The Tale of the Tail that wags the Dog: Israel’s Lobby in the US - 24 October 2023

Currently, there is anger amongst the Arab masses towards the West for their callous attitude toward Arab human life and their apparent total support for Israel, the occupier who has broken every international law and got away with murder(s) time and again. At times like these, it is important to understand the sources and causes of this seemingly unjustified bias. 

Why does Israel have such support in democratic countries?

The answer was made ever so clear in the book They Dare to Speak Out: People and Institutions Confront Israel's Lobby, which was first published in 1985 by former US Representative Paul Findley. The book states that Israel has been able to utilize the democratic process by influencing election results and political processes to its advantage through formal and informal lobby groups.

The formal lobbying groups include the “Christians United for Israel”, which is the US largest pro-Israel lobby; the “American Israel Public Affairs Committee (AIPAC)”, which directly lobbies the United States Congress; and the “Conference of Presidents of Major American Jewish Organizations”, which contacts the executive branch" of the US government on behalf the Jewish community. The informal lobbying group is even wider and contains too many organizations to mention.

These lobbying groups contact the legislative and executive branches of government in the US, pour money and votes into election campaigns of persons who support Israel, keep a tally of individuals who do not support Israel, and ensure that Israel is always beyond reproach.

Every US president since the mid-1960s has had to seek the support of these lobbying groups, and shower their constituents with promises of guns and roses to Israel and affirmations of his commitment to its survival and welfare. Some have even gone as far as visiting the Wailing Wall in Jerusalem wearing the kippah to display their loyalty.

No matter what the US party agenda is, support for Israel is a must. Should a president show some neutrality toward the Arab-Israeli conflict, such as in the case of Barack Obama’s second term campaign in 2013, funds would flow in to support his opponent--American Israeli billionaire Sheldon Adelson poured US$ 100 million into campaigns opposing the election of Obama.

On the other hand, when Arab Americans make donations to campaigns the money is returned with a thanks-but-no-thanks note. The case of the Lebanese-American lawyer, Joe Jamail whose contribution to the George H. Bush presidential campaign was speedily returned; possibly in order not to upset the Jewish lobbying groups. The incident was later noted by Reverend Jesse Jackson. 

So why are there no pro-Arab lobbying groups?

There are several Arab lobbying groups in the USA.  Saudi Arabia, Egypt, Libya, and the UAE all have lobbyists on Capitol Hill but unlike their Israeli counterparts, they are not united. They do not form an Arab lobby whose main interest, unlike the Jewish lobby, is the question of Palestine. Each of these lobbies is concerned with its country’s interests, which is why, among other things, their impact pales next to the Israeli lobby.

Does public opinion matter?

It does not. Yes, people’s awareness worldwide of the justice of the Palestinian struggle has improved thanks to social media and non-state actors, but so what? Israel knows that the leaders of democracies only care about the electoral process and the powerful lobbies that control it. To emphasize, democracies are run by special interest groups; the more powerful these groups are at lobbying diplomats and diplomacy, the more control they have. Israel has great clout through its special interest groups and its lobby, the Arabs don’t. Therefore, Arabs should not expect fairness or equitable treatment from the US and other Western democracies.

 

Published in Jordan News: 

https://www.jordannews.jo/Section-36/Opinion/The-Tale-of-the-Tail-that-wags-the-Dog-Israel-s-Lobby-in-the-US-31757

أسعار البنزين هنا وهناك 12-09-2023

 قررت لجنة تسعير المشتقات النفطية رفع أسعار البنزين السوبر في الأردن اعتباراً من 1 ايلول 2023، وحتى نهاية الشهر ليبلغ بذلك 1.7 دولارا للتر الواحد، بينما يبلغ متوسط سعر بنزين أوكتان 95 حول العالم 1.35 دولارا للتر الواحد، مما يعني أن السعر في الأردن يفوق المتوسط العالمي بنسبة 26%..

وقد يعتقد البعض أن هذه النسبة هزيلة ولا تستحق التداول فيها. كما أن هذه المقارنة تعنى بالمتوسط، وتخفي الاختلاف الكبير في هذا السعر بين البلدان بسبب الدعم أو الضرائب في كل بلد. وعادة ما تكون أسعار في الدول الغنية أعلى في حين أن الأسعار في الدول الفقيرة والبلدان التي تنتج وتصدر النفط تكون أقل بكثير (الأردن من بين الاستثناءات لهذه القاعدة).

عند تحليل ومقارنة الأسعار، يحتاج المرء إلى النظر ليس إلى الأرقام المطلقة فقط بل وإلى الدخل النسبي في البلد لتتم مقارنة السعر الى الدخل في البلدان المختلفة والوقوف على عبء تسعير المشتق النفطي على المواطن أو السكان، فليس من الحصافة أو حتى العدالة أن نعتقد أن وقع السعر في الأردن على دخل المواطن فيه مثل وقع ذات السعر على دخل المواطن في بريطانيا أو ألمانيا مثلا، لأن دخل المواطن في هذه الدول أعلى منه بكثير من دخل المواطن الأردني.

يبلغ السعر النسبي للتر البنزين أوكتان-95 حوالي 15 بالمئة من الدخل اليومي للشخص في الأردن، مما يضع الأردن في المرتبة الثانية عشرة كأغلى دولة في العالم العربي من حيث سعر بنزين الأوكتان-95 ، أي أن السعر لدينا أعلى من السعر في 11 دولة عربية أخرى.

وبالأرقام المطلقة (أي من حيث سعر البنزين فقط ودون التطرق للدخل)، فإن الأردن يحتل المرتبة الخامسة عشرة بين الدول العربية، أي أنه الأغلى بين الدول العربية التي تتوفر بيانات حول تسعيرتها.

وفي الولايات المتحدة الأمريكية، حيث يبلغ الدخل 18.2 ضعف نظيره في الأردن، يُباع بنزين أوكتان 95 بسعر 1.09 دولار أمريكي للتر الواحد، وفي بعض الولايات يصل إلى 0.7 دولار أمريكي للتر الواحد. أي أنه أقل بكثير من السعر لدينا رغم أن دخل المواطن هناك أضعاف أضعاف دخل المواطن الأردني. تخيل ما سينجم من شغب وفوضى في الولايات المتحدة إذا تم رفع سعر اللتر هناك إلى 31 دولارًا وهو ما يعادل السعر لدينا منسوباً إلى الدخل.

