Talal Abu-Ghazaleh… An exceptional interview in an exceptional time
The basics of the Arab economy are sound and the decline of the stock market isn’t worrying.
They are selling a barrel of ice cream for 1,600 dollars, and they want our oil cheap!
This is a new reading in the chapters of the global financial crisis by someone of various capabilities and talents who has abundant activities in both the East and West. He says that he is neither an analyst nor an expert, but I say that he’s an economic intellectual with sound capabilities in research, investigation, analysis and creative idea forming an idea with creativity that this interview was dedicated to revealing. This dialogue sought to understand the hidden aspect of this crisis and delve into its details. Why did it begin, how long will it go on for and what will be the final scene of this play that’s setting the world ablaze?
Talal Abu-Ghazaleh defines a new map in this interview, displaying coherent visions and stances that combine politics and the economy. He reaches startling facts that help clarify the issue, taking us behind the common cluster of information. It is truly an exceptional interview in an exceptional time, and accordingly, it deserves to be read and studied.
Let’s begin with the global economic scene after the financial crisis that hit the markets and affected our region.
First, what we need to do is distinguish between the financial crisis and the economic crisis, which means the crisis of the financial market and the crisis of the economy and they are two different things. There must be a distinction between the real market and the imaginary market, and what is meant by the ongoing financial crisis in the world today is a crisis of banks and financial institutions and securities. It is a real and dangerous predicament, larger than what’s being portrayed in the media. Currently, we aren’t witnessing a temporary breakdown or something caused by a casual accident, but rather a collapse due to fundamental reasons that need to be addressed for the situation to return to normal. As for the economic status, that’s a different matter as it refers to the real market which includes buying and selling commodities and services, along with the industry market and its production, and this is the market that represents income and the gross national product (GNP).
When one party borrows from another, it’s not included within the economy because it doesn’t add anything to the GNP, except for what is registered as trade transactions. So it doesn’t affect the national economy, but rather the income of individuals and its causes. So what we’ve been talking about so far is the crisis in the imaginary market, and until now, researchers and decision-makers haven’t dealt with the main problem, which is the basics of the economy.
What is meant by the basics of the economy?
The crisis didn’t take place because a certain event triggered it, but rather because there is a flaw in the American economic system. This flaw resulted from increased oversight of institutions that began over 20 years ago. The United States was directing the world towards free trade, allowing the freedom of institutions and non-interference in the economy, and so on. We finally noted that this tendency is what caused this collapse.
How so?
Because we see that there was a complete negation of oversight and transparency, and there is no authority that can interfere or organize the stock and loan transactions in financial institutions. There is no real transparency and no real information being issued by the banking apparatus.
Where is the failure here, in the system or in the procedures?
There is a deficiency in the system. The American capitalist system is the worst kind. Here in the Arab world, we implement a capitalist system, but one of a different pattern called the state’s capitalist system. So what does the state’s capitalist system mean? It is a structure that is organized and supervised by the state. In the US, there is an absolute capitalist order that doesn’t have any oversight, so it suffers from a basic problem where pumping more money into the system is useless. I am currently hearing about a tendency to ask the Gulf states to provide funds to the US so that the investments of these states can be preserved. The idea is to use these safe funds to save the funds that are in danger, thereby putting the safe funds in danger. This is strange logic, when someone comes to you and says, arrogantly, “Give me your money in order to save the money you have with me!”
How does this trend contradict economic logic?
Economic sense states that if the money you have is in jeopardy, you should not add more money to it. There is also the Western talk about the rise in price of oil because the West was suffering from poor economic health, and so demand for oil will drop, as will its price.
In 1997, Thomas Friedman said that the financial market is like a herd of cattle and that this market cannot be controlled. He launched a vociferous attack on Mahathir Mohammed, Malaysia’s prime minister, who was demanding control over the financial markets at the time. He considered him ignorant because there is no way to control them and stated that the current system, namely, absolute freedom, is best. Now, after the crisis broke out, I heard him last week saying, “We need to ask the whole world to undergo a rescue operation of this market,” – the one he used to claim was an ideal market that could not collapse.
I still remember what Henry Kissinger said when he warned the world of the rise in oil prices: that this rise is dangerous at a global level because it distributes wealth incorrectly, taking from the large nations and giving to the smaller ones, thereby giving these smaller states more than they deserve. He also stated that this disrupts the balance of decision-making globally because smaller countries will play a role that is inconsistent with their size. He added that this is dangerous because it finances what are called ‘terrorist movements’. So he believes that we should stop this increase in prices and calls for a counter-bloc to OPEC, comprised of the major parties affected by the crisis in addition to China, India and Brazil. He mentions the last two in particular because they represent large economies that need oil. He added that Russia can be added to this bloc as needed because it is an oil exporter, and he wants to create a cartel of consumers in order to impose the logic of resource distribution.
In your estimation, what is the conclusion that Henry Kissinger was alluding to?
It is that oil isn’t our resource but rather that of the world, and so it should be distributed based on defining the price and imposing on the oil-producing countries.
