An “emerging market (EM) economy” is the economy of a developing country that is becoming more engaged with global markets as it grows. Countries named as EM economies are those with some of the characteristics of a developed market. EMs have the features of increased liquidity in equity markets, increased trade and foreign direct investment, and modern financial institutions. About 20 countries are classified as emerging economies although there are differences among them.

EM countries include Argentina, Brazil, Bulgaria, Chile, China, Colombia, Croatia, the Czech Republic, Hungary, India, Indonesia, Latvia, and Lithuania, Malaysia, Mexico, Peru, the Philippines, Poland, Romania, Russia, South Africa, South Korea, Taiwan, Thailand, Turkey, and Ukraine.

Inflation is the rate at which the general level of prices for goods and services is rising. The Keynesian school believes that inflation results from economic pressures such as rising costs of production or increases in aggregate demand. In cost-push inflation, production costs rise on an economy-wide level because of mainly increases in input prices, and this can lead to increased consumer prices throughout the whole economy, as producers pass on their increased costs to consumers.

Demand-pull inflation occurs when aggregate demand exceeds aggregate supply, and thus prices increase economy-wide. Built-in inflation is a type of inflation that results from past events and persists at the present. It then becomes a normal aspect of the economy, via inflationary expectations and the price/wage spiral. According to the monetarist view, the expansion of the money supply is the principal cause of inflation. Economists from these schools disagree on the root causes of inflation, although they underscore the fact that inflation is a far more complex phenomenon.

The ratio of food expenditure in all consumer spending is higher in EMs compared to developed economies. This ratio, for example, is about 26% in Turkey and 13% in the U.S., which are EM and developed economies respectively. Food inflation occurs when the food consumer price index (CPI) exceeds headline CPI. For example, in September 2021, the yearly increase in Turkey’s food CPI was 28.8% while the increase in headline CPI was 19.6%. Food inflation exists in almost all EMs, and thus increases headline inflation.

What does inflation look like in EMs?

Consumer prices are increasing in both developed and EM economies. The International Monetary Fund (IMF) expects inflation will accelerate to 2.4% in 2021 from 0.7% in 2020 in developed countries and to 5.4% from 5.1% in EMs. Rising food and energy prices, pandemic-related supply chain disruptions, and surging shipping costs are among the determinants. In recent years, inflation has been very low in rich countries while it has been high in poorer countries. Basic necessities such as food and energy typically account for a bigger part of household spending, so current developments can lead to hardships for people.

The increase was modest and prudent, raising rates from 0.1% to 0.5%. Central banks have less breathing room to wait and see whether price rises and supply bottlenecks are temporary. The Polish rate was 5.8% in September 2021 which is the highest in 20 years. It is closer to double figures in Brazil and Mexico, where in September the core inflation rate accelerated to the fastest rate since 2017. These higher rates of inflation are partly because food accounts for a larger proportion of consumption.

Several local factors affect food inflation, and the causes of higher prices have not been homogenous across EM economies. Inflation in items like fruit and vegetables in particular seems to vary across markets, due to local factors and the climatic conditions for such products. In its April 2021 report, the IMF estimated that the annual pass-through from international food prices to the domestic food CPI was much higher for middle- and low-income countries than for high-income countries.

This means that the impact on headline inflation is higher in EMs since food has a larger share in CPI baskets. Food items in the U.S., the Euro zone, and Turkey are about 13%, 17%, and 26% of CPI baskets respectively. This is particularly true for countries such as Turkey, Brazil, Russia, and countries in Central and Eastern Europe, the Middle East, and Africa where food inflation remains significantly above headline inflation.

Economic and political impact of inflation in EMs

Inflation is a kind of tax on the poor. This is possibly why central banks in EMs are acting against the price pressures caused by the rising costs of oil, food, and other goods and services. EM central banks do not have the luxury of waiting. Many EMs have kicked off interest rate cycles even before their economies recover from the pandemic.

According to the UN’s Food and Agriculture Organization, food prices increased 40% over the previous 15 months, the biggest increase since 2011. The IMF forecasts inflation rates to peak at 6.8% in EM economies before falling to about 4% next year. In contrast, advanced economies are likely to experience inflation that is more modest: peaking at 3.6% in autumn 2021, before falling to 2%.

