FIRST WORLD, THIRD WORLD, GLOBALIZING WORLD: WHERE IS THE MIDDLE EAST?

How should we think of the contemporary 'global' economy? Unprecedented in most respects, it has only the barest similarity to historical economic experiences. Even if we accede to Andre Gunder Frank's latest thesis that the expansion of trade world wide during the four centuries prior to 1800 constituted a 'global' economy (Frank 1998), the fact remains that the European industrial revolution changed the nature of production and with it economic relationships and institutions. Pre-industrial centers of production and of economic life may have been connected by long distance trading of merchants and intermittent travels of adventurers but the societies themselves were not structurally connected. Nor is today's global economy simply another form of imperialist empire although the centers and institutions of finance capital wield enormous influence. It is a 'world system' certainly, but industrialization in some parts of the periphery belie those theories which posit inevitable dependency and unrelenting underdevelopment as the lot of a 'periphery'.

The most prominent characteristic of today's global economy is that it is capitalist. Its most visible participants come from, and also are, capitalist national economies and multinational firms. Its contours derive from capitalist economic institutions and the behavior of finance capital, nationally regulated, internationally largely unfettered. Certainly globalization owes its origin to the growth and spread of capitalist relations of production from its developed centers. It also owes much to advances in technology that allow instantaneous communication and movement of financial assets around the globe, and the capacity to transport large numbers of people and amounts of material across large distances quickly. This kind of technology was pioneered within the advanced industrial economies that continue to be almost exclusively its producers.

The centrality of advanced industrial capitalist economies to the presently developing global economy is indisputable. However, such states account for a minority of the world's peoples and occupy geographic areas of limited extent. What of other countries and peoples, those called the Third World, which are pulled into the global economic orbit? The connotation of 'global' is encompassing inclusion.

First we will introduce the theory of regulation developed to understand periods of capitalist growth and crisis in the industrialized centers. Then we will discuss the spread of industrialization to the periphery as the regulationists analyze it, including reference to the Middle East generally and to Egypt. Finally we show where the Middle East fits into the global capitalist order.

'FIRST WORLD' CAPITALISM

The heartland of capitalism, where industrial and finance capital developed, the so-called 'developed' world, otherwise spoken of as the center of the world system, is the place where capitalism first appeared and from whence it spread outwards to far corners of the earth. Capitalist development in the center is not, however, uniform. Cycles of growth intersperse with recessions that at times became crises. The latter have stimulated attempts to theorize and explain, to try to mitigate the effects, and to figure out how to reverse the downward spirals of capitalist accumulation. In the 1970s when a new recession became undeniable new theories and hypotheses appeared.

Of particular interest for this paper is the theory of 'regulation'. Formulated by French researchers in the 1970s it was initially concerned with the empirical, historical situation of economic crisis in the United States and France. They sought to understand the nature of structural change that brought the downturn of growth and crisis in industrial capitalist economies. Subsequent work expanded to include a number of third world states as well as global relationships.

'Regulation' translates into English as 'regulation' only in the broad sense of social ordering, the 'regularization' of those relationships that underpin the social order (see Jessop 1997:519). For 'regulationists' the most important relationship is that of capital and labor as it is the primary contradiction of capitalism.

This theory works with two main concepts: 'mode of regulation' and 'regime of accumulation'. A 'mode of regulation' refers to those individual and collective actions that reproduce fundamental social relations of a given historical-institutional context, allowing decentralized economic decisions to maintain the system. A 'mode of regulation' produces a 'regime of accumulation' where the established regularities insure orderly accumulation (Boyer and Saillard 1995:546, 547). From this base the theory elaborates other concepts and ways of analyzing structural relations of periods of rapid growth in capitalist economies. It is also "a theory for troubled times." The authors' claim for the regulation approach that it treats problems of economic crisis "many others have treated badly" (pp. 11, 12).

Problems analyzed include unemployment deriving from differences between growth of the economically active population and a slow-down in the creation of jobs. Such disjunction is seen as connected with the persistence of forms of organization which, although inadequate for new social and economic conditions, remain deeply rooted in existing institutions and state policies. Institutions that inhibit the utilization of new technologies to restore gains in productivity need reforming. Also needed is an understanding of the market as "a form of coordination of economic activities much more organized and sophisticated than, neoclassical theories suppose." While the market is "incapable of self-institutionalization" it can work "with great efficacy and appear to be self-regulating" once it is situated within "a web of rules and legal constraints" (p. 14).

The first generation of regulationist writers formulated their theory by direct reference to the historical experiences of the United States and France with capitalist growth (i.e. accumulation) and crisis (i.e. recession). They sought to explain why accumulation faltered in these countries at the end of the 1960s and continued in recession. They conceptualized the inter-war period and the post-war years (to the late 1960s) as times of increased accumulation through assembly line production, pioneered by Henry Ford in the 1920s, greatly increasing labor's productivity. Thus the era was one of 'intensive' accumulation which regulation theory calls 'Fordism.' Fordism's characteristic feature is a form of institutionalized labor-management relations whereby, through institutionalized modes of adjustment, wages are kept at a level that allows the labor force to become mass consumers of their mass production. Thus capital accumulation and investment continues, and the system grows. However, not all regimes of mass production produce mass consumption. While mass consumption began in the United States during the inter-war period, it did not occur in France until after 1945.