There is now a decline in the price of oil and a lot of talk on this issue. What is your take on it?
I’m reading and following up with what’s going on. They’re justifying the drop in prices as being due to the financial crisis. The question is, since the financial crisis began, did the factories, cars and planes of the world stop or reduce their consumption to half?! The situation requires that we have a little common sense in this regard so that we don’t fall for this lie, tying the drop in oil prices with the financial crisis.
So what is the cause of the recent decline in oil prices?
It is due to psychology, because there’s a feeling and rumors circulating that this crisis will affect the price of oil and the policy related to it. So if you’re following Kissinger’s reasoning and his article, which states that a number of countries – among them some Gulf states – will receive a large income due to the increase in oil prices. He adds that the price of oil should be reduced to half under the pretext of balance and fairness in the world. It is ironic that Kissinger is suddenly seeking fairness and equality, just as he was keen on being fair when it came to the Palestinian cause!
It seems as though you believe in a conspiracy theory; is this true?
I do not believe in such a theory, nor do I argue based on that logic. I’m basing it on an analysis of numbers and financial data. Are you telling me that the drop in oil prices is due to the global economic deflation? This is incorrect because the global economy didn’t shrink to half in a month. For example, did half of the United States’ cars suddenly stop? We would be naïve to think that OPEC defines the price of oil, as it just dropped the amount of production, and this didn’t lead to a price increase, so there are other factors and interests at work.
By reviewing Kissinger’s statements and the developments of the global economic crisis, it seems as if there are hidden forces running the global economy.
No, there is a real and apparent force. So when the US buys cheaper oil, its trade deficit is reduced. So who decides? Oil producers don’t have the right to market it, and they don’t control its price, as the major corporations are the ones who buy, refine, manufacture and sell oil. Therefore, defining the price doesn’t happen in a real market as there is a monopolization of the company-controlled oil market. Don’t tell me it’s due to a conspiracy theory. I need someone to explain to me why the oil prices dropped to the levels they have.
I’m talking about the conspiracy theory on their part. There is talk of Jewish forces that are behind the financial crisis. Your thoughts?
Thank you for this question. This is one of the rumors initiated by the West on purpose. The main party negatively affected by this crisis is Israel and the Zionist lobby. This is because the weakness of the US and the decline in its hegemony will lead to a regression in Israel’s arrogance and its blackmailing of the Arab nation. You may have noted how Peres, in his latest visit to Egypt, requested a revisiting of the Arab initiative. In six years, which is the age of this initiative, have we seen any Israeli interest in it? Secondly, those who control the financial market are Jews, and they are the ones who are hurting most from this. A Jew can hurt anyone but himself. Thirdly, the Zionist lobby depends on the strength of the US for its own strength, so if America becomes weak, then the lobby becomes the primary loser and victim. We don’t like to see what is happening to America, and we aren’t malicious towards it, but maybe this is for the best. This is because American weakness means the end of Israel. I claim that the countdown for the Zionist occupation of Palestine has begun because of the predicament, and I used to say that the Israeli rule in Palestine will end as a result of financial reasons, not military ones. This is because we cannot face the Western hemisphere militarily, but we can fight it intellectually, culturally and morally, and in the end, the result will be an economic war. I think that our problems in the Arab region will emerge because of this crisis. The reason is that the Zionist entity’s aim of negotiations is entering the region economically, and all Arab decision-makers who are more knowledgeable than I am know this. So the Israeli goal of what is called ‘the peace process’ is entry into the Arab economy, and this goal is no longer attainable.
How is it unattainable?
I’d like to come out of this interview with a certain vision, and I don’t know if I’m right or wrong, but starting from now and for another 10 years, the American economy, policy and society will go through a difficult battle. Why? Because the current disaster didn’t happen because a bank or a company went broke, but because there is an error in the policies of the American economy that needs to be addressed. What is it? We can summarize it in that the United States must transform from a market economy to state capitalism. This is what it needs to do if it wants to save its economy. The problem isn’t a problem of mortgages worth 20 trillion dollars, although it’s true that this is what got the banks in trouble since they aren’t subject to any form of oversight, and some of them took loans over 30 times. This happened because the government called for it, as did President Bush himself when he called on Americans to take out loans in order to raise consumption and ideally bolster the economy. Bolstering the economy was necessary to finance the wars on Iraq and Afghanistan and to support Israel; the Iraq war alone cost one trillion dollars annually in the beginning and now costs four trillion annually. So the US is now approaching a difficult period in which it will be quite busy with itself. This will last a while and affect its standing and role in the world, and some parties have requested that Europe take another look at the role of the US in the world.
What does the collapse of stocks that took place in Asia and the Arab region mean?
This isn’t worrying, because the stock market is not real; rather, it is the composite of non-existent papers that are sold from one person to the next and registered on the computer. They rise and fall according to artificial decisions most of the time, by rumors in many cases. Whenever these stocks fluctuate, analysts and experts talk about it, saying that the market of so-and-so country lost two billion dollars, but what does this really mean? We need to take into account what the price of a stock was previously, so if a share was at two dollars and then went up to 100 dollars and then dropped to 50 dollars, can this be considered a loss? So stocks don’t worry me. They may worry some due to the losses of individuals, but we have to look at the basis of economies.
