Globalization: Its Lures and Discontents in the Muslim World

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S. M. Naseem[1]


(Muslims constitute approximately 20 percent of the global population, but the Islamic world’s share of global wealth is estimated at only 6 percent. The question that arises is whether globalization, in its multifaceted ways, can retrieve the Muslim world from the economically disadvantageous position its inhabitants find themselves in. Some Muslim countries have too much affluence but a majority are beset by poverty. If even 10 percent of the reported one trillion dollars worth of cumulative Arab wealth floating to find purposeful investment could be put into a trust fund, it would generate enough income to invest in a Marshall Plan for the economic development of the Islamic world. Editor).

I. Introduction

The sorrowful economic and political state of Muslims is apparent; the solution, however, is not.  Discourse on this predicament has considered globalization, by some, as the culprit, and, by others, as the solution to the present state of Muslims in general and Muslim countries, in particular.

Irrespective of ones point of view, few would want to be deprived of its benefits.  The debate, therefore, shifts from whether or not Muslims want to be involved in the globalization process to what sort of globalization is more suitable for long term Muslim interests and the sanctity of their identity.  The dilemma in this debate is that it is difficult to stratify globalization into separate, sterilized compartments to pick and choose from. Globalization implies global interdependence; living with others who may have different cultures, values and perspectives.

In the Muslim world, in particular, besides its economic failings, globalization has aroused unequivocal abhorrence to some of its aspects, especially those relating to its impact on culture and religious beliefs. On the other hand, there is acceptance of its other aspects, such as those relating to entertainment (pop music, video games, fast computers and fast foods). Benjamin Barber, one of the US’s leading intellectuals, has contrasted these two visions of globalization in his best-selling book, Jihad vs. McWorld, written well  before the 9/11 attacks[1]. According to him, “The two axial principles of our age – tribalism and globalism – clash at every point except one: they may both be threatening to democracy.” Barber uses jihad, which has assumed purely Islamic connotations since 9/11, as a generic term for all narrow “tribalist” movements which show “parochial, proselytizing, sectarian and ethnocentric, rather than universalizing” tendencies.

Although adherence to Islam is a significant component of personal and communal identity, many Muslims take Islamic teach­ings as one, not necessarily the only, prism through which they view the outside world and the globalization process. A family’s aspirations, the concern for the education and future of its children and, the urge to partake of the cultural hedonism of consumerism, also act as a powerful lure for globalization.[2]

The post 9/11 scenario has made the economic decline of the Muslim world a mainstream global concern.  Identifying, understanding and resolving issues of the Muslim world have become a global priority; as the consequences of ignoring these issues have become more apparent.  The perception about the non-assimilation and continued discontent of the Muslim world in the globalization process has also undergone serious re-examination since the 9/11 attacks. At the same time, globalization has run into serious difficulty as a result of the misconceived and mismanaged war on terror.

In common discourse, globalization is seen as a process where the ideas of western modernity, of economic development in a capitalist model and, of western cultural influence are brought to other parts of the world. This paper takes a more holistic, political and economic approach to globalization and the Muslim world. It considers the relationship as a two-way interactive process. While globalization has made the world a “global village,” it has also made the widely dispersed followers of the religion, with its formative roots in the Middle East, much more inter-connected. The global Islamic village is, however, no less fragmented than the world as a whole: along racial, regional, ethnic, class and intra-religious divides. The globalization that the world is experiencing today is not a singular but a multiple process, and it has cohesive as well as fissiparous tendencies.

In this essay an attempt will be made to explore the extent to which globalization, in the multifaceted ways it manifests itself, is capable of retrieving the Muslim world from the economically disadvantageous position its inhabitants find themselves in. In order to do this,  the paper will briefly outline the nature of the economic and social problems being faced by the Muslim world and, will attempt to identify some of the major ingredients of its current economic predicament, as well as the reasons for  its inability to play an active role in the world economy. It will then juxtapose this with the major facets of the present phase of globalization and, identify the inadequacies in the present global economic system which prevents the current phase of globalization from transcending into a virtuous cycle of growth for developing countries in general and the Muslim world in particular.   In conclusion, it will suggest some strategies both for the Muslim world and the world community to make it possible for the former to participate in the globalization process in the larger interest of peace, prosperity and justice in the world.

II. The Current Economic Profile of the Muslim World

A. The Diversity of Economic Conditions in the Muslim World

  1. General

Islam was founded fourteen centuries ago in the Middle East.  The Quran was revealed in Arabic, the language of the region. Three of the most prominent Islamic shrines are located in this region; namely, the Kaaba, the Al Aqsa mosque in Jerusalem and Karbala.  It is also the locus of Islamic history and remains, to date, the region where conflicts between Muslims, Jews and Christians are prevalent. The Muslim world is, therefore, primarily associated with the Middle East[3].

As a result of vast expansion and migration, however, the Middle East (excluding North Africa) now comprises only 18 percent of the Muslim population, while an additional 4 percent live in the contiguous region of central Asia. The rest are scattered globally but with two main concentrations, viz., South Asia and Middle East (including North Africa) where about 34 percent and 26 percent, respectively, of the world’s Muslims are located. Another 17 percent live in East Asia, where the largest concentration is in Indonesia and Malaysia.  Thus the demographic profile of the Muslim world has greatly changed during the last 1400 years, testifying to the strong link between globalization and Islam that has existed over centuries.

The 1.3 billion-plus Muslims worldwide, roughly equivalent to the population of China, constitute approximately 20 percent of the global population. Despite this, the Islamic world’s share of global income is estimated at only 6 percent.[4]The following brief survey brings out the major features of the Muslim population.

The economic and social conditions of Muslim countries, except for a few, are generally dismal. Although a small number e.g., U.A.E., Kuwait, Saudi Arabia and Oman, have high per capita incomes, none is included in the category of developed countries. The average per capita Gross National Income in current US dollars for Muslim countries is a fifth of the world average, and only 4 percent compared to average per capita income of High Income Countries. The average per capita income of Muslim countries is, in fact, lower than the average for developing countries. Of the 25 poorest nations in 2002, by Gross National Income Purchasing Power Parity adjusted, 11 are Muslim countries. The rank of 9 Muslim-majority countries in the Human Poverty Index in 2002 was 80 and below. The Human Development Index (HDI), for that year, has ranked as many as 33 Muslim-majority countries 100 and below[5].

Table 1: Main characteristics of Muslims in major regions of the world

Region Muslim GDP US$ (million) Percentage

GDP share

Muslim Population Distribution of Muslim Population Per capita income


Relative per capita


Balkans 21689.31 0.67% 8,060,000 0.57% 2,682.6 1.17
Central Asia 60023.06 1.86% 52,822,600 3.75% 1,123.5 0.49
East Asia 399110.85 12.35% 248,573,000 17.64% 1,605.0 0.70
Europe 396858.7944 12.28% 38,340,000 2.72% 10,340.5 4.51
Latin America 16780.79 0.52% 1,701,000 0.12% 10,019.50 4.37
MENA 1603783.54 49.63% 372,920,000 26.46% 4,310.4 1.88
North America 271405.2 8.40% 6,620,000 0.47% 40,972.3 17.87
South Asia 343277.82 10.62% 474,911,959 33.69% 710.8 0.31
SSA 118771.74 3.68% 205,495,000 14.58% 573.2 0.25
TOTAL 32,317,011.04 1,409,443,559 2,292.8 1.00

Source: World Development Report and author’s calculations

b. Demographic Dispersion

Table 1 shows the diversity of the Muslim world in terms of population. The largest share is that of South Asia which accounts for more than a third – almost evenly divided between   India, Pakistan and Bangladesh.  The next is the Middle East and North Africa with a little more than a quarter. East Asia, which includes two major Muslim majority countries, Indonesia and Malaysia, as well as China and Thailand has a share of approximately 18 percent. sub-   Saharan Africa accounts for about 15 percent – this region includes Nigeria, Niger, Guinea, Sudan and Senegal where Muslims are in majority – along with significant Muslim populations in smaller countries such as Benin, Uganda, Kenya and South Africa. The Muslim population of central Asia is about 4 percent of the total. Besides these main regions, there are pockets of Muslims in the Balkan states such as Albania, Bosnia-Herzegovina, Bulgaria and Macedonia.  Muslims in Europe and North America constitute about 2.72 percent and 0.4 percent respectively of the total world Muslim population.