Another concept developed by regulationists is 'Taylorism', both predecessor and contemporary of Fordism in the historical progression of industrialization of the first world. The name derives from the inventor of 'scientific management'. In regulation theory it refers to the tasks of organization of the labor process being separated from their execution on the shop floor (Lipietz 1995:348). Its hallmark is "direct control by the management of the activity of workers" (p. 352). Its relation to Fordism? Fordism is "Taylorism plus mechanization" (p. 348). Adapted to conceptualize situations of third world development they become 'peripheral Fordism' and 'primitive' or 'bloody' Taylorism.

Fordism's transformation of industrial production through the assembly line means division of industrial activities into (1) conception, organization, engineering, (2) skilled manufacturing, and (3) unskilled (perhaps more accurately, semi- or low-skilled) assembly (Lipietz 1987:71). 'Taylorism' is used by the regulationists to refer to increased accumulation achieved through greater exploitation of workers, as occurred in the industrialized centers before the age of Fordism. It is now showing a comeback with newly devised forms of work force "flexibility" and "hierarchical direct control" in the wake of the restructuring and the demise of Fordist labor-management regulation in, notably, England and America. "We are back to some form of Taylorist organization of the labor process without the social counterparts of Golden Age Fordism" (Lipietz 1995:348, 353). It happens because labor's position is considerably weakened vis-a-vis capital and the compensating features of complimentary levels of production allowing mass consumption have been eroded. Lipietz coins the term 'neo-Taylorism' to mean the return to forms of exploitation of labor in the "post-Fordist" North that are unmitigated by Fordist levels of capacity to consume, and with employment unprotected.

With the expansion of capitalist production and the distribution of commodities around the world the notions of the regulationists become relevant to the global context. But there is great variation between and among economies in the 'globalized' world. There are world market factories where industrial production of the center countries is moved overseas but kept within the control of center industrialists. There is piece-work and various forms of partial assembly moved out of the center to the periphery leading to variants within the new international division of labor (see Froebel et al. 1980). But there has also been industrialization properly speaking within the periphery. In some countries it has been recent while other countries have had historical experiences extending back for considerable periods of time. How, then, are we to understand the present position of the periphery within globalization?

THE THIRD WORLD

Regulation theory was derived from case studies of advanced industrial capitalism at the center but its conceptual apparatus concerns capitalism as such. Since capitalism has spread worldwide it is not surprising that regulationist theorists began to analyze socioeconomic development in the Third World. A proliferation of persons using regulation theory for case studies in the Third World appear among the contributors to recent collections (Boyer and Saillard 1995, Schor and You 1995, Aglietta et al. 1994). The basic perceptions as to how regulation theory applied in the periphery were set forth in Lipietz 1987, 1986; Boyer 1990; and Boyer et al. 1986. The earliest case studies of the third world in regulationist perspective were of Chile (Ominmi 1980) and Venezuela (Hausmann 1981). Ominami (1986) looked at the crisis of capitalism in relation to the Third World specifically and Mistral (1986) considered third world development in relation to the global economy.

'Peripheral Fordism,' means that whereas the organization of production is Fordist in the sense that there is mechanization and a combination of intensive accumulation and a growing market for consumer durables, the skilled manufacturing and engineering levels are still mainly outside these countries. This external location of the higher levels of the production process includes the machines that are used for industrial production. 'Primitive Taylorization' includes the transfer of specific and limited segments of manufacture to states with high rates of exploitation and the exportation of the production back to the center (Lipietz 1987:78-79). It also includes the exploitative sweat shops and garment factories in some NICs.

It is incontrovertible that, since its invention, industrialization has been the motor of vast economic growth. In the 18th century the per capita margin of variation of national product was 1 to 1.5. From the first third of the 19th century the variation began to increase significantly between rapidly industrializing countries and others. As of the early to mid 1980s and "excluding extreme examples" the variation was 1 to 20 (Mistral 1986:173). Not knowing what "extreme examples" Mistral eliminated, we cannot calculate change. However, taking $1,000 per capita GNP as the low end (thus eliminating Sub-Saharan Africa and South Asia), and Sweden and France at the high end (ranking 10th and 11th) at slightly over $26,000 GNP per capita income one can readily see that the ratio is at least 1:26 using figures from the same source (World Bank 1998/99: 190-191). Both this ratio and undoubtedly that of Mistral concern countries in the more 'developed' part of the periphery, many with industrialization.

The claim is made that Fordism even if it is in crisis, still dominates. This means a close link between the valorization of capital invested in the production of commodities and the realization of profit through their sale. "The logic of the international diffusion of Fordism . . . presupposes the simultaneous expansion of productivity and real wages," that is, an increase in disposable income to purchase the increase in commodities. The Fordism of the center provided increased purchasing power through higher wages to workers resulting in mass consumption. In the Third World this condition tends to be met by increased income in the middle class "provided that class is sufficiently large" (Lipietz 1987:102). Foreign direct investment in industrial projects in the Third World today often seeks markets in those countries for the commodities produced there, perhaps in the process getting around import barriers and high import tariffs. That is, foreign direct investment may involve other considerations besides finding cheap labor to produce commodities for central markets.

