What is going on around the world bothers me. Deeply. Especially our role as a super-power.
It reminds me of what happened in Italy in the 20 years after WWII. Europe was in the process of rebuilding the industries and infrastructures totally shattered by the war.
As the people were waiting for better times ahead, optimistically promised by the class in power, jobs were hard to find. Wealth was concentrated (so, what’s new, you might say) close to the top of the political body.
The idea that communism was the answer, and the Soviet Union was the workers’ paradise was sold to the Italians and most Europeans. Even on this side of the pond there were people believing in the Russian miracle.
Why did communism gain so much success in Western Europe? Because people did not see any light at the end of the tunnel. They were frustrated by the corruption and wealth in the hands of the very few. I remember asking people why they were voting for the communist party. Their answer was an unequivocal: “What do we have to lose!”
Poverty is a desperate state for any human being. And desperation drives individuals to desperate acts. Those of us who have never seen poverty call those acts “insane” manifestations.
In the issue of 10-15-01 I gave you the sad documentation of how poor the Islamic world is. What is happening there reminds me of why people voted for the communist party in Italy. They do not have anything to lose. The sheiks, kings, dictators, and their acolytes are wealthy. The populace, however, is poor and is easily convinced to do insane acts. They are being brainwashed that we are guilty for their miseries.
As discussed by the Financial Times, however, a report sponsored by the Council on Foreign Relations shows that the Arab economies lack freedom and have an overwhelming public sector. (This confirms my beliefs about political systems. Please see my report Political Systems on our website www.peterdag.com under Understanding the Markets.)
Corruption, public sector monopolies, red tape, contract enforcement and equity foreign ownership limitations, taxes that reach 175% of sales, lack of skilled labor, governments that want to deal only with nationals, and very weak or non-existent capital markets are just some of the issues faced by the area.
I condemn terrorism. If we want, however, to deal with it we must understand what drives these desperate people. They do not have a better option than blowing themselves up against human targets. Their families and friends see them as patriots and freedom fighters, not as criminals.
Mr. Sharon’s proposal of establishing “security buffer zones” is being questioned by the Israeli press, as the economy sinks in a deep recession. Industrial production is down 9.7% in Israel, one of the worst declines in the world. Building another iron curtain is not the answer. This is the reason why Mr. Sharon’s speech did not generate the enthusiasm he expected.
These issues are not going to be resolved by force. The “Axis of evil” image triggers emotions. Frankly, however, I cannot see the US roaming around the Islamic world and toppling one government after another. The world opinion will not stand still.
These issues can only be solved through diplomacy, economic initiatives, incentives based on economic performance, and a deep understanding that we are dealing with desperate people, highly centralized economic and political systems, and that desperate people do not have anything to lose.
(This Observations appeared in the 3/8/02 issue of The Peter Dag Portfolio)
George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest
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