Global Trends by Martin Khor

Monday 29 December 2009

2008 ends with new Palestinian plight

As the year ends, the world is reminded again of the plight of Palestinians, now under a new bombardment by Israel.  Things will get worse in 2009 before they get better, for Palestine as well as for the global economy.


For Palestinians and for all who care for them around the world, the year 2009 is ending in a terrible way, even by the standards of the suffering endured by this most suppressed of people.

The Israeli air strikes onto the small and highly populated Gaza Strip have killed 230 people by Sunday morning Malaysian time and injured hundreds more, and this may only be the start, as Israel vows to expand its operation.

 The television footage of scores of bodies lying dead on the ground, and many more injured and bloodied people being carried onto trucks or in small medical vans gave concrete backing to the condemnations by many around the world, that this was gross aggression, a massacre.

Israeli propaganda says that their big military move is to protect its citizens from rocket attacks from Gaza

However, the actions of an occupied people in resistance mode cannot be put on par with the heightened aggression of an occupying force.  And the application of high-powered weapons launched from modern aircraft and navy ships, aimed at many places in Gaza, is a very disproportionate method of punishing an entire population of Palestinians.

It is a repeat of the Israeli mass bombing of Lebanon just a few years ago, when innocent civilians became victims of air and land attacks on the country’s infrastructure, cities and countryside.

The Palestinians in Gaza have already gone through hell-like conditions this year as Israel imposed a siege on this territory, blocking the movement of people and supplies of daily essentials, and with no electricity for long stretches of time.

The hospital system was already on the brink of collapse, with medical supplies running out, when it was placed under greater stress by the bombings starting last Saturday.

As the year ends, questions crying to be answered include whether Israel will again get away with the continuation of its aggression against the Palestinians, covered by the lack of concrete responses from global and regional powers. 

Or whether the “international community” will finally decide to act and let Israel know that enough is enough.  In the dying days of the Bush regime, we cannot expect any such direction from the United States, which may in fact be supportive, at least implicitly, of the latest actions.

The world wonders whether a new US administration under Obama will be more inclined to discipline Israel, if not be supportive of the Palestinian cause.  However, given the recent political appointments, hopes of such a change in direction are not high.

It looks as though things will get even worse for Palestine and its people before they get better.

This prediction, not so difficult to make, applies also to the global economy in 2009.  In 2008, the near collapse of the Western financial system was the most significant global event.

In the last quarter of 2008, the drama-filled financial crisis (affecting financial institutions) was transformed into a “real economy” crisis, characterized by losses of industrial companies (such as the near bankruptcies of the Detroit car makers), falling consumer demand and rising job losses, and culminating in declines in the GDP.

In developing countries like Malaysia, the effects are being felt through plummeting commodity prices (such as petroleum, palm oil and rubber), weakening manufactured exports, and outflows of foreign funds.

Grim though the situation already is, 2009 will see worse times as the real-economy recession is only at its starting point.  There will be deeper cuts in consumer spending and business investments, more profit and job losses in the developed economies, and these will translate into yet lower demand for developing countries’ exports.

The United States, Europe, China and Japan are all embarking on Keynesian strategies of boosting government spending, loosening monetary policies and lowering interest rates in a multi-prong attack on recession, rather like doctors using surgery, drugs and radiation to attack a cancer.

These emergency measures will to some extent alleviate the recessionary tendencies.  But by how much, and when will they take effect?  Will there also be adverse side effects, such as the ballooning of government deficits, and inflation, which will limit the extent to which the medicines can be applied?

These will be among the big issues of 2009.  For developing countries like Malaysia, it is important not only to come up with short term strategies to counter the imported recession (using these Keynesian policy tools, as Malaysia did during the Asian crisis a decade ago) but also to review the export-led and foreign investment-led economic model.

This model may have been suitable in an environment of rapid global economic growth, but may be a source of weakness if the global economy remains in a weakened state for many years.

There is already a debate in China, the main beneficiary in recent years of the export-led strategy, as to whether and how to rely more instead on domestic sources of growth and development.  Other developing countries, including Malaysia, would do well to look at the alternatives too.