Amounts of direct investment by MNCs is, however, less than the amounts of commercial borrowing by the countries themselves. Peripheral Fordism began to expand in the 1960s through borrowing for capital investments from international banks. After the first oil shock in 1974 came an explosion of available liquid assets that banks were eager to lend and the amount borrowed rapidly increased (see Sampson 1981). There were also export credits to import capital goods. Amounts borrowed from banks rose from 10 to 145 billion between 1971 and 1980. In the same period borrowing against issues of debentures increased from 4 to 15 billion while export credits to import capital goods went from 25 to 110 billion. Direct investment abroad rose from 53 billion to 120 billion in this period. All this borrowing meant "a heavy debt servicing burden" as well as the repatriation of profits by the multinationals. Thus "in terms of transferring value from the periphery to the center, the new system is as efficient as the old" (Lipietz 1987:106-107). Nevertheless, this did mark the "end of classic dependency" (a phrase of Lipietz, p. 107) and a number of countries of the South did develop substantial industrial activities, albeit unevenly. They were often of the 'primitive Taylorist' variety. The four Tigers (Singapore, Hong Kong, Korea, and Taiwan) accounted for 60% of exports from the South (1980s figures) while if Brazil and India are added, this rises to 70% (p. 95).

A home market is obviously developing in some of these newly industrializing countries. There is also, says Lipietz, a 'common market' of middle class demand that is fueling trade between (some) countries of the periphery. While few countries have become export-based industrial powers, capital goods account for 41% of this 'common market' trade (for example, cheaper professional equipment and engineering products), as against 31% of the total export trade from NICs to the North. (p. 97). Third World industrialization is more widespread and occurred earlier than one might think. Singapore was a NIC already in the early 1960s (p. 95).

Regulation theory has identified three possible economic strategies for Third World states. The first is the traditional one of the exportation of primary products. Then there is that of import substitution industrialization, and lastly 'export substitution' which means substituting manufactured produced in place of primary products. Choices, it is emphasized, are largely political, "bound up with the internal class struggle" involving "classic ruling classes" and their struggles to maintain or regain control of the state. (p. 78).

We are reminded that "the economic constitution of nations is not geographic but historical" (Mistral 1986:176). Many third world countries find themselves in an impasse as regards industrialization that "depends more on internal forces than on pernicious international influences." Mistral recounts the experiences of Australia and Argentina. Both embarked on a process of rapid growth in mid 19th century, exporting the same range of agricultural food products, and with a revenue per capita at the beginning of the 20th century that was "the most elevated in the world." The principal external influence at that tune was British "at least as great in Australia as in Argentina." In Argentina, however, there was "an old class of powerful landed proprietors that Australia did not have." By contrast, political life in Australia "was sufficiently influenced by urban milieus to engender the development of industrial activities" (p. 178).

What then can be said of modes of regulation in the Third World? Presently, "the Third World looks like a constellation of special cases." There are "vague regularities" and "elements of a logic of accumulation" but the variation is much more compelling. Korea exports one third of total output while Brazil exports relatively little (Lipietz 1987:98-99). Historically, the diffusion of the industrial revolution also occurred in an unequal maimer. Internal forces are referred to as an explanation for unequal development. Also, industry depended on agriculture and it was also affected by the concentration of power in a landed aristocracy.

Lipietz calls for concrete analysis, "the study of the economic and social history of each specific country, for the study of the modes of regulation, their forms of class alliance and their successive hegemonic systems" (p. 99). This has been done now for several countries. Latin America figures prominently. The Middle East is notably absent.

THE MIDDLE EAST

Prior to the massive influx into Middle Eastern markets of European machine made goods during the 19th century, the Ottoman Empire not only produced cotton and silk textiles and yam to meet domestic needs but also exported considerable amounts to France. By 1825 Ottoman industry began to be "exposed to the crushing competition of the Manchester factories" (Issawi 1966:48) from which it was not to recover for a century.

Egypt had an early period of industrialization with Muhammad Ali's military factories established to serve his construction of a modern army as well as those serving the domestic market. He established cotton spinning and weaving mills, factories for cloth production, woolen and linen factories, refineries for sugar. He had establishments that manufactured glass, paper, tanneries, sulfuric acid and other chemicals, a foundry that produced 1,000 tons per annum and an arsenal in Alexandria that "launched seventeen warships and five steam vessels" in the 1830s (Issawi 1966:389). Following the defeat of his army and the Treaty of London in 1840 he was obliged to close the military factories and to open Egypt to foreign commerce. Muhammad Ali also began the production of long staple cotton. During the American Civil War in the 1860s the world market demand for cotton rose sharply and Egypt became a vast cotton plantation serving the mills of Lancashire. Cotton exports continued to rise until by the turn of the century when cotton and cottonseed then became 90 percent of Egypt's exports (pp. 416-417). Egypt's next phase of industrialization began following the first World War, the results of which became nationalized between 1956 and 1961 into a public sector.

Middle East/North African countries (MENA) have very disparate economic characteristics. "Only Turkey is clearly a full-fledged NIC," say Richards and Waterbury (1990:78). This assertion is curious given current figures and definition of the NIC (see below). Egypt is clearly moving ahead with industrial development, as will be outlined below. Morocco also was exporting industrial products at a creditable percentage of its exports in 1985 (40%) with industry producing 17% of GDP, and employing 25% of its work force. In addition to these actual and proto NICs are the "oil industrializers" ([ran, Iraq, Algeria, and Saudi Arabia). They have used their large revenues from oil exports to develop industry. A group of smaller countries with limited natural resources (Israel, Jordan, Tunisia, and Syria) have concentrated on "exporting skill-intensive manufactures" and have "made major efforts to educate their people" (p. 78).