وحتى في ألمانيا، حيث يبلغ متوسط دخل المواطن ما يزيد عن 12 ضعف الدخل في الأردن، يبلغ السعر دولارين للتر الواحد. وإذا ما قارنا السعر بالدخل فان السعر لدينا يعادل 20.5 دولاراً للتر الواحد هناك.

أيضاً، يمثل سعر لتر البنزين في ألمانيا 1.6% من متوسط الدخل اليومي هناك بينما يمثل سعر البنزين في الأردن 15 في المائة من متوسط الدخل اليومي، وبعبارة أخرى، فان وطء سعر البنزين على الدخل لدينا أعلى بعشرة أضعاف وطء السعر على الدخل في المانيا.

حسب موازنة 2023 فان الضرائب على أسعار المحروقات ارتفعت من 652 دولار في عام 2015 الى قرابة 1.5 مليار دولار في عام 2019، وحسب بعض المصادر بلغ مجموع الضرائب في 2022 1.7 مليار دولار وذلك لان الحكومة لم تقم برفع الأسعار حينها مما كلفها (حسب التصريحات الرسمية) 774 مليون دولار، لذا، من الممكن ان تبلغ الضرائب والرسوم على المشتقات النفطية حوالي 2.5 مليار دولار أو ما يقارب 1.7 مليار دينار أردني، وهو ما يعادل 5% من الناتج المحلي الإجمالي.

قد يعتقد البعض أن أسعار البنزين في الأردن تخضع لضرائب باهظة بالأرقام المطلقة وهو اعتقاد صائب حسب رأي الكثيرين، فقطاع الطاقة تعرض للكثير من المحن والتخبط وأحياناً، بعض الغموض والضبابية.

من ناحية أخرى، اذا ما قارنا الضرائب وحجمها في الأردن بتلك في دول أخرى، فان الضرائب على الوقود في الدول المتقدمة تذهب هناك، حسب مبادئ الحوكمة السليمة، لإصلاح الطرق، ومعالجة التحديات البيئية، ودعم التكنولوجيا، والتقليل من استخدام الوقود في المواصلات، وترشيد اسخدام الطاقة، فتوفر الحكومات من خلال هذه الضرائب بدائل تقلل من استخدام السيارات، مثل الأرصفة المناسبة للسير واستخدام الدراجات الهوائية، ومسارات الدراجات المحددة لتحفيز ركوب الدراجات، وتخفيض أسعار السيارات الكهربائية والهجينة من خلال أسعار مدعومة، وإقامة أنظمة النقل العام المناسبة وغيرها من الإجراءات التي تزيد من كفاءة الاستهلاك والإنتاج وتقلل من التلوث.

فكلها محتكرة من قبل الحكومة، وهي لسيت متوفرة كبدائل بشكل ملائم في الاردن.

تحتكر الحكومة حق وضع الضرائب وتسعير سلع أساسية كالمشتقات النفطية، كما أنها تحتكر أيضاً حق تقديم خدمات عامة (ملائمة) نرجو أن تقدمها لكي لا تختل معادلة الحقوق ويضمحل النمو والتنمية.

 

 نشرت في صحيفة عمون الالكترونية

https://www.ammonnews.net/article/795243

Raising gasoline prices and lowering growth – Sep 11,2023

The average price of Octane-95 gasoline around the world is US$1.35 per litre. There is a considerable difference in these prices among countries. Usually, richer countries have higher prices while poorer countries and the countries that produce and export oil have much lower prices (Jordan is among the exceptions to this rule). The differences in retail prices across countries are caused by taxes and subsidies, which vary from one country to another.

The government in Jordan opted to raise the gasoline and diesel prices as of September 1, 2023. It is important from an economic perspective to figure out the standing of Jordan relative to other countries and determine whether such an action places the economy in a depressed state or not. To keep this article short, the focus is on Octane-95 gasoline.

Relative income and pricing
When analyzing and comparing prices, beyond the absolute values of gasoline prices, one needs to look at the relative income in the country and compare the price relative to income among the comparators. The relative price of Octane-95 gasoline in Jordan is 15% of the daily income per person, which ranks Jordan as the 12th most expensive country for gasoline in the Arab world.

In absolute numbers (i.e., in terms of the price of gasoline), Jordan is the 15th highest Arab country.  In the USA, where income is 18.2 times that of Jordan, Octane-95 gasoline is sold at US$1.09 per litre, and in some states it is as low as US$0.7 per litre. Imagine the riots and chaos in the US if the price of a litre went to US$18. Even in Germany, where the average income is almost 12 times that of Jordan, the price is US$2 per litre, which is 1.6% of the average daily income there; in Jordan, it is 15% of the average daily income, in other words, it is 10 times as high in Jordan.

Taxation and growth
Gasoline in Jordan is heavily taxed; some say by 75% (but the formula is nobody’s business, it seems). On the other hand, principles of proper governance dictate that governments use taxes on fuel to fix roads, address environmental issues, and subsidize technologies. Otherwise, the taxes become a tool for additional taxation to generate more income for the government.

Furthermore, the government is supposed to provide alternatives that minimize the use of cars, such as proper pavements and marked bike routes to enable bike riding, electric and hybrid cars at subsidized rates, and proper public transport systems. All of which are monopolized in terms of provision by the government.

Although the discussion above does not address the recent rise in diesel prices, which is used in freight and production in addition to heating, it is vital to point out that raising the price of diesel will adversely affect economic growth in the country and thus possibly derail the achievement of some of the main goals of the Economic Modernization Vision. Why? There are three main categories of inputs that are used in production: capital which is machinery and manmade inputs, labour, and land, which is energy, fuel, water, and minerals. Raising the prices of all three (interest, wages, and energy prices) will not lead to encouraging investment and growth. 

To grow the economy the government must utilize economic (not accounting) principles, work with a long-term perspective, and repeal some of the hurdles already in place. Because countries are not run as companies, there should be no time to waste.