  1. Income Disparities

In contrast, the share of Muslim GDP in a country (calculated as the product of the per capita income of the country and the number of Muslims living in a country) as a percentage of the total Muslim GDP, is quite different.  Thus Muslim GDP in North America constitutes approximately 8.4 percent of total Muslim GDP, whereas, its share in total population is 0.47 percent Sub-Saharan Africa constitutes only 3.68 percent of total Muslim GDP and its share in total population is 14.58 percent. The contrast between distribution of income and the distribution of population is vividly seen in the accompanying “pie” charts. The relative per capita income in terms of the average income of Muslim population is shown in the last column of table 1.[6] The relative inequality measure in the last column of table 1 shows that Muslims in the sub-Saharan African region have the lowest per capita; just one-fourth of the average world Muslim per capita income (MPCI). The next poorest Muslims are in South Asia with a per capita income less than a third of the world MPCI.  The East Asian average MPCI is about 70 percent of the world MPCI, while central Asian Muslims are about half as well off as an average Muslim in the world. Thus nearly 70 per cent of the world Muslim population has a per capita income well below the world MPCI.

Not surprisingly, among the most prosperous Muslims in the world are those living in North America. They earn 17.8 times the world MPCI, followed by those living in Europe and Latin America, whose per capita incomes are over four times the world MPCI[7]. The per capita income of Muslims in Middle East and North Africa is about twice as high as the world MPCI, while those living in the Balkans are only 20 percent better off than an average Muslim. These relative figures do not fully reflect the problem of income distribution in countries where Muslims are in a majority. However, they do provide a good indication of the incentives of globalization in terms of migration to more prosperous countries. As we shall see, a major effect of globalization has been through international migration, not only to the Middle East and the Gulf region, but also to the prosperous western countries.

c. The centre and the periphery

Although the problems of the Islamic world are much more serious outside the Middle East, the latter remains the centre of attention for both Muslims and the international community.[8] The importance of the Middle East has grown in recent years for two main reasons: the growing importance of oil from the second half of the last century and the creation of Israel in the midst of a predominantly Muslim and Arab population. These two developments in the Middle East have overshadowed the problems of the large majority of Muslims living elsewhere.  Indeed, their silent suffering,  especially, in  regions such as sub-Saharan Africa and South and Southeast  Asia, which remain ridden with poverty, disease, illiteracy, ethnic violence and social discrimination, deserve equal, if not greater, attention.  However, the process of globalization has affected both sets of Muslim communities, which can be differentiated as the centre and the periphery of the Islamic world.

Islam reached the pinnacle of its geographical expansion and cultural achievements during the early Abbasid period (750-1258); extending from Spain across three continents to East Asia. Unparalleled prosperity evolved from a combination of successful trade, industry, and agriculture. Muslims, however, were not able to maintain an integrated empire; politically the empire fragmented into smaller states and the relationship with the idle eastern centre gradually weakened.  Muslims also settled in non-Muslim countries as traders, travellers and soldiers. The development of the Muslim periphery, from its heartland in the Middle East and North Africa, to India and Southeast Asia and other parts of the world, was based on the spiritual power, as well as commercial and sometimes military influence of Islam. However, Islam provided new influences and contacts, without amalgamating local culture as a whole to the Middle Eastern core.  During the ascendancy of Rome, sub-Saharan Africa, like northern Europe, was on the periphery of the major centres of civilization. After the fall of Rome, the civilizations of Byzantium and the Islamic world provided a link between the civilizations of the Middle East and the Mediterranean as well as areas, such as northern Europe and Africa, on their frontiers. In Africa, between roughly A.D. 800 and 1500, the frequency and intensity of contact with the outside world increased as part of the growing international network. Until about 1450, however, Islam provided the major external contact between sub-Saharan Africa and the world.

d, Middle East’s Growing Importance

The attention lavished on the Muslims in the Middle East also stems from the US post 9/11 concerns. It has belatedly started focusing on the worsening economic conditions and political isolation which have made the region a breeding ground for Islamic fundamentalism and terrorism. This has culminated in a new Congressional initiative of Greater Middle East to include the five Central Asian Republics. The new initiative, which  was introduced in the United States Congress as “Greater Middle East and Central Asia Development Act of 2004” provides for US $5 billion over five years for economic and political development of these 33 countries through a GME&CA (i) Development Bank (ii) Foundation and (iii) Trust for Democracy.  In its findings, the Act states, “The war on terrorism requires that the United States consider the Greater Middle East and Central Asia as a strategic region with its own political, economic, and security dynamics”.

The earlier Greater Middle East proposal defined the target area as “the Arab world, plus Pakistan, Afghanistan, Iran, Turkey, and Israel.” It took, as its point of reference, the UNDP’s Arab Human Development Reports (AHDRs) for 2002 and 2003 and their identification of three deficits that plague the region – freedom, knowledge and women’s empowerment[9]. The only comprehensible reason for merging the two, otherwise disparate, regions – the Middle East and Central Asia — for policy purposes, are the existence of large energy supplies and Muslim populations within their borders. The development problems of the two regions are analytically very different.  The whole exercise, therefore, is politically-motivated to transform these states into “moderate and modern” nations, which would hopefully reduce the threat of “Islamic fundamentalism.” It is unlikely to be of much help in improving the well-being of Muslims in poorer countries, who remain marginalized and disconnected with the globalization process. Even in the designated area a mere $5 billion spread over 5 years and 33 countries can hardly be expected to bring any significant social and economic change on the pattern of a Marshall Plan for the region.

The economic condition of the population in the Middle East is much better than those Muslims in other regions, with the exception East Asia, Europe and America.  The economic development of the Middle East during the last half century, largely as a result of  increased  oil revenues, has however indirectly benefited Muslims in other regions, especially South Asia, Africa as well as the non-oil producing countries of the Middle East, particularly Egypt and Yemen. The distinction between Muslims living in Middle Eastern and other high-income countries and those in less prosperous regions is to some extent contrived. There exists considerable inequality, not only between Muslim countries, but also within Islamic states.  Moreover, Muslim minorities in many countries usually stand at the lower end of income distribution.

At the start of the 1950s, the Middle Eastern per capita income growth or total factor productivity growth and the performance of the region’s economies was not markedly different from those of other developing countries – although it was better than sub-Saharan Africa (the other region most profoundly marked by weak states and arbitrary boundaries) and did not compare unfavourably to those of Latin America or South Asia. The rising demand for oil in the industrial world was paralleled by economic nationalism in the Middle East. This was demonstrated by Mossadegh’s abortive attempt to nationalize the Iranian oil industry in 1953 and the subsequent nationalization of the Suez Canal by Egypt’s Gamal Abdel Nasser. These developments paved the way for the establishment of OPEC and the emergence of the Middle-East as a major player in the world economy. The 1973 oil shock changed the fortunes of the major Middle-East oil producers led by Saudi Arabia though this varied considerably among the countries of the region and depended on the extent to which they relied on oil production.

