 0,065
Pakistan 0,065
Algeria 0,052
Morocco 0,046
India 0,045
Portugal 0,043
Malaysia 0,038
Mali 0,034
Bangladesh 0,029
Gambia 0,029
Chile 0,028
Swaziland 0,028
Thailand 0,028
Ireland 0,027
Turkey 0,025
Nigeria 0,021
Australia 0,017
Finland 0,013
Spain 0,012
Honduras 0,011
Norway 0,010
Bolivia 0,009
United Kingdom 0,009
Israel 0,007
Senegal 0,007
Italy 0,006
Sri Lanka 0,006
Ghana 0,005
Japan 0,004
Dominican Republic 0,003
Mauritania 0,003
France 0,002
Greece 0,002
Austria 0,001
Colombia 0,000

264
Canada -0,001
Brazil -0,002
Mexico -0,002
Netherlands -0,003
El Salvador -0,004
Sweden -0,004
United States -0,004
Guatemala -0,007
Peru -0,010
Ecuador -0,011
Philippines -0,012
Uruguay -0,012
Papua New Guinea -0,014
Guinea-Bissau -0,016
Lesotho -0,017
Trinidad and Tobago -0,018
Denmark -0,019
Costa Rica -0,025
Panama -0,026
Switzerland -0,026
Paraguay -0,030
Hungary -0,035
Venezuela -0,038
Madagascar -0,039
Niger -0,041
Jamaica -0,052
Kenya -0,052
Côte d'Ivoire -0,054
Nicaragua -0,058
South Africa -0,058
Central African Republic -0,063
Romania -0,064
Guyana -0,069
Zimbabwe -0,087
Zambia -0,142

Poverty indicators

Country Estimated earned Estimated earned Female economic Gender

income (PPP income (PPP activity (age 15 empowerment
US$), Female, US$), Male, 1999 and above): as % measure (GEM)
1999 of male rate, 1999 Value
Norway 22037 34960 84 0,836
 266

Australia 19721 29469 76 0,738

Canada 20016 32607 81 0,763
Sweden 18302 27065 89 0,809
Belgium 15510 35798 65 0,692
United States 24302 39655 80 0,738
Iceland 21297 34335 85 0,815
Netherlands 16405 32170 66 0,755
Japan 15187 35018 67 0,52
Finland 18405 28023 86 0,783
Switzerland 17977 36569 66 0,696
Luxembourg 22733 63473 57 ,,
France 17525 28554 76 ,,
United Kingdom 16753 27611 74 0,671
Denmark 21274 30565 84 0,804
Austria 16445 34182 65 0,723
Germany 15846 31994 69 0,749
Ireland 14347 37641 51 0,644
New Zealand 15119 23209 78 0,756
Italy 13632 31238 58 0,536
Spain 10741 25747 55 0,688
Israel 12360 24687 67 0,569
Greece 9401 21595 57 0,502
Hong Kong, 15547 28396 63 ,,
China (SAR)
Cyprus 12511 25524 62 ,,
Singapore 13693 27739 64 0,509
Korea, Rep, of 9667 21676 69 0,358
Portugal 11163 21348 70 0,629
Slovenia 12232 19942 80 0,574
Malta 6526 24017 36 ,,
Barbados 76 0,648
Brunei 10865 24163 61 ,,
Darussalam
Czech Republic 10214 15980 84 0,546
Argentina 6319 18467 45 ,,
Slovakia 8393 12912 84 0,546
Hungary 8381 14769 72 0,493
Uruguay 5963 11974 66 0,491
Poland 6453 10561 80 0,518
Chile 4613 12772 48 0,445

266
Bahrain 6194 19228 37 ,,
Costa Rica 4518 13080 45 0,571
Bahamas 12138 18457 85 0,639
Kuwait 10563 22086 52 ,,
Estonia 82 0,552
United Arab 5954 24392 37 ,,
Emirates
Croatia 5300 9612 72 0,527
Lithuania 5406 8055 79 0,474
Qatar 5831 25753 40 ,,
Trinidad and 4510 11878 58 0,599
Tobago
Latvia 5021 7716 81 0,54
Mexico 4486 12184 47 0,507
Panama 3821 7892 54 0,475
Belarus 5373 8599 82 ,,
Belize 1858 7972 31 0,496
Russian 5877 9283 81 0,434
Federation
Malaysia 5153 11183 60 0,503
Bulgaria 3951 6251 86 ,,
Romania 4441 7711 76 0,449
Libyan Arab 2771 12024 32 ,,
Jamahiriya
Macedonia, 71 ,,
TFYR
Venezuela 3104 7855 53 0,439
Colombia 3587 7965 60 0,507
Mauritius 4789 13452 48 0,403
Suriname 48 0,438
Lebanon 2160 7364 38 ,,
Thailand 4634 7660 84 ,,
Fiji 2322 7193 44 ,,
Saudi Arabia 2715 17857 26 ,,
Brazil 4067 10077 52 ,,
Philippines 2684 4910 61 0,47
Oman 3554 22001 24 ,,
Armenia 1775 2685 86 ,,
Peru 1835 7455 43 0,516
Ukraine 2488 4576 79 0,428
 268

Kazakhstan 81 ,,
Georgia 77 ,,
Maldives 3256 5531 79 ,,
Jamaica 2746 4400 86 ,,
Azerbaijan 74 ,,
Paraguay 2105 6625 43 0,407
Sri Lanka 2193 4305 55 0,409
Turkey 3937 8772 60 0,308
Turkmenistan 81 ,,
Ecuador 1331 4643 38 0,482
Albania 2248 4088 73 ,,
Dominican 2794 8133 47 0,51
Republic
China 2841 4350 86 ,,
Jordan 1728 6008 33 ,,
Tunisia 3055 8802 46 ,,
Iran, Islamic Rep, 2331 8581 36 ,,
of
Cape Verde 2687 6560 52 ,,
Kyrgyzstan 83 ,,
Guyana 1949 5435 49 ,,
South Africa 5473 12452 59 ,,
El Salvador 2399 6363 54 0,44
Samoa (Western) .. ,,
Syrian Arab 1881 6960 36 ,,
Republic
Moldova, Rep, of 1618 2495 83 ,,
Uzbekistan 1769 2740 84 ,,
Algeria 2169 7882 38 ,,
Viet Nam 1552 2170 90 ,,
Indonesia 1929 3780 67 ,,
Tajikistan 769 1295 78 ,,
Bolivia 1446 3272 57 0,425
Egypt 1847 4954 44 0,258
Nicaragua 1338 3231 55 ,,
Honduras 1202 3462 46 0,449
Guatemala 1691 5622 41 ,,
Gabon 75 ,,
Equatorial Guinea 2659 6749 51 ,,
Namibia 3676 7308 67 ,,

268
Morocco 1930 4903 52 ,,
Swaziland 2424 5594 52 0,385
Botswana 5183 8638 77 ,,
India 1195 3236 50 ,,
Mongolia 1363 2058 87 ,,
Zimbabwe 2159 3593 78 ,,
Myanmar 746 1311 75 ,,
Ghana 1618 2145 98 ,,
Lesotho 1127 2594 56 ,,
Cambodia 1190 1541 96 ,,
Papua New 1742 2941 78 ,,
Guinea
Kenya 966 1078 84 ,,
Comoros 996 1861 73 ,,
Cameroon 964 2189 58 ,,
Congo 516 946 71 ,,
Pakistan 826 2787 41 ,,
Togo 908 1918 62 ,,
Nepal 849 1607 67 ,,
Bhutan 65 ,,
Lao People's 1169 1774 84 ,,
Dem, Rep,
Bangladesh 1076 1866 76 0,309
Yemen 345 1272 36 ,,
Haiti 1030 1916 69 ,,
Madagascar 595 1005 78 ,,
Nigeria 520 1182 56 ,,
Djibouti .. ,,
Sudan 308 1016 40 ,,
Mauritania 1163 2062 74 ,,
Tanzania, U, Rep, 418 585 93 ,,
of
Uganda 942 1393 88 ,,
Congo, Dem, 575 1031 72 ,,
Rep, of the
Zambia 577 934 76 ,,
Côte d'Ivoire 892 2379 51 ,,
Senegal 996 1844 72 ,,
Angola 82 ,,
Benin 769 1102 90 ,,
 270

Eritrea 601 1164 87 0,404

Gambia 1181 1987 78 ,,
Guinea 89 ,,
Malawi 485 689 90 ,,
Rwanda 719 1054 89 ,,
Mali 582 928 80 ,,
Central African 894 1452 79 ,,
Republic
Chad 629 1077 76 ,,
Guinea-Bissau 442 921 63 ,,
Mozambique 713 1013 92 ,,
Ethiopia 414 844 67 ,,
Burkina Faso 766 1177 92 ,,
Burundi 472 690 89 ,,
Niger 561 941 75 ,,
Sierra Leone 53 ,,

270
Country Human poverty Inequality Inequality Inequality
index (HPI-2) measures: Gini measures: Richest measures: Richest
Value ( %) index 10 % to poorest 20 % to poorest
10 % 20 %
Norway 7,5 25,8 5,3 3,7
Australia 12,9 35,2 12,5 7
Canada 12,1 31,5 8,5 5,2
Sweden 6,8 25 5,4 3,6
Belgium 12,5 25 5,5 3,6
United States 15,8 40,8 16,6 9
Iceland ,, ,, ,, ,,
Netherlands 8,5 32,6 9 5,5
Japan 11,2 24,9 4,5 3,4
Finland 8,8 25,6 5,1 3,6
Switzerland ,, 33,1 9,9 5,8
Luxembourg 10,7 26,9 5,4 3,9
France 11,1 32,7 9,1 5,6
United Kingdom 15,1 36,1 10,4 6,5
Denmark 9,1 24,7 5,7 3,6
Austria ,, 23,1 4,4 3,2
Germany 10,5 30 7,1 4,7
Ireland 15,3 35,9 11 6,4
New Zealand ,, ,, ,, ,,
Italy 12,3 27,3 6,2 4,2
Spain 11,5 32,5 9 5,4
Israel ,, 35,5 9,6 6,2
Greece ,, 32,7 8,5 5,3
Hong Kong, ,, ,, ,, ,,
China (SAR)
Cyprus ,, ,, ,, ,,
Singapore ,, ,, ,, ,,
Korea, Rep, of ,, 31,6 8,4 5,3
Portugal ,, 35,6 9,3 5,9
Slovenia ,, 28,4 5,8 4,1
Malta ,, ,, ,, ,,
Barbados ,, ,, ,, ,,
Brunei ,, ,, ,, ,,
Darussalam
Czech Republic ,, 25,4 5,2 3,5
 272

Argentina ,, ,, ,, ,,
Slovakia ,, 19,5 3,6 2,6
Hungary ,, 24,4 5 3,5
Uruguay ,, 42,3 15,4 8,9
Poland ,, 31,6 7,8 5,1
Chile ,, 57,5 33,7 18,2
Bahrain ,, ,, ,, ,,
Costa Rica ,, 45,9 20,7 11,5
Bahamas ,, ,, ,, ,,
Kuwait ,, ,, ,, ,,
Estonia ,, 37,6 10 6,5
United Arab ,, ,, ,, ,,
Emirates
Croatia ,, 29 6,3 4,3
Lithuania ,, 32,4 8,3 5,2
Qatar ,, ,, ,, ,,
Trinidad and ,, 40,3 14,4 8,3
Tobago
Latvia ,, 32,4 8,9 5,3
Mexico ,, 51,9 26,4 14,3
Panama ,, 48,5 29 14,8
Belarus ,, 21,7 3,9 2,9
Belize ,, ,, ,, ,,
Russian ,, 48,7 23,3 12,2
Federation
Malaysia ,, 49,2 22,1 12,4
Bulgaria ,, 26,4 5 3,6
Romania ,, 28,2 6,1 4,2
Libyan Arab ,, ,, ,, ,,
Jamahiriya
Macedonia, ,, ,, ,, ,,
TFYR
Venezuela ,, 48,8 24,3 13
Colombia ,, 57,1 42,7 20,3
Mauritius ,, ,, ,, ,,
Suriname ,, ,, ,, ,,
Lebanon ,, ,, ,, ,,
Thailand ,, 41,4 11,6 7,6
Fiji ,, ,, ,, ,,
Saudi Arabia ,, ,, ,, ,,