Published on Jordan News:

https://www.jordannews.jo/Section-36/Opinion/Raising-gasoline-prices-and-lowering-growth-30816

لا ابتكار ولا إنتاجية وديون متزايدة 05 ايلول 2023

أعتذر مقدمًا عن استخدام كلمة "أنا" في هذا المقال؛ فقد ناديت منذ عقود بأن الحكومة يجب أن تركز على الابتكار وتستثمر فيه، دون أن تجد الدعوات والمبررات آذاناً صاغية رغم أن الوصفة بسيطة: الاستثمار في الإبتكار يؤدي إلى زيادة إنتاجية الموارد كالعمالة ورأس المال والريادية، ومع ارتفاع الإنتاجية يزداد دخل الجميع، بما في ذلك الدولة. واليوم، وفي محاولة أخرى لتوجيه الأنظار الى هذه الوصفة السهلة (الممتنعة على الحكومات كما يبدو)، أشرح مرة ثانية أهمية وضرورة الابتكار.

لنبدأ بمثال رقمي بسيط: تبلغ نسبة الدين إلى الناتج المحلي الإجمالي حالياً حوالي 115% (أي تبلغ قيمته 39.4 مليار دينار ويبلغ الناتج المحلي الإجمالي 34.3 مليار دينار وهو دخل الأردن في عام واحد)، تتراوح نسبة الفائدة على الدين العام بين 2% و 7.5%، حسب منشورات وزارة المالية، ولإجراء عملية حسابية بسيطة، دعونا نفترض أن سعر الفائدة الذي تلتزم الحكومة بدفعه هو 4%، وهي فائدة أقل بقليل من متوسط الفائدتين.

والآن لنحسب مقدار الفائدة التي يتعين على الحكومة دفعها في نهاية العام كنسبة مئوية من الناتج المحلي الإجمالي، فهي لن تكون 4% لأن الدين تجاوز الناتج المحلي الإجمالي. الفائدة الواجب دفعها هي 4.6% من الناتج المحلي الإجمالي، وهي حاصل ضرب 4% في 115% (لأن الفائدة على كامل مبلغ الدين وليس على الناتج المحلي الإجمالي). وبالتالي، يتعين على الحكومة توفير 4.6% من الناتج المحلي الإجمالي (أو 1.576 مليار دينار) لسداد فوائد الدين.

ولكن ما هو دخل الحكومة من الاقتصاد المحلي؟ يبلغ دخل الحكومة حوالي 29% (10 مليار دينار أردني) من الناتج المحلي الإجمالي، مما يعني أن مقابل كل دينار ينفق في الاقتصاد المحلي تحصل الحكومة على ضرائب ورسوم قدرها 29 قرشاً، وعلى هذا فإذا نما الاقتصاد بنسبة 6%، فإن الدخل الحكومي سوف يتنامى بنسبة 30% من هذا النمو، وهو ما يعادل 1.8% من الناتج المحلي الإجمالي، وهي نسبة لا تقترب بأي حال من نسبة 4.6% من الناتج اللازمة لدفع الفائدة، وبالنتيجة لابد أن ينمو الاقتصاد بنسبة 15% حتى تتمكن الحكومة من دفع الفائدة البالغة 4.6% على ديونها القائمة، وهو أمر غير مرجّح بل مستحيل في ظل السياسات الاقتصادية القائمة وأسلوب العمل الحالي، بما أن الأردن لن يحقق معدل نمو بنسبة 15% هذا العام، فإن أفضل ما يمكنه فعله هو الاقتراض مجددا لسداد الفائدة على الدين.

وبعبارة أخرى، ستحصل الحكومة على المزيد من الديون (هذه المرة من صندوق النقد الدولي، وبالتالي سيدخل الاقتصاد برنامج "إصلاح" جديد) لتسوية بعض فوائد الديون القديمة، لماذا؟ لأن الحكومة لن تتمكن من تحقيق معدلات النمو المرجوة للوفاء بالتزامات الديون القائمة.

ونسأل مرة أخرى: لماذا؟ لأن الأموال المقترضة تذهب لدفع الرواتب ومعاشات التقاعد وخدمة الديون، لاحظ أن بعض الأموال التي تنفق على سداد الدين العام ستتسرب الى خارج الاقتصاد المحلي مما يعني أن الاقتصاد لن يستفيد منها بشيء بل سيتقلص بقيمة ما يخرج منها.

أيضا، بما أن باقي الأموال المستدانة تذهب لدفع الرواتب ومعاشات التقاعد، فإن الاقتصاد سيستمر بالنمو الاستهلاكي البطيء بينما يعاني الاقتصاد الحقيقي (الصناعة) من هجرة العقول، ارتفاع أسعار الطاقة، شح الدعم، غلاء نظام النقل، وتدني التعقيد والمحتوى العلمي في المنتجات بسبب تدني البحوث والدراسات التي تقود الى الابتكار وتجعل المنتج أعلى قيمة وتنافسية.

لا بد أن يذهب جزء من القروض لرفع مستوى الإنتاج في الأردن والانفاق على الإبداع وتشجيع البحث والتطوير لكي ينمو دخل الجميع وتتراجع نسبة الدين العام الى الناتج المحلي. بمجرد أن يرتفع دخل المواطن العادي، سيزداد أيضاً دخل الحكومة من الإيرادات المحلية، وهو ما من شأنه أن يمكّن الحكومة من تسوية الديون، ويرفع من وتيرة اعتماد الأردن على الذات. هذه هي الصيغة التي يجب على صناع القرار فهمها تماما والعمل بها، وإلا فإن الحكومات المتعاقبة ستستمر بالتذرع بالأحداث الإقليمية والعالمية لتفنيد معدلات النمو الهزيلة التي يعاني منها الاقتصاد الأردني منذ 2010.

لم تخرج السياسة الحالية عن النموذج المعتاد (اقترض لتنفق على الرواتب والتقاعد وخدمة الدين) مما يذكر بـمقولة "إن من الجنون أن يفعل المرء ذات الشيء مرارًا وتكرارًا ويتوقع نتائج مختلفة.