The 1970s oil boom triggered a construction and financial boom in the Middle East and these had spill-over effects well beyond its borders. It provided employment to skilled and unskilled labour of many developing countries, not only from the neighbouring Arab states, such as Yemen, Egypt, Syria and Lebanon, but also from South Asian countries, such as India, Pakistan, Bangladesh and Sri Lanka, a majority of whom were Muslims. These large labour migrations became a useful source of remittance to the manpower-exporting countries and provided them a much needed balance of payments support as the volume of concessional aid was in decline and being replaced by commercial bank loans, which were both inaccessible and unaffordable for many developing countries.

The oil boom also provided lucrative construction and project management contracts to US, European and East Asian firms. Perhaps, the most significant impact was on the global financial system, which recycled the surplus revenues of the Middle Eastern oil producers, by extending loans to Latin American countries, who were keen to borrow large sums, often for unproductive purposes, at rather low (often negative) real interests in view of the high rates of inflation raging at that time. However, as a result of deteriorating fiscal and current account balances, most sovereign borrowers were forced to default or reschedule their debts thereby plunging the global financial system into a grave crisis.

The debt crisis of the 1980s resulted in a serious world economic recession, which did not spare the Middle East. During the 1980s, the region as a whole actually experienced negative growth in per capita income; though Egypt, Morocco, and Tunisia were notable exceptions. When per capita incomes were, once again, rising in the 1990s, they were at rates markedly lower than those experienced by Latin America and South Asia, not to mention East Asia.

Table 2 lists the countries of the Middle East, along with their populations, GDP and per capita GDP.  The region as a whole has a population of about 313 million, slightly larger than the population of the United States, but a GDP of only US $732 billion, which is about one-fourteenth that of the United States. Almost 90 percent of the Middle East’s population are concentrated in eight nations, namely: Algeria, Egypt, Iran, Iraq, Morocco, Saudi Arabia, Syria and Yemen. All countries of the region are classified as middle-income by the World Bank with the exception of the small oil-rich states of Kuwait, Qatar, the United Arab Emirates (high-income) and Yemen (low income).

Table 2 : Population, GDP and HDI index  for MENA, 2004

Country Name Population




GDP Per Capita


HDI Index

2004 (Rank)

Algeria 31 56 1,785 102
Bahrain 1 8 11,007 39
Djibouti 1 1 861 148
Egypt 66 90 1354 111
Iran 66 108 1652 96
Iraq 24 n.a. n.a. N.A.
Jordan 5 9 1799 86
Kuwait 2 35 15193 33
Lebanon 4 17 3894 78
Libya 5 19 3512 64
Morocco 30 36 1218 123
Oman 3 20 8002 56
Qatar 1 17 28634 46
Saudi Arabia 22 188 8612 76
Syria 17 21 1224 107
Tunisia 10 21 2149 87
UAE 4 71 18902 49
Occupied Palestine 3 3 1051 100
Yemen 19 10 537 160
Middle East and North Africa 313 732 2532
United States 288 10383 36006

Source Yousef, Tariq M. Development Growth and Policy Reform in the Middle East and North Africa since 1950, General of Economic Perspective Vol 18 No.3 Summer 2004

As is evident from the above Table, there are more differences than commonalities between the countries of the region although it is more homogeneous than the rest of the Muslim world.   In the UNDP Human Development Index, four Arab countries (Bahrain, Kuwait, Qatar and United Arab Emirates) are included in the lower half of the first rank, with their low ratings shown as inconsistent with their GDP per capita. Eleven countries from the region (Libya, Albania, Oman, Saudi Arabia, Lebanon, Turkey, Jordan, Tunisia, Syria, Algeria, Egypt, Morocco) are classed as Medium Human Development, with all but Albania and Syria displaying low levels of other indicators compared with GDP per capita. Finally, one country (Yemen) is classed as Low Human Development, with its GDP per capita a tiny fraction of its poorest Arab neighbours namely, Syria and Egypt.

III. Globalization’s Lures and Discontents

Globalization is a complex and often much misunderstood concept.   The perceptions about globalization are diverse and range between two extremes.  One such view is that it is a virtuous and integrative phenomenon which could harmonize the many differences existing among the peoples of the world.  It often presents a vision of seamless integration which would end the current disparities in economic development, discord on religious and ideological issues, and, lead to a greater understanding, if not homogeneity, of cultural and moral values.  The other extreme view is that globalization is at best a folly or at worst a malicious conspiracy to reverse the process of decolonization of the developing world.  A more balanced and mainstream view is that it is neither a particularly new phenomenon nor, in general, either a folly or disaster.  In its multifaceted form, globalization takes place through global movements of ideas, people, capital, goods and technology that different regions of the world have tended, by and large to benefit from, as a result of progress and development occurring in other regions.  In this context it is necessary to dispel the notion that the global movement of ideas and technology is unidirectional – from west to east or from north to south.  This can, however, be contradicted by the historical record of globalization during the past millennium[10].

In its modern re-incarnation, globalization has its roots in the second half of the eighteenth century. Economists[11] classify the period of 1870-2000 into three sub-periods: the first wave of globalization 1870-1913, the de-globalization period of 1913-1950, the golden age of 1950-1973, and the second wave of globalization from 1973 onwards. However, the current more intense phase of globalization can be traced back to the early 1990s when rapid developments in the fields of information technology and telecommunications coincided with the end of the Cold War and the proclamation of the Washington Consensus as the guiding principle of economic policy for all aspirants of integration into the global economy. During the Cold War, globalization was largely a political phenomenon with the two superpowers competing for political influence around the globe, but, with its end, globalization became predominantly an economic project seeking to integrate the global economy through the reduction of barriers and free movement of goods, capital and, to a more ambiguous extent, of labour[12].

While the virtues of globalization were being extolled by international financial institutions, its downsides were becoming increasingly obvious to both analysts and activists by the end of 1990s. One of its main failings is the unprecedented rise in income inequality both within and between nations.[13] Theoretically, economists have differed whether globalization will lead to convergence or divergence in per capita incomes, with the neoclassical theorists favouring the former outcome and the post-modern endogenous growth theorists and the neo-Marxian dependency theorists strongly favouring the divergence outcome[14]. Empirically, the divergence hypothesis seems to be winning the day, with income inequality between nations contributing far more to global income inequality than income inequalities within nations.[15]

Global economic interactions bring general benefits but they may also create problems for many vulnerable sections of the population whose predicament does not receive adequate attention in the present phase of globalization.  In the past, as well as to a large extent in the present, these inequities, both between and within nations, were often resolved through violence or the display of excessive power. In recent times there has been an upsurge of protests against globalization such as those in Seattle against WTO and similar outpourings of anger and dissent in other metropolises of the world hosting the meetings of the IMF, World Bank, WEF and other international organizations.

Although often these protests were ill-organized and poorly coordinated and some times even pointless, they did play an important role in drawing attention to the problem of inequality and injustice created by the unevenness of the globalization process.  Indeed the real debate on globalization is not so much about efficiency of markets or the importance of modern technologies but, quintessentially, it is about the asymmetry of power of which the world is now much less intolerant than during the days of Cold War.  They have given rise to what Amartya Sen calls “global doubts.[16]”  The resistance to global disparity calls for both global initiative, as well as national and local ones.  Unfortunately, the preoccupation with the global war on terrorism has crowded out the need for articulating the proper response to the inadequacies of globalization from the global agenda.

