Q: What is your outlook for the Middle East?
The Middle East will continue to go through socioeconomic
reforms. The change in some countries will be faster than the others. The unrest
has spread from Tunisia to Egypt, Jordan, Libya, Algeria,
Bahrain, and Yemen. We also saw rising tensions in Kuwait between the parliament
and the Prince and the civic movement by the stateless Arabs. Saudi Arabia's king is old and the
power transition period can be critical. There
are deep social tensions in Saudi Arabia; they could be brought up to the
surface by the high unemployment rate and widening gaps in wealth
and power between the populations.
As for the two main non-Arab countries in the Middle East,
Israel and Iran:
Israel is under tremendous security, political and economic pressures
caused by the loss of Turkey and its main Arab allies, the disillusionment of
the Palestinians with the peace process, the
increasing tensions with its neighbors, the diminishing power and influence of
the US, and the increasing size of its own disenfranchised populations of
African and Arab origins. All these factors present formidable challenges to
Israeli policy makers.
Iran has more than 30 million people living under the poverty
line. The problem is exasperated by the enormous pressure imposed by the
economic sanctions driven by the US and Israel. We
saw the mass protests after the last elections and the recent demonstrations
inspired by Egypt's uprising.
The region is under a pressure
cooker. If cooler heads do not prevail, we could see a conflict that could
damage the region and cause a global economic recession, especially if the oil
production or transportation are affected.
Q: What are the driving forces behind the Middle East unrest?
Although the protesters in Egypt and
neighboring countries are calling for democratic reforms, in reality they are
calling for a better economic life. Democracy is only a means to an end. I believe
the driving forces behind the Tunisian and Egyptian uprisings are economical. A
chronic high unemployment rate combined with an inflation in food prices is a
volatile mix that can lead to major civic outbursts.
To understand what is happening and what is going to happen you
need to look at inflation as a force of pressure. If the socioeconomic system of
a country is open and democratic, the pressure will dissipate through
elections and peaceful change of government. On the other hand, if the system is
closed, it might be able to contain the pressure for a while, but the pressure
will build up with time and at a certain point it will exceed the strength of
the system causing it to crack. We saw it in Tunisia and Egypt. In other nations, this pressure release may take other forms such as
racial, ethnic, or religious conflicts.
Rulers who learn from history and create a socioeconomic system
that is open will achieve stability and continuity. Those who fight against the
socioeconomic laws may win some battles in the short term, but will lose
From a global perspective, what is happening today is simply
part of the process of moving towards the new world order and part of the shift
of power from the West to the East. The Middle East is at the center of that
Q: Do you think the sectarian conflict in Bahrain could
spread to neighboring GCC countries?
On the surface, it appears that what is going in Bahrain is
sectarian, in reality it is economic. Egypt's ex-President, Hosni Mubarak,
alleged that the unrest was incited by external forces and governments. He
missed the real causes of the unrest and now he is out of power. Many analysts
are confusing the cause with the effect. The cause is the economic conditions
and the distribution of wealth; the effect is sectarian, political, national divisions and unrest.
From a psychological point of view, when people go under
pressure in life, be it economic or otherwise, they seek support from the
people closest to them, usually religious or ethnic groups. They also
start blaming other groups who have more control over the national resources. If the gap of power is wide, this will eventually create
deep divisions in the society. The divisions can take on new forms of conflict
such as class warfare, ethnic, religious, political unrest and at times civil wars.
The only effective protection against national divisions is an open
socioeconomic system with a large and growing middle class.
The same thing happened in Lebanon during the civil war in the
70s. The conflict was between the poor Muslims and the ruling Christians. People
on both sides of the conflict used religious or sectarian slogans to amass
support to win the fight. On the surface, the Lebanese civil war looked like a
conflict between Christians and Muslims. Initially the people in power alleged
that the Palestinians are the cause of the civil war in Lebanon, but when the
Palestinian forces left the country, the war continued. By the end of the civil
war Christians were fighting each other and Muslims were fighting each other. It
is a classic struggle for power between different groups and factions of the
society. A sustainable civil peace in Lebanon is not possible without creating a
secular state with an open socioeconomic system allowing equal access to jobs
and economic opportunities to all the segments of its population.
Sustainable prosperity and stability of the nations in the
region cannot be realized without re-engineering their state models to more open
socioeconomic systems allowing equal access to national resources and
opportunities instead of the current closed systems based on tribal, ethnic, or
Q: How will the Middle East unrest affect the
Most analysts think this is a Middle East problem
and the people of the region are demanding democratic reforms. I see
it differently; I see it as a global problem requiring global
monetary and economic reforms. This wave of unrest did not start
with the Middle East and will not end there. The unrest could spread
to other regions around the world, although at different pace and in
different forms. The spread of the unrest is determined by the rate
of the economic decline, unemployment and inflation in each country.
Just look at what happened in Greece, we saw similar unrest by the
citizens against their government. The country would have failed, if
it was not for the massive bailout by the European Union (EU).
Similar violent protests happened in the UK by students in response to
the proposal of the government to increase tuitions. These events
are simply the after effect of the global financial crisis and long
term wrong economic policies.