Greater Arab integration has long been a dream of the Arab people. Wherever one travels in the Middle East, the romantic idea of Arab unity and brotherhood pervades conversations, and it is not uncommon to hear Arabs speaking positively about the idea of forging closer bonds with their fellow Arabs in other countries.

Therefore, when news emerges of summits being held and planned by two historically important Arab powers such as Iraq and Egypt, there are always murmurs of “what could be?” should these summits bear fruit.

However, considering recent Arab history, the chances of anything fruitful emerging from these talks to establish greater Arab interdependency should be taken with a fistful of salt.

The Egypt-Jordan-Iraq land bridge

Alongside Jordan acting as a nexus between the two, the leaders of the three countries have hatched preliminary agreements to create land corridors between Iraq and Egypt, allowing for cross-border trade, investments, and the transfer of manpower and energy between the three nations.

The idea is that, for $130 dollars per ticket. Egyptian passengers could board a ferry at Nuweiba, cross over to Jordan’s Aqaba, and then use the Jordanian road network to access Iraq and even Syria when the security situation permits. This would facilitate a two-way exchange of goods, expertise, labour, and energy, providing a tripartite economic partnership that benefits all.

Iraq currently cannot support its own energy needs, despite its rich oil wealth and natural gas deposits.

By utilizing Egypt’s vast human resources to enhance the labour force in Iraq in particular, and by exploiting Iraq’s substantial fossil fuel reserves to provide energy to its energy starved neighbors, it appears like a win-win for all involved. In fact, an agreement between Egypt and Iraq at the end of last year has already paved the way for Egyptian contractors to redevelop dilapidated and bombed out Iraqi cities in exchange for oil.

But this plan is poor from the outset. Iraq currently cannot support its own energy needs, despite its rich oil wealth and natural gas deposits. Indeed, Baghdad currently imports most of its energy needs from neighboring Iran, which has a disproportionate level of influence over Iraqi affairs and has infiltrated most of its political, economic, and security institutions leaving Iraq as a rump state servicing the needs of Tehran rather than the Iraqi people.

A history of failure

If it flounders, the imperiled tripartite agreement will not be the first to fail in the Arab world. Arab unity and cooperation has been tried many times throughout the modern Middle East since the fall of the Ottoman Empire. Indeed, the first attempt at uniting the Arab world was the Arab Revolt that was supported by the British Empire in a successful attempt to undermine the Ottomans and divide their lands.

However, rather than live up to their end of the bargain by allowing their client Sharif Hussein bin Ali to become king of the Arabs, the British divided up Arab lands between themselves and the French, beginning decades of brutal and exploitative colonial rule.

In the post-colonial era, nominally independent yet weak and incompetent Arab rulers again made a cosmetic attempt at uniting their forces in 1948, this time in a military alliance to defeat the nascent Israeli state and expel the Jewish occupation of Palestinian Arab lands. That campaign ended in monumental failure, as did the wars of 1967 and 1973.

But before the wars of the 1960s and the 1970s, the secular nationalist Arab rulers of Egypt and Syria attempted a political union under the leadership of Egyptian independence icon Gamal Abdel Nasser. The United Arab Republic, as it was known, brought together Egypt and Syria in a political union in 1958 that had the potential to be as effective as the united territories of the same lands under Sultan Salahuddin al-Ayoubi who, in 1187, reconquered Jerusalem from the Crusaders.

However, Nasser’s undeniable charisma could not plug the shortfalls caused by his incompetence, poor planning, and institutionally poor governance. Eventually, the Syrian military forced themselves into the equation and restored the pre-UAR Syrian republic, re-establishing their independence in 1961. This paved the way for the Syrian coups of 1963, 1966, and 1971 that established Hafez al-Assad as the sole dictator of a Ba’athist regime. We all know the results of those events, as Hafez’s son, Bashar, is currently in the process of butchering his own people.

This long history of failure by greedy, weak, and self-interested Arab rulers places into doubt any enterprise that they engage in or appear to be making moves towards agreeing. After all, the Saudi-Egypt Causeway that has been in development since the mid-2000s has yet to see the light of day, in large part because Israel has opposed it.

The stark reality is that any plan that may appear to benefit the Arab people will either be scuppered by Arab leaders or else will be vetoed by more powerful interlocutors such as Israel or the United States.

It is therefore highly doubtful that these states, who suffer from so much internal instability as aptly demonstrated by an attempted coup in Jordan earlier this month, will be able to make anything substantial work.