نشرت في موقع عمون 

https://www.ammonnews.net/article/793021

Innovation, productivity, and mounting debt - 05 September 2023

Why I call for investment in innovation, as explained by simple economics

Apologies in advance for using the word “I” in this article; however, I have been preaching for years now that the government should focus on and invest in innovation for decades now, and all calls and justifications seem to fall on deaf ears. The formula is simple: innovation leads to increased productivity, which increases everyone's income, including the state. Today, in yet another attempt, the argument for why innovation is so necessary is explained with a simple numerical example.

 

The ratio of debt to GDP is currently around 115 percent or a debt of JD39.4 billion to a GDP of JD34.3 billion. The interest rate on the debt is between 7.5 percent and 2 percent, according to the Ministry of Finance publications. To make a back-of-the-envelope calculation, let’s assume, for simplicity, that the interest rate the government is committed to paying is 4 percent.  Note that this is slightly less than the average of the two rates of interest.

Now let’s turn to the amount of interest the government has to pay at the end of the year as a percentage of the GDP. Note that this will not be 4 percent because the debt has exceeded the GDP. The arithmetic is straightforward. The interest to be paid is 4.6 percent of the GDP, which is the product of multiplying the 4 percent by the 115 percent (since the interest is on total debt and not the GDP). Hence, the government has to come up with 4.6 percent of the GDP (or JD1.576 billion) to pay the interest on the debt.

But what is the income of the government from the domestic economy? It is around JD10 billion (numbers are rounded), which is 29 percent of the GDP.  That is, for every Jordanian Dinar spent in the domestic economy, the government receives in taxes and fees 29 piasters. So, if the economy grows by 6 percent, the government income will grow by 30 percent of that, which is 1.8 percent of the GDP, which is nowhere close to the 4.6 percent needed to pay the interest. Indeed, the economy has to grow by 15 percent for the government to pay the 4.6 percent interest, which is not bound to happen under the current modus operandus.

Since Jordan is not looking at a 15 percent growth rate this year, the best it can do is to borrow to offset the interest on the debt. In other words, the government takes more debt (this time from the IMF, hence the new “reform” programme) to settle an old debt. Why? Because it has not been able to achieve the desired growth rates to enable it to meet existing debt obligations. Again, why? Because the borrowed funds go to pay salaries, pensions, and debt. Note that some of the debt repayment is leaked outside the economy.

Instead, had borrowing been focused on innovation and the encouragement of R&D, it would have motivated higher productivity, which means income growth. Once the average citizen’s income rises, so would the income (domestic revenues) of the government, which would enable it to settle the debt. This is the formula that all have to understand and work with. Otherwise, every cabinet of ministers will use regional and global happenings as an excuse for the dismal growth rates that the Jordanian economy suffers from.

The current policy has not departed from the usual paradigm; it is a business-as-usual mindset that continues to do the same and achieves the same unacceptable results. Why repeat failed policies? Isn’t this reminiscent of, “The definition of insanity is doing the same thing over and over again and expecting different results?”

 

Published in Jordan News:

https://www.jordannews.jo/Section-36/Opinion/Innovation-productivity-and-mounting-debt-30709

Clash of the monopolies - 28 August 2023

The recent dispute between two associations, the Jordan Insurance Federation (JIF) and the Jordan Medical Association (JMA), has garnered substantial attention from the media and the public. Physicians threatened to decline patient care until the matter was resolved in their favour. Under mounting public pressure, the government, represented by the Central Bank of Jordan (CBJ) as the regulator of the insurance sector, and the Ministry of Industry, Trade and Supplies (MOITS), home to the Competition Directorate responsible for safeguarding competition (not necessarily competitors) in the Kingdom, has stepped in to mediate.

Inflation and rising living costs

The Insurance Federation asserts that the JMA is proposing a 400% increase in physicians' fees. In contrast, the JMA counters with a 30 to 40% increase, attributing the decision to inflation and rising living costs. In response, the government has established a committee after engaging with both parties, aiming to find a middle ground.

The problem and its solution is unclear

However, the problem and its solution seem unequivocally clear. An examination of the Law Amending the Competition Law No. 12 for the Year 2023 highlights Article 6, which prohibits institutions with a dominant market position or significant market influence from abusing this power to impede, limit, or obstruct competition. The term "dominant organization" is defined as one capable of controlling or affecting market activities. This raises the possibility that fee setting could defy the law.

They risk becoming cartels
Another pertinent article is Article 20 (Paragraph 3-C), which directly pertains to the case at hand. It prohibits any association or private sector entity responsible for regulating or advocating for economic or commercial establishments from making decisions that breach competition regulations, restrict competition, or violate the provisions of this law and other legislations. Such actions incur penalties. This makes it illegal for associations, regardless of their nature, to establish prices for their members' services or outputs. The same rule applies to all associations; otherwise, they risk becoming cartels (effectively monopolies), as prohibited by Article 5 of the Law. Additionally, Article 8 A, 1, prohibits entities like producers, importers, wholesalers, or service providers from imposing a lower limit on resale prices.

It can be argued that no association or society possesses the right to dictate prices for its members. From an economic perspective, uniform pricing across the board leads to inefficiency, making discriminatory pricing a better alternative. The market, guided by skills and reputation, should determine who earns more or less among physicians, rather than the decision of an association.

Out of touch
Regarding inflation, the total price increase since 2008 stands at 6.67%, far from the claimed 30 to 40%, making significant fee hikes unwarranted. Moreover, the growth rate, whether nominal (Factoring in inflation) or real values, remains low, rendering any discussion of substantially raising prices for essential services out of touch with current circumstances.

Published in Jordan News: 

https://www.jordannews.jo/Section-36/Opinion/Clash-of-the-monopolies-30562

 

Checks and economic growth and decline 19 August 2023

Reports show that the number of checks circulated in Jordan has declined steadily over the period of 2018 – 2020, and started to rise again, but at a very slow rate, in 2021 and 2022. Given that checks are the preferred debt payment method in the country, it is worth investigating the reason(s) behind this rise and decline, whether there is an emerging trend, and if so, can this information be of use to analysts and policymakers.

 According to the Central Bank of Jordan (CBJ), the number of checks has declined from 16.18 million (numbers are rounded) in 2018 to 14.27 million in 2019, and 10.1 million in 2020.  The number of checks rose thereafter slightly to 10.17 million in 2021, and 10.27 million in 2022.  Hence the use of checks has declined significantly over the past five years by about 58 percent.