With the decline witnessed by the Arab financial markets, how do you view the basics of the Arab economy?
The basics of the Arab economy are sound, and I’m not worried about any Arab state, and in particular the non-oil-producing states and those that are on the US’s blacklist. These countries will not be hurt. The rich Arab nations that have investments abroad will be only slightly affected, but the important thing is that the basics of the economy in the region are sound and production processes are ongoing.
What danger can emanate from this crisis?
I have said in the past and I repeat that what I fear is a new monetary fund being created. I envisioned that Western thought will create a new theory to pounce on Arab surpluses, and this has been mentioned before. It was said that they want to create a new fund from “surplus nations”. What are these nations? China won’t pay, and that leaves us, the Arabs. I am sure that Arab decision-makers, particularly those in the Gulf, are fully aware of all these aims and intentions. Actually, there are no surpluses but only capital used to develop the nations involved. So when Qatar, Saudi Arabia, Kuwait or Bahrain become like Britain in road networks, services, capacity-building, education and other areas, then I would say that they have surpluses. But now, what are they? There is only capital that I need to build my country and, in particular, human capacities. The Gulf has a long road ahead so that everyone in it will possess the privileges of a good lifestyle that we are being asked to ensure the West before we ensure it for ourselves.
In your estimation, what is the right policy that Gulf nations in particular should adopt in this period?
There must be coordination with countries that have surpluses. The problem is that the West doesn’t want Arab money in control; that’s why they thought of this fund, which entails collecting this money and controlling it.
We’re entering a phase that will last 10 years. After this decade, what will the world’s economy look like?
What I read and see is that the international community isn’t the US, but rather the community including Russia and China. There will be numerous power centers globally, and the United States will remain a superpower, but just one of several. This, I believe, is in America’s best interest, because I think that its latest crisis was due to the fact that it was the sole superpower. Because of this, it became the sole authority and lost competitiveness with others, which was a weak point for it. So in 10 years, there will be various poles in the world along with a number of economic blocs including American, European, Arabic and Islamic. I think this crisis will impose more cooperation and proximity on the region, that will include Iran, especially since it’s an economic powerhouse. The US has placed us in a state of animosity with Iran, yet this enmity is something we have no interest in, and the political decision-makers are well aware of the political interest. We must work with the giants of the region. So if all the powers in the region come to an agreement, it would mean the formation of a huge market. And if they reach an understanding with countries like China – and I am writing a book and drafting the outline of an upcoming economic map from Iran to India and China – then this region will become the strongest economic force in the world because it will have money, surpluses, technology and an enormous market that is inclusive of three billion people. Also, I predict that the price of oil will return to 150 dollars (per barrel) in 2009.
How will it return to that price?
This is because India and China will make up for the decline in Western oil consumption. Even if it isn’t made up for, let’s just leave the oil in our lands, as future generations will enjoy this resource. The Western media talks aimlessly about the alternatives to oil; the truth is that there is no alternative to oil, and even if there was, that’s better because our oil will last a longer time. In any case, we’re the beneficiaries of this. I don’t understand how it can be claimed that the price of oil is expensive when a barrel of Coca-Cola is 126 dollars, a barrel of mineral water is 300 dollars and orange juice 307 dollars. The fair price of oil is 200 dollars per barrel, and it will reach this price despite all the attempts by the West to prevent it. Remember that the price of a barrel of ice cream is 1,600 dollars!
At this stage, expenditures should be on health and education, and we must double our budgets. If there are surpluses, they must be used to strengthen the economy and build capacities.
Currency transactions are also witnessing unclear activities. What is your take on that?
It’s confusing. When the Federal Reserve was established in 1913 by banks and not the government, the government came in and gave it powers over liquidity, currency and interest. These axes allowed it to control the economy. One of its chairmen used to write down the values of currencies before he went to bed, stating, for example, that the yen must either decline or rise, and so on. This method is followed by the Federal Reserve in defining currency prices. The rise of currency now has nothing to do with the crisis but is connected to this method I’m referring to. The rise of the dollar will negatively affect America’s exports because economic decisions have political dimensions. So the decision to raise the dollar is an American one, and, in any case, the idea of tying the world economy into one currency has proven to be a faulty one, because if one part of the system collapses, the whole system will collapse.
How do you view the November 15 summit?
I’m quite apprehensive about it. The US is now hurting, and it will be aggressive and use everything in its power to impose policies on other countries that suit its needs without changing its own policies. We should go back to the declaration of the Group of Seven in which the US was supposed to give Africa 50 billion dollars over five years. This hasn’t yet happened, though when the economic crisis hit, they pumped out 1,200 billion dollars in a single day. It is with this logic that they will attend the November 15 summit and talk about standing together to surpass this predicament, but the question is, Why didn’t you stand with Africa and rather let it die? So they’ll show up at the summit stating that this financial disaster is everyone’s, which isn’t true; it is theirs alone and we have nothing to do with it.