In recent years Turkey has moved ahead with industrialization in the region. In 1985 she had a manufacturing share of GDP of 25%, the highest in the MENA, a percentage equal to France and above average for OECD countries and the United States (Richards and Waterbury 1990:69). This percentage went down to 18% around 1987 (World Bank 1998/99: 213) (further discussion below). In terms of growth of GDP (1980-85) Egypt is highest with 5.2 percent. From 19701980 it was 7.4 percent, explainable as the great boom of economic activity that followed the economic opening (infitah) of 1974. Algeria had a rate of growth of 7.0 for 1970-80 but it dropped to 4.9 in 1980-85 (and has dropped further since). Rates of growth for Turkey were 5.9 percent for 1970-80 and 4.5 percent in 198085 (p. 70, using figures from the World Bank, World Development Report).

A better picture of "sustainable structural change" is to be had from manufacturing and manufacturing value added (MVA) than using the industrialization category, as the latter includes the petroleum sector. Comparative figures for this category show clearly how the region is lagging behind other industrializing parts of the Third World: The total MVA in the region is approximately that of Brazil. Turkey and Iran have the same number of people as Italy, but Italy's MVA is five times that of Turkey and ten times that of Iran. Turkey and Iran account for 48% of all manufacturing in the region. Saudi Arabia and Algeria account for another one-fifth. Adding Egypt "brings the total share of manufacturing for the five countries with the largest manufacturing sectors to over two-thirds of the total" ((Richards and Waterbury 1990:73). This concentration of manufacturing in five countries in terms of MVA is a graphic indicator of the condition of the rest of the countries in the area. The labor force also shows the nature of economies. From one-quarter to one-third of the labor force is employed in industry in MENA "well over one-half of these workers are in small establishments with fewer than twenty people". The informal sectors of many of these countries are extensive. This figure also shows that industrial growth has been insufficient "to provide enough decent jobs for the rapidly growing labor force" perhaps the region's most pressing issue (p. 73).

Whereas Egypt has yet to create the conditions for industrial employment to deal with its sizeable number of unemployed, an acceleration of investment in modern private sector industry has clearly taken place in recent years.

EGYPT

Since 1981 there has been a policy in Egypt to promote productive enterprise. That was the year also when the new Company Law was issued, greatly facilitating the establishment of companies of all kinds. In 1989 a new 'consolidated' investment law was passed which increased tax holidays and other incentives for projects in specified fields that were high priority for development, and located in an industrial zone of one of the 'new communities' established in the desert. In 1991 came the Public Business Sector Law that would be the vehicle by means of which public sector companies were prepared for privatization. It has been written and said by many that Egypt's only hope for the future is to industrialize. Samir Amin wrote in the early 1960s: "The only solution possible, outside of massive emigration, is rapid industrialization in a few decades such that demographic growth . . . would not neutralize it" (Riad 1964:191). Whereas one cannot characterize the present as "rapid industrialization" there has been a remarkable increase in industrial establishments during the past two decades. Statistics of the Ministry of Planning and CAPMAS (quoted in Soliman 1998) show the following.

The share of industry (ex. petrol) in GDP increased from 13.5% (1980/81) to 18.1% (1996/97). The rate of growth of industry (ex petrol) was above that of the GDP in the 1980s and 1990s: 7.5% industry in contrast to 5.4% GDP (1982-95 average). The rate of value-added in the manufacturing sector rose from 26.6% in 1975 to 37.2% in 1990. The share of industry in private sector investments moved from 15.9% in 1981, to 34.7% in 1990, to 45.9% in1995. (In 1995 - as the major push to privatize was beginning - investment in industry in the public sector was 4%.). The share of industry in total private sector product was 9.1 in 1981 and 17.3 in 1995/96. The rate of growth of private industrial product was 10.3% in 1995/96.

Industry is the fastest job generator in the private sector. Its share in private employment in 1983was 7.3% and in 1992 was 11.8%. Increase in the share of intermediate and capital goods industries in 1980/81 was 9.6 and in 1994/95 increased to 11.8. There are (at last count) 13 foreign vehicle companies in Egypt with 15 plants capitalized at 6.1 (perhaps more since the latter figure relates to a previous count of 9 car manufacturing companies). Similarly potentially underestimated the figure of 133 factories of feeder industries was given in the local press. The new vehicle manufacturing sector is reported to have created 100,000 new jobs and growing. And the number of larger enterprises (100 + workers) has steadily risen (Figure 1):

Figure 1

No. of                            1976           1986           1996
enterprises

1000+                                2              8             30
500-999                              9             25             69
100-499                            161            237            621

Source: Soliman (1998)

LOCATING THE MIDDLE EAST IN THE GLOBALIZING WORLD

By examining states of the region as regards key factors of importance to capitalist economies, compared among states of the region and with selected states in the 'First' and Third worlds can give an overall view of the relationship of the Middle East within the globalizing world. For this we use the World Bank statistics as supplied each year in their World Development Report. One caution: There may be things wrong with the WB figures as they are only as accurate as those reporting give accurate figures, but they give some idea in broad outline.

Relationship #1. Size of Economies and Per Capital Incomes.