272
Brazil ,, 59,1 48,7 24,4
Philippines ,, 46,2 16,1 9,8
Oman ,, ,, ,, ,,
Armenia ,, 44,4 15,3 9,2
Peru ,, 46,2 22,3 11,7
Ukraine ,, 29 6,4 4,3
Kazakhstan ,, 35,4 9,8 6,3
Georgia ,, 37,1 12 7,1
Maldives ,, ,, ,, ,,
Jamaica ,, 36,4 10 6,3
Azerbaijan ,, 36 9,8 6,3
Paraguay ,, 57,7 91,1 31,8
Sri Lanka ,, 34,4 7,9 5,3
Turkey ,, 41,5 14,2 8,2
Turkmenistan ,, 40,8 12,3 7,7
Ecuador ,, 43,7 15,4 9,2
Albania ,, ,, ,, ,,
Dominican ,, 47,4 17,7 10,5
Republic
China ,, 40,3 12,7 8
Jordan ,, 36,4 9,1 5,9
Tunisia ,, 41,7 13,8 8,5
Iran, Islamic Rep, ,, ,, ,, ,,
of
Cape Verde ,, ,, ,, ,,
Kyrgyzstan ,, 40,5 11,9 7,5
Guyana ,, 40,2 13,3 7,4
South Africa ,, 59,3 42,5 22,6
El Salvador ,, 50,8 28,5 14,8
Samoa (Western) ,, ,, ,, ,,
Syrian Arab ,, ,, ,, ,,
Republic
Moldova, Rep, of ,, 40,6 13,7 8,3
Uzbekistan ,, 33,3 8,2 5,5
Algeria ,, 35,3 9,6 6,1
Viet Nam ,, 36,1 8,4 5,6
Indonesia ,, 31,7 6,6 4,6
Tajikistan ,, ,, ,, ,,
Bolivia ,, 58,9 91,4 32
Egypt ,, 28,9 5,7 4
 274

Nicaragua ,, 60,3 70,7 27,9

Honduras ,, 59 119,8 38,1
Guatemala ,, 55,8 29,1 15,8
Gabon ,, ,, ,, ,,
Equatorial Guinea ,, ,, ,, ,,
Namibia ,, ,, ,, ,,
Morocco ,, 39,5 11,7 7,2
Swaziland ,, 60,9 49,7 23,8
Botswana ,, ,, ,, ,,
India ,, 37,8 9,5 5,7
Mongolia ,, 33,2 8,4 5,6
Zimbabwe ,, 56,8 26,1 15,6
Myanmar ,, ,, ,, ,,
Ghana ,, 39,6 12,3 7,8
Lesotho ,, 56 48,2 21,5
Cambodia ,, 40,4 11,6 6,9
Papua New ,, 50,9 23,8 12,6
Guinea
Kenya ,, 44,5 19,3 10
Comoros ,, ,, ,, ,,
Cameroon ,, ,, ,, ,,
Congo ,, ,, ,, ,,
Pakistan ,, 31,2 6,7 4,3
Togo ,, ,, ,, ,,
Nepal ,, 36,7 9,3 5,9
Bhutan ,, ,, ,, ,,
Lao People's ,, 37 9,7 6
Dem, Rep,
Bangladesh ,, 33,6 7,3 4,9
Yemen ,, 33,4 8,6 5,6
Haiti ,, ,, ,, ,,
Madagascar ,, 46 17,2 9,6
Nigeria ,, 50,6 24,9 12,8
Djibouti ,, ,, ,, ,,
Sudan ,, ,, ,, ,,
Mauritania ,, 37,3 11,2 6,9
Tanzania, U, Rep, ,, 38,2 10,8 6,7
of
Uganda ,, 37,4 9,9 6,4
Congo, Dem, ,, ,, ,, ,,

274
Rep, of the
Zambia ,, 52,6 36,6 17,3
Côte d'Ivoire ,, 36,7 9,4 6,2
Senegal ,, 41,3 12,8 7,5
Angola ,, ,, ,, ,,
Benin ,, ,, ,, ,,
Eritrea ,, ,, ,, ,,
Gambia ,, 47,8 24,9 12,1
Guinea ,, 40,3 12,3 7,3
Malawi ,, ,, ,, ,,
Rwanda ,, 28,9 5,8 4
Mali ,, 50,5 23,1 12,2
Central African ,, ,, ,, ,,
Republic
Chad ,, ,, ,, ,,
Guinea-Bissau ,, 56,2 84,8 28
Mozambique ,, 39,6 12,5 7,2
Ethiopia ,, 40 11,4 6,7
Burkina Faso ,, 48,2 17,6 10
Burundi ,, 33,3 7,8 5,2
Niger ,, 50,5 46 20,7
Sierra Leone ,, ,, ,, ,,
 276

Country Infants with low Long-term Mean years of Population below

birth-weight ( %) unemployment (as schooling (age 15 income poverty
1995-99 % of labour and above), 2000 line ( %), $11 a
force), 1999 day (1994 PPP
US$), 1994-95
Norway 4 0,2 11,9 4,3
Australia 6 2,1 10,9 17,6
Canada 6 0,9 11,6 7,4
Sweden 5 2,8 11,4 6,3
Belgium 6 5,5 9,3 ,,
United States 7 0,3 12 13,6
Iceland ,, ,, 8,8 ,,
Netherlands ,, 1,4 9,4 7,1
Japan 7 1,1 9,5 ,,
Finland 4 3 10 4,8
Switzerland 5 1,2 10,5 ,,
Luxembourg ,, 0,8 ,, 0,3
France 5 4,5 7,9 9,9
United Kingdom 7 1,8 9,4 15,7
Denmark 6 1,1 9,7 ,,
Austria 6 1,2 8,4 ,,
Germany ,, 4,5 10,2 7,3
Ireland 4 5,6 9,4 ,,
New Zealand 6 1,4 11,7 ,,
Italy 5 7 7,2 ,,
Spain 4 8,1 7,3 ,,
Israel 7 ,, 9,6 ,,
Greece 6 5,9 8,7 ,,
Hong Kong, ,, ,, 9,4 ,,
China (SAR)
Cyprus ,, ,, 9,2 ,,
Singapore 7 ,, 7,1 ,,
Korea, Rep, of 9 ,, 10,8 ,,
Portugal 5 1,9 5,9 ,,
Slovenia ,, ,, 7,1 ,,
Malta ,, ,, ,, ,,
Barbados 10 ,, 8,7 ,,
Brunei ,, ,, ,, ,,
Darussalam

276
Czech Republic 6 3,3 9,5 ,,
Argentina 7 ,, 8,8 ,,
Slovakia ,, ,, 9,3 ,,
Hungary 9 3,5 9,1 ,,
Uruguay 8 ,, 7,6 ,,
Poland ,, 4,0 9,8 ,,
Chile 5 ,, 7,6 ,,
Bahrain 6 ,, 6,1 ,,
Costa Rica 7 ,, 6,1 ,,
Bahamas ,, ,, ,, ,,
Kuwait 7 ,, 6,2 ,,
Estonia ,, ,, ,, ,,
United Arab 6 ,, ,, ,,
Emirates
Croatia 5 ,, 6,3 ,,
Lithuania ,, ,, ,, ,,
Qatar ,, ,, ,, ,,
Trinidad and 10 ,, 7,8 ,,
Tobago
Latvia ,, ,, ,, ,,
Mexico 7 ,, 7,2 ,,
Panama 10 ,, 8,6 ,,
Belarus ,, ,, ,, ,,
Belize 4 ,, ,, ,,
Russian 7 ,, ,, ,,
Federation
Malaysia 9 ,, 6,8 ,,
Bulgaria 6 ,, 9,5 ,,
Romania 7 ,, 9,5 ,,
Libyan Arab 7 ,, ,, ,,
Jamahiriya
Macedonia, ,, ,, ,, ,,
TFYR
Venezuela 9 ,, 6,6 ,,
Colombia 9 ,, 5,3 ,,
Mauritius 13 ,, 6 ,,
Suriname 13 ,, ,, ,,
Lebanon 10 ,, ,, ,,
Thailand 6 ,, 6,5 ,,
Fiji 12 ,, 8,3 ,,
 278

Saudi Arabia 7 ,, ,, ,,
Brazil 8 ,, 4,9 ,,
Philippines 9 ,, 8,2 ,,
Oman 8 ,, ,, ,,
Armenia 9 ,, ,, ,,
Peru 11 ,, 7,6 ,,
Ukraine ,, ,, ,, ,,
Kazakhstan 9 ,, ,, ,,
Georgia ,, ,, ,, ,,
Maldives 13 ,, ,, ,,
Jamaica 11 ,, 5,3 ,,
Azerbaijan 6 ,, ,, ,,
Paraguay 5 ,, 6,2 ,,
Sri Lanka 25 ,, 6,9 ,,
Turkey 8 ,, 5,3 ,,
Turkmenistan 5 ,, ,, ,,
Ecuador 13 ,, 6,4 ,,
Albania 7 ,, ,, ,,
Dominican 13 ,, 4,9 ,,
Republic
China 6 ,, 6,4 ,,
Jordan 10 ,, 6,9 ,,
Tunisia 8 ,, 5 ,,
Iran, Islamic Rep, 10 ,, 5,3 ,,
of
Cape Verde 9 ,, ,, ,,
Kyrgyzstan 6 ,, ,, ,,
Guyana 15 ,, 6,3 ,,
South Africa ,, ,, 6,1 ,,
El Salvador 13 ,, 5,2 ,,
Samoa (Western) 6 ,, ,, ,,
Syrian Arab 7 ,, 5,8 ,,
Republic
Moldova, Rep, of 4 ,, ,, ,,
Uzbekistan ,, ,, ,, ,,
Algeria 9 ,, 5,4 ,,
Viet Nam 17 ,, ,, ,,
Indonesia 8 ,, 5 ,,
Tajikistan ,, ,, ,, ,,
Bolivia 5 ,, 5,6 ,,

278
Egypt 10 ,, 5,5 ,,
Nicaragua 9 ,, 4,6 ,,
Honduras 9 ,, 4,8 ,,
Guatemala 15 ,, 3,5 ,,
Gabon ,, ,, ,, ,,
Equatorial Guinea ,, ,, ,, ,,
Namibia 16 ,, ,, ,,
Morocco 9 ,, ,, ,,
Swaziland 10 ,, 6 ,,
Botswana 11 ,, 6,3 ,,
India 33 ,, 5,1 ,,
Mongolia 7 ,, ,, ,,
Zimbabwe 10 ,, 5,4 ,,
Myanmar 24 ,, 2,8 ,,
Ghana 8 ,, 3,9 ,,
Lesotho 11 ,, 4,2 ,,
Cambodia ,, ,, ,, ,,
Papua New 23 ,, 2,9 ,,
Guinea
Kenya 16 ,, 4,2 ,,
Comoros 8 ,, ,, ,,
Cameroon 13 ,, 3,5 ,,
Congo 16 ,, 5,1 ,,
Pakistan 25 ,, 3,9 ,,
Togo 20 ,, 3,3 ,,
Nepal ,, ,, 2,4 ,,
Bhutan ,, ,, ,, ,,
Lao People's 18 ,, ,, ,,
Dem, Rep,
Bangladesh 30 ,, 2,6 ,,
Yemen 19 ,, ,, ,,
Haiti 15 ,, 2,8 ,,
Madagascar 5 ,, ,, ,,
Nigeria 16 ,, ,, ,,
Djibouti 11 ,, ,, ,,
Sudan 15 ,, 2,1 ,,
Mauritania 11 ,, ,, ,,
Tanzania, U, Rep, 14 ,, 2,7 ,,
of
Uganda 13 ,, 3,5 ,,
 280