IV. The Importance of Globalization to the Muslim World

  1. A. Demographic Imperatives

The demography of the Middle East has created some of the most intense labour market pressures observed in the world: further undermining the sustainability of the old development model and the social contract underpinning it.[17] The Middle East region has been undergoing a demographic transition by moving from pre-industrial conditions of high birth and death rates to a post-industrial equilibrium of low birth and death rates (Lee, 2003).  Since the 1950s, the region experienced significant declines in infant mortality.  But in the demographic transition, fertility declines often lag behind mortality declines. In 1950, the Middle East had the highest fertility rate in the world at seven children per woman, a position it maintained through 1970.  As a result, the region’s population growth rates in the post-World War II period, averaging close to 3 percent per annum, exceeded all other regions in the world except sub-Saharan Africa.

According to Noland and Pack,[18] the Middle East is a demographic time bomb. As stated in   the United Nations De­velopment Program’s (UNDP)Arab Human Development Report  2002, the population of the Arab region is expected to increase by around 25 percent between 2000 and 2010 and by 50 to 60 percent by 2020—or by perhaps 150 million people, a fig­ure equivalent to more than two Egypts. Even under the UNDP’s more conserva­tive scenario, Bahrain, Kuwait, Qatar, and the United Arab Emirates will be the only Arab countries in 2020 with median ages above 30.[19]

These figures suggest that the region as a whole will experience labour force growth of more than 3 percent for the next 15 years or so. On current trends, according to an Arab League report, unemployment in the region could rise from 15 million to 50 mil­lion over this period. Under plausible as­sumptions about the rate of productivity growth and required investment levels, the economies of the region will have to main­tain investment rates on the order of 30 percent of GDP and income growth of 5 to 6 percent a year to absorb all this labour. This is a tall order for a region where the manufacturing sector is still in its infancy, for reasons to be elaborated later. It is almost impos­sible to imagine the sustained generation of employ­ment opportunities on the needed scale without a successful process of globalization and cross-border economic integration. Thus globalization and its intensification is an economic necessity for the region, if it is to avoid the vicious cycle of weak economic performance, pessimism and frustration among youth and rise of fundamentalist movements – an experience characteristically exemplified by Saudi Arabia and Egypt.

Over the next two decades, the Middle East and North African (MENA) countries’ labour force is expected to increase by some 80 percent in total, increasing from 11.6 million to 20.7 million for GCC countries, and going up from 92.8 million to 164.6 million for non-GCC member states. The countries with the biggest labour stocks are Egypt, Morocco and Saudi Arabia – the latter including non-nationals in the labour force. Thus, by 2020 the number of jobs required to absorb the new labour market entrants, and to deal with current unemployment levels averaging 15 percent is around 100 million. This is effectively a doubling of the current levels of employment (World Bank 2004a: 1), requiring massive labour market and economic reforms.

B. Main Sources of Globalization in the Muslim World

Economic globalization takes place through three principal means: trade in commodities, migration of labour and movement of capital. According to classical economic theory, an unfettered movement in these three spheres could lead to an equalization of prices of commodities as well as of wages and of returns on capital and would thus lead to the optimal allocation of resources and maximization of welfare, globally. Unfortunately, this theoretical construct has hardly ever held true in real life because of the existence of market imperfections, and many other rigidities in economic life, which violate the underlying assumptions of the theoretical model.

All three kinds of exchanges have taken place under varying degrees of restriction through history. For instance, the migration of labour, which was almost unfettered (except for the slave trade) a few centuries ago, is highly restricted now by most countries, especially for migrants from poorer countries. On the other hand, the movement of goods and capital has now become much smoother and speedier, both because of the decline in protectionist measures introduced to encourage the industrialization of developed countries and because of reduction in transport and transactions costs made possible by advances in technology. These asymmetries in the globalization process have generally affected the developing countries adversely and have added to the growing global inequality of incomes. The Muslim countries, most being developing countries, have, therefore, been negatively affected by these inequities.

1.The Role of Labour Migration

Migration has played an important role in the globalization process of the Muslim world. Following on the heels of post-war decolonization, the first two post-war decades saw considerable migration from the Middle East, Africa and South Asia to Europe, especially Britain and France, the main colonial powers. Among the Muslim countries which took early advantage of the emerging labour shortages in post-war Europe was Turkey, where emigration to Europe started as late as 1961: by 2001, there were some 3.6 million Turks abroad – mostly in the EU, and with 2 million in Germany alone. Turkish labour emigration has undergone three distinct phases since then.[20] After the first phase ended in1974 with the cessation of labour migration to Europe (although family reunification, asylum-seeking and illegal migration continued), and the re-emergence of labour migration, Turkish migration headed towards the Middle East and Australia. Since the 1980s it found a niche in mass temporary labour migration to GCC countries, partly displacing Arab and South Asian labour. Since the 1990s, after the dissolution of USSR and reduction in labour migration to GCC countries in the wake of the first Gulf war, Turkish labour found migration opportunities in the former Soviet Republics.

Among other significant Muslim labour exporters to Europe (mainly France) have been the North Africans, mainly Algeria, Morocco and Tunisia. One of the largest labour exporters in North Africa is Morocco.  It has had a long history of migration to Europe, both in pre- and post-French colonial periods. 2.5 million, nearly 10 percent of the current population, is estimated to be living abroad. The colonial era (1912 to 1956) marked the beginning of migration to France. An urgent lack of manpower in France led to the active recruitment of tens of thousands of Moroccan men for factories, mines, and the French army. During World War I, 40,000 and 126,000 during World War II were recruited for the French army.  Morocco, due to its proximity to Europe, has also become a major conduit of illegal migration from developing countries, especially from the African continent. Initially, the flow from sub-Saharan Africa seemed to be a reaction to political turmoil and civil war affecting countries like the Democratic Republic of Congo, the Republic of the Congo, Sierra Leone, Liberia, and Côte d’Ivoire. Since 2000, however, migrants tend to come from an increasingly diverse array of countries, including Nigeria, Senegal, the Gambia, Liberia, Mali, Ghana, Burkina Faso, Niger, Sudan, the Central African Republic, and Cameroon, which have high proportions of Muslim population.

In South Asia, Pakistan, India (a significant number of whose population is Muslim) and Bangladesh are also major labour exporters, with a total emigrant stock of nearly 5 million and gross labour outflows of half a million per year. Indonesia is also a major labour exporter, although most of the emigration is destined for Malaysia, Brunei and other Southeast Asian countries.

Muslim countries, especially in the Middle East and Gulf region, are also among the largest importers of labour.  The world’s highest share of migrant population is to be found in the Middle East. Of the top ten countries recorded in the 2004 Human Development Report, five (UAE 68 percent, Kuwait 49 percent, Jordan 37 percent, Oman 26 percent, Saudi Arabia 24 percent) are Middle Eastern, and, the highest ratio of migrants to total population outside  the Middle East  region is in Singapore with 34 percent[21] (UNDP, 2004: 87).

The major influx of migrants to the Middle East occurred in the GCC countries (Bahrain, Kuwait, Oman, and Saudi Arabia), from 1970s to early 1980s, with each GCC country   competing to attract US, European, Arab and some Asian workers. The number of foreigners doubled from 1975-80, reaching 33 percent of total population.

Despite the existence of open unemployment of GCC nationals, the private sector is unwilling to hire nationals with their low skills and high wage expectations; the public sector is unable to afford to do so, and relies upon laying off foreign workers in order to employ nationals – many of whom are first-time job-seekers with no work experience. As a result many GCC countries have long-term plans for the reduction of their dependence on migrant labour. For instance, the 2003 mandate of the Saudi Manpower Council determined that foreign workers and their dependants should not exceed 20 percent of total population by 2013, which implies the removal of some three million immigrants by that date.