Looking at 2023, one notes that the number of checks has risen in the second quarter (1.59 million) relative to the first quarter (1.55 million checks). The total value of checks in circulation is JD9.77 billion in the Q2 of 2023, up by JD499 million from Q1 of 2023. The value per check has also increased from JD592 to JD614.

As to bounced checks, the number has decreased in absolute numbers from 51800 checks in Q1 to 50600 checks in Q2; however, as a percentage of total checks, there was a slight increase from 0.334 percent bounced checks to 0.375 percent. The good news is that the value per bounced check has declined from JD6158 to JD4916.

One possible explanation for the decline in the use of checks provided by the CBJ is that alternative and more efficient payment methods to checks have grown in popularity in recent years. Hence, according to this explanation, the dominance of checks as a means of payment is finally being challenged in Jordan. But the negative trend stopped after 2020 as the number of checks began to increase, albeit at a slow pace. How can one explain such an anomalous trend using the simple explanation provided by the CBJ?

There may be another less conspicuous reason for such a pattern. In the years 2018 – 2020, the per capita income in Jordan declined by 0.5 percent in 2018, 0.5 percent in 2019, and 3.7 percent in 2020. It’s also important to note that 2020, where the greatest decline in check usage occurred, also saw the most significant decrease in per capita income. On the other hand, 2021 and 2022 were years of positive growth in per capita income, 0.2 percent and 1.3 percent respectively, and also witnessed a slight rise in the number of checks in circulation. Consequently, one could deduce that the number of checks in circulation per year correlates with the per capita income in Jordan, a correlation worth pursuing.

Given that data on the number and value of checks in Jordan is readily available, while the per capita income takes longer to estimate, it is worth using the number and value of checks as coincident indicators to predict the direction of the economy. The ease of determination makes such a tool almost a costless planning instrument that provides readily available indications of the direction of the economy.

Published on Jordan News:

https://www.jordannews.jo/Section-36/Opinion/Checks-and-economic-growth-and-decline-30408

Jordan’s decreasing inflation rate: celebration or more work ahead? 14 August 2023

Let us dig deep into all of its impacts and implications 

Recently, there have been calls in the media by officials and some columnists to celebrate the decline in the inflation rate in Jordan. Yet, the complexity of the issue is not being addressed in most of what is being published.

Jordan: A mixed economy

Jordan possesses a mixed economy, amalgamating various private freedoms, centralized economic planning, and government regulation. It has recently been reclassified as a low-middle-income country. Additionally, the economy is small and reliant on foreign loans, international aid, and remittances from expatriate workers.

From one school of economic thought to another
One can also assert that, over the years and depending on the prime minister in office, the type of economic interventions and instruments offered by the government swing from one school of economic thought to another.

Furthermore, the economy is viewed as an open economy with a small production base. Consecutive governments, without providing substantial support to businesses and the manufacturing sector in particular, have hastily entered into numerous trade-liberalizing agreements. This has been done at a pace surpassing that of many other countries.

Measured by consumer prices

In economics, inflation is defined as a rise in the general price level of goods and services in an economy, which constitutes a crucial aspect of macroeconomic governance in any economy. The inflation rate in Jordan, as measured by consumer prices from 1970 to 2022, has ranged between -0.9 percent and 25.7 percent, with an average annual inflation rate of 5.8 percent. In 2022, the inflation rate was 4.2 percent.

Interestingly, when inflation is high, the Jordanian Dinar purchases fewer goods and services, thereby diminishing the purchasing power of money. Conversely, when prices fall (referred to as deflation), consumers may choose to wait and spend less in anticipation of further price reductions. This phenomenon can be observed in Jordan regarding real estate purchases. Even as real estate prices have declined, people seem to delay purchasing real estate in anticipation of future deflationary pressures.

Inflation is brought about by three types of variables, which are not mutually exclusive and may occur simultaneously. The first is demand-pull inflation, which arises when buyers' aggregate demand exceeds the productive capacity (aggregate supply) of a nation. This type of inflation can be caused by easy money and low-cost liquidity, often due to low-interest rates. The second type is cost-push inflation, which pertains to increases in the prices of inputs such as wages or commodities necessary for production, like energy and equipment.

A third type of inflation: Expectations
The third type is inflation expectations, wherein people's anticipation of higher or lower future prices results in present price increases.

In Jordan, one can readily argue that the economy's openness and the limited scope of its industrial base have significantly impacted inflation. Jordan imports 87 percent of its caloric intake and 93 percent of its fuel demand. Historical data spanning 1970 to 2022 demonstrates a strong positive correlation (91 percent) between inflation in Jordan and global inflation; that is, prices in Jordan move in conjunction with world prices 91 percent of the time. Similarly, prices align with those in the EU and the US at rates of 65 percent and 64 percent, respectively.

It is important to note that economists prefer a low (though not zero or negative) and steady inflation rate, particularly since it affects salaried employees by eroding the purchasing power of their fixed incomes. This, in turn, could expedite the onset of a recession as aggregate demand dwindles. However, Jordan presents an interesting case once again.

Allowing wages to easily adjust to inflation
A substantial portion of wages in Jordan are non-contractual (informal), allowing wages to easily adjust to inflation. According to the International Monetary Fund (IMF), the informal economy in Jordan accounts for 26 percent of the economy's size. In terms of employment, 46.1 percent of workers hold informal jobs.

Consequently, only 54 percent of workers (those formally employed) are directly and adversely impacted by inflation, experiencing wage stickiness.

The remainder may require immediate adjustments based on their employment type. Unfortunately, the Employment Cost Index (ECI), a quarterly economic series delineating labor cost changes for businesses, is not measured in Jordan. Otherwise, it would provide an estimate of the impact of inflation on labor costs.

A surge in capital costs
Despite all of the aforementioned points, one certainty remains: with over 90 percent of formal credit acquired from banks, elevating borrowing costs raises production expenses due to the surge in capital costs. This, in turn, affects consumption, especially for significant purchases. In other words, both Jordan's aggregate demand and supply will decrease at a time when the country is grappling with a prolonged recession and one of the world's highest unemployment rates.

