Excerpted from Paul Singer's Elliott Management letter to investors,
CLASH OF CIVILIZATIONS?
Saudi Arabia has generally aligned its energy and foreign policy with that of Europe and the U.S. (except, of course, for the periodic bouts of engineered price collapses, as described before [9]). However, although it has lavished its citizens (which are relatively few in number for a country of its size) with lots of benefits, it has also funded and encouraged the spread of Wahhabism, its religious ideology and institutions. This sect of slam has been followed by many of today’s Islamist terrorist groups and individuals, even as the Saudi government itself now opposes many of those same groups. ISIS is just the most recent example of an extremist religious organization that manipulates a version of Islam to use as its basis for obtaining and maintaining political power.
It should not be forgotten that other religions and religious ideologies have gone through periods when murderous, highly motivated vanguards went rampaging through other countries and people in their quests for power and submission. But the current episode has people around the world wondering about the scope of this problem. It is surely not isolated criminal activity, but is it really a clash of civilizations? There is a great deal of ideological territory between these two concepts.
Even if it is the latter, large earth-shaking ideological movements always contain layers of varying motivation and savagery. The super-violent tip of the spear is always a minority, and the power of its leadership determines the size of that spear tip, its motivational power for its legion of warriors, the quality and depth of support by the next layer and the buy-in of the great mass of relatively passive members. The twin questions that should concern us are: what is this struggle really about, and how should the West (or better Western liberalism) respond to it?
There are no obvious answers, but there will be milestones as events unfold. Obviously, the Middle East is in chaos even without regard to the struggle between Israel and several of its neighbors. We do not see many clues in the Middle East that lead to answers about the ultimate nature of the struggle. Outside of the Middle East, particularly in Europe, there are a number of countries in which radicalized elements of the Muslim population are not only rejecting some of the basic tenants of liberal democracy (freedom of speech, freedom of religion, gender equality etc.) but are actively working to replace those ideas with opposing values and their own independent Sharia-based legal systems.
Europe consists of a number of different countries, in which different Muslim (largely immigrant) populations hold varying levels of buy-in to the European or national cultures of the countries in which they live. At the moment, France is the center of attention, given the recent massacres there, but additional episodes will likely occur elsewhere. At present we cannot fathom whether the greater risk for France (and the other nations of Europe which have significant Muslim immigrant populations) is under-reaction or overreaction to the threat of radical Islamists. The French response will be interesting and informative, but it will be difficult to design an effective strategy that will not ultimately embolden the Islamists. The rest of Europe, and indeed the world, will be watching closely.
Economic hardship is another piece of the puzzle governing the extent to which violent extremism takes hold of societies. Europe, in part because of the unintended (but entirely predictable) effects of the euro currency union, is in its seventh year of economic stagnation. Unemployment and underemployment are high, especially among the region’s youth. This economic environment is a foul ground in which anger and racial, religious and ideological hatreds flourish.
Such an environment does not constitute firm ground on which a strong economic recovery can be based. Jews (the populace which often bears the brunt of an upsurge of xenophobia and societal anger) are leaving France in sizeable numbers, and will continue to do so if they do not feel safe and protected. A similar scenario may also result in other countries as well.
If terrorism and the concomitant struggle between radical elements of Europe’s Muslim populations and the states within which they reside intensifies, do you think that business expansion will be hampered, canceled or just not planned? We think the answer lies somewhere on that spectrum.