2.The Pivotal Role of Oil

As discussed above, notwithstanding its relatively small share in total population and area over which Muslims are spread, the Middle East is the primary source of economic power in the Muslim world. The fountainhead of this power is oil, which is also the main driving force of globalization, not only in the region, but well beyond its borders. The Middle Eastern countries account for about one fourth of the total world oil production, 80 percent of the world oil and gas reserves, but less than 10 percent of the world refinery capacity.

In recent years, oil has truly become the lubricant of the global economy, both literally and metaphorically. In periods of low oil prices, i.e., before 1970, it fuelled the high growth of the industrial world, especially Japan and the United States.[22] After the oil shocks in the 1970s, the global economy, as a whole, did not suffer as badly as was feared. This occurred largely as a result of a triangular pattern of trade financing among developed western countries, East Asia (initially Japan) and the Middle Eastern oil-producers. Thus, during the 1974-85 period, Japan posted an average annual trade deficit of US $17 billion with the oil-producing countries around the Persian Gulf, which was offset by an average trade surplus of US $16.6 billion with western countries.[23] Meanwhile, the trade deficit of the U.S. and European Community with Japan was financed by flows of oil surpluses from the Middle East into the West through sales of weapons or Middle Eastern investments in American and European securities. The following table shows the changes in imports of arms by the Middle Eastern countries and their sources over time:[24]

Table 5.3 Arms Exports to the Middle East

Period Total exports

(US$ million)

Supplier (Percentage of total)

USA      USSR/Russia         Others

1964-73 9,447 34.4 50.2 15.4
1974-78 29,000 47.6 25.9 26.6
1979-83 65,355 21.7 31.2 47.0
1984-88 89,065 18.3 29.9 51.8
1989-93 83,600 38.3 11.4 51.4
1994-97 67,300 47.1 3.9 49.0

Source: The Global Political Economy of Israel, p. 259

This “Oil Triangle” pattern of settlement between East Asia, the Middle East and the West has been reinforced by the expansion of the ranks of East Asian late industrializers, i.e., the joining of the East Asian tigers (South Korea, Taiwan, Hong Kong and Singapore) and cubs (Malaysia, Thailand, Indonesia and Viet Nam). This pattern of international division of labour consisted of the domination of global markets for weapons and financial services by the developed countries, while East Asian countries focused on production of civilian manufactured goods, both labour-and technology-intensive industries. Since the turn of the century, a new dimension to this triangle has been added by China’s emergence as a new, enormously influential player, creating tidal waves of cheap exports into the U.S. and the European Union, while importing a rapidly increasing amount of oil. This has further enlarged the Oil Triangle, as economic ties within East Asia have become closer. At the same time, the energy efficiency of the industries in East Asia, especially in Japan, has been improving steadily and helping in the reduction of its trade deficit with Middle-Eastern countries.

Japan’s post-war commitment to abstain from the development of defence industries has contributed to the maintenance of this arrangement by which Western military industries are free from competitive pressures from East Asia. In turn, Middle Eastern oil producers have used part of their oil revenue surpluses to buy weapons from the U.S. and Western Europe. This recycling of capital back into the West via arms exports to the Middle East has cemented Western dominance in world financial markets, which have benefited by borrowing funds cheaply from the Middle East and lending the same on high rates to non-oil producing developing countries, especially in Latin America, Africa and Southeast Asia, which, in turn, became burdened with heavy external debts in the 1980s and lost a whole decade of development.

Oil, however, is not simply a commercial commodity, but also a strategic asset in which the United States and other industrial powers have been deeply involved. Although the ostensible purposes of the two Gulf wars were to stop Iraqi aggression in Kuwait and to destroy Iraq’s capability for making weapons of mass destruction as well as its alleged involvement in global terrorism, there is little doubt that the main purpose of both wars was to ensure the continued and unhindered access to the region’s vast energy resources. Even before the end of the Cold War, the Carter Doctrine of 1978 had affirmed the United States’ willingness to protect the Gulf’s oil supply at all costs, including the possibility of going to war. The 1991 Gulf war was perhaps the first test and application of the Carter Doctrine of the post-Cold War era. The 2003 invasion of Iraq was an even more explicit reaffirmation of that doctrine.

3. Crossing the Rubicon

Saudi Arabia has played a pivotal role in ensuring that the western industrial nations have uninterrupted access to oil supplies from the Middle East at a reasonable price and that oil is not used as a political weapon, as it was in the 1973 oil boycott. It has used its enormous reserves and production capacity to play the role of a “swing producer” to dampen the effect of “irrational exuberance” on the part of its OPEC partners to cut oil supplies and boost oil prices. The Saudi kingdom has pursued the most conservative economic and social policies and has tried to shy away from globalization initiatives, especially FDI inflows, which other Middle Eastern countries were keen to accept. Its accession to the W.T.O. was achieved in late 2005 after a long delay. Its political alliance with the United States, in particular its close relationship with the Bush family, has not yielded the desired economic and political dividends. Its growth rate has been the slowest in the Middle East region and its external and domestic debt increased after the dramatic fall in oil prices in the mid-1980s.[25] Its debt burden increased after the first Gulf War when it had to pay enormous sums to the United States for sharing the costs of the war.[26]

Beginning in 1998 (after the collapse of oil prices due to the Asian Financial Crisis), the Saudi monarchy decided, for “strategic reasons,” to globalize its economy and society beginning with the oil sector. The oil industry had been nationalized since 1975 and foreign investors were allowed to participate only in “downstream” operations like refining. In 2001 the Saudi Government decided to open its doors to FDI and it was announced that US $500 billion of new investments would be deployed over the next decade to change the form of the national economy. US $100 billion of this investment was already promised by foreign oil companies. In May of 2001 the first concrete measure in this stepped-up globalization process was concluded when Exxon/Mobil and Royal Dutch/Shell Group led eight other foreign companies (including Conoco and Enron from the US) on a US $25 billion natural gas development project in Saudi Arabia.  The reason for the Saudis’ crossing the Rubicon of globalization was not so much because of external economic pressure, but because, faced with an intensifying opposition, the King and his circle realized that only with the full backing of the US and European Union could they hope to preserve their rule in the coming years.[27]

An important vehicle of globalization in the Muslim world is the movement of capital from the rich oil producing countries to other parts of the world. For many developing countries, this has occurred in the shape of remittances, official development assistance and, to a limited extent, through FDI flows.  The most important role played in the globalization process by the Muslim world, however, has been recycling of the large oil revenue surpluses which emerged in the 1970s and have resurfaced since 2001; although its beneficiaries have largely been countries in the developed world where these surpluses have been invested, usually in low interest-bearing instruments.

4. The Role of Remittances

Although globally, remittances are smaller than FDI inflows and larger than international capital market flows; for most of the developing non-oil producing countries, however, remittance receipts are the most important component of international capital inflows and in the past two decades have exceeded official development assistance (ODA). As a share of GDP and other key economic indicators, remittances are significantly higher in low-income countries than in other developing countries. In 2001, remittances to low-income countries were 1.9 percent of GDP and 6.2 percent of imports; in the upper-middle-income countries they were 0.8 percent of GDP and 2.7 percent of imports. As a share of GDP, remittances were larger in low-income countries. As a percentage of GDP, South Asia was the largest recipient of remittances; with remittances of nearly 2.5 percent of GDP in 2001. Remittance flows to sub-Saharan Africa were also significant.[28]

Workers’ remittances are more equitably shared among developing countries than world FDI flows and exports and, therefore, they provide a useful means of integration of poorer sections of the population in the Muslim world into the globalization process. In terms of the source of origin of remittances, two countries, the United States and Saudi Arabia provide more than half the total workers’ remittances to developing countries (until the mid-1990s the remittance flows out of Saudi Arabia exceeded those from the United States).