So, before one begins to celebrate the declining inflation rate, conducting thorough research by trained economists is advisable. After all, Jordan exports talent, and its economists make positive contributions to institutions worldwide.

Published in Jordan News:

https://www.jordannews.jo/Section-36/Opinion/Jordan-s-decreasing-inflation-rate-celebration-or-more-work-ahead-30296

Jordan needs an industrial policy - 05 August 2023

The economic debate regarding the effectiveness of industrial policy is at an all-time high. An industrial policy is usually a set of actions that combine and coordinate government efforts to bolster economic activities in one or more sectors of the economy. They could include strategic protection of certain industries, government subsidies, direct public sector investments, tax holidays and breaks, supply-chain resilience, job creation, better-paying jobs, greening the economy, etc.

After having been shunned for decades due to the pervasiveness of neoliberal demagoguery, and the focus of analysis on import duties, there is currently a growing prevalence of industrial policies. Furthermore, as in the past, the pursuance of such policies is led by the countries of the global North.  It is time that Jordan devises and implements an industrial policy.

International examples
The Biden Administration issued legislation last year that would pump over a trillion dollars into the economy with a focus on innovation, technology, IT, green economy, and infrastructure. The legislation, which intends to syphon investment out of other countries, create new jobs in the US, and maintain its innovative and experiential global leadership is camouflaged in a legitimate sounding cloak of creating a greener economy.  

But the US is not alone, the European Union is introducing similarly protective legislation on semiconductors to increase the EU’s share in global chips production capacitors. China also aims to boost its high-tech manufacturing. Furthermore, the World Economic Forum believes that industrial policies will have a significant impact on the global economy in the coming years. 

Economic wars
Although industrial policies may trigger economic wars reminiscent of the 1930  Smoot-Hawley Tariff Act, a United States law that raised import duties to protect American businesses and farmers. The result was severe retaliation by many foreign governments. China is already imposing its protective measures on semiconductor sales in response to the recent US deglobalizing actions.  

There is almost a consensus among economists that industrial policies will deepen geo-economic rivalries and tension, and, if they become widespread, reduce competition in some areas as countries attempt to monopolize certain industries or products, relocate economic activity and increase sovereign debt.

However, some believe that industrial policy will also increase innovation. Moreover, the success of so many countries that adopted industrial policies underscores their effectiveness in pushing the development of economies that adopt such policies.

Jordan’s case for innovation
Jordan needs to have an industrial policy with an emphasis on innovation. Why innovation? Because innovation is the vehicle for enhancing productivity, productivity increases the incomes of workers, business owners, and government—and they all need a boost right now. Furthermore, innovation attracts foreign investment and investors as well as domestic investment; thus investment promotion is more likely to succeed in economies where productivity is growing at a fast pace.

Alas, currently Jordan’s score on the Global Innovation Index (GII) in 2022, ranked 78 out of 132 countries, is no cause for celebration. Jordan is weakest in infrastructure, ranked 100, and not doing so well in human capital and research, at 76th place, in business sophistication it ranked 75th, knowledge and technology outputs, 76th again, and creative outputs, 78th. Hence, the industrial policy that should be adopted must be mission-oriented with innovation enhancement being at its core. Otherwise, the necessary innovation solutions will not happen, and productivity will remain stymied.

Resources should be reallocated to funding innovation whereby the government finances research that is done by the private sector.  The success of the research can be availed to the private sector for developing and commercializing its results under special conditions that ensure its spread throughout the economy.

Published in Jordan News:

https://www.jordannews.jo/Section-36/Opinion/Jordan-s-decreasing-inflation-rate-celebration-or-more-work-ahead-30296

بين الحرية والابتكار 30 7 2023

 من الواضح أن الرفض الشعبي واسع النطاق للتعديلات الأخيرة على قانون الجرائم الالكترونية مبرر ومشروع، والأفضل التراجع عن هذه التعديلات كليا لأن من الواضح أنها تهدف لتقليص مساحات الحرية لدى الأفراد والمؤسسات.

تحذّر كتابات ونصائح الحكماء من عواقب تقليص الحريات. فالتاريخ وأسفاره التي ينهل ويتعلم منه ومنها كل ذو بصيرة يروي العديد من القصص التي ينبغي أن توجّه فكر وإجراءات كل مسؤول عن مستقبل الاقتصاد الأردني.

لقد وصف أمارتيا سين، الحائز على جائزة نوبل واقتصادي التنمية المشهور عالميًا، "التنمية" بأنها "حرية" ، ومن هنا جاء كتابه الرائع، "التنمية كحرية"، حيث جادل فيه بأن الحرية ليست فقط الهدف الرئيسي للتنمية بل الوسيلة الرئيسية اليها. ومن بين تأكيدات سين الأساسية أن الحرية السياسية والشفافية مترابطتان بشكل كبير. ولضمان الشفافية، التي هي أفضل علاج للفساد والريعية، يجب أن تكون هناك حرية للصحافة بكافة أشكالها.

ولكي لا يقال أن هذا كلام تنظير وفلسفة، دعونا نزور قصة تاريخية حقيقية من الكتاب الهام "لماذا تفشل الأمم"، بقلم دارون أشيموغلو وجيمس روبنسون حول طباعة الكتب. قدم يوهانس جوتنبرج للعالم في عام 1445، مطبعة للكتب في مدينة مينز بألمانيا لتصبح طباعة الكتب من خلال الآلات (بدلا من الممارسة السابقة وهي الكتابة باليد) وبالتالي انخفضت تكلفة الطباعة بنسبة 90٪، وأصبح التعلم أكثر سهولة وتحسنت إمكانية الوصول الى العلم والآداب تحسنا كبيرا. وفي غضون 15 سنة (عام 1460) تم إنشاء مطبعة أخرى في مدينة ستراسبورغ بفرنسا، وتأسست بعدها مباشرة مطابع في روما والبندقية. وفي عام 1476، تم إنشاء مطبعة في لندن تلتها مطبعة أخرى في أكسفورد عام 1478. وبالنتيجة انتشرت المطابع في جميع أنحاء أوروبا في غضون ثلاثة عقود، وبدأت أوروبا في القراءة والتطور والتعلم لتصبح دولها بعد ذلك دولا متقدمة يسودها الرخاء.