The six largest economies today in order of magnitude of GNP are the United States, Japan, Germany, France, United Kingdom, and Italy, and then the developing countries. China ranks seventh, Brazil eighth, Korea eleventh, India fifteenth, Mexico sixteenth, and Indonesia is 22nd. As regards the Middle East:

Figure 2

The Nine Largest MENA Economies (in order of size of GNP)

Ranking by GNP per capita                              $ billion GNP

1. Turkey ranked 23rd                                      199.5
2. Saudi Arabia ranked 30th                                129.9
3. Iran (not ranked)                                       113.5
4. Israel ranked 37th                                       87.6
5. Egypt ranked 41 st                                       71.2
6. Algeria ranked 49th                                      43.8
7. U.A.E. ranked 50th                                       42.7
8. Kuwait (not ranked)                                      35.0
9. Morocco ranked 51st                                      34.4

Source: World Bank (1998/99: 190-191,232)

These figures indicate remarkable development in the erstwhile 'periphery,' namely capitalist growth, making theories about the center keeping the periphery in an underdeveloped condition questionable. It has not been only the 'miracle' economies of the little tigers of Asia that have been industrializing and whose economies have grown dramatically in recent years. The nine states of the Middle East above are presently in the upper one-third of the world economies' GNP. Among them are the region's most populous states (Turkey with 64 million, Iran with 60.9 million and Egypt with 60 million). The populations of Algeria and Morocco together amount to another 57 million.

Several states have had remarkable growth rates since 1970. Note the large increases from 1970 when the recession began in the industrial economies and their crisis in capital accumulation appeared (Figure 3).

Figure 3

Growth of MENA Economies 1960-1997

Rate of
Growth                      GDP in billions of $
(GNP)                              (rounded)
1996-97

                      1997      1991      1980      1970      1960

8.1%       Turkey    181.5      95.8      68.8      11.4       8.8
4.9%       Egypt      73.4      30.3      23.0       6.6       3.9
2.0%       Algeria    46.0      32.7      42.3       4.5       2.7
-2.7%      Morocco    33.3      27.7      18.8       4.0       2.0
11.5%      Tunisia    19.1      11.6       8.7       1.2       0.8

Source: World Bank (1998/99:190-191,212-213; 1995:242-243;
1982:114-115)

However, composite figures of 1997 (GNP) place the Middle East/North Africa region above only South Asia and Sub Saharan Africa. Regions above them are:

Latin America                                       $1,916.8 billion
East Asia                                           $1,707.3 billion
Eastern Europe/Central Asia                         $1,105.8 billion
Middle East/North Africa                            $  582.7 billion

(World Bank 1998/99:191)

Turkey's $199.5 billion GNP is not included in ME/NA as the World Bank classifies it with Europe. High levels of oil production in some countries give the region a special significance in the world economy. Because of oil the region has also produced some of the highest per capita incomes in the world, although not the highest. Kuwait is the top per capita income in the region at $22,110. Next is the UAE with $17,360. In contrast, the present world leader, Switzerland, is at $44,320, followed by Japan ($37,850), Norway ($36,090), Singapore ($32,940), Denmark ($32,500) and the USA ($28,740). Israel had a per capita income of $15,180. Lebanon was highest among the other states of the region with $3,350 in 1997. Turkey was next with $3,130. These are in contrast to some of the highest per capita PC incomes of the more rapidly developing states in Latin America and Asia (Figure 4).

Figure 4

Per Capital Income 1997

Selected States of Latin America and Asia

Korea                                                 $10,550
Argentina                                             $ 8,570
Chile                                                 $ 5,020
Brazil                                                $ 4,720
Malaysia                                              $ 4,680
Mexico                                                $ 3,680

World Bank (1998/99:190-191)

The oil economies are linked to the industrialized parts of the world with a special relationship. They supply the industrialized world not only with oil but also provide their f'mancial institutions with petrodollar deposits which exponentially increased after 1993, from which heavy borrowing by industrializing third world countries took advantage. At the same time Middle Eastern oil exporting states provided markets for the industrial goods, including capital goods, and services from the First World.

Relationship #2. Manufacturing and the Export of Manufactures.

To estimate something of the nature of the growth of these economies we can take a look at the percentage of value-added in industry and manufacturing to the GDP in the high growth countries. Manufacturing does not include petroleum but it comes within the industry category.

The value-added share of manufacturing in Turkey rose from 14% of GDP to 18% from 1980 to 1997. Industry rose 22% to 28% over that time. The industry category includes mining, manufacturing, construction, and electricity, gas and water. Not being an oil-producing economy Turkey does not have petroleum extracting as part of industry. Agriculture dropped in the same period from 26% to 17%. The share of manufactures in merchandize exports in 1997 was 74%.

Value added in Egypt's manufactures rose from 12% in 1980 to 25% in 1997. Industry (which in Egypt's case does include petroleum extraction)fell during the same period from 37% to 32%. Agriculture also fell from 18% to 16%. Egypt's share of manufactures in merchandise exports in 1997 was 32%.

Tunisia's share of value added in manufacturing grew from 12% to 18% and in industry declined from 31 to 28%. Agriculture was static at 14%. Share of manufactures in merchandise exports was 80%.

In Morocco manufacturing has been static over the period at 17% value added and industry was static at 31%. Contrary to the above states, agriculture in Morocco increased from 18% to 20%. Algeria also has been static in manufacturing which in any case is not large (9%) and industry fell from 54% to 51% while agriculture there also increased 10% to 12%.

The OECD defines NICs as countries where manufactured products represent 25% of GDP and at least 50% of exports. None of our industrializing states in the Middle East, including Turkey quite meet this criteria, (Figure 5), contrary to the assertion of Richards and Waterbury (1990) using earlier figures (see above).