Congo, Dem, 15 ,, 3 ,,
Rep, of the
Zambia 13 ,, 5,5 ,,
Côte d'Ivoire 12 ,, ,, ,,
Senegal 4 ,, 2,6 ,,
Angola 19 ,, ,, ,,
Benin ,, ,, 2,3 ,,
Eritrea 13 ,, ,, ,,
Gambia ,, ,, 2,3 ,,
Guinea 13 ,, ,, ,,
Malawi 20 ,, 3,2 ,,
Rwanda 17 ,, 2,6 ,,
Mali 16 ,, 0,9 ,,
Central African 15 ,, 2,5 ,,
Republic
Chad ,, ,, ,, ,,
Guinea-Bissau 20 ,, 0,8 ,,
Mozambique 12 ,, 1,1 ,,
Ethiopia 16 ,, ,, ,,
Burkina Faso 21 ,, ,, ,,
Burundi ,, ,, ,, ,,
Niger 15 ,, 1 ,,
Sierra Leone 11 ,, 2,4 ,,

280
Country Population below Population below Population using Population using
income poverty income poverty adequate improved water
line ( %), $4 a day line ( %), 50 % of sanitation sources ( %) 1999
(1990 PPP US$), median income, facilities ( %)
1993-95 1987-97 1999
Norway ,, 6,9 ,, 100
Australia ,, 14,3 100 100
Canada ,, 11,9 100 100
Sweden ,, 6,6 100 100
Belgium ,, 5,2 ,, ,,
United States ,, 16,9 100 100
Iceland ,, ,, ,, ,,
Netherlands ,, 8,1 100 100
Japan ,, 11,8 ,, ,,
Finland ,, 5,2 100 100
Switzerland ,, 9,3 100 100
Luxembourg ,, 3,9 ,, ,,
France ,, 8 ,, ,,
United Kingdom ,, 13,4 100 100
Denmark ,, 7,2 ,, 100
Austria ,, 10,6 100 100
Germany ,, 7,5 ,, ,,
Ireland ,, 11,1 ,, ,,
New Zealand ,, ,, ,, ,,
Italy ,, 14,2 ,, ,,
Spain ,, 10,1 ,, ,,
Israel ,, 13,5 ,, ,,
Greece ,, ,, ,, ,,
Hong Kong, ,, ,, ,, ,,
China (SAR)
Cyprus ,, ,, 100 100
Singapore ,, ,, 100 100
Korea, Rep, of ,, ,, 63 92
Portugal ,, ,, ,, ,,
Slovenia 1 ,, ,, 100
Malta ,, ,, 100 100
Barbados ,, ,, 100 100
Brunei ,, ,, ,, ,,
Darussalam
 282

Czech Republic 1 2,3 ,, ,,

Argentina ,, ,, 85 79
Slovakia 1 2,1 100 100
Hungary 4 10,1 99 99
Uruguay ,, ,, 95 98
Poland 20 11,6 ,, ,,
Chile ,, ,, 97 94
Bahrain ,, ,, ,, ,,
Costa Rica ,, ,, 96 98
Bahamas ,, ,, 93 96
Kuwait ,, ,, ,, ,,
Estonia 37 ,, ,, ,,
United Arab ,, ,, ,, ,,
Emirates
Croatia ,, ,, 100 95
Lithuania 30 ,, ,, ,,
Qatar ,, ,, ,, ,,
Trinidad and ,, ,, 88 86
Tobago
Latvia 22 ,, ,, ,,
Mexico ,, ,, 73 86
Panama ,, ,, 94 87
Belarus 22 ,, ,, 100
Belize ,, ,, 42 76
Russian 50 20,1 ,, 99
Federation
Malaysia ,, ,, 98 95
Bulgaria 15 ,, 100 100
Romania 59 ,, 53 58
Libyan Arab ,, ,, 97 72
Jamahiriya
Macedonia, ,, ,, 93 99
TFYR
Venezuela ,, ,, 74 84
Colombia ,, ,, 85 91
Mauritius ,, ,, 99 100
Suriname ,, ,, 83 95
Lebanon ,, ,, 99 100
Thailand ,, ,, 96 80
Fiji ,, ,, 43 47

282
Saudi Arabia ,, ,, 100 95
Brazil ,, ,, 72 83
Philippines ,, ,, 83 87
Oman ,, ,, 92 39
Armenia ,, ,, 67 84
Peru ,, ,, 76 77
Ukraine 63 ,, ,, ,,
Kazakhstan 65 ,, 99 91
Georgia ,, ,, 99 76
Maldives ,, ,, 56 100
Jamaica ,, ,, 84 71
Azerbaijan ,, ,, ,, ,,
Paraguay ,, ,, 95 79
Sri Lanka ,, ,, 83 83
Turkey ,, ,, 91 83
Turkmenistan 61 ,, 100 58
Ecuador ,, ,, 59 71
Albania ,, ,, ,, ,,
Dominican ,, ,, 71 79
Republic
China ,, ,, 38 75
Jordan ,, ,, 99 96
Tunisia ,, ,, ,, ,,
Iran, Islamic Rep, ,, ,, 81 95
of
Cape Verde ,, ,, 71 74
Kyrgyzstan 88 ,, 100 77
Guyana ,, ,, 87 94
South Africa ,, ,, 86 86
El Salvador ,, ,, 83 74
Samoa (Western) ,, ,, 99 99
Syrian Arab ,, ,, 90 80
Republic
Moldova, Rep, of 66 ,, ,, 100
Uzbekistan 63 ,, 100 85
Algeria ,, ,, 73 94
Viet Nam ,, ,, 73 56
Indonesia ,, ,, 66 76
Tajikistan ,, ,, ,, ,,
Bolivia ,, ,, 66 79
 284

Egypt ,, ,, 94 95
Nicaragua ,, ,, 84 79
Honduras ,, ,, 77 90
Guatemala ,, ,, 85 92
Gabon ,, ,, 21 70
Equatorial Guinea ,, ,, 53 43
Namibia ,, ,, 41 77
Morocco ,, ,, 75 82
Swaziland ,, ,, ,, ,,
Botswana ,, ,, ,, ,,
India ,, ,, 31 88
Mongolia ,, ,, 30 60
Zimbabwe ,, ,, 68 85
Myanmar ,, ,, 46 68
Ghana ,, ,, 63 64
Lesotho ,, ,, 92 91
Cambodia ,, ,, 18 30
Papua New ,, ,, 82 42
Guinea
Kenya ,, ,, 86 49
Comoros ,, ,, 98 96
Cameroon ,, ,, 92 62
Congo ,, ,, ,, 51
Pakistan ,, ,, 61 88
Togo ,, ,, 34 54
Nepal ,, ,, 27 81
Bhutan ,, ,, 69 62
Lao People's ,, ,, 46 90
Dem, Rep,
Bangladesh ,, ,, 53 97
Yemen ,, ,, 45 69
Haiti ,, ,, 28 46
Madagascar ,, ,, 42 47
Nigeria ,, ,, 63 57
Djibouti ,, ,, 91 100
Sudan ,, ,, 62 75
Mauritania ,, ,, 33 37
Tanzania, U, Rep, ,, ,, 90 54
of
Uganda ,, ,, 75 50

284
Congo, Dem, ,, ,, 20 45
Rep, of the
Zambia ,, ,, 78 64
Côte d'Ivoire ,, ,, ,, 77
Senegal ,, ,, 70 78
Angola ,, ,, 44 38
Benin ,, ,, 23 63
Eritrea ,, ,, 13 46
Gambia ,, ,, 37 62
Guinea ,, ,, 58 48
Malawi ,, ,, 77 57
Rwanda ,, ,, 8 41
Mali ,, ,, 69 65
Central African ,, ,, 31 60
Republic
Chad ,, ,, 29 27
Guinea-Bissau ,, ,, 47 49
Mozambique ,, ,, 43 60
Ethiopia ,, ,, 15 24
Burkina Faso ,, ,, 29 ,,
Burundi ,, ,, ,, ,,
Niger ,, ,, 20 59
Sierra Leone ,, ,, 28 28
 286

Country Population with Probability at Probability at Share of income

access to essential birth of not birth of not or consumption (
drugs ( %) 1999 surviving to age surviving to age %): Poorest 10 %
40 ( % of cohort), 60 ( % of cohort),
1995-2000 1995-2000
Norway 100 2,4 9,1 4,1
Australia 100 3 9,1 2
Canada 100 2,7 9,5 2,8
Sweden 99 1,9 8 3,7
Belgium 99 2,9 10,5 3,7
United States 99 3,9 12,8 1,8
Iceland 100 2,3 8,7 ,,
Netherlands 100 2,2 9,2 2,8
Japan 100 2,1 8,2 4,8
Finland 98 2,8 11,3 4,2
Switzerland 100 3 9,6 2,6
Luxembourg 99 3,5 11,4 4
France 99 3,3 11,4 2,8
United Kingdom 99 2,6 9,9 2,6
Denmark 99 2,9 12 3,6
Austria 100 2,6 10,6 4,4
Germany 100 2,6 10,6 3,3
Ireland 99 2,7 10,4 2,5
New Zealand 100 3,4 10,7 ,,
Italy 99 2,7 9,1 3,5
Spain 100 3,4 10,3 2,8
Israel 99 2,2 8 2,8
Greece 100 2,9 9,4 3
Hong Kong, . . 2 8,5 ,,
China (SAR)
Cyprus 100 3,1 8,9 ,,
Singapore 100 2,3 10,6 ,,
Korea, Rep, of 99 4 14,3 2,9
Portugal 100 4,5 13,1 3,1
Slovenia 100 3,5 13,8 3,9
Malta 99 2,6 8,4 ,,
Barbados 100 3 10,2 ,,
Brunei 99 3,2 11,1 ,,
Darussalam

286
Czech Republic 88 3 13,7 4,3
Argentina 70 5,6 16,5 ,,
Slovakia 100 3,8 16,6 5,1
Hungary 100 4,6 21,9 4,1
Uruguay 66 5,1 15,5 2,1
Poland 88 4,3 17,5 3,2
Chile 88 4,5 13,8 1,4
Bahrain 100 4,7 14,6 ,,
Costa Rica 100 4 11,6 1,7
Bahamas 80 11,8 27,3 ,,
Kuwait 99 3 10,8 ,,
Estonia 100 6,4 23,8 3
United Arab 99 5,4 16,2 ,,
Emirates
Croatia 100 4,3 15,8 3,7
Lithuania 88 6,3 21,6 3,1
Qatar 99 4,8 18,9 ,,
Trinidad and 77 4,1 15 2,1
Tobago
Latvia 90 7,6 23,7 2,9
Mexico 92 8,3 18,9 1,6
Panama 80 6,4 15,1 1,2
Belarus 70 7,2 26 5,1
Belize 80 6,8 15,1 ,,
Russian 66 10,3 30,1 1,7
Federation
Malaysia 70 5 16,2 1,7
Bulgaria 88 5,2 18,8 4,5
Romania 85 6,7 21,6 3,7
Libyan Arab 100 6,4 19,8 ,,
Jamahiriya
Macedonia, 66 4,1 14,5 ,,
TFYR
Venezuela 90 6,5 17 1,6
Colombia 88 10,1 20,7 1,1
Mauritius 100 5,4 20,1 ,,
Suriname 100 7,4 19,9 ,,
Lebanon 88 5 14,6 ,,
Thailand 95 9 20,8 2,8
Fiji 100 6,3 22,1 ,,
 288