وماذا عن الشرق؟ في عام 1485، منع السلطان العثماني بايزيد الثاني  المسلمين الذين كانوا تحت حكمه من الطباعة باللغة العربية، وأكد السلطان سليم الأول الحظر في عام 1515. وفي عام 1727، أي بعد ما يقارب ثلاثة قرون من اختراع المطبعة وانتشارها في الغرب، منح السلطان أحمد الثالث إذنًا بممارسة الطباعة لشخص واحد (إبراهيم موترفريكا) شريطة أن يقرأ الكتب المطبوعة ثلاثة من كبار قضاة الدولة يشرف عليهم وعلى العملية برمتها قاض رابع بحجة التأكد من عدم وجود أخطاء في المطبوعات. وكما هو متوقع، طُبع عدد قليل من الكتب في ظل هذه الرقابة الخانقة، حيث تم طباعة 17 كتابًا فقط في ظل الحكم العثماني خلال 1729- 1743.

أما بالنسبة للدول التي كانت تحت الحكم العثماني ومنها العالم العربي. للأسف، أصبحت المنطقة بأكملها متأخرة بثلاثة قرون ونصف عن بقية العالم، حيث لم يتم إدخال الطباعة إلا في مصر عام 1798 عندما ترك جيش نابليون بونابرت المنسحب خلفه مطبعة لتصبح من خلالها مصر رائدة المنطقة من حيث المنتجات الثقافية والعلمية.

وهنالك قصص أكثر حداثة كقصة الدولة العربية التي حظرت اقتناء او استخدام جهاز الفاكس حتى عام 1999. وقصة دولة أخرى في المنطقة منعت مواطنيها من الحصول على جوازات سفر حتى الستينيات لكي لا يتعرفوا على كيف يعيش ويُحكم الناس في العالم الخارجي.

المغزى من سرد هذه القصص، إن لم يكن واضحًا للآن، هو أن من أكثر التدبيرات أو الإجراءات الحكومية كسلاً (تخفف الجهد على البيروقراطي وتريحه بينما تضر بالأمة وتطورها) هو حظر النشاط بدلاً من تنظيمه بشكل صحيح ومفيد للأمة. فأي دولة تدعي أنها تسعى إلى الحداثة والتنمية لا تقبل أن تكون تشريعاتها حافلة بالتهديدات والعقوبات المشددة والغرامات المبالغ فيها وأوصاف غامضة للجرائم المحتملة والنية الواضحة للداني والقاصي بتقليص الحريات.

أليس من الأجدى للأردن أن يرفض هذه المسوّدة البائسة لتعديلات قانون الجرائم الالكترونية وأن نركّز بدلا من ذلك على تنفيذ بنود رؤية التحديث الاقتصادي وتحقيق معاييرها (ومن بينها إيجاد 100,000 وظيفة هذا العام أو منذ عام من إطلاق الرؤية)؟؟؟؟

Preserving freedom and progress – Why rejection of the Cyber Security Law amendments is justified - 30 July 2023

The widespread rejection and disdain of the recent amendments to the Cyber Security Law are justified. The writings and advice of the stoics warn of the consequences of curtailing freedoms, and history, and that scholar that teaches the wise, tells many a story that should guide those in charge of Jordan's destiny now.

Amartya Sen, a Nobel laureate and world-renowned development economist, described the development as freedom. Hence, his magnum opus, "Development as Freedom," where he argued that freedom is both the principal objective of development and the primary means of development.

There must be freedom of the press in all its forms
Among Sen's primary assertions is that political freedom and transparency are highly interlinked. To ensure transparency, which is the best cure for corruption and rent-seeking, there must be freedom of the press in all its forms.

But enough of theory, let us take a look at history
But enough talk of theory and philosophy; let us visit a true historical story from the great book, "Why Nations Fail," by Daron Acemoglu and James Robinson.

In 1445, in Mainz, Germany, Johannes Gutenberg presented to the world his book press. Before him, books were written by hand, which made the books costly and only accessible to the clergy and the rich.

The cost of printing thus fell by 90 percent and learning became more accessible and possible. Within 15 years, in 1460, a press was established in Strasbourg, France, followed immediately thereafter by presses in Rome and Venice. In 1476, a press was set up in London, and another was set up in Oxford in 1478. Within three decades, presses were spread all over Europe, and Europe began to read and develop.

Three judges to rule
On the other hand, in 1485, the Ottoman Sultan, Bayazid II, banned Muslims under his rule from printing in Arabic, and Sultan Selim I enforced the ban in 1515.

In 1727, almost three centuries after the invention of the press, Sultan Ahmed III granted one man, Ibrahim Muterferrika, permission to print.

However, three judges had to read the printed books to ensure that there were no mistakes in them. A fourth judge supervised the whole process. As expected, few books were printed under this stifling control process. Only 17 books were printed under Ottoman rule during 1729-1743. Consequently, Ibrahim and his offspring gave up the press in 1797.

As for the countries under Ottoman rule, the press was only introduced in 1798 in Egypt when Napoleon’s army left it behind. And no wonder why Egypt came to lead the region in terms of cultural and scientific products. Meanwhile, the whole region was three and a half centuries behind the rest of the world.

The fax became obsolete
Another story is the ban on the fax machine in a neighbouring country until 1999, by which time the use of the fax was becoming obsolete as email replaced it. Another country banned its citizens from having passports until the 1960s so they would not be exposed to how people are governed in the outside world.

The moral of recounting these stories, if it is not apparent by now, is that one of the laziest exercises in governance, one that relieves the bureaucrat and harms the nation and its development, is to ban an activity instead of properly regulating it.

The many implied threats of severe punishments, exaggerated fines, vague descriptions of would-be crimes, and the obvious intent of curtailment of freedoms do not belong to a state that claims to seek modernity and development.

Let us focus elsewhere
Let us just do away with this miserable draft and focus on implementing the Economic Modernization Vision (EMV) and achieving its benchmarks (among the 100,000 jobs created this year or was it a year from its launch, I wonder!).

Published in Jordan News: 

https://www.jordannews.jo/Section-36/Opinion/Preserving-freedom-and-progress-30013 

Mail my package, please (16 July 2023)

A recent flurry of complaints has surfaced yet again about the spread of mail orders and the eased customs regulations on packages valued at less than JD200, placing customs fees/taxes at JD5–10 per package. The attack on mail orders has focused on the losses to the importing merchants as customers choose to purchase through mail orders.