Figure 5

Manufacturing 1997

                                  % in GDP              % in Exports

Turkey                               18%                      74%
Egypt                                25%                      32%
Tunisia                              18%                      80%
Morocco                              17%                      50%

Source: World Bank (1998/99:212-213)

Only Egypt shows the OECD requirement in percentage of manufactures in GDP (25%) having risen fi'om 12% in 1980 but does not have a developed export market to the size specified. Both Turkey and Tunisia have well over the 50% requirement for the percentage of manufactures in exports but both are under the 25% for percentage of manufactures in GDP. Morocco also has reached the magic number of 50% for share of manufactures in exports but is below the GDP percentage. Thus none of these are, according to OECD criteria, NICs.

Comparative figures are instructive (Figure 6).

Figure 6

Comparative Experiences Manufacturing 1997

                                Value added            % of
                                as % of GDP         Manufactures
                                                    in Exports

Israel                               -                  91%
Brazil                              23%                 54%
Mexico                              20%                 78%
Korea                               26%                 92%
Malaysia                            34%                 76%

Source: World Bank (1998/99:212-213)

All of these industrializing Third World states have well over the 50% to be a NIC in the percentage of manufactured goods in their exports but only Korea and Malaysia have more than 25% of valued added to GDP and thus are NICs! It would seem that this designation of 'NIC' given to the industrializing Asian economies heavily leans to include those with manufacturing largely for the world market. For a real world economy to develop, however, the purchasing power of the labor forces in these countries needs to increase. High percentages of manufactured goods as exports in developing countries almost certainly points to primitive Taylorism, especially when coupled with relatively low proportions of value added. By contrast, the low percentage of manufacturing in exports in Egypt combined with the relatively high percentage of manufacturing in GDP indicates a developing home market. Egypt may not have a developed capital goods sector but the expansion of the domestic market is a necessary condition of balanced (as opposed to peripheral) forms of capitalist growth.

Relationship #3. Labor Forces and Total Populations

Turkey has a large labor force in proportion to total population, as does also Tunisia. Thus it is no surprise that they have also among largest percentages of females in the work force. Morocco surprisingly also has a large percentage of women which may indicate a high rate of migration of males and/or points to world market manufacturing (Figure 7).

Figure 7

Labor Forces in Largest MENA Populations (In order of the size of
the workforce)

             Population      Labor          Av. Annual      of
             (millions)      force          growth rate     emales
                             (millions)     1990-97         in labor
                                                            force

Turkey           64              29             2.2            36
Egypt            60              22             2.8            29
Morocco          28              11             2.5            35
Algeria          29               9             4.1            26
Saudi            20               7             3.2            14
Yemen            16               5             4.9            28
Tunisia           9               4             3.0            31
Syria            15               4             3.3            26

Source: World Bank (1998/99:194-195)

Of the seven countries listed, minus Turkey, the labor force is only 32% of the population, which bears out what is known otherwise, that the populations of the region generally speaking are young, substantiated below (Figure 8). Adding Turkey it goes up to 40%. The work forces in other listed states (Jordan, Lebanon, UAE, and Oman) are stated as one million each but all figures are rounded.

Comparisons of the percentage of the population age who are between the ages of 15 to 64 by regions is instructive. In the Middle East/North Africa this part of the population is lower than Latin America and both are much lower than East Asia. The Middle East reports the least amount of women and children in its labor force. Both Latin America and East Asia report substantially more. Even given the admitted unreliability of labor force figures it would seem that a much smaller part of the total MENA population is economically active.

Figure 8

Labor Force Composition Compared by Region

         Pop. Aged      Labor      % of pop.    % women   % children
          15-64         Force      15-24 in     in labor   in labor
        (millions)   (millions)   labor force     force      force

MENA        162           92           57%         26%         5%

Latin       306          206           67%         34%         9%
Am.

East      1,155          979           85%         44%        10%
Asia

Relationship #4. Financial Flows and Exports

Turkey and Egypt both show increases in net private capital flows between 1980 and 1996. In Egypt they doubled and in Turkey increased three-fold. Of the next largest, Lebanon showed an increase fi'om a very low level but still obviously has not recovered from the war. Tunisia moved from a negative position to being the fourth largest

Turkey shows a small increase in foreign direct investment for the period while Egypt actually had a decrease. As indicated above, foreign capital was not the motor of Egypt's great spurt in industrialization in the last decade. While Lebanon shows a large jump in foreign direct investment in this period it is still low, substantially less than even Tunisia. Capital flows in Tunisia is the big surprise moving from a negative position to where Egypt was in 1980. (Figure 9).

Figure 9

(Millions of $)

               Net Private Capital Flows   Foreign Direct Investment

                   1980         1996           1980         1996

Turkey            1,782        5,635            684          722
Egypt               698        1,432            734          636
Lebanon              12          740              6           80
Tunisia            -122          697             76          320

Source: World Bank (1998/99:230-231)

However, financial flows within MENA, even including Turkey (and/or Israel), are dwarfed beside those in the major developers in Latin America and in East Asia (Figure 10b).

There is a problem with the figures supplied by the World Bank. My computations from figures for all the individual countries of MENA given in the World Bank tables are detailed in Figure 10a with totals shown beside those of the composite figures for MENA given by the World Bank in the same table.