Saudi Arabia 99 6,4 17,5 ,,

Brazil 40 11,3 25,9 1
Philippines 66 8,9 21,3 2,3
Oman 90 6,8 18,2 ,,
Armenia 40 4,4 14,7 2,3
Peru 60 11,6 23 1,6
Ukraine 66 7,8 26,3 3,7
Kazakhstan 66 13 31,6 2,7
Georgia 30 5,9 17,5 2,3
Maldives 50 12,5 26,2 ,,
Jamaica 95 5,4 13,8 2,9
Azerbaijan 66 7,9 20,4 2,8
Paraguay 44 8,7 19,7 0,5
Sri Lanka 95 5,8 16,4 3,5
Turkey 99 9,6 20,1 2,3
Turkmenistan 66 12,6 27,6 2,6
Ecuador 40 11,1 21,5 2,2
Albania 60 6,2 12,4 ,,
Dominican 66 11,9 23,9 2,1
Republic
China 85 7,9 18 2,4
Jordan 100 7,9 20,9 3,3
Tunisia 51 7,8 19,6 2,3
Iran, Islamic Rep, 85 9,3 21,2 ,,
of
Cape Verde 80 10,4 21,3 ,,
Kyrgyzstan 66 11,2 26,4 2,7
Guyana 44 15,4 30,4 2,4
South Africa 80 24,4 44,8 1,1
El Salvador 80 10,9 23,4 1,4
Samoa (Western) 100 7,8 22,5 ,,
Syrian Arab 80 6,9 18 ,,
Republic
Moldova, Rep, of 66 8,1 27,4 2,2
Uzbekistan 66 10,2 23,9 3,1
Algeria 95 10,5 20,1 2,8
Viet Nam 85 12,8 24,2 3,6
Indonesia 80 12,8 26,7 4
Tajikistan 44 12,5 25,3 ,,
Bolivia 70 18,4 32,8 0,5

288
Egypt 88 10,3 23 4,4
Nicaragua 46 11,5 25 0,7
Honduras 40 16 29,9 0,4
Guatemala 50 15,6 31,1 1,6
Gabon 30 32 47,7 ,,
Equatorial Guinea 44 33,7 49,4 ,,
Namibia 80 46,7 65,9 ,,
Morocco 66 11,8 23 2,6
Swaziland 100 36,3 52,6 1
Botswana 90 49,5 68,7 ,,
India 35 16,7 29,9 3,5
Mongolia 60 15 32,4 2,9
Zimbabwe 70 51,6 73,3 1,8
Myanmar 60 26 41,9 ,,
Ghana 44 27 42,8 2,4
Lesotho 80 35,4 50,1 0,9
Cambodia 30 24,4 41,1 2,9
Papua New 90 21,6 45,2 1,7
Guinea
Kenya 36 34,6 53,6 1,8
Comoros 90 20,6 36,8 ,,
Cameroon 66 36,2 53,7 ,,
Congo 61 34,8 52,6 ,,
Pakistan 65 20,1 34 4,1
Togo 70 34,1 51,4 ,,
Nepal 20 22,5 39,1 3,2
Bhutan 85 20,2 33,8 ,,
Lao People's 66 30,5 45,9 3,2
Dem, Rep,
Bangladesh 65 21,4 37,8 3,9
Yemen 50 20 35,7 3
Haiti 30 31,6 52,9 ,,
Madagascar 65 31,6 47,1 2,2
Nigeria 10 33,7 50,6 1,6
Djibouti 80 42,3 58 ,,
Sudan 15 27,3 42,3 ,,
Mauritania 66 33,1 48,8 2,5
Tanzania, U, Rep, 66 33,3 52,6 2,8
of
Uganda 70 48,4 68,5 3
 290

Congo, Dem, . . 34,7 51,8 ,,

Rep, of the
Zambia 66 53,6 73,6 1,1
Côte d'Ivoire 80 40,2 58,4 3,1
Senegal 66 28,5 47 2,6
Angola 20 41,6 58,4 ,,
Benin 77 29,7 45,4 ,,
Eritrea 57 31,7 49,2 ,,
Gambia 90 40,5 57 1,5
Guinea 93 38,3 54,4 2,6
Malawi 44 50,4 66,2 ,,
Rwanda 44 51,9 70,8 4,2
Mali 60 38,5 48,9 1,8
Central African 50 45,3 63,4 ,,
Republic
Chad 46 41 57,8 ,,
Guinea-Bissau 44 42,2 58,8 0,5
Mozambique 50 49,2 66,2 2,5
Ethiopia 66 43,6 61 3
Burkina Faso 60 43 62,3 2,2
Burundi 20 50,1 68,8 3,4
Niger 66 41,4 57,6 0,8
Sierra Leone 44 51,6 68,6 ,,

290
Country Share of income Tuberculosis Under-five Undernourished
or consumption ( cases (per mortality rate (per people (as % of
%): Poorest 20 % 100,000 people) 1,000 live births) total population)
1998 1999 1996/98
Norway 9,7 5 4 ..
Australia 5,9 5 5 ..
Canada 7,5 6 6 ..
Sweden 9,6 5 4 ..
Belgium 9,5 10 6 ..
United States 5,2 7 8 ..
Iceland ,, 6 5 ..
Netherlands 7,3 8 5 ..
Japan 10,6 35 4 ..
Finland 10 10 5 ..
Switzerland 6,9 10 4 ..
Luxembourg 9,4 10 5 ..
France 7,2 12 5 ..
United Kingdom 6,6 10 6 ..
Denmark 9,6 10 5 ..
Austria 10,4 16 5 ..
Germany 8,2 13 5 ..
Ireland 6,7 10 7 ..
New Zealand ,, 10 6 ..
Italy 8,7 10 6 ..
Spain 7,5 23 6 ..
Israel 6,9 10 6 ..
Greece 7,5 10 7 ..
Hong Kong, ,, 115 .. ..
China (SAR)
Cyprus ,, 6 8 ..
Singapore ,, 61 4 ..
Korea, Rep, of 7,5 65 5 ..
Portugal 7,3 53 6 ..
Slovenia 9,1 21 6 3
Malta ,, 4 7 ..
Barbados ,, 3 16 ..
Brunei ,, 52 9 ..
Darussalam
Czech Republic 10,3 17 5 ..
 292

Argentina ,, 34 22 ..
Slovakia 11,9 21 10 4
Hungary 10 34 10 ..
Uruguay 5,4 20 17 4
Poland 7,8 34 10 ..
Chile 3,4 25 12 4
Bahrain ,, 36 16 ..
Costa Rica 4,5 18 14 6
Bahamas ,, 25 21 ..
Kuwait ,, 31 12 4
Estonia 7 57 21 6
United Arab ,, 33 9 ..
Emirates
Croatia 8,8 47 9 12
Lithuania 7,8 82 22 ..
Qatar ,, 44 16 ..
Trinidad and 5,5 15 20 13
Tobago
Latvia 7,6 81 21 4
Mexico 4 8 33 5
Panama 3,6 53 27 16
Belarus 11,4 60 28 ..
Belize ,, 40 43 ..
Russian 4,4 82 22 6
Federation
Malaysia 4,4 66 9 ..
Bulgaria 10,1 55 17 13
Romania 8,9 114 24 ..
Libyan Arab ,, 29 22 ..
Jamahiriya
Macedonia, ,, 31 26 7
TFYR
Venezuela 4,1 27 23 16
Colombia 3 22 31 13
Mauritius ,, 12 23 6
Suriname ,, 17 34 10
Lebanon ,, 23 32 ..
Thailand 6,4 26 30 21
Fiji ,, 21 22 ..
Saudi Arabia ,, 16 25 3

292
Brazil 2,6 51 40 10
Philippines 5,4 219 42 21
Oman ,, 9 16 ..
Armenia 5,5 39 30 21
Peru 4,4 176 52 18
Ukraine 8,8 62 21 5
Kazakhstan 6,7 126 42 5
Georgia 6,1 96 23 23
Maldives ,, 65 83 ..
Jamaica 7 5 11 10
Azerbaijan 6,9 61 45 32
Paraguay 1,9 36 32 13
Sri Lanka 8 38 19 25
Turkey 5,8 35 48 ..
Turkmenistan 6,1 89 71 10
Ecuador 5,4 75 35 5
Albania ,, 22 35 3
Dominican 5,1 52 49 28
Republic
China 5,9 36 41 11
Jordan 7,6 6 35 5
Tunisia 5,7 24 30 ..
Iran, Islamic Rep, ,, 18 46 6
of
Cape Verde ,, 50 73 ..
Kyrgyzstan 6,3 123 65 17
Guyana 6,3 37 76 18
South Africa 2,9 326 69 ..
El Salvador 3,7 28 42 11
Samoa (Western) ,, 13 26 ..
Syrian Arab ,, 35 30 ..
Republic
Moldova, Rep, of 5,6 60 34 11
Uzbekistan 7,4 62 58 11
Algeria 7 51 41 5
Viet Nam 8 113 40 22
Indonesia 9 20 52 6
Tajikistan ,, 41 74 32
Bolivia 1,9 127 83 23
Egypt 9,8 19 52 4
 294

Nicaragua 2,3 54 47 31
Honduras 1,6 80 42 22
Guatemala 3,8 26 60 24
Gabon ,, 118 143 8
Equatorial Guinea ,, 97 160 ..
Namibia ,, 480 70 31
Morocco 6,5 106 53 5
Swaziland 2,7 433 90 14
Botswana ,, 303 59 27
India 8,1 115 98 21
Mongolia 7,3 113 80 45
Zimbabwe 4 416 90 37
Myanmar ,, 33 112 7
Ghana 5,9 53 101 10
Lesotho 2,8 272 134 29
Cambodia 6,9 158 122 33
Papua New 4,5 245 112 29
Guinea
Kenya 5 169 118 43
Comoros ,, 23 86 ..
Cameroon ,, 35 154 29
Congo ,, 139 108 32
Pakistan 9,5 60 112 20
Togo ,, 28 143 18
Nepal 7,6 106 104 28
Bhutan ,, 64 107 ..
Lao People's 7,6 42 111 29
Dem, Rep,
Bangladesh 8,7 58 89 38
Yemen 7,4 73 119 35
Haiti ,, 124 129 62
Madagascar 5,4 97 156 40
Nigeria 4,4 19 187 8
Djibouti ,, 597 149 ..
Sudan ,, 80 109 18
Mauritania 6,4 154 183 13
Tanzania, U, Rep, 6,8 160 141 41
of
Uganda 7,1 142 131 30
Congo, Dem, ,, 120 207 61

294
Rep, of the
Zambia 3,3 482 202 45
Côte d'Ivoire 7,1 104 171 14
Senegal 6,4 94 118 23
Angola ,, 102 295 43
Benin ,, 41 156 14
Eritrea ,, 218 105 65
Gambia 4,4 114 75 16
Guinea 6,4 65 181 29
Malawi ,, 220 211 32
Rwanda 9,7 93 180 39
Mali 4,6 39 235 32
Central African ,, 140 172 41
Republic
Chad ,, 38 198 38
Guinea-Bissau 2,1 156 200 ..
Mozambique 6,5 104 203 58
Ethiopia 7,1 116 176 49
Burkina Faso 5,5 18 199 32
Burundi 7,9 101 176 68
Niger 2,6 34 275 46
Sierra Leone ,, 72 316 43
 296