However, the arguments used are not only remiss but also one-sided and lack comprehensiveness.

Retailers in Jordan complain that such a practice, allowing packages of mail-order purchases to enter the Kingdom at such a small fee, is harmful to them and the government budget (they claim that the government loses out on what can be more revenue in customs). Hence, they are asking for a revision of current regulations. Additionally, they claim that those who purchase through mail-ordered packages risk being sold fake products and will suffer from being unable to return the items.

The claim regarding the budget is meant to urge the government to tax the mail parcels further. Such an argument is bogus as it is unlikely that the government would generate any revenue if it were to depart from the current regulation and go into over-taxation. Simply put, people would stop buying through the mail, and the government would lose the revenue it currently generates from the current 1.1 million mail parcels per year.

Also, it is well established in the economic literature that if a tax rate is doubled, its deadweight loss (the overall economic loss in an economy caused by a new tax on a product) will quadruple. In other words, the excess burden on the economy (buyers and sellers) will increase faster than revenue increases. It is, therefore, important when suggesting policy changes to consider not only the change in government revenue a tax increase would cause but also the increased deadweight loss the tax increase would perpetuate.

Furthermore, many of those that use mail orders from overseas are guaranteed the authenticity of the products (while some stores in Jordan offer fakes unbeknown to the buyers) and are offered return policies, including money-back guarantees that are not commonly available in the retail stores in Jordan.

Moreover, people who order goods via mail seek alternatives, the newest or modern varieties, and options that may be available outside the Jordanian market. Most Jordanian retailers do not turn over their products quickly and keep displaying old merchandise. One reason for this is the excessive taxation paid on such products. Hence, buyers would not purchase the offered retail product because it is not what they want. A policy such as raising tax that limits their choices is a lazy and blunt instrument, to say the least.

The real problem that retailers suffer from when it comes to imports is not mail parcels but the high and numerous taxes and fees. Jordanians pay 121 types of taxes and fees. Look, for example, at some of the taxes that importers face: Tariff tax, unified additional tax, general sales tax, fines, deposits, and insurance, fees for combustible materials, payments to revitalize tobacco cultivation, rewards, and endeavours, universities, and municipalities, subsidy fees for agricultural products, other department fees, veterinary fees, passport fees, livestock census fees, stamp fees, fees for displaying cinematic film, overload fines, walking fees, road tolls, drawing paintings of Jordanian products, inspection fee, additional tax, social affairs tax, insurance for Al-Hussein City for Youth, insurance for the Directorate of Civil Aviation, taxes for municipalities,  taxes for universities, additional tax, and import fees.

Such a baffling and innovative array of taxes fees can best be described as a comedy of compiled errors. Can you imagine what a dilemma tax compliance is for importers? Also, they have to pay the import duties and fees whether they end up selling the product, which explains why retailer turnover of goods is extremely low. 

Alas, the creativity of the legislature and executive branches of government in the search for a fistful of dinars and a few dinars more is genuinely baffling. Instead of restricting people’s choices as a policy response, let’s lower the taxes and fees, which is where the problem lies. It is not the fault of people that they decide to maximize their own choices and utilities; and it is not a bad that foreign producers and shippers are mass customizing and shipping efficiently; in developed countries where customs duties and fees are low, governments hardly ever face such a complaint about mail orders.

Published on Jordan news:

https://www.jordannews.jo/Section-36/Opinion/Mail-my-package-please-29756

Busting economic myths, Jordan does not consume more than it produces 10 July 2023

International development organizations such as the World Bank and the IMF often claim that Jordanians consume more than they produce, raising concerns about the economy's sustainability. However, historical data contradicts this claim, demonstrating that it is not always the case.

Let us examine the historical data using the ratio of final consumption expenditure (household and government) to GDP, as provided by the World Bank. From 1976 to 1985, this ratio stood at 113 percent, driven by aid inflows and rising incomes in the oil-producing Gulf countries. In 1986-1989, the ratio was 100 percent, indicating a balance between expenditures and income. Toward the end of this period, expenditures were even lower than income (99 percent and 95 percent in 1988 and 1989, respectively). From 1990 to 1999, consumption relative to GDP was 95 percent, consistently lower than income. In the period from 2000 to 2019, consumption accounted for 98 percent of income.

Jordan is not consuming more than it produces
These findings indicate that Jordan is not consuming more than it produces. However, the country's spending has a limited impact on labor productivity, resulting in a decline in per capita income. Recently, the World Bank downgraded Jordan's classification from upper middle-income to lower middle-income, attributing the change to adjustments in population estimates used to calculate per capita income.

Thus, earning Jordan the dubious honour of being the only country last year whose classification has been downgraded.

Proves to be harmful
Government consumption expenditure not only fails to enhance productivity and competitiveness but also proves to be harmful. Why? Because it is pro-cyclical, increasing during times of high private demand and decreasing during low private demand, contrary to John Maynard Keynes' counter-cyclical theory.

The recent 2.8 percent increase in GDP in the first quarter should not be cause for celebration. It should be compared with the first quarter of 2022 when growth was 2.5 percent, rather than the fourth quarter. Additionally, the growth is not attributed to government economic policies, decrees, strategies, or actions. Instead, it is primarily driven by government services and the banking sector, which does not indicate a significant recovery.

So, the famous phrase uttered by the Noble Laureate economist Milton Friedman “We are all Keynesians now,” which refers to the government’s involvement in the economy to spur total demand in times of low economic activity, does not apply to Jordan. In fact, in Jordan, we are not Keynesian now, we were never Keynesian and looks like we are not likely to become Keynesian any time soon.

In conclusion, Jordan needs to fit the Keynesian economic model, which emphasizes government intervention during periods of low economic activity. The country has never adhered to this model and is unlikely to adopt it in the future. Can we change this paradigm? I hope that we can, instead of the eat, pray, and love version we are going with now.

Published in Jordan News:

https://www.jordannews.jo/Section-36/Opinion/Busting-economic-myths-Jordan-does-not-consume-more-than-it-produces-29655