In net capital private flows the MENA region were substantially less than South Asia in both 1980 and 1996 unless Turkey is included in which case they are roughly similar. In 1996 MENA without Turkey even lags behind Africa. Both Latin America and East Asia are huge in both net capital flows and foreign direct investment by comparison.

Figure 10a

Financial Flows (millions of $)

               Net Private Capital Flows   Foreign Direct Investment

                   1980         1996           1980         1996

Algeria            -442          -72            349            4
Egypt               698        1,434            734          636
Jordan              254         -119             38           16
Lebanon              12          740              6           80
Morocco             337          388            165          311
Oman               -259           69            141           67
Syria                18           77             71           89
Tunisia            -122          697             76          320
Yemen                30          100           -131          100

Total               526        3,314          1,449        1,623

+Israel               -            -            101        2,110

Total                 -            -          1,550        3,072

+ Turkey          1,782        5,635            684          722
(-Israel)

Total             2,308        8,949          2,133        2,345

Source: World Bank (1998/99:230-231)

As regards increases in net capital flows between 1980 and 1996, my figures show a six fold increase in MENA compared to five and a half increase in East Asia and over seven times in Latin America. South Asia shows only four fold increase but Africa, starting very low jumped 22 times in net capital flows.

The MENA increased very little in foreign direct investment. If Israel is included FDI doubles. That is by contrast with Latin America where FDI increased four and a half times and in East Asia it increased five times. Starting much lower FDI to South Asia increased seven and a half times and to Africa, four times, overall the picture given by such statistics shows the Middle East/North Africa as a region not keeping pace with net capital flows and foreign direct investment elsewhere.

Figure 10b

Financial Flows (Millions of $)

                        Net Private Capital         Foreign Direct
                                Flows                  Investment
                         1980         1996         1980         1996

MENA(*)                   526        3,314        1,449        1,623
+ Israel                    -            -        1,550        3,072
+ Turkey                2,308        8,949        2,234        3,794

MENA(**)                  646        1,979        2,757          614

Latin                  12,601       95,569        8,188        8,015
America

East Asia              18,443      101,272       10,347       58,681

South Asia              2,173        8,743          464        3,439

Sub-                      195        4,376          834        3,271
Saharan
Africa

* Totals computed in Figure 10a from countries for which figures are
given by World Bank, not including Turkey which is classified by WB
with Europe. Israel is classified as Middle East but no figures are
given for net private capital flows for 1980 and 1996.

** Composite figures for MENA given by the World Bank are
significantly different from any combinations including/excluding
Turkey and Israel, for which the variations are computed in Figure
10a. Figures which should be comparable are highlighted.

Source: World Bank (1998/99:230-231)

Relationship #5. "Export Substitution"

In Regulationist theory the term 'export substitution' is coined to indicate the shift away from the export of primary products to that of manufactured goods. Below is shown the amounts and percentage increases in five countries of the area where this phenomenon would seem to be developing (Figure 11).

Figure 11

Merchandise Exports

(In descending order of percentage of manufactures exported in 1996)

                         1980                        1996

                Millions        % of        Millions        % of
                  of $      manufactures      of $      manufactures

Tunisia          2,234          36%           5,517         80%
Turkey           2,910          27%          23,045         74%
Morocco          2,403          24%           4,742         50%
Jordan             402          34%           1,466         49%
Egypt            3,046          11%           3,534         32%

Source: World Bank (1998/99:228-229)

Turkey shows a phenomenal jump since 1980 in both value of merchandise exports (eight times) and percentage (more than two and a half times). Tunisia and Morocco both doubled the value of merchandise exports. Tunisia has a very high percentage of manufactured goods in exports, a suspicious indication of the phenomenon of world market factories. Turkey also has almost as high a percentage of manufactures in total exports. As shown above, Egyptian manufacturing has grown greatly in the past ten years but manufactures still are barely one third of exports.

Egyptian manufactured commodities are obviously absorbed to a large degree by the home market. The relatively small change in the total value of manufactures exported read against what we know of the increase in domestic manufactures bears out the contention that Egypt's increased production is largely absorbed by the home market. The three-fold increase in value of imports between 1980 and 1996 (from mn$4,860 to mn$13,020) read against the GNP growth rate (1996-97) of 4.9% and the growth rate for GNP per capita of 3% suggests a further increase in domestic consumption. Such aggregate figures of course do not indicate where in the social/class structure these increases are occurring.

Comparisons with countries that export substantial amounts of manufactured goods that also are at above 50% of exports (Figure 12) shows Malaysia, Mexico and South Korea which have higher percentages of manufactures in exports than Turkey. Thailand has just about the same, 73% as opposed to 74% for Turkey. The increases of all these countries since 1980 (except South Korea) is phenomenal. All would seem to be embarked on 'export substitution'. South Korea of course was not a primary exporter previously, was at 90% of exports being manufactures in 1980, but even rising to 92%. In 1996 Argentina with 30% of exports in manufactures is similar to Egypt's 32%. However the value of Argentina's manufactured exports is nearly seven times that of Egypt.