Q: How could the world leaders mitigate the
If the global economic engine is restarted and
inflation is controlled, the instability can be limited. If the
recovery experiences new setbacks and inflation becomes
hyperinflation, many countries could see civil unrest. We could
also see more international conflicts.
One quick and effective solution to the global economic crisis
is a global economic and political reset. A global economic reset means that
world leaders can come together to agree on debt forgiveness to all nations and
restructuring of the global economy. Friends and enemies alike, no exceptions.
To be fair to nations with lesser debts, they could be compensated on a fair
ratio basis to enjoy treasury surpluses. A new international trade and reserve
currency will probably be established to create a fair global economic system
and to implement the reset. This could usher a new era of global prosperity and
socioeconomic exchange. This is a much better alternative than currency wars,
international hostilities and continuous risks of global socioeconomic shocks.
Without peaceful international relations, there could be no
economic stability and prosperity. On the political front, world leaders and UN
veto-holding members could reset their foreign policies and stop burdening their
economies and their people with international conflicts. The UN international
court of justice could be responsible for resolving international conflicts.
The implementation of this solution requires a
strong global leadership vision and action. Unfortunately the US
leadership is limited by many conflicting private interest groups
and is buried in domestic politics, ideological conflicts, and
security issues. It is also unlikely that the global powers will let
go of their power voluntarily and the situation will not get better
before it gets worse.
Q: The US was hit several times with recessions
and inflation, why didn't we see the similar unrest?
In the US we had our share of civil conflicts driven by
economic forces. The European immigrants brought slaves from Africa
to use them as cheap labor for farming their lands. The color of the
skin was only a rationalization for the continuation of the slavery
system. All the segregation and discrimination rules against the
blacks, at that time, were made to preserve the existing economic
system and the interest of its beneficiaries. Although history books
attribute the American civil war to states and civil rights, the
driving force behind the war was the conflict of economic
American rulers learned their lessons
early on and created a socioeconomic system that allowed a free
distribution of wealth and power. Today, we have a black president,
we have more people leave their parent's economic class and become
richer regardless of their religious, ethnic or national background.
Despite having more diverse people in our society than any other
nation, we have more stable national politics. If our elites try to
limit the openness of the socioeconomic system, the system will be
corrected in any number of forms including civic unrest. When Bush's
administration invaded Iraq and bailed out Wall Street, the people
brought in Obama. When Obama bailed out Wall Street again and
considered raising the tax on the people, the people brought the Tea
Party into power and the ruling party lost control of the Congress.
Corrections are made via peaceful elections.
When people have hope that their economic
conditions can improve by simply working harder, they care less
about politics, race and religion. They may not like many things in
their society but they are unlikely to get angry to a point of
violent uprising or dividing the country. When people feel stuck or
when they are poor and do not have much to lose, they are more
likely to rise against the people in power, even if they belong to
the same ethnic, religious or political group.
Q: Is it safe to say that there is no risk to the
US national integrity from high unemployment rates and rising
The integrity of states is ruled by the
socioeconomic integrity theory. The degree of the stability of any
social system is proportional to the degree of its economic growth
and vice versa. Stated differently, the risk to national integrity
increases proportionally to the country's economic decline.
When the members of a sociopolitical system share
the same economic interests and the existing system produces enough
economic opportunities to meet the needs of the members, they are
likely to tolerate existing differences and work together towards
On the other hand, when the system fails to produce
enough economic opportunities over a long period of time, the
members of the system are likely to compete more aggressively for
existing resources, causing divisions among the members to grow
stronger. The degree of social cohesiveness will diminish and
divisions could take different forms such as ethnic, religious and
geographic conflicts and at times class warfare or civil wars. If
not managed properly, such sociopolitical systems can become
dysfunctional. If the dysfunction is left untreated, at a certain
point it will take more energy to fix the system than to let it
History teaches us that people from different
religions and ethnic groups can be united around one shared economic
goal; equality and prosperity for all. We saw that in the rise of
the communist USSR. When the economic policies of the USSR failed,
ethnic and national divisions took the forefront and the USSR was
dissolved. That can happen to the US if we are hit hard enough by
hyperinflation and currency collapse. How the divisions evolve and
what forms they will take depend on the type and speed of the
government's reaction. It is too early to foresee such events.
However, it is important to note that no country is above the
socioeconomic laws, US included.
Q: You mentioned that wrong economic policies can
cause international conflicts, can you elaborate on your statement?
The inflationary pressure forces and socioeconomic
laws are also applicable to international relations. The historical
crusades against Muslim lands, the colonization of Spain by the
Muslim Moors and India by the British were all driven by economic
interests, despite the advertised reasons that were used to mobilize
their armies at the time. In my opinion, the invasion of Iraq was
not about spreading democracy or weapons of mass destruction, it was
about the oil. Iraq has one of the world's largest proven oil
reserves. Oil is a strategic US economic interest, especially with
the rise of China and India, and rise of the global demand for
energy resources. The division between the Kurds and the Arabs of
Iraq is driven by oil. The division of Sudan between the north and
the south is driven by the control of natural resources.
