The Burj Khalifa in Dubai lit up with the flag of the United States on July 4, 2019. Photo: UAE Foreign Ministry.
By Rami Assoum – Nov 4, 2024
“We must choose which model we want, Hanoi or Hong Kong?” – Walid Jumblatt
The cliché passes from one generation to another to become: “They made paradise from the desert” (referring to Dubai,) while “we made a desert from paradise.” Clichés are like viruses—easy and quick to spread, requiring no mental effort, as the human brain prefers ready-made prescriptions and avoids taxing analysis of its habits. Those who repeat such statements overlook the fact that they fundamentally fall into a false dichotomy, which reduces multiple choices before humans to just two options with no third alternative.
According to the Jumblatt’s statement, Beirut has no options except to become like Dubai (Hong Kong) or Hanoi, with no possibility to even think, just for the sake of thinking, about becoming like Milan, Buenos Aires, or Cairo. As if all human civilizational history must compress itself into one of these two choices.
Both the promoter and receiver of such statements overlook that the decision to transform a city into a global or regional financial hub is not primarily a national decision, but rather an external one that essentially stems from the global capitalist center at a given time (Britain before World War II, and the United States afterward.) To become a regional financial center in the Third World, it is not enough to make that decision, then proceed to build infrastructure to receive foreign investments and prepare trained human resources to manage those investments. Rather, the decision originally stems from the global capitalist center, according to its interests, then the most suitable geographical location is selected to implement this choice, based on geopolitical considerations (which will be mentioned), in order to prepare the ground for establishing the regional center before the local population even knows about it.
The models witnessed in the Third World during the twentieth century until now are almost limited to Hong Kong, Singapore, and the United Arab Emirates. These countries became regional capitalist centers, hosting banks, asset management companies (investment and portfolio management), and regional centers for Western companies seeking a suitable environment to launch into neighboring markets to sell their products or services.
By studying the conditions of the emergence of each of these “financial cities,” we can conclude that all of them emerged by purely external decisions, with their primary purpose being to absorb the financial surplus of regional countries and transfer it to the imperialist center (Britain, and then the United States.) In simple terms, the function of these financial cities is to transfer wealth from their neighboring countries to invest it in the industrial West through various financial instruments, from corporate stocks and financial portfolios to US government bonds in particular.
The United States is the largest recipient of foreign direct investments (FDI) in the world, not only in absolute value but also relative to GDP. The Net International Investment Position (NIIP) indicator for a country’s economy calculates the difference between the country’s external financial assets (invested in other countries) versus other countries’ financial assets on its territory. It is positive when the country invests abroad more than others invest in it, and negative in the reverse case.
Paradoxically, the United States has the highest negative ratio of this indicator in the world, reaching about $22 trillion in 2024. In simpler terms, this means that the world invests in the United States $22 trillion more than the United States invests in the rest of the world. This massive wealth has been transferred from around the globe to the United States. By comparison, the NIIP was negative $368 billion in India, and positive $3 trillion in China. This means the world invests in the United States 60 times more than it invests in India (contrary to global propaganda suggesting India has become an attraction point for foreign investments.) We also note that the pace of foreign investments entering the United States began accelerating strongly after the 2008 global financial crisis, rising from $3 trillion to $22 trillion in just 16 years. This means it captured most global investment flows during this period, depriving Global South countries of their fair share of these investments.
When examining investment destinations flowing out of regional financial centers, particularly Hong Kong, Singapore and Dubai, we observe the following:
- About 45% of Singapore’s investments go to the West, specifically the United States, Europe, and the Cayman Islands (according to Singapore’s Department of Statistics.)
- As for the United Arab Emirates, the United States alone captures 40% of its foreign investments, reaching $1 trillion out of $2.5 trillion (according to the UAE Embassy website in Washington.) This may reach more than 70% when counting Britain and the European Union (no official figures, just estimates.)
- Note that Hong Kong’s foreign investment shifted over time to China instead of the Western world after its return to the People’s Republic of China in 1997.
- However, official statistics show that Singapore and Dubai still perform their role in transferring wealth to the “free world.”
We can summarize the conditions for the existence of these financial centers as follows:
- Their small geographic and demographic size, thus their national economy has low absorption capacity compared to incoming investments, necessitating finding external investment destinations to obtain viable returns for investors (this condition applied and still applies to Lebanon.)
- Their existence as “islands” in an ocean of massive economies (like Indonesia, Malaysia, Thailand and Vietnam for Singapore, China for Hong Kong, and the Persian Gulf for the Emirates.) These islands form tax havens for businesspeople (and thus capital flight) from those economies, due to the islands’ ability to follow lenient tax policies, which large economies cannot do for various structural reasons. This is what happened during the twentieth century and continues regarding Indonesia and Malaysia suffering from capital flight to Singapore, to be recycled in US and British economies.