Data for the multivariate analysis in Section C (Arno Tausch)

human female life female share female literacy female share Islamic EU
development expectancy of life years of literate Conferenc membership
index people e years in 2000
membershi
p
Switzerland 0,910 81,9 52,0 99,0 50,0 0 0,0
Netherlands 0,919 80,8 51,8 99,0 50,0 0 42,0
Finland 0,913 80,8 52,5 99,0 50,0 0 5,0
United 0,914 80,0 51,7 99,0 50,0 0 27,0
Kingdom
Germany 0,905 80,3 52,0 99,0 50,0 0 42,0
United States 0,927 80,2 52,2 99,0 50,0 0 0,0
Israel 0,877 79,9 51,3 93,7 48,9 0 0,0
Italy 0,895 81,3 52,0 97,9 49,8 0 42,0
Austria 0,901 80,3 52,1 99,0 50,0 0 5,0
Japan 0,916 83,0 51,9 99,0 50,0 0 0,0
Korea, Rep. of 0,847 76,2 52,5 95,9 49,2 0 0,0
Canada 0,932 81,9 51,8 99,0 50,0 0 0,0
Mali 0,371 55,0 51,2 31,1 40,5 1 0,0
Senegal 0,405 54,6 51,8 25,8 36,2 1 0,0
Bangladesh 0,441 58,7 50,1 28,6 35,8 1 0,0
Algeria 0,661 70,6 51,0 54,3 41,5 1 0,0
South Africa 0,689 56,2 52,8 83,9 49,6 0 0,0
France 0,914 82,1 52,5 99,0 50,0 0 42,0
Niger 0,280 50,5 51,7 7,4 24,9 1 0,0
Ethiopia 0,297 44,4 51,1 30,5 42,0 0 0,0
Belarus 0,778 74,0 54,3 99,4 49,9 0 0,0
Côte d'Ivoire 0,401 47,5 50,6 35,7 40,3 1 0,0
Nepal 0,449 57,6 49,8 21,7 27,6 0 0,0
Ireland 0,896 79,4 51,8 99,0 50,0 0 27,0
Denmark 0,909 78,4 51,7 99,0 50,0 0 27,0
Central 0,359 46,8 52,2 31,7 35,6 0 0,0
African
Republic
Mauritania 0,441 55,5 51,5 31,0 37,5 1 0,0
Madagascar 0,478 59,4 51,3 57,8 44,5 0 0,0
Ukraine 0,740 73,9 53,5 99,4 49,9 0 0,0
Estonia 0,798 74,7 54,1 99,0 50,0 0 0,0
Guinea-Bissau 0,298 46,4 51,7 17,3 23,3 1 0,0
Kenya 0,503 52,2 50,8 73,5 45,6 0 0,0
India 0,545 63,3 50,3 43,5 39,3 0 0,0
El Salvador 0,693 72,7 52,2 75,0 48,1 0 0,0

296
Yemen 0,389 58,9 50,4 22,7 25,7 1 0,0
Guatemala 0,603 67,6 52,3 59,7 44,4 0 0,0
Uzbekistan 0,683 70,9 52,3 83,4 47,3 1 0,0
Guyana 0,698 68,2 52,6 97,8 49,7 1 0,0
Turkey 0,726 72,0 51,9 75,0 44,7 1 0,0
Sri Lanka 0,727 75,6 51,5 88,3 48,4 0 0,0
Australia 0,927 81,2 51,8 99,0 50,0 0 0,0
Russian 0,769 72,9 54,5 99,3 49,9 0 0,0
Federation
Pakistan 0,489 65,6 50,9 28,9 33,3 1 0,0
Zimbabwe 0,551 44,0 50,5 82,9 47,5 0 0,0
Brazil 0,736 71,2 52,9 84,5 50,0 0 0,0
Uruguay 0,821 78,2 52,5 98,0 50,2 0 0,0
Spain 0,891 81,6 52,2 96,5 49,5 0 14,0
Morocco 0,570 68,9 51,4 34,0 36,1 1 0,0
Slovenia 0,857 78,3 52,5 99,6 50,0 0 0,0
Lithuania 0,785 75,7 53,9 99,4 49,9 0 0,0
Slovakia 0,822 76,9 52,6 99,0 50,0 0 0,0
Norway 0,932 81,3 51,9 99,0 50,0 0 0,0
Bulgaria 0,769 74,9 52,5 97,6 49,7 0 0,0
Sweden 0,923 81,0 51,4 99,0 50,0 0 5,0
Venezuela 0,763 75,9 52,0 91,4 49,7 0 0,0
Romania 0,767 74,1 52,7 96,9 49,5 0 0,0
Greece 0,869 80,8 51,6 95,5 49,2 0 19,0
Egypt 0,604 68,3 51,2 41,8 39,0 1 0,0
Thailand 0,741 72,1 52,3 93,2 49,0 0 0,0
Portugal 0,858 78,9 52,3 89,0 48,6 0 14,0
Honduras 0,644 72,5 51,7 73,5 50,0 0 0,0
Tunisia 0,688 71,0 50,8 57,9 42,2 1 0,0
Lesotho 0,556 56,4 51,1 92,9 56,7 0 0,0
Zambia 0,413 41,0 50,7 69,1 45,1 0 0,0
Nigeria 0,425 51,5 51,4 52,5 42,8 1 0,0
Moldova, Rep. 0,697 71,7 52,9 97,9 49,6 0 0,0
of
Philippines 0,739 70,5 51,3 94,6 49,9 0 0,0
Uganda 0,401 41,5 51,0 54,2 41,6 1 0,0
Indonesia 0,664 67,5 51,4 80,5 46,9 1 0,0
Dominican 0,720 73,3 51,5 82,8 50,0 0 0,0
Republic
Gambia 0,388 49,0 51,7 27,5 39,6 1 0,0
Bolivia 0,631 63,6 51,4 77,8 46,0 0 0,0
Paraguay 0,723 72,2 51,6 91,5 49,3 0 0,0
Chile 0,812 78,4 52,0 95,2 49,9 0 0,0
Mozambique 0,326 45,0 51,4 27,0 31,6 1 0,0
Ecuador 0,701 72,7 51,8 88,7 49,0 0 0,0
Mexico 0,775 75,7 52,1 88,7 48,9 0 0,0
 298

Panama 0,770 76,5 51,5 90,8 49,6 0 0,0

Poland 0,811 77,1 53,0 99,7 50,0 0 0,0
Latvia 0,770 74,5 54,3 99,8 50,0 0 0,0
Peru 0,723 71,2 51,8 84,3 47,2 0 0,0
Colombia 0,760 74,5 52,4 91,2 50,0 0 0,0
Ghana 0,552 62,2 51,4 59,9 43,3 0 0,0
Tanzania, U. 0,410 49,0 51,1 64,3 43,5 0 0,0
Rep. of
Costa Rica 0,789 79,1 51,5 95,4 50,0 0 0,0
Nicaragua 0,624 70,9 51,7 69,3 51,1 0 0,0
Lao People's 0,469 55,0 51,2 30,2 32,8 0 0,0
Dem. Rep.
China 0,700 72,3 51,5 74,6 45,1 0 0,0
Jamaica 0,732 77,0 51,3 89,9 52,3 0 0,0
Swaziland 0,646 63,0 51,9 77,3 49,3 0 0,0
Czech 0,841 77,7 52,4 99,0 50,0 0 0,0
Republic
Trinidad and 0,784 76,4 51,6 91,5 49,0 0 0,0
Tobago
Viet Nam 0,668 70,0 51,7 90,6 48,7 0 0,0
Malaysia 0,762 74,5 51,5 82,0 47,5 1 0,0
Papua New 0,536 59,1 50,7 55,1 43,7 0 0,0
Guinea
Hungary 0,813 75,1 52,8 99,1 49,9 0 0,0

298
 300

GDP per GDP per GDP per capita^3 net foreign female
capita capita^2 direct economic
investment as activity rate
% of GNP
Switzerland 25512 650877989 16605401394724 -2,30 51,4
Netherlands 22176 491789616 10906088847510 -1,40 45,1
Finland 20847 434609054 9060416335396 -1,30 57,5
United 20336 413566321 8410421213996 -1,10 52,4
Kingdom
Germany 22169 491464994 10895292251191 -0,80 48,4
United States 29605 876459610 25947639820471 -0,60 58,2
Israel 17301 299338118 5178965700838 -0,50 47,7
Italy 20585 423743833 8722783359011 -0,30 38,2
Austria 23166 536658036 12432156123988 -0,30 44,4
Japan 23257 540908944 12580162300833 -0,30 51,0
Korea, Rep. of 13478 181647060 2448175569865 -0,20 52,6
Canada 23582 556113119 13114287813544 -0,20 59,6
Mali 681 464129 316197064 0,04 71,9
Senegal 1307 1706995 2230222568 0,04 61,3
Bangladesh 1361 1853111 2522620961 0,04 65,8
Algeria 4792 22964125 110046150521 0,04 27,6
South Africa 8488 72043094 611488833720 0,04 46,2
France 21175 448379384 9494420325976 0,04 47,8
Niger 739 546298 403780046 0,10 69,5
Ethiopia 574 329166 188852455 0,10 57,5
Belarus 6319 39932668 252343709957 0,10 59,0
Côte d'Ivoire 1598 2554499 4082804820 0,20 43,8
Nepal 1157 1338950 1549339044 0,20 56,8
Ireland 21482 461487485 9913794023574 0,20 35,9
Denmark 24218 586496482 14203589677276 0,20 61,9
Central 1118 1249477 1396665395 0,30 68,2
African
Republic
Mauritania 1563 2443000 3818433908 0,30 63,4
Madagascar 756 571264 431772673 0,30 69,1
Ukraine 3194 10202530 32588306971 0,30 55,3
Estonia 7682 59019268 453409620713 0,30 61,7
Guinea-Bissau 616 379099 233414950 0,40 56,8
Kenya 980 959714 940184010 0,40 74,5
India 2077 4313306 8958090669 0,40 41,8
El Salvador 4036 16289215 65743109501 0,40 44,5
Yemen 719 517378 372144862 0,50 29,9
Guatemala 3505 12286286 43065644360 0,50 34,6
Uzbekistan 2053 4214398 8651737261 0,50 61,8

300
Guyana 3403 11580000 39406045355 0,50 41,0
Turkey 6422 41240027 264836848410 0,50 48,7
Sri Lanka 2979 8874143 26435627295 0,50 41,9
Australia 22452 504077921 11317396015120 0,50 55,3
Russian 6460 41731341 269583629667 0,60 59,0
Federation
Pakistan 1715 2940539 5042436777 0,70 34,4
Zimbabwe 2669 7124949 19018341437 0,70 66,6
Brazil 6625 43885986 290729295046 0,70 44,0
Uruguay 8623 74356297 641175078772 0,70 47,4
Spain 16212 262838032 4261203835863 0,80 36,9
Morocco 3305 10922562 36098301598 0,90 40,9
Slovenia 14293 204293841 2920000398868 0,90 53,9
Lithuania 6436 41421197 266583933154 1,00 58,0
Slovakia 9699 94062058 912266470287 1,00 62,9
Norway 26342 693896231 18278552166332 1,00 58,5
Bulgaria 4809 23125326 111206913674 1,10 57,4
Sweden 20659 426812439 8817705731390 1,10 62,9
Venezuela 5808 33736347 195950815490 1,20 42,1
Romania 5648 31897417 180149584117 1,20 51,0
Greece 13943 194412832 2710737032743 1,20 37,2
Egypt 3041 9244762 28108883904 1,30 34,0
Thailand 5456 29762587 162370082953 1,30 73,1
Portugal 14701 216126752 3177333406408 1,30 50,6
Honduras 2433 5918321 14397855299 1,40 39,2
Tunisia 5404 29202894 157811569811 1,50 36,4
Lesotho 1626 2644917 4301480570 1,60 47,1
Zambia 719 517594 372377769 1,70 65,4
Nigeria 795 631739 502118673 1,70 48,0
Moldova, Rep. 1947 3789135 7375815449 1,70 60,1
of
Philippines 3555 12640301 44940315063 1,90 49,2
Uganda 1074 1153712 1239213859 2,20 80,1
Indonesia 2651 7029710 18638293772 2,30 54,5
Dominican 4598 21137006 97177386234 2,30 39,3
Republic
Gambia 1453 2109814 3064547664 2,60 69,7
Bolivia 2269 5149359 11685028904 2,60 47,5
Paraguay 4288 18383686 78822263076 2,60 36,3
Chile 8787 77210133 678440012760 2,60 36,6
Mozambique 782 612291 479111254 2,80 83,0
Ecuador 3003 9020712 27093255842 2,80 31,8
Mexico 7704 59350074 457227027023 2,90 38,4
Panama 5249 27553472 144632036699 3,10 42,6
Poland 7619 58054496 442337529086 3,10 57,2
Latvia 5728 32813419 187965099658 3,20 61,2
 302

