Economic Development of the Middle East and the Role of Foreign Trade Andcapital
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Louisiana State University LSU Digital Commons LSU Historical Dissertations and Theses Graduate School 1962 Economic Development of the Middle East and the Role of Foreign Trade Andcapital. Jitendra Madho Prasad Louisiana State University and Agricultural & Mechanical College Follow this and additional works at: https://digitalcommons.lsu.edu/gradschool_disstheses Recommended Citation Prasad, Jitendra Madho, "Economic Development of the Middle East and the Role of Foreign Trade Andcapital." (1962). LSU Historical Dissertations and Theses. 797. https://digitalcommons.lsu.edu/gradschool_disstheses/797 This Dissertation is brought to you for free and open access by the Graduate School at LSU Digital Commons. It has been accepted for inclusion in LSU Historical Dissertations and Theses by an authorized administrator of LSU Digital Commons. For more information, please contact [email protected]. This dissertation has been 63—2791 microfilmed exactly as received PRASAD, Jitendra Madho, 1927- ECONOMIC DEVELOPMENT OF THE MIDDLE EAST AND THE ROLE OF FOREIGN TRADE AND CAPITAL. Louisiana State University, Ph.D., 1962 Economics, finance University Microfilms, Inc., Ann Arbor, Michigan ECONOMIC DEVELOPMENT OF THE MIDDLE EAST AND THE ROLE OF FOREIGN TRADE AND CAPITAL A Dissertation Submitted to the Graduate Faculty of the Louisiana State University and Agricultural and Mechanical College in partial fulfillment of the requirements for the degree of Doctor of Philosophy in The Department of Finance by Jitendra Madho Prasad B.Com., Patna University, 1948 M.B.A., Louisiana State University, 1959 August, 1962 DEDICATED TO THE MEMORY OF MY BELOVED DAUGHTER GEETA ACKNOWLEDGEMENT Sincere appreciation and deep gratitude is extended to Dr. John W. Chisholm for his interest, untiring patience, time and guidance, which were of immense help in the preparation of the manuscript. Grateful appreciation is also extended to Dr, Stanley W . Preston, Dr. Reymond V. Lesikar and Dr. Lee J. Melton for their helpful criticisms and valuable suggestions. Sincere appreciation is also extended to Dean William D. Ross and Dr. Robert H. Van Voorhis for • their so kindly assisting me with the Graduate Assistantship without which this work could not have been possible. Appreciation is also extended to Dr. Eric N, Baklanoff, currently at the Vanderbilt University, whose inspiring lectures under Finance 136, 163, and 235 led me finally to decide on the topic. Grateful appreciation is also extended to my Great Mother, my wife Annpurna, my brother Rajendra M. Prasad and my brother-in-law Mangala Nandan Sahay for their continuous encouragement throughout my stay in the United States which provided me with inner strength towards bringing this work to a successful end. iii TABLE OF CONTENTS CHAPTER Page DEDICATION......................................................................................... ii ACKNOWLEDGEMENT...................................................................... iii ABSTRACT............................................................................................... vi INTRODUCTION......................................................................... ix a) Plan of W ork......................................................................... ix b) Methodology......................................................................... xi c) The Region of the Middle E ast ...................................... xi I . CIVILIZATION AND SOCIETY OF THE MIDDLE EAST .... 1 II. RESOURCES OF THE REGION........................................................ 13 a) Human Resources............................................ 13 b) Non-human Resources...................................................... 16 III. TRADITIONAL ECONOMY AND INDUSTRIAL REVOLUTION. 24 a) Land Ownership .......................................... ..................... 25 b) Agriculture and Livestock ................ 30 c) Handicrafts and Industries ............................................. 41 d) Industrial Revolution and the Role of the West. 48 IV. ECONOMIC PLANNING AND DEVELOPMENT........................... 57 a) The Co-operatives ................................................... 60 b) Land Reforms .......................................................... 65 c) Plans and Developments ................................................... 69 V. FOREIGN TRADE, BALANCE OF PAYMENTS.............................. 98 a) Direction of Trade................................................................ 100 b) Exports — Main Items and Progress ......................... 106 c) Imports — Capital Goods and Progress 108 d) Balance of Payments ..................................................... 