Figure 12

Merchandise Exports Comparisons

                          1980                       1996

                Millions        % of       Millions        % of
                  of $      manufacture      of $      manufactures
                                 s

Korea           14,467          90         124,404         92
Mexico          15,442          12          95,199         78
Malaysia        12,938          19          78,151         76
Thailand         6,369          25          55,789         73
Brazil          20,132          37          47,164         54
Indonesia       21,909           2          49,729         51
Argentina        8,019          23          23,810         30
Australia       21,279          22          53,252         30

Source: World Bank 1998/99:228-229

Because we referred to a comparison above between the situation of Argentina and Australia in the 19th century, it is interesting to make a comparison with 1996 figures in this context. Also, Australia with 30% of its exports as manufactures in 1996 is slightly less than that of Egypt with 32%. The total value of manufacturing exports is more than double for Australia over Argentina (with Egypt's value of exports more than six times less than Argentina). Such comparisons indicate 'peripheral capitalism' if not also peripheral Fordism.

CONCLUSION

When applied to countries of the Third World, regulation theory points to the phenomenon of industrialization that has occurred now in a number of parts of the so-called periphery, and identifies characteristics of economic development that accompany it. Although the MENA region is noticeably absent in regulation studies, the concepts are clearly applicable.

Turkey (if we still accept it as being Middle Eastern after being classified as European by the World Bank) is the most advanced state of the MENA region industrially. It has the largest population and is now in a league with other industrializing economies of the periphery, although by some criteria it does not quite qualify as a NIC. (The OECD definition of a NIC is that manufactures are 25% of GDP and at least 50% of exports.)

Egypt has made a substantial jump in the last few years but is still dragged down by its large, underemployed, impoverished urban and rural masses, and has not become an urbanized industrialized population. Although the Egyptian Central Agency for Public Mobilization and Statistics (CAPMAS)joyfully announced in 1976 that for the first time the decenniel census showed the urban population of Egypt to have reached 50%. The World Bank, however, puts Egypt's urban population at 45% in 1997, up 1% from 1980. High illiteracy (36% males, 61% females as of 1995) (World Bank1998/99:192) further mitigates against the creation of a skilled labor force. (The contrasting figures for Turkey are 8% and 29%.) Other states show interesting developments, for example Tunisia, with its quite extraordinary statistical indications of recent economic growth. Israel figures prominently with a sizable per capita income ($15,810), second only to the UAE in the region, above both Spain and Greece and ranking 22nd in the world. In World Bank statistics its population is listed as 6 million with a GNP of $87.6 billion (p. 190). The OPEC oil exporters are also in a category to themselves. They produce proportionally large per capita incomes - although not the highest globally. The largest have significant GNPs, but again are dwarfed by the developed industrial countries. Nor are they the highest GNPs in the region. That position belongs to Turkey with $199.5 billion.

Such examples underscore the great differences in economic base and development of states that are geographically located in the MENA. At the same time political situations vitiate the contributions to economic development and integration of substantial populations of the region into the globalizing economy. The erratic shifts in the financial flows shown in Figure 10a are testimony to real and imagined political disturbances periodically in the region.

Nevertheless, what we are seeing in the Middle East in the era of 'globalization' is the advancement of industrialization in Turkey and Egypt in ways that seem to be surmounting the 'dependency' syndrome. Their home markets have obviously expanded.

The economies of the developed capitalist countries exert strong influences - that is undeniable - but at the same time the developed capitalist economies were forced to change. Two things happened historically. One was the crisis of central capitalism, beginning in the late 60s, fully recognizable in the 1970s. The second was change in the political economies of several states in diverse parts of the globe. For those who wish to see man as the maker of his own destiny such developments are vindication. Indeed, human agency did take advantage of propitious conditions for industrialization in the periphery, in a number of places in the MENA.

Regulationist theory captures some essential features of these changes. Viewing capitalist economies as 'regimes of accumulation', regulationists are interested in those states where the kind of accumulation that industrialization allows takes place. That this theory of capitalist development has interested itself in the industrializing states of the periphery is itself a demonstration of the significance of present industrial development in the Third World. The recently emerged 'regimes of accumulation' also are shown to have 'modes of regulation' that define the way accumulation takes place. Obviously unsolved however in many states is the incorporation of large sections of populations into the more productive forms of activity.

This is a particularly acute problem in Egypt given its large population of rural, unskilled labor, without any near solution in evidence. It bears restating that the capital-labor relation is the most important of the several relations that 'modes of regulation' must accommodate in ways that do not hinder and preferably advance accumulation. In developing the home market, however, Egypt has certainly made a beginning in the development of a regime of mass consumption, necessary if heightened productivity and therefore increased earnings can occur.

At the same time evidence of the particular forms that capitalism on the periphery takes, as described by Ominami, Liepitz inter alia, are evident in the MENA region. A feature of 'peripheral Fordism" is the dependence on central capitalism for complex machinery. It is not the case in Egypt, however, that industrialization depends on design and production planning abroad. Only in very limited areas (notably the recent establishment of automobile factories) has Egypt hosted multinational enterprises where production is based on foreign conception and planning. In the industrial areas of the Gulf oil producing states this feature of peripheral Fordism is ubiquitous.

'Primitive Taylorism' of low paid assembly by low-skilled, low paid labor is not in evidence in the region. Tunisia is where the figures suggest it may be occurring. Poor working conditions and low salaries for manual labor are of historical origin long before the globalization of production took place. Most of this production does not enter the world market except as handicrafts for the tourist trade in Egypt and the smaller states of North Africa and Jordan.

With the great diversity of populations and production regimes in the Middle East 'globalization' is shown to have affected this region in widely divergent ways.

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Enid Hill is Professor and Chair of Political Science, the American University in Cairo.