Peru 4282 18331840 78489053650 3,30 33,5

Colombia 6006 36066869 216602099601 3,40 47,3
Ghana 1735 3009149 5219940837 3,70 80,8
Tanzania, U. 480 230525 110681884 4,30 82,1
Rep. of
Costa Rica 5987 35839737 214559242634 4,30 36,3
Nicaragua 2142 4589707 9832804817 4,40 46,2
Lao People's 1734 3006756 5213714904 5,10 74,6
Dem. Rep.
China 3105 9643013 29944640940 5,20 73,2
Jamaica 3389 11484507 38919614262 5,30 69,1
Swaziland 3816 14559795 55556247374 5,50 41,9
Czech 12362 152819285 1889153499052 5,70 62,3
Republic
Trinidad and 7485 56023880 419333708757 6,30 43,2
Tobago
Viet Nam 1689 2851471 4815079984 7,00 73,8
Malaysia 8137 66217770 538842478678 7,20 47,5
Papua New 2359 5565730 13130558403 9,90 67,0
Guinea
Hungary 10232 104699340 1071311864170 10,80 48,4

302
 growth of female % population, share of economic
female economic aged >65y, income/consu growth, 1975-
economic activity rate as 1998 mption richest 98
activity % of male 20 % to
(1975=100) economic poorest 20 %
activity rate
Switzerland 111,7 65,2 14,5 5,80 0,9
Netherlands 119,3 65,2 13,6 5,50 1,8
Finland 100,8 85,7 14,6 3,60 2,0
United 109,6 73,2 16,0 6,50 1,9
Kingdom
Germany 105,4 68,7 15,9 4,70 1,2
United States 109,9 79,9 12,5 8,90 1,9
Israel 118,6 66,0 9,7 6,20 1,8
Italy 110,9 57,3 17,6 4,20 2,2
Austria 103,8 64,3 14,7 3,20 2,2
Japan 105,5 66,4 16,1 3,40 2,6
Korea, Rep. of 109,4 68,6 6,2 5,20 6,0
Canada 110,0 80,6 12,5 5,20 1,5
Mali 98,2 80,5 3,7 12,20 0,0
Senegal 100,3 71,8 2,5 7,50 -0,2
Bangladesh 99,0 76,2 3,2 4,90 2,4
Algeria 147,4 36,3 3,7 6,10 0,2
South Africa 103,5 58,7 3,5 22,30 -0,7
France 106,5 75,2 15,6 5,60 1,8
Niger 98,1 75,0 2,5 20,50 -1,4
Ethiopia 98,4 67,3 2,9 6,70 -0,4
Belarus 96,1 81,3 13,2 2,90 -1,3
Côte d'Ivoire 100,3 50,3 2,9 6,20 -1,0
Nepal 100,4 66,4 3,6 5,90 1,6
Ireland 115,8 50,5 11,4 6,40 4,4
Denmark 103,8 83,6 15,2 3,60 2,1
Central 94,4 78,6 3,9 32,50 -1,2
African
Republic
Mauritania 94,7 73,6 3,2 7,40 -0,6
Madagascar 98,3 77,9 2,9 10,20 -1,8
Ukraine 94,4 79,0 14,0 4,80 -7,6
Estonia 95,8 82,2 13,4 6,70 -0,1
Guinea-Bissau 100,2 62,7 4,1 28,00 -1,1
Kenya 99,6 84,0 3,0 10,00 0,5
India 98,0 49,3 4,8 5,70 3,0
El Salvador 129,4 52,6 4,8 16,60 -0,2
Yemen 107,2 36,2 2,4 7,60 -0,6
Guatemala 125,4 39,6 3,5 30,00 0,5
 304

Uzbekistan 101,2 83,6 4,5 5,50 -2,0

Guyana 124,9 48,4 4,1 7,40 -0,2
Turkey 109,4 59,4 5,6 8,20 2,3
Sri Lanka 117,0 54,4 6,4 5,40 3,3
Australia 113,3 74,9 12,1 7,00 1,9
Russian 96,3 80,8 12,3 12,20 -0,8
Federation
Pakistan 123,3 40,5 3,1 4,30 2,7
Zimbabwe 99,6 78,0 2,8 15,60 0,1
Brazil 110,6 52,3 4,9 25,50 1,2
Uruguay 123,4 65,0 12,7 8,90 1,7
Spain 118,6 54,9 16,5 5,40 1,9
Morocco 108,2 51,5 4,3 7,00 1,6
Slovenia 96,3 79,6 13,2 4,20 1,2
Lithuania 94,7 79,3 12,9 5,20 -1,5
Slovakia 102,9 84,5 11,2 2,60 0,6
Norway 113,4 83,1 15,7 3,70 2,9
Bulgaria 96,2 86,7 15,4 4,40 0,2
Sweden 108,4 88,8 17,4 3,60 1,2
Venezuela 121,2 51,9 4,3 14,40 -0,8
Romania 91,7 76,1 12,7 4,20 0,4
Greece 118,4 56,8 17,1 5,40 1,6
Egypt 116,5 43,2 4,0 4,00 3,5
Thailand 97,4 84,6 5,5 7,60 4,9
Portugal 105,7 70,0 15,4 5,90 2,9
Honduras 119,9 45,7 3,3 17,10 0,7
Tunisia 110,5 45,9 5,7 7,80 2,2
Lesotho 100,2 55,8 4,1 21,50 3,5
Zambia 97,9 76,2 2,2 13,00 -2,2
Nigeria 99,9 55,7 3,0 12,70 -0,7
Moldova, Rep. 94,5 82,8 9,6 6,00 -4,7
of
Philippines 106,6 60,2 3,5 9,70 0,5
Uganda 98,4 88,1 2,2 7,00 2,2
Indonesia 114,2 66,2 4,5 5,60 4,1
Dominican 122,2 45,8 4,3 12,50 1,9
Republic
Gambia 100,6 77,7 3,0 12,00 0,0
Bolivia 111,8 57,0 3,9 8,60 -0,2
Paraguay 109,6 42,3 3,5 27,10 1,4
Chile 124,2 47,1 6,9 17,40 4,2
Mozambique 97,7 91,8 3,3 7,20 0,7
Ecuador 126,3 37,7 4,6 9,20 0,8
Mexico 118,6 46,1 4,5 16,20 1,2
Panama 114,9 53,9 5,4 14,70 1,0
Poland 97,7 79,3 11,6 5,30 1,6

304
Latvia 95,7 81,4 13,8 5,30 -0,1
Peru 122,2 42,2 4,6 11,60 -0,4
Colombia 132,7 59,1 4,6 20,30 1,7
Ghana 98,5 98,4 3,1 5,00 -0,1
Tanzania, U. 97,8 92,9 2,6 6,70 0,2
Rep. of
Costa Rica 125,2 44,6 4,9 13,00 1,0
Nicaragua 123,0 54,2 3,1 13,10 -3,4
Lao People's 100,0 84,0 3,2 4,20 4,3
Dem. Rep.
China 101,8 86,2 6,5 7,90 7,5
Jamaica 103,1 85,2 7,1 6,20 -0,7
Swaziland 105,0 51,9 2,6 23,90 1,2
Czech 102,0 84,4 13,4 3,50 0,4
Republic
Trinidad and 113,5 57,0 6,5 8,30 1,5
Tobago
Viet Nam 100,6 89,5 5,2 5,60 4,4
Malaysia 110,3 59,7 4,0 12,00 3,9
Papua New 98,0 77,5 3,0 12,60 0,2
Guinea
Hungary 98,7 71,5 14,5 4,50 1,4
 306

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I Index of Names

Abdullah M. S.
Abu El Assal R. (Catholic Bishop of Jerusalem)
Achen Ch. H.
Addo H.
Adler E.
Afheldt H.
Aghion Ph.
Ahluwalia M. S.
Ahsan S.
Alderson A.
Almond G.
Amato G.
Amin S.
Amnesty International
Amsden A. H. et al.
Andreson A.
Angresano J.
Apter D.
Armour J. M.
Arrighi G.
Australian Treasury
Axtmann R.
Bailey P.
Bakshi-Doron E. (Sephardi Chief Rabbi)
Baldwin R. E. et al.
Balibar E.
Bandt J.
Bandyopadhyay S.
Baran P. A.
Barnes S. H. et al.
Barnier M. (EU-Commissioner)
Barr N.
Barro R.
Barta V.
Batt J.
Bauer P.
Bauer Th.
Beaud M.
Beck F. D.
Becker G.
Beckerman W.
Beer L.
 350

Belkacem L.
Bello R.
Bello W.
Berry A.
Betcherman G.
Bhaduri A.
Bhagwati J. N.
Boehring W. R.
Bollen K. A.
Boswell T.
Botsford D.
Boxberger G.
Bradshaw Y.
Brahmbhatt M.
Breedlove W. L.
Bullock B.
Burgstaller J.
Burns T. J.
Caminada K.
Caporaso J. A.
Carballo M.
Cardoso F. H.
Carey G. (Bishop of Canterbury)
Carroll E.
Chase - Dunn Ch. K.
Chiti V.
Clark R.
Clark R. et al.
Clauss G.
Cohen R.
Cohn - Bendit D.
Coleman J. S.
Commonwealth of Australia, Office of the Status of Women
Coppel J. et al.
Corden, W. M.
Cordova A.
Cornia G. A.
Cox P.
Cox, R. W.
Crafts, N.
Crawford B.
Crenshaw E.
Dadush U.
Datta A.
David A.
Deacon B.
del Sarto R.
Delacroix J.

350
Deshingkar G.
DeSoysa I.
Diamantopolou A. (EU-Commissioner)
Dixon W. J.
Dollar D.
Dollar D.
Dossa Sh.
Dubiel I.
Dubiel I.
Easterly W.
Ebner H.
Elsenhans H.
Emmanuel, A.
Enste D.
Esfahani H. S.
Esping - Andersen G.
European Commmission
Evans P. B.
Fain H. D. et al.
Faletto E.
Fedderke J.
Feder E.
Feldman S.
Fiala R.
Fielder N.
Fischler F. (EU-Commissioner)
Flechsig St.
Frank - Fuentes M.
Frank A. G.
Franzmeyer F.
Friedman M.
Froebel F. et al.
Fuest C.
Fukuyama F.
Gaerber A.
Gallaway L. E.
Galtung J.
Garcia de Cortázar F.
Garson J. P. et al.
Gartner R.
George S.
Ghazouani S.
Ghobarah H. et al.
Giering C.
Gierus J.
Gillespie R.
Goaied M.
Goedings S.
 352

Goesling B.
Goldfrank W. L.
Goldstein J. S.
Gonzales Casanova P.
Gonzáles Vesga J. M.
Gore A.
Goudswaard K.
Gould E.
Gower J.
Gray C.
Griffin K.
Grilli V.
Grimes P.
Gurley J.
Gurr T. R.
Gwartney J. et al.
Haddad M.
Hadden K.
Hall Th. D.
Harss, C.
Havlik P.
Heintz P.
Herrmann P.
Hertz E. et al.
Hettne B.
Hickmann Th.
Hilferding R.
Hilgemann W.
Holmes L.
Holtbruecke D.
Holzmann R.
Hopkins T. K.
Huang J.
Huber P.
Huebner K.
Huntington S. P.
ICMPD
IFO-Institut
IFRI
ILO
Inglehart R.
IOM (International Organization for Migration)
Jabber P.
Jackman R. W.
Jenkins J. C.
Jenkins R.
Jorgenson, A.
Juchler J.