- Exploiting the “idealism” of neighboring economic systems for the benefit of capitalist “realism.” Just as Lebanon benefited from the existence of socialist economies in Syria and Iraq, which placed harsh conditions on the operations of foreign companies to preserve their national resources from plunder, leading to the transfer of Syrian and Iraqi bourgeois wealth to Lebanese banks, the same applies to Indonesia regarding Singapore, and China regarding Hong Kong. Note that all these islands play a key role in money laundering resulting from corruption of the ruling class in neighboring countries (Indonesia and Singapore, Syria and Lebanon, China and Hong Kong,) because “idealistic” economic systems are still subject to exploitation by the dominant economic system, thus needing channels to dispose of wealth plundered from those economies.
- The existence of these islands requires an environment rich in natural resources and thus their ability to absorb financial surplus coming from extracting those resources (Dubai as a model.) This applied to Lebanon in the 1950s and 1960s after the Gulf states’ financial boom, but that has become impossible now with the UAE’s presence as a regional financial center.
- These financial islands enjoy the highest degrees of military protection to repel any attempt by neighbors to chip away at, or end, these parasitic economic models. Paradoxically, Singapore with 6 million people possesses an air force stronger and more modern than the combined forces of Indonesia with a population of 280 million and Malaysia with 30 million.The American-equipped Singaporean military, in addition to its F-16 and F-15 aircraft fleet, is among the few countries that managed to obtain squadrons of F-35 stealth fighters. As for the UAE, it possesses one of the strongest military air fleets in the region (after Israel) in terms of quantity and modernity, in addition to American military bases that provide protection from potential threats (Iran primarily, and Saudi Arabia to a lesser degree.)Of course, Hong Kong was an integral part of the British Empire until 1997, which formed a protection umbrella that exempted it from the challenge of building its own strong army.
- All this requires laws protecting individual property in an unquestionable manner to establish long-term trust of regional investors (enshrining individual property in Lebanon versus nationalization policies in Syria as a model,) and building skilled human capital in financial management to serve investments optimally (Lebanon, Singapore, Hong Kong, Dubai.)
Returning to Lebanon, some of the above conditions were met in the 1950s, in terms of geographical location and skilled knowledge capabilities in the field of finance. It even practiced its role as a “wealth transferor” admirably in the 1950s and 1960s, according to banker Tawfiq Kasbar’s study in his book Lebanon’s Political Economy 1948-2002 where he says, “The two main functions of banks before the war were: financing imports and recycling foreign currency deposits to major financial centers in Europe.”
Lebanon, which was “given” the role of financial center in the region for two decades, can no longer recover that function for several reasons, most importantly:
- The UAE’s entry to the forefront of the financial scene since the 1990s, which attracted Gulf capital surplus to it, and the region consequently no longer requires two regional financial centers.
- The destruction of wealth of the neighboring countries, that is, Syria and Iraq. Thus, there is no longer any need for a subsidiary regional center (assistant to the regional center in Dubai) to absorb surplus from those countries.
- End of the era of socialist policies in neighboring countries, with most entering the neoliberal model after 2000.
- Lack of a strong army capable of protecting the “financial island” model (this was one of the most important reasons for Lebanon losing its economic function in the region after 1970.)
While the policy of neutrality is one of the requirements for the country’s continuation as a regional financial center, it must be purely regional neutrality (i.e., non-alignment with regional powers only.) However, that neutrality does not apply when the United States enters a regional conflict, or else it will lose its function assigned by the latter. Neutrality in this sense will necessarily be biased neutrality toward the United States at key junctures. When taking into account that “Israel’s” interests take the highest consideration in US regional policies, Lebanon is therefore obligated to accept all of Washington’s policies regarding “Israel.” Therefore the policy of neutrality is fundamentally impossible.
Lebanon’s neutrality did not protect it from the displacement of Palestinians into its territory in 1948 and 1967, nor would it have protected it from the cascade of Syrian displacement during the proxy war in Syria. This is due to the United States’ presence as a key player in both cases (Palestine and Syria) and the absence of a strong army capable of protecting Lebanese territory from consequences of what happens outside its borders.
Returning to the requirement of a strong military for the financial island, building a strong army needs approval from the global financial center to arm the army with latest equipment quantitatively and qualitatively (US in the case of UAE and Singapore, and Britain in the case of Hong Kong) while ensuring neighboring countries’ armies remain weak compared to the regional financial center’s army.
But this does not apply to Lebanon, because having a strong army would conflict with “Israel’s” existence as a super-powerful state relative to its neighbors. The multiple incidents of Washington preventing the Lebanese army from acquiring weapons (from Russia for example) is evidence that Lebanon is forbidden from possessing even minimum capabilities of military power.
Based on all of the above, and referring to Walid Jumblatt’s false dichotomy, and since the first choice (Hong Kong model) has become impossible for Beirut without radical change at the global system level (from unipolarity to multipolarity,) we are left only with the Hanoi option (although today’s Hanoi is completely different from 1970s Hanoi.)
Nevertheless, by being aware of this logical fallacy, we can choose another model different from both Hong Kong and Hanoi, a model based on an economic system built on real production (knowledge, industry, agriculture, and tourism) and planning for moderate but sustainable positive growth (instead of rocket growth followed by complete collapse as we witnessed over the past 30 years), with its pillars being industrialization (production,) administrative flexibility, social justice, and building a strong army to protect stability.
Translation: Orinoco Tribune
OT/DZ/SC