5. FDI Flows

FDI inflows have had a rather insignificant role in the past in most Muslim countries, but the situation has improved in recent years. The Middle East, which includes the Gulf Cooperation Countries (GCC), accounted for US $35 billion of total FDI inflows in 2006 or a little over 10 percent of the FDI flows of US $334 million to developing countries (and less than 4 percent in the global total of US $916 million), thereby showing a growth of 85 per cent over the previous year, according to the 2006 FDI Report released by UNCTAD. This is the best result achieved by any regional group, but is based on the rather low levels of FDI in the past.

The UAE was the top performer in GCC states in terms of FDI inflows in 2005, attracting a massive US $12 billion, showing growth of 43 percent. The UAE accounted for more than 34 percent of total FDI to Middle East countries. Saudi Arabia came second with FDI inflows of US $4.6 billion in 2005, up from US $1.9 billion in 2004, which was partly attributable to the reforms undertaken by the country before being admitted to the WTO in late 2005. Qatar with FDI inflow of nearly US $1.5 billion, ranked third, while Bahrain with more than US $1 billion, Oman with US $715 million and Kuwait with US $250 million of FDI flows performed less well. With the exception of the UAE, the FDI inflows in China and East Asia and lately even in India are much larger. Among other Muslim countries the main FDI destinations were Malaysia and Indonesia, which have been adversely affected by the 1997 East Asian currency crisis, as well as by the 9/11 and Bali terrorist attacks. Even so, FDI inflows to Indonesia surged by 177 percent to US $5.3 billion in 2005. A modest increase in FDI flows also occurred in Pakistan, largely through investments from UAE and other Gulf states in privatized industries and the real estate sector.

  1. Recycling of oil revenue surpluses

Of much larger significance to the process of globalization in the Muslim world than remittances and FDI inflows are the oil revenue surpluses of major oil producers.  These include, besides the Middle Eastern countries, Indonesia, Nigeria, Brunei and Malaysia. The International Monetary Fund estimates that oil exporters’ current-account surplus could reach US $400 billion, more than four times as much as in 2002. In real terms, this is almost double the dollar surpluses in 1974 and 1980, after the twin oil-price shocks of the 1970s—when Russia’s hard-currency exports were small.[29]

After reversing to negative in 1998, in the wake of a steep fall in oil prices triggered by the East Asian crisis, the oil revenue surpluses of OPEC member countries started to climb again at the turn of the century and peaked towards the end of 2006. They are expected to remain strong in the foreseeable future.  The IMF forecasts an average annual current-account surplus of US $470 billion over the next five years (assuming an average oil price of US $59 a barrel).  The Middle East oil exporters are expected to have an average surplus of 25 percent of GDP in 2006. In the past recycling episodes, Arab countries indulged in a spending spree on lavish construction projects that required imported equipment and skilled foreign workers. They did little to create local jobs or to diversify economies. They invested the rest of their savings in US Treasury securities which depreciated with the fall in the value of the dollar and yielded lower interest income as a result of falling interest rates. This time, however, oil exporters seem to be spending less, creating even larger external surpluses, repaying debts and building up assets.

In 1973-76, 60 percent of the increase in OPEC’s export revenues was spent on imports of goods and services. In 1978-81, the proportion rose to 75 percent. But the IMF estimates that only 40 percent of the windfall in the three years to 2005 will have been spent. In addition, the oil producing countries have been cautious in their fiscal spending as well. IMF officials estimate that the Middle East governments have, on average, spent only 30 percent of their extra oil revenue since 2002, compared with 75 percent in the 1970s and early 1980s, after previous steep climbs in the oil price. Their average budget surplus has increased from 2 percent of GDP in 2002 to nearly 15 percent this year.

The problem is how and where to invest these surplus funds. In some ways, as the Economist says, the Arab countries have learnt their lessons perhaps too well.[30] Although they have not put their money in commercial banks, they are trying to find profitable avenues to invest their funds both within their countries and outside. Although hard information on the magnitude and destination of these surpluses are not easy to obtain, unofficial estimates claim that the Middle East oil states hold a cumulative US $1 trillion in foreign assets – stocks, bonds, government debt, real estate, and other investments. In fact, the money is difficult to trace because unlike the oil boom of the 1970s, today’s petrodollars are not being placed in a few big American and European banks. Instead they are scattered around the world through an intricate network of private banks, funds, and offshore financial centres. The problem is that such large sums cannot be easily and safely invested without exposing them to large market risks. Much of the unused funds are finding their way into bond markets and hedge funds which are extremely volatile and subject to considerable risks. If the oil revenue surpluses continue to aggravate global imbalances, they will create pressures on these countries to increase imports (most likely of arms that they and the region do not need) and revalue their currencies. There are similar pressures on China, whose current account surpluses are smaller and whose economy is much more diversified.

There seem to be few options for deploying the large oil revenue surpluses of the Arab countries in a safe and profitable way. The first is to invest in the development of their own         economies, which we discuss in some detail below. The second is to invest abroad by acquiring profitable business ventures and investing in the equity markets. This option, which is being pursued by all surplus countries, has definite limits, especially in the United States, where Arab investments have aroused visceral reactions. According to Commerce Department Data, at the end of 2004, investors from Arab countries held just US $4 billion in direct investment in the United States. The cancellation of the Dubai ports contract in 2006 has soured the Arab’s taste for investments in the United States. The third option, which could immensely enhance the participation of Muslims in the globalization process, is to launch a Marshall Plan for the uplift of the Muslim masses in the poorer counties of the world, especially in sub-Saharan Africa and South Asia.

C. Difficulties of Domestic Development

The real bane of the major oil-exporting Arab economies is their high dependence on and, concomitant depletion of raw materials, chiefly oil, and reliance on external rents from rising oil prices. In such modes of production, economic returns do not usually accrue from hard work and high productivity, particularly in political systems that do not encourage people to be industrious, reinforcing the myth that Islam is inimical to growth. The enormous oil wealth keeps the exchange rates of Arab currencies too overvalued to let non-oil industries flourish – a phenomenon known in economics literature as the Dutch Disease, named after the effects of discovery of natural gas in the Netherlands in the 1960s, when that windfall bonanza drove up the exchange rate of its currency hurting manufacturing industries and agriculture.

As a result, it is more than likely that much of the Arab wealth will be frittered away in glitzy real estate and infrastructure investment projects, such as what is presently being undertaken in Dubai, Doha and other smaller Gulf states in the hope that they would recreate the role they have played in the past, albeit with a modern and technological visage.  Dubai, for instance, is fast becoming a hub for transporting goods, people and money across continents and regions. The enormous investments being made to expand the airline fleets in the region and the open skies followed by many of them are symptomatic of the envisioned goal. The Emirates airline of Dubai, for instance, has an astonishing US $37 billion worth of planes on order, including 45 of Airbus’ new A380 – the biggest order placed by any airline for the double-decker mega-plane. Along with the facilities for travellers, investors, bankers and other expatriates, other collateral investments are being made by multinational corporations such as Airbus, Boeing and General Electric.

One of the most aggressive efforts at globalization comes from the small Arab states in the Persian Gulf region, such as UAE, Qatar, Bahrain and Oman. The effort is spearheaded by Dubai, a gulf emirate with little oil but plenty of dare. The United Arab Emirates’ Crown Prince Sheik Mohammed bin Rashid al-Maktoum is Dubai’s leading protagonist of global integration and has helped launch a series of projects to raise Dubai’s profile. In 2005, the Dubai stock exchange opened its doors, with the oil money in the region fuelling the project. The fact that the emirate does not collect taxes or regulates companies as aggressively as some western exchanges do has also helped. As a result, major banks and investment houses are snapping up office space in Dubai’s new financial district. Since it opened in September 2004, the Dubai International Financial Centre (DIFC) has attracted high calibre firms from around the world. A world-class stock exchange, the Dubai International Financial Exchange (DIFX), opened in DIFC in September 2005. DIFC is a 110-acre free zone. It primarily serves the financial needs of the vast region between Western Europe and East Asia.