352
Kalecki M.
Kanbur R.
Kantor J.
Karatnycky A.
Kasarda J. D.
Kay C.
Kearny A. T.
Kennedy P.
Kent G.
Kent N. J.
Kentor J.
Khoury A. Th.
Kick E. L. et al.
Kick E. L. et al.
Kiiski G.
Kiljunen K.
Kinder H.
Klein M.
Klimenta H.
Klitgaard R.
Knight J.
Köhler G.
Korcelli P.
Korpi W.
Korzeniewicz R.
Kothari R.
Kraay A.
Krassilchtchikov V.
Kriz J.
Krzysztofiak M.
Kunzmann P. et al.
Kuznets S.
Lamy P. (EU-Commissioner)
Landesmann M.
Laski K.
Laxer G.
Lengyel P.
Lerner, Rabbi M.
Lewis - Beck M. S.
Lewis Sir W. A.
Liemt G. van
Linnemann H.
Lipset S. M.
Lipton M.
Loeffelholz H. D.
London B.
Lundberg M.
Luszniewicz A.
 354

Luttwak E.
Mackelar L. et al.
Maier, K.
Malcolm N.
Mandel E.
McCallum C.
Meier G. M.
Melchior M. (Rabbi, Deputy Foreign Minister of Israel)
Melchior, A.
Meyer W. H.
Microsoft Excel
Milanovic, B.
Mittelman J.
Moaddel M.
Modelski G.
Moeller St. et al.
Moon B. E.
Moran T.
Morawetz R.
Morawska E.
Mulford Ch. L.
Müller A. OFM et al.
Muller E. N.
Murshed S. M.
Myrdal G.
Nederveen-Pieterse J.
Nielsen F.
Nollert M.
Nolte H. H.
Nuscheler F.
O’Neill H.
Olson M.
Omran M.
Oneal J.
Opitz P. J.
Opp K. D.
Orenstein M. A.
Orlowski L. T.
Orszag P. R.
Palme J.
Parisetto A.
Parnreiter Ch.
Patten Ch. (EU-Commissioner)
Perroux F.
Petrella R.
Pfaller A.
Piore M.
Podobnik B.

354
Polanyi, K.
Pollins B. M.
Popper Sir K.
Portillo M.
Prebisch R.
Prodi R. (EU-Commission President)
Prophet Muhammad (peace be upon him)
Raffer K.
Ragin C. C.
Ragin Ch.
Ramonet I.
Ray J. L.
Renshaw G.
Richter S.
Robinson T. D.
Rodas-Martini P.
Rodrik D.
Rogers R.
Ross R. J. S.
Rostow W. W.
Rothgeb, Jr. J. M.
Rothschild K. W.
Rubinson R.
Rummel R. R.
Russell B.
Rutkowski M.
Saalfeld Th.
Sala-i-Martin X.
Salama C. M.
Salt J.
Sarma A.
Scandella L.
Scanlan S. J.
Schloeter - Paredes M. L.
Schmidt M. G.
Schmidt P.
Schneider F.
Schultz, T. P.
Schulz B.
Schumpeter J. A.
Seers D.
SEF (Stiftung Entwicklung und Frieden)
Seligson M.
Senghaas D.
Shafik N.
Shaw T. M.
Shen C.
Shin M. E.
 356

Siebert H.
Silva - Michelena H.
Silver B. J.
Singer H. W.
Singer P. I.
Skidmore D.
Smith D. A.
So A. Y.
Spiesberger M.
Squire L.
Srubar I.
Stalker P.
Stiglitz J.
Stokes R. G.
Sunkel O.
Suter Chr.
Sweat M.
Tausch A.
Therborn G.
Thompson W. R.
Tibi B.
Timberlake M.
Togan S.
Tovias A.
Trachte K. C.
Trezzini B.
Turner J.
UN ECE
UN Economic and Social Council
UNCTAD
UNDP
United Nations
United Nations Centre on Transnational Corporations
United Nations Development Programme, Arab Fund for Economic and Social Development
United Nations Economic and Social Council
United States Arms Control and Disarmament Agency
United States Central Intelligence Agency, National Foreign Intelligence Board
United States Department of State
Vaeyrynen R.
Van Rossem R.
Vedder R. K.
Verheugen G. (EU-Commissioner)
Vickrey W.
Wagstaff A.
Walker R. A.
Wallerstein I.
Ward K. B.
Watanabe N.

356
Weede E.
Weig D.
Wheelwright T.
Wickrama K. A. S.
Williams B.
Williams B. A.
Williams K. R.
Williams K. R.
Williamson J. A.
Williamson J. G.
Wimberley D. W.
Woehlcke M.
Wood A.
Woods A.
World Bank
World Resources Institute
Yotopoulos, P. A.
Zentner Chr.
Zielonka J.
Zienkowski L.
Ziltener P.
Zimmerman E.
Zimmermann, K. F.
Zoethout T.
Zolberg A. R.
Zouev A.
 358

J Index of subjects

absolute GNP
absolute income growth
ACDA (Arms Control and Disarmament Agency, United States Department of State)
adjustment
adult literacy rate
age of democracy
aggregate net transfers
agricultural share in GDP
aid dependency
Albania
Algeria
alphabetization rate
ancient world systems
Angola
Antigua and Barbuda
Arab Marxism
Argentina
Armenia
ASEAN (Association of Southeast Asian Nations)
asylum
Australia
Austria
average population growth
Azerbaijan
Bahamas
Bahrain
Bangladesh
Barbados
Barcelona process (of dialogue between the European Union and the southern Mediterranean
countries)
Belarus
Belgium
Belize
Benin
Bhutan
big landholding
Boabdil (the last Muslim ruler in Spain)
Bolivia
Bosnia
Botswana
Brazil
Brunei Darussalam

358
budget surplus/deficit
Bulgaria
Burkina Faso
Burundi
Cambodia
Cameroon
Canada
capability poverty measure
Cape Verde
Catholic Church
Catholicism (as a social tradition)
center
Central Africa
Central African Republic
Chad
child mortality rate
Chile
China
CIS (Community of Independent States in the ex - USSR)
CO2
Cold War
Colombia
Communist legacy
Comoros
Confucianism
Congo
corporatism
Costa Rica
Cote dIvoire
country risk
Croatia
Cuba
Culturalist theories
currency reserves
current account balance
Cyprus
Czech Republic
Dar al Harb (The house of war, a term from Islamic theology)
Dar al Islam (The house of peace, a term from Islamic theology)
defeudalization
deforestation
deforestation rate
Denmark
dependency theory
deregulation
destabilization index
Deutschmark
distribution coalition
 360

Djibouti
Dollar
Dominica
Dominican Republic
double deficits
DYN HD (growth of life expectancy over time)
East Asia
East Rome
East-West gap
EC (European Community, now: EU)
economic growth
ECU (European Currency Unit)
Ecuador
Egypt
El Salvador
employment
ENCONS (energy consumption per capita)
end of Cold War
end of history
enlargement of participation
Equatorial Guinea
Eritrea
Estonia
Ethiopia
ethno - linguistic fractionalization
ethno - linguistic fractionalization index
ethno - political conflict (EP)
EU (European Union, per 1. 1. 1995 15 member states)
EU enlargement
EU membership years
EURATOM (Atom Energy Agency of the European Union)
EURO (European Single Currency)
European Monetary Union
EXCEL (computer software)
export processing zones
external migration
F (productivities)
failure of demographic transition
female excess infant mortality rates
feminism
fertility rate
Fiji
financial capitalism
Finland
five pillars of inequality (five monopolies, S. Amin)
fordism
foreign debt
forest area per total land area

360
France
freedom of market and enterprise
G - 24
Gabon
Gambia
GDP
GEI (Gender Empowerment Index, see also gender issues)
gender - related development index
gender discrimination
gender empowerment
gender issues
General Motors
Georgia
Germany
Ghana
ghettos
Gibraltar, Straits of
global economy
global warming
globalization
GNP (Gross National Product)
GNP per capita growth
government
government consumption per GDP
government expenditures per GNP
Greece
greenhouse effect
greenhouse index
Grenada
Grenada
Guatemala
Guinea
Guinea-Bissau
Guyana
Haiti
HDI (Human Development Index)
HDR (Human Development Report published each year by the UNDP)
hegemonic cycle
historical fertility rate
Honduras
Hong Kong
human capital formation
human development index (HDI)
Hungary
Huntington Index
Huntington theory (clash of civilizations)
IBM
Iceland
 362

ILO
IMF
income concentration
income distribution
increase in life expectancy
India
Indian Ocean rim
Indonesia
industrial employment
industrial waste
inflation
ins (members of European monetary Union)
Iran, Islamic Republic of
Iraq
Ireland
Islam as a world religion
Islamic Conference
Islamic philosophy
Islamic tolerance
Israel
Italy
Jamaica
Japan
Jordan
Juche idea (North Korean totalitarian ideology)
Judaism
Jugar cycles
Kantian peace (see also: Kant I.)
Kazakstan
Kenya
Keynesianism
Kitchin cycles
Kohl Helmut
Kondratieff cycles
Korea, Democratic People’s Republic of
Korea, Republic of
Kuwait
Kuznets curve
Kuznets cycles
Kyrgyztan
labor force in agriculture
labor force in industry (see: labor force agriculture)
labor force participation ratio
Lao People’s Democratic Republic
Latin America
Latin Americanization
Latvia
LDCs (less developed countries)

362
Lebanon
Lesotho
liberalism
liberation theology
Libyan Arab Jamahiriya
life expectancy
life expectancy increases over time
life-styles
Lithuania
long cycles
Luxembourg
M (Imports)
Maastricht
Macedonia, FYR
Madagascar
main telephone lines
Malawi
Malaysia
Maldives
Mali
malnourishment
Malta
market economy without adjective nouns
market size
mass murder, politically motivated, in our Century
maternal mortality rate
Matthew’s effect
Mauritania
Mauritius
mean years of schooling
MEDA – Programme of the European Union
Mediterranean
MENA - region (World Bank region for Middle East and North Africa)
Mexico
Mezzogiorno (European South)
migration
migration dependency
migration pressure
military expenditures
military expenditures per GDP
military personnel ratio
military transfers
“missing women” (concept in the social sciences describing gender discrimination in life
expectancy patterns
mixed enterprises
MNC (Multinational Corporations)
MNC penetration
MNC penetration index
 364

mobility in the international system

modernization theory
Moldova, Republic of
money laundering
Mongolia
Morocco
Mozambique
Myanmar
NAFTA (North American Free Trade Area)
Namibia
Napoleonic Wars
narco-states
national disintegration
nationalism
NATO (North Atlantic Treaty Organization)
natural logarithm of per capita income
natural logarithm of per capita income, squared
neo-dependency theory
Nepal
Netherlands
new international division of labor
New Zealand
Nicaragua
Niger
Nigeria
North-South gap
Norway
OECD
Oman
organized crime
Orthodoxy (Christian Orthodoxy)
outs (non-members of European monetary Union)
Pacific rim
Pakistan
Palestine
Plaestinian Authority
Panama
Papua New Guinea
Paraguay
percent employment in agriculture
percent employment in foreign capital enterprises per total employment
percent employment in mixed enterprises per total employment
perestroika
periphery
Peru
Philippines
Poland
political instability