110 e) Foreign Exchange Policy. ........................................ 114 iv CHAPTER Page VI. FINANCING THE DEVELOPMENT................................................. 119 a) A Rough Financial Sketch............ .................................. 121 b) Financial Institutions—National Development B a n k .................. 125 c) Encouragement to Foreign Investors............................. 129 VII. THE U . S . AND SOVIET ECONOMIC POLICIES IN THE REGION.................. 133 a) The United States ........................ ...................................... 133 b) The Soviet U nion........................ 138 VIII. POLITICS OF THE REGION.............................................................. 144 a) The Background .................................................................. 144 b) Rationale Behind the Present Po litics ........................ 150 IX. CONCLUSIONS AND RECOMMENDATIONS........................ 162 I. The Downfall............................................................. 162 II. The Religion. ............. 163 III. The Resources............................................................. 164 IV. The Planning ....................................... 167 V. The Development.................... 170 VI. The Foreign Trade and Capital ............................. 174 VII. The Epilogue................................................................. 178 SELECTED BIBLIOGRAPHY..................................................... 181 VITA........................................ 196 v ABSTRACT The Middle East — once prosperous and famous for her civilizations, surprisingly stands today as an underdeveloped region. The reason for this decay was, in short, the sinfulness of the people. Landlords, de veloped as a natural consequence to the system prevalent, proved later an impedement in the economic progress. As the cottage industries, particularly those of silk, cotton, brocades, goat hair and sheep skin, wool, ceramics, ship-building and pearling, declined as a result of the Industrial Revolution in the W est, the poverty in the region grew. World wars worsened the situation. Planned development in the region started after 1950, but the techniques adopted for planning were unscientific. Yet, the Middle Eastern Governments have invested so far over $15 billion in their respective countries. This amounts to $14.50 per capita divided into social services $2.70, transport and communications $3.50, agricul tural and industrial developments $3.50 and $4.50, respectively. With diseases, 50 per cent infant mortality in some areas and 80 per cent illiteracy, the allocation on account of social services appears very inadequate. Production of wheat, maize and barley together increased at the rate of 13.7 per cent per year during 1949-59, but the share per capita of these cereals equals to only about 1.4 pounds per person per day. This proves that the masses are not living even on subsistence diet. Meats and vegetables in the region are also scarce and costly. Apart from the investments out of internal savings, it was essen tial for the region*s economic development to invest $760 million annually from abroad. The amount actually received was only $320 million a year. An analysis showed that at least $400 million are flying out of the region every year. These add up to over $800 million shortage in investments. The yearly investments after armaments of $750 million with $172 million only received from abroad, further accentuated the problem . The plans do not seem to stress the development of cottage industries although the resource base of the heavy minerals in the region is very weak. As a solution to the middle class problems, it is essential to organize the Urban Ladies* Multi-purpose Cooperative Societies wherein women should be provided with jobs at home. The intra-regional trade standing at 15 per cent shows non cooperation. Sixty-six per cent of the foreign trade directed towards the W est, and Western Europe receiving 80 per cent of her oil supplies from the Middle East, show inter-dependence. Exports during 1949-59 rose at the rate of 21 per cent a year while imports rose at the rate of 14 per cent only. But this may be an intentional cut down of imports in order to facilitate the $400 million flight out of the region every year. Although import of capital goods during 1959 appears to be 30 per cent vii of the total, it is reduced to about 15 per cent when imports of arma ments are taken into account. The Suez as a vital waterway needs to be kept out of politics as a necessity for the survival of Egypt. The revolutions and assassinations in the region appear emanating out of the economic discontent of the masses. The Arabs accuse the West for exploiting them, but they also do not seem to have done better in the past. The fundamental fact is that humanity has not yet achieved