Pain, not gloating

A number of people emailed to ask me why I haven't written blog entries in recent months.

The main reason is that most of the trouble that I have warned against in recent years, including about the faulty legal structures of so called sukuk as well as other debt instruments marketed as "Islamic" (see my 2006 book Islamic Finance: Law, Economics, and Practice, Chapter 6 on faulty sukuk structures), and the speculative bubbles that were again plaguing the Middle East (my 2009 book with Amy Jaffe -- an expert on energy markets -- Oil, Dollars, Debt, and Crises: The Global Curse of Black Gold), have come to pass. Contrary to what those who criticized me for my gloomy predictions may think, I had wished all along that I was wrong. When bad things happen, sincere people do not gloat: they feel too much pain to do that.

Therefore, I do not want to write to say "I told you so." I am, instead, starting to work on my next book project on Middle-East economic development. To the extent that the region's limited absorptive capacities have contributed to local bubbles and then global credit bubbles (1980s and again this decade), enhancing the region's real (i.e. industrial) growth prospects is in the region's as well as the world's long-term best interest. However, national-level industrial plans (as in Saudi Arabia, for instance) are too limited in scope.

My argument at recent conferences has been that we need an industrial plan at the regional level. Unfortunately, this type of plan would run contrary to the short-term profit motives that have fueled speculative bubbles, of which the debt culture that has been marketed as "Islamic finance," as well as closely-related debt-driven construction booms, are but two examples. Commissions that short-term rent seekers can collect in those two bubble industries prevent the region from focusing on the task ahead -- the last opportunity to use the region's mineral wealth as an engine for long-term industrialization.