364
political instability theories
population
population density
population density^0. 50
population dynamics
population growth rates
Portugal
private land per total land
private landholding
private peasants
privatization
profits
protectionism
Protestantism as a social, historic behavior pattern
public investment
purchasing power parity
Qatar
raw materials
real appreciation of the national currency
real GDP per capita
Reconquista (1492 in Spain)
refugees
regulation
religious practice
Renaissance
rent-seeking
repressiveness of the security apparatus
RGP (linear standard regression procedure of the EXCEL 4. 0 program)
RKP (non - linear standard regression procedure of the EXCEL 4. 0 program)
Romania
Russia (as a historic entity until 1917)
Rwanda
Saint Kitts and Nevis
Saint Lucia
Saint Vincent
Samoa (Western)
Sao Tomé and Principe
Saudi Arabia
savings
semi-finished products
semi-periphery
Senegal
Serbia
Seychelles
share of outward FDI stock in gross domestic product in 1985
share of women in the membership of national legislature
Sierra Leone
Singapore
 366

Slovakia
Slovenia
small states
SO2
social reform as a strategy of ascent
social reform theories
social security
social security benefits expenditure as % of GDP
Solomon Islands
South Africa
Spain
speculation
Sri Lanka
St. Matthew
state sector size
structural disarticulation
structural heterogeneity
Sudan
Suriname
Swaziland
Sweden
Switzerland
Syrian Arab Republic
Taiwan
Tajikistan
Tanzania, United Republic of
terms of trade
Thailand
Thirty Years War
TNC (Transnational Corporations)
Togo
total area
total fertility rate
totalitarianism
tourism
trade dependency
traditions of male prejudice
transfers per capita
transnational integration
Trinidad and Tobago
Tunesia
Turkey
Turkmenistan
Uganda
UK
Ukraine
UN ECE
UN membership years

366
UN(O)
undervalued currencies
UNDP
UNDP Arab Human Development Report 2002
unemployment
unequal exchange
UNICEF
union density
United Arab Emirates
United Kingdom
urban bias
urbanization
Uruguay
USA
USSR
Uzbekistan
Vanuatu
Venezuela
Viet Nam
violation of civil rights
violation of political rights
voting
vulnerability of a nation in terms of the expansion of the new international division of labor
wage level
war years
WDR (World Development Report, document, published each year by the World Bank)
weakening of the social and political center
welfare borders
welfare gaps
welfare state
West Rome
“Wider Europe” (foreign policy concept of the European Commission)
world political threats
world systems theory
X (exports)
years of Communist rule
years of membership in the United Nations
Yemen
Yen
Zaire
Zambia
Zimbabwe
 368

i
TP. This is a revised and updated version of Russett & Oneal (2001, ch. 7), which in turn
PT

builds on Russett, Oneal, & Cox (2000). Huntington (2000) and Oneal & Russett (2000) exchange
views. Our data are at http://www. yale. edu/unsy/democ/democ1. htm or http://bama. ua.
TU UT

edu/~joneal/triangle_data.
2. Huntington (1996) expands and slightly modifies his analysis in Huntington (1993a,
1993b). All page references to Huntington, unless otherwise indicated, are to the book. Kurth
(1998) strikes a laudatory note; scathing attacks include Holmes (1997) and most of the responses
in Foreign Affairs 1993, 72(4): 2-21. One of the best, and certainly the most amusing, is Tipson
(1997). Other widely-read books on the alleged power of cultural differences in promoting conflict
include Kaplan (1993) and Moynihan (1993).
3. Huntington differentiates (p. 13) his “framework” for “interpretation” from “a work of
TP PT

social science. ” Yet his goals (p. 30) to “order and generalize about reality” and to “understand
causal relationships among phenomena,” are surely grounds to employ social science methods.
5. Mercer also gives a good review of this literature. For major constructivist
applications, see Onuf (1989) and Wendt (1999).
6. Also consider Doyle (1986: 116): ‘Fellow liberals benefit from a presumption of
amity; non-liberals suffer from a presumption of enmity’ (p. 116). This is consistent with the
hypothesis in Hermann and Kegley (1995) that democracies will see one another as part of an in-
group to be defended against outsiders.
7. Note also Huntington (1999: 49): ‘For the reasons I set forth in my book, the core state
of a civilization can better maintain order among the members of its extended family than can
someone outside the family. ’
8. Evidence for this proposition goes back to Richardson (1960). More recent work
includes Siverson & Starr (1991), Goertz & Diehl (1992), Kocs (1995).
9. Huntington (pp. 256-57) cites Gurr’s evidence that conflicts between Muslims and
non-Muslims were common and intense, but he misreads the table in Gurr’s appendix as listing 30
inter-civilizational conflicts (C:C and C:Is) rather than 18 (or 19 with one recoding by
Huntington). He does not discuss Gurr’s other findings.
10. Other research summarized in this paragraph is by Sadowski (1998), Ayers (2000),
Wallensteen & Sollenberg (1999), Lian & Oneal (1997), and Fearon & Laitin (1996).
11. Huntington also compares his paradigm with alternatives, notably on pp. 31-35. The
‘184 States, More or Less,’ and ‘Sheer Chaos’ alternatives focus on the realist state-centric system
of power and alliances. ‘Open World: Euphoria and Harmony’ and ‘Two Worlds: Us and Them’
represent versions of liberal arguments about the role of democracy and differences in economic
development. His critique of the democratic peace concentrates on the widespread absence of
democracy. He does note that shared democratic institutions, where they exist, diminish conflict.
On p. 67 he rejects the idea that trade reduces interstate disputes. Our purpose is to confront
directly Huntington’s hypothesis of civilization-based interstate violence with specific hypotheses
central to these other paradigms.
12. We checked, here and in Russett & Oneal (2001), whether Huntington’s thesis was
validated when tested over the long period 1885-1992. It was not. Russett, Oneal, & Cox (2000)

368
 report analyses that include all dyads, and the results support Huntington even less than those
presented here. Henderson & Tucker (2001) concur on both counts.
13. We relied primarily on the map in Huntington’s book, but consulted his text to clarify difficult choices.
The coding of ambiguous cases affects only a small fraction of the cases we analyze, so it has little
influence on our results. Henderson & Tucker (2001) make independent and somewhat different
coding decisions, but reach conclusions consistent with ours.
The Buddhist civilization was not in Huntington’s initial article (1993a), and in the book (e.g., p. 48) he
says that Buddhism is ‘not the basis of a major civilization;’ nevertheless the map identifies
Buddhist as one of the eight civilizations. The three ‘lone’ states are Japan, Ethiopia (‘culturally
isolated,’ p. 136), and Haiti (‘truly a kinless country,’ p. 137). Japan is identifiably separate on
Huntington’s map; Ethiopia and Haiti are not, but we regard the text as more accurately reflecting
Huntington’s intentions. The map suggests that all the former British Caribbean states are Latin
American, but that is inconsistent with his text (p. 131): ‘The single civilization Caribbean
Community (CARICOM). . . has created an extensive variety of cooperative arrangements, with
more intensive cooperation among some sub-groupings. Efforts to create broader Caribbean
organizations bridging the Anglo-Hispanic fault line in the Caribbean have, however, consistently
failed. ’ This is the only point at which he refers to any multi-state civilizations that are not
identified as such on his map. Considering their parliamentary political systems and
predominantly Protestant Christian religious identity, we choose to code these island states as part
of the Western civilization.
Four countries are ‘torn,’ home to two or more civilizations in which leaders of one predominant culture
want to shift to another (pp. 139-154): Russia, (Orthodox to Western), Mexico (Latin to Western),
Turkey (Islamic to Western), and Australia (Western to Asian). On the map, however, all are
unambiguously identified with the first civilization listed; we classified them accordingly. The
civilizations of several states in Africa cannot definitively be determined from the map, nor are
they clearly apportioned in the text. When in doubt we consulted CIA (1994) on religious
composition and assigned those with greater than 50 % Muslim population to the Islamic group
and the rest to the African group. Accordingly, we assigned Nigeria to the African civilization,
though it is identified as a ‘cleft country’ in the text and is split on the map. India is another
divided, cleft country; but surely it must be identified with the Hindu civilization. Sri Lanka is
unclear on the map and sometimes in the text; but Huntington identifies it as Buddhist on p. 48,
consistent with the CIA’s estimate that the country is 69 % Buddhist. On the basis of its largest
religious group (41 %) we assigned the former Yugoslavia to the Orthodox civilization. The
Philippines is also cleft in the text and the map, but on the basis of its 92 % Christian population
we assigned it to the West. South Africa is difficult, and Huntington’s discussion in the text is
ambiguous; we followed the map and regarded it as African.
The most curious case is Israel. In the text Huntington is sometimes ambivalent (p. 48), often (pp. 90, 156,
186) labels it non-Western, and on p. 188 calls it a civilization of ‘Zionism and politicized
Judaism. ’ On the map it appears to be part of Islam. In light of its history as a stable
parliamentary democracy and the predominance of Jewish immigration from Europe and America
(Eisenstadt, 1985: 296), we coded it as Western. Since the vast majority of Israel’s disputes have
been with Islamic states, that coding increases the evidence in favor of Huntington’s hypothesis.
14. An alternative would be to count only the initial year of a dispute. As explained
below, however, we believe that counting every year of multi-year disputes as an instance of
conflict is correct for addressing Huntington’s position. Empirically, analyses with all years or just
the first year of a dispute give very similar results. For extensive tests of robustness see Oneal &
 370

Russett (2000) and Bennett & Stam (2000).

15. We estimated the coefficients in our regression equations using the General
Estimating Equation (GEE) method of Diggle, Liang, & Zeger (1994), using the computing
algorithms of Stata 5. 0 (StataCorp, 1997). We adjust for first-order autoregression (AR1) and
estimate statistical significance using robust standard errors that take into account the clustering of
our data by dyads. Thus we respond to the issues raised by Beck, Katz, & Tucker (1998). We rely
on GEE rather than their recommended solution for temporal dependence because of doubts about
its appropriateness (Oneal & Russett, 1999). We did, however, re-estimate key analyses reported
below and found that our conclusions regarding civilizational differences were unaffected.
xv
TP . Russett and Oneal (2001) give further details about measures and theory.
PT

1 .
TP 7 For dyads in which one or both states were IMF member, we assumed that missing
PT TP PT

data indicated zero trade (Oneal & Russett 1999). Where data for trade involving only non-
members of the IMF—within the communist bloc, for example—are missing those dyads are not
included in our analyses.
1 .
TP8 We conducted other tests of Huntington’s basic hypothesis. First, we assessed whether
PT TP PT

split had a greater effect for contiguous pairs of states, which are particularly prone to conflict and
might be more subject to this influence, by including an interactive term, SPLIT*CONTIG, in the
analysis reported in the third column of Table 7. 1; but the coefficient of the interactive term was
not statistically significant. Thus, there is no evidence that states that are split across civilizational
boundaries, whether they are contiguous or not, are more likely to become involved in a dispute
once the realist and liberal influences are taken into account. Rather, the coefficient of SPLIT was
negative and significant at the . 09 level, indicating that dyads divided by civilizational boundaries
fight less than other pairs. Also, (Russett, Oneal & Cox (2000) found that with the dependent
variable limited to serious disputes (with fatalities) SPLIT was more nearly significant (. 06) in
making those disputes less likely.
19. This is done with an interaction of the dummy for each civilization with the core
state’s share of the civilization’s capabilities.
20. Huntington says (p. 14) that while a civilizational approach may help us to understand
global politics in the late twentieth century that does not mean it would have been equally helpful
in the mid-twentieth century. This does not identify a breakpoint or transition.
21. We created an interactive variable consisting of the variable YEAR, which marked
the passage of time from 1950 to 1992, times SPLIT.
22. Split is rather strongly correlated with some of these variables, notably alliances and
IGOs (. 52 and . 46 respectively).
xxii
TP . An effort to predict trade patterns well, rather than simply to establish a basis for
PT

judging the effect of civilization, would have include other variables, notably the size of the two
economies, which is key to economists’ gravity models. Bliss & Russett (1998) show that such an
equation, with some political variables, can predict as much as three-quarters of the total variance;
also see Oneal & Russett 2001, ch. 6).
24. Note that we do not analyze intra-state violence here, nor consider acts of terrorism
by non-state actors, to which Huntington devotes great attention.

370