JERUSALEM — Middle East peace could restore the region to its role as a central actor in the world economy, a position it held long ago, said a world-renowned Harvard University economics professor.
“The economic benefits of peace to the region would be profound,” Jeffrey Sachs said during his recent stay in Israel “as the region could exploit its unique geographic advantage between Europe and Asia.”
Sachs, the director of Harvard’s Center for International Development, was in town to deliver a lecture at Tel Aviv University on the economic development of the Middle East from the rise of Islam to the present day.
According to Sachs, during the Middle Ages, “the Middle East was the most cosmopolitan region of the world, as it sat astride the great trade routes between Europe and Asia.” In 800, around the time that the Jewish communities flourished in Babylonia, Baghdad was the world’s largest city — an indication of the region’s economic strength.
Sachs noted that the sources of wealth were mostly related to physical geography, especially its ideal location regarding trade. His theory of geography-based growth contrasts with those who promote the idea that economic prosperity is a function of cultural traits.
The region’s downfall began with Europe’s rise in the late Middle Ages, as “the peoples of Europe learned how to master the continent’s temperate-zone environment and it became possible to settle more regions. Europe’s population increased sharply, while the population of the desert-based Islamic Middle East did not increase by much.
“By 1900, the Middle East was not a significant player in the global economy. The Islamic powers had lost ground militarily, and were deficient in the key resources — coal, iron ore, water — needed for rapid industrialization.”
The Middle East has the potential, however, to return to its past days of glory, with Israel playing a critical role.
“The Islamic region’s major long-term obstacles include the lack of economic integration between its urban centers and the rest of the world economy. The region as a whole needs to increase its resources devoted to science, technology and education,” said Sachs, who noted that most of the area’s economy still relies on the production of primary commodities, such as oil and agricultural products.
“Israel, however, stands out as a unique economy in the region,” Sachs continued. “The population was always mostly urbanized and highly educated. The country has been deeply connected with Europe and the United States. It has never been detached from the world economy in this regard. Israel’s technological prowess could be a great benefit to the whole region in the event of peace and economic integration, and of course Israel would benefit enormously by increased trade with its neighbors.”
No stranger to Israel, Sachs, 46, has visited over 15 times and has numerous relatives all over the country. In 1979-80, he served as a research associate at the Hebrew University of Jerusalem’s Falk Institute for Economic Research, where he collaborated with Michael Bruno, the former governor of the Bank of Israel, on a study of stagflation: a macroeconomic phenomenon where an economy suffers from both inflation and falling output.
Sachs, who also takes special interest in the developing countries, said that there are more than a billion people in the world who currently earn about $1 per day. “Global inequality between the world’s richest and poorest regions is increasing. Over the last 30 years, no economic progress has been made in many of the poorest regions, such as sub-Saharan Africa, while the rich have raced ahead.
“It would be unrealistic to expect the poorest of the poor to be able to solve their problems of disease, hunger, and lack of technology by themselves. The roots of impoverishment are deep and the only realistic way out of this will require substantial aid from the rich countries. Reducing the number of poor can’t be done for free, but it should be done.”