As a leading aspirant and protagonist of globalization in the Middle East, Dubai attracts thousands of immigrants from the Middle East, Asia, and Europe. About 80 percent of the emirate’s population is expatriate. Manual labour comes from as far away as Bangladesh, Sri Lanka, and the Palestinian territories. The massive building projects where they toil, such as the artificial islands built in the shape of a palm tree, cater to the wealthy pining for luxury and seclusion. Many celebrities, such as soccer star David Beckham and crooner Rod Stewart, have found it a convenient abode for rest and pleasure. The flow of people, money, and expertise is hastened by Dubai’s open-skies policy. Even though the government of Dubai owns Emirates Airline, it has welcomed carriers from dozens of other countries. Airline competition, it seems, is a small price to pay for making sure that all flight paths lead to Dubai.

The UAE, like other Gulf states, faces a serious problem of dependence on imported labour. The UAE has a native population, in all seven states combined, of just 300,000, and a so-called temporary immigrant population four times that much. 80 percent of the immigrants, mostly of Indian and Pakistani origin, are destined to leave some day, but most of the second and third generation immigrants have no roots back in the countries of their origin and are unlikely to get permanent citizenship in any of the Gulf states. This is a serious dilemma faced by the UAE, in common with other Gulf states. This has not only constrained its long-term development, but has also impeded the pace of the much-needed democratic reforms.

Another route being taken, in line with the recommendations of Arab Human Development Report  published in 2002 and 2003 respectively and prepared by independent teams of Arab scholars, called for building a ‘knowledge society’ in the Arab world. The economic development strategy in the UAE, particularly the Emirate of Dubai, has been to establish “themed” industrial clusters, with free-zone benefits, to attract a critical mass of related industries. Some, such as Dubai Biotechnology and Research Park, Dubai TechnoPark and Dubai Silicon Oasis, promote linkages with local academic institutions as well as incorporating university campuses within the free-zone, and offer services such as shared facilities and equipment, incubation centres and support with government relations. Similar efforts to be sucked into the globalization vortex are being made by, among others, Doha’s Education City, Muscat’s Knowledge Oasis.

The cluster-based development strategy of developing themed free zones and industrial clusters with the purpose of building critical mass in strategic industries, however, suffers from a fundamental weakness. Such a strategy requires a number of key elements as a prerequisite, such as a highly skilled workforce of engineers, technicians and scientists, and strong basic research infrastructure in universities, with R&D capability. These prerequisites can hardly be obtained in most of these countries. The inability to concurrently develop these areas along with the physical infrastructure leaves some doubt on the sustainability of these ventures, given the competitive global marketplace for skilled labour. This lack of human resource development is reflected in the table below showing selected knowledge economy indicators.

Table 3. Selected Knowledge Economy Indicators

Variable Bahrain Kuwait Oman Qatar Saudi Arabia UAE GCC Av Other MENA av
Public Exp. on


6.1 4.6 3.6 8.3 1.6 4.8 4.1
Total Exp on R&D (%GDP) 0.19
Researchers in R&D/mln 72.59 3.75 38.17 996.83
Scientific & Tech.

Articles/ mil

44.21 112.97 38.74 33.62 27.25 45.58 51.63 25.21
Patent Applics

(USPTO)/ mil

0.0 1.63 0.0 0.0 0.65 0.70 0.50 0.18


33.17 20.92 7.48 22.05 25.43 34.66 23.95 24.02
Computers /

1000 people

163 173 40 214 340 119 175 39
Internet Users

/ 10,000 pop

2,066 2,312 834 2,665 636 3,185 1,950 798

Source: World Bank

Despite all the efforts to diversify the economies of Saudi Arabia and the rest of the Gulf countries, they remain strongly linked to oil. Oil and gas production is more than 50 percent of GDP in Qatar and Kuwait and 42 percent in Saudi Arabia. There is also a concern about overheating the economy, with investors borrowing money to chase local stocks and consumer debt growing to worrying levels in some of the Gulf countries, along with fears of a “bubble burst” in the real estate and stock market haunting the investors.

V. Conclusion

The Muslim world in the 21st century is disparately divided in terms of the benefits received from the present phase of globalization, which is largely scripted by the developed western world in the pursuit of the advancement of their collective goals. While the larger Middle Eastern countries, with high proportion of Muslim population among them, have benefited the most due to the oil boom since the 1970s, the Muslim periphery, inhabiting the poorer regions of the world, such as sub-Saharan Africa and South Asia, have benefited the least because of their isolation, impoverishment and low levels of human resource development. This, in turn, makes for low entitlements in accessing the fruits of globalization.

In countries where Muslims live as significant religious minorities, they often face discrimination and marginalization, but they do not look up to the Middle Eastern centre for help in the resolution of their problems. Most Muslim minorities have learnt to live in plural societies, without giving up their religious and cultural identity. In some countries, Muslim minorities face unsubtle ways of discrimination and harassment. In Myanmar, for example, Muslims have not been allowed to build new mosques since 1962, and the existing ones are inaccessible for most of the day and are not shown on official maps. In India, where Muslims form 14 percent of the population and enjoy constitutional rights, they suffer from lack of opportunities in the economic and social fields. As the recent report of the Sachar Committee concluded, they suffer from numerous instances of exclusion and alienation in a number of areas. The share of Muslims in education, public employment and welfare programs is generally less than a third of their share in population. In many small towns, the per capita expenditure of Muslims was found to be less than for Dalits, for whom special affirmative action measures have been taken. Although globalization has to some extent ameliorated their conditions by providing overseas employment, especially in the Middle East, their salvation lies in forging political alliances with similarly deprived groups.

Ironically, the Muslims of the periphery are able to cope with the challenges of globalization better because of the contact they have with different religions as well as culturally rich and diverse environments. The Muslims of Southeast Asia in particular derive their ability to get on in the world from their flexibility, ongoing dialogues, reasonable compromises and competitive spirit. One of the reasons that Muslims in the larger Muslim majority countries, including Pakistan, are isolated from the rest of the world is because they are not compelled to adapt and compete in the same way.

The Muslim world seems to be divided between those with too much affluence and those with too much poverty. While the former is unable to find productive and socially useful ways of deploying their oil revenue surpluses, the latter is unable to find employment for their surplus labour, which not only needs complementary capital goods, but also large investments in human resource development to reduce poverty and unemployment. The solution seems to lie in what the United States did after the Second World War: jump-start its European periphery through the Marshall Plan.  The latter option has never been considered seriously, either by G-8 countries or the Arab and Islamic summits. Instead of indulging in the rhetoric of “enlightened moderation,” democratization and promotion of a “moderate Islam,” such a plan would help the marginalized Muslim world to enter the mainstream of the globalization process.

Even if 10 percent of the reported one trillion dollars worth of cumulative Arab wealth floating to find a purposeful investment avenue could be put into a trust fund for this purpose, it could generate enough income to invest in such a “Marshall Plan.” The enormous change in economic fortunes which the Arab countries are now experiencing provides, once again, an excellent opportunity to the Muslim world to redeem itself from the depths of social and economic degradation. Such an opportunity was largely missed in the episodes of the oil bonanza and petrodollar recycling that occurred in the 1970s. The rich Arab elites need to learn from Bill Gates and Warren Buffet and devote a large part of their wealth for philanthropic purposes to regenerate the Muslim periphery, as part of a concerted effort to develop the South.