Throughout history, national and international
conflicts can be traced to economic reasons, they can be disguised
under different propaganda and may take different forms as conflicts
evolve, but these forms are the effect not the cause.
Today, there is a lot of tension behind the scene
between major powers on global economic and monetary policies.
Currency wars could eventually lead to physical wars.
International media must look beyond the declared
reasons for international conflicts. It is the duty of journalists
to explore all angles, so the attention of the people is not
monopolized by any single point of view.
Q: What is your economic outlook for Israel?
Israel has the same problem, about 20% of the Israeli population
lives under the poverty line, the reason you do not hear about their problems, is because they are focused on an external enemy and they get very generous
annual US economic support. However their socioeconomic system is unsustainable,
especially with rising tensions with their neighbors and the decline of the US
Like other countries, Israel's economy was hit by
the US financial crisis. Israel has a population of about 7.5
million. About 20% live under the poverty line, mostly marginalized
Israelis of Arabic and African origin. The country has limited
natural resources and is in constant sate of conflict with its
Israel's survival and economy are highly dependent
on US support. Israelís public debt is almost 80% of its GDP. Half
of that is external debt owned mostly by the US. Israel is the top
recipient of US foreign aid. Even the US economic aid to Egypt and
neighboring countries is made to support the peace agreement with
Israel. Israel's supporters in the US Congress and the White House
are pushing to increase US foreign aid to Israel, despite US plans
to cut domestic spending. In 2010, President Obama's budget
appropriated $3 billion for Israel and gave another $3 billion of
loan guarantees. There are more than 600 companies listed on Tel
Aviv Stock Exchange and Israel has the most foreign stocks listed in
New York. Based on the aforementioned data, it is unlikely that the
country can survive without US support and is highly vulnerable to
US economic shocks and geopolitical risks.
From a long-term standpoint, if you consider the
cycle of rise and decline of countries throughout history, Israel
reached the height of its power cycle in the late 1990s. They missed
two golden windows of opportunity to make peace with the neighbors
and hold maximum gains by sacrificing some land for peace. The first
opportunity was missed in 1995 with Rabinís assassination by Jewish
extremists. The second opportunity was missed by rejecting the Arab
peace initiative in 2002. I see a rise in ethnic and religious
fundamentalism in Israel and Anti-Israeli sentiment around the
world. Traditionally, Israel used excessive power and fear as a
strategy to ensure the security of the state. However, after their
failure in 2006 war with Lebanon, it became clear that the barrier
of fear has been broken and power gap has been reduced
significantly. The dynamics of the conflict is entering a vicious
cycle that can cause a lot of damage to the countries involved, US
In the age of global knowledge and socioeconomic
exchange, goodwill and trade relations are far important to national
prosperity and security than land or military power.
Socioeconomic systems that are built on exclusive
ideologies, religious or ethnic purities are breeding grounds for
extremism and will eventually lead to civil and international
conflicts. Those countries must change or fail. If the Israeli
elites are betting on the passage of time for the Arab people to get
tired of the Palestinian cause, they just need to remember that the
Moors occupied Spain for more than 700 years and they eventually
were driven out by the Europeans. The only way for Israel to survive
in a region surrounded by Arabic and Islamic countries is to make
peace and integrate with their neighboring countries.
The Israeli-Palestinian conflict is one main source
of negative international politics, terrorism and tensions between
the US and about two billion Muslims. By solving this conflict, a
major part of national security problems, along with the human and
economic costs of future wars can be avoided by the Israelis,
Americans and Arabs alike. Without peace, Israel is increasingly
becoming a financial and psychological burden on its allies and its
I foresee more bad news for the Israeli economy,
unless they reach a peace agreement with their neighbors.
Q: What is the likelihood of a conflict with
From an economic perspective, a war with Iran could
be devastating to the region and the world, causing a severe global
recession. If Israel strikes Iran in 2011 or if the war lobby wins
the US elections in 2012, the event would be a key catalyst for a
global energy crisis followed by US economic depression and currency
crisis. If you thought the economic crisis caused by the financial
sector was hard on the world, you have not seen anything compared to
the inflation pains and socioeconomic challenges caused by rising
energy prices. The best way to get rid of the threat of a nuclear
Iran is for Israel to make peace with its neighbors.
About Med Jones
Med Jones is the president of International Institute of Management. He is recognized as one of the few experts who predicted the US financial and economic crises of 2008.
In a policy white paper, he challenged the US President's State of the Union Address, Federal Reserve Chairman and
mainstream economists. His predictions were the most
comprehensive and accurate among the experts who warned
about the crisis. The original warnings can be found at:
- The instituteís 2006 policy white paper:
U.S. Economic Risks & Strategies 2007-2017
warned about key risks for the decade, including the housing
bubble, consumer and national debts, trade and investment deficits, and
Reuters: When the Fed, major
investment banks and leading economists denied the housing bubble risks and
asserted that the impact of the subprime mortgage defaults is limited to a
few companies in the financial sector, the institute warned about the
widespread impact of the
bankruptcies and the loss of confidence in US
economy (March 2007)
Jones is a non-partisan technocrat. He can be