[1] The author is an economic analyst who has worked as an academic and as a UN expert.

[1] Barber, Benjamin R., Jihad vs MxWorld, Times Books, New York, 1995.

[2] The real issue about consumerism is not consumption itself but its patterns and effects. Inequalities in consumption are stark. Globally, the 20% of the world’s people in the highest-income countries account for 86% of total private consumption expenditures — the poorest 20% a minuscule 1.3%. More specifically, the richest fifth: consume 45% of all meat and fish, the poorest fifth 5%;consume 58% of total energy, the poorest fifth less than 4%; Have 74% of all telephone lines, the poorest fifth 1.5%; Consume 84% of all paper, the poorest fifth 1.1%; Own 87% of the world’s vehicle fleet, the poorest fifth less than 1%.(Based on UNDP HDR 1998, but the percentages have hardly changed since, even though the membership of different groups may have changed).

[3] In much of  this paper, reference to the Middle East corresponds to the operational definition of the Middle East and North Africa region used by the World  Bank, which includes most members of the Arab League and Iran.

[4] See Kuran, Timur, Islam & Mammon, The Economic Predicament of Islamism, Princeton University Press, 2004, p. 124. While Kuran focuses on Islam and its system of beliefs pertaining to the economy, this paper is more concerned with the condition of the peoples whose identity as followers of Islam has achieved salience in the context of the war on terror launched after 9/11. The purpose of the paper is to show the diversity of Muslim peoples and the reasons for their inability to effectively participate in the current phase of globalization. While their religion, Islam, is often considered as the main marker of their identity, both by them and the “others” they face, their functioning as individuals and societies is also affected by other facets of their identity than merely their religion.

[5] Data based on  Statistical Monograph No. 25, Key Socio-Economic Statistics on IDB Member

Countries, Islamic Development Bank, 2005 and World Development Indicators, 2004, The World Bank

[6] .  These calculations are subject to many caveats.  First of all the estimates of population of Muslims are not reliable in many countries where the census of population does not ask questions about a person’s religion.  Secondly, in countries where Muslims are subject to discrimination or mistreatment they may prefer to hide their religious identity,  while in other countries they may exaggerate their numbers for the sake of greater political representation.  Thirdly the per capita income of Muslims in a country is unlikely to be identical with average per capita income of their country.  In countries where Muslims are in a majority it is likely that their per capita income would be greater than average per capita income, though not necessarily so.  Similarly, in some countries where Muslims are in a minority, their per capita income may well be higher than the country’s average per capita income, because of their need to be competitive and the absence of distractions due to social exclusion..

[7] One needs to differentiate between Muslims in the developed countries who are part of a diaspora of a developing country and those nationals who have converted to Islam. The former usually keep their umbilical links with the country of origin and are often active in the development of  their own religious communities, both in the original and adopted country.

[8] The expression Middle East is a loaded term. As succinctly pointed out in Hassan Hanafi: it is  “an old British label based on a British Western perception of the East divided into middle or near and far, which are two relative concepts having Britain as a referring point. The expression is a projection from outside, not emerging from inside, conceiving the other in relation to the self as it was always the case in classical orientalism, the periphery in relation to the center, which is already a power relationship”. The Middle East, in Whose World? (Primary reflections) in Papers from the Fourth Nordic Conference on Middle Eastern Studies, Oslo 1998, Edited by Bjørn Olav Utvik and Knut S. Vikør,

[9] Arab Human Development Report, 2002

[10] A.K. Sen, The Argumentative Indian, Penguin, 2006

[11]For example, see O’Rourke K.H. and J.G. Williamson Globalization and history: the evolution of a nineteenth-century Atlantic Economy. The MIT Press, (2000).

[12] It is, however, naïve to think that technology has replaced ideology in the current phase of globalization. Ideology, embedded in the hegemony of the dominant power has always been at the centre of all previous globalization episodes in history, expressing the will of the powerful, the balance of power between the center and the periphery. Even after the demise of colonialism, economic exploitation, scientific dependency and cultural domination are still continuing in the periphery.

[13] Global income inequality is probably greater than it has ever been in human history, although there is some debate about whether it is getting worse or getting better. Currently, the richest 1% of people in the world receives as much as the bottom 57%. The ratio between the average income of the top 5% in the world to the bottom 5% increased from 78 to 1 in 1988 to 114 to 1 in 1993. See Milanovic, B. (1999). “True world income distribution, 1988 and 1993: First calculation based on household surveys alone“, World Bank.

[14] For a comprehensive survey of the literature on globalization and inequality, see Heshmati, Almas, The Relationship between Income Inequality and Globalization, The United Nations University, UNU/WIDER,

[15] The greatest contributors to world income inequality are the large countries at either end of the spectrum, the “Twin Peaks,” as defined by Quah, [see Quah, Danny (1997), “Empirics for growth and distribution: stratification, polarization and convergence clubs“, London School of Economics and Political Science, Center for Economic Performance Discussion Paper No. 324, pp. 1-29.]. One pole represents the 2.4 billion people whose mean income is less than $1000 year and includes people living in India, Indonesia and rural China. With 42% of the world’s population, this group received just 9% of the world PPP income. The other pole is the group of 750 million people whose income exceeds $11,500. This group includes the US, Japan, Germany, France and the UK. Combined, they account for 13% of the world’s population yet garner 45% of the world PPP income. Yousef, Tariq M. Development Growth and Policy Reform in the Middle East and North Africa since 1950, General of Economic Perspective Vol 18 No.3 Summer 2004

[16] Sen, AK “How to judge globalism”, American Prospects, no 13 January 2002.

[17] Yousef, 2004

[18] Noland, Robert and Howard Pack, Islam, Globalization, and Economic Performance in the Middle East, 2004.

[19] UNDP, Arab Human Development Report, 2002 and 2003

[20] Içduygu, A. , I. Sirkeci and G. Muradoglu (2001): ‘Socio-economic development and

international migration: a Turkish study’, International Migration, 39/4, pp. 40-61

[21] UNDP Human Development Report, 2004, p. 87

[22] Two-thirds of Gulf oil currently goes to Western industrial nations. However, by 2015, three-quarters of the Gulf’s oil will go to Asia, chiefly to China, according to a study by the CIA’s National Intelligence Council, China’s growing dependence on oil could cause it to develop closer military and political ties with countries such as Iran and Iraq, Indonesia and Nigeria.

[23] Kaoru Sugihara, Higher oil prices van benefit E. Asia,, may 29, 2006

[24] Jonathan Nitzen and Shimshon Bichler, The Global Political Economy of Israel, Pluto Books, 2002

[25] According to the World Bank, from 1980 to 1990 the Saudi GDP’s growth rate was 0.0 percent (no growth at all) and in the following ten years (1990-2000) was 1.6 percent.

[26] During and after the Persian Gulf War, the Government of Saudi Arabia provided water, food, shelter, and fuel for coalition forces in the region. There also were monetary payments to some coalition partners. Saudi Arabia’s combined costs in payments, foregone revenues, and donated supplies were $55 billion. More than $15 billion went toward reimbursing the United States alone for basing its troops in Saudi Arabia.

[27] Gawdat Bahgat, Oil and militant Islam: strains on U.S.-Saudi relations, World Affairs. 1 January, 2003

[28] Ratha, Dilip, Workers’ Remitances; An Important and Stable Source of External Development Finance, Global Development Finance, World Bank, 2003.

[29] In contrast, the combined current-account surplus of China and other Asian emerging economies, which is often thought to be of greater concern as an imbalance in the world economy, is put at only $188 billion in 2005.

[30] The Economist, Recycling the Petrodollars, November 10, 2005