An extraordinary aspect of old Jerusalem is the number of different religions and sects vying for position within the walled city. Muslims, Jews, Catholics, Anglicans, Greek Orthodox, Copts, Armenian Orthodox are all there, claiming the divine city as their own.

This mishmash of peoples, mainly small minorities co-existing with the overwhelming Muslim majority, gives us glimpse of what the Ottoman Empire must have looked like in its heyday.

Back then, these minorities were called Dhimmis (protected people). This term was used to describe non-Muslims whose religions had written scriptures. Initially Dhimmis status was limited to Jews and Christians, but later others such as Hindus fell into this category. The Dhimmis were accorded legal status, but were second-class citizens, liable to a poll tax but not allowed to enter the army or seek converts. These restrictions remained in force until the beginning of this century. Thus for many years, Islam was a relatively tolerant religion, accepting of most faiths.

In 1941, shocked by what he saw as the decline of proper Islam, Abul’-Ala-Mawdudi, an Indian-born Muslim cleric, founded Jamat’at-i-Islami. This movement called on all Muslims to return to the Koran and follow a purified version of the religion. Central to his teaching was the notion that the Shari’a (strict Muslim law) should be applied to all aspects of life. This pure version of Islam rejected western notions of materialism and nationalism.

According to fundamentalists, only a true Islamic state, based on true Islamic laws could bring social peace. By extension, those who propagated materialism and other competing ideologies were enemies of true Islam.

When the fundamentalists came into contact with both secular Muslims and Dhimmis, they called for a jihad, or holy war. Jihad is based on the idea that Islam is the universal religion and that force may be used to expand its borders.

Terms like Dhimmis, jihad and shari’a may explain the theocratic justification for a holy war, but it is the lamentable economic performance of the Arab states and their inability to deliver prosperity to their people that gives fundamentalism its resonance among young Middle Eastern Muslims.

For example, the economy of Saudi Arabia, the world’s biggest oil exporter and for many in the west a symbol of Arab opulence, is only marginally bigger than Portugal’s. The economy has stagnated for the past decade, yet the population is rising by over 3 per cent per year, and 60 per cent of the country’s 12 million native citizens are under 25. Seven million foreigners work in Saudi, most of them employed in the private sector. The public sector tries to mop up the native school-leavers. Yet even the Saudi central bank admits “there are only enough new jobs for one in three Saudis coming into the workforce”. Unemployment is close to 20 per cent. The budget has been in deficit for the past 17 years, and between $600 billion and $800 billion — five times GDP — has been salted away abroad.

The country is ruled by an inept royal family that holds all cabinet posts and 11 of the 14 provincial governorates. With no democracy, an exploding population and falling living standards, is it any wonder fundamentalism is gaining strength?

For the Arab region as a whole — home to over 280 million people — the picture is even worse. In the 1990s the region grew at only half the rate of other developing countries. Its share of global trade shrank from 3 per cent in 1990 to 1 per cent in 2000.

Other indicators show the region slipping backwards both economically and socially. Today, 37 per cent of all Arabs are illiterate, and it appears that Arab leaders remain wedded to economic cronyism and an Orwellian-style control freakery.

For example, internet access — typically a good indicator of openness and modernity — is almost non-existent. In the US the average number of internet subscribers is 1,940 per 10,000. In sub-Saharan Africa it is 2.7; in the Middle East the figure is just 0.06. Figures for human rights and political freedom are just as bad. According to Freedom House (a Washington-based think-tank) five of the world’s 11 most repressive countries are in the Arab League. The annual United Nations Development Report is equally damming.

Despite the clear lack of progress on economic and social issues, the Middle East economy is burdened with the highest military spending in the world. In 1999, the region spent over 7 per cent of GDP on arms, compared to an average of 2.5 per cent in the rest of the world. Close to 3 per cent of the labour force is in the armed forces and arms constitute 14.5 per cent of all imports, compared to 1 per cent on average for the rest of us.

Not surprisingly, given the existence of enormously wealthy elites ruling millions of semi-literate, unemployed subjects, income disparities are huge. Despite a rapid increase in oil prices last year, which netted over $100 billion in increased revenues for the region, the average Arab lives on less than $4 per day. The average Irishman is 20 times richer.

Even a cursory glance at the figures suggests that the autocratic regimes and their subjects are becoming increasingly alienated from each other. Governments don’t get voted out in the Arab world. Most dynasties pass from father to son or from one hard man to the next.

In most cases, the establishment uses ferocious internal state security apparatus to keep the lid on things. As a result, the rhetoric of the government and the reality on the streets are miles apart. So while the governments may condemn Tuesday’s bombings, there is still serious anti-American feeling among the population.

The great enemy for most of the Arab establishments and their elites is Islamic fundamentalism. Many states have become little more than clients of the US, receiving huge amounts of direct aid from the US in return for toeing the line.

For example, Egypt, is the biggest recipient of American cash in the world, after Israel.

However, cash, (particularly if it is squandered in such cavalier fashion) is not enough, and the classic pax-Americana dogma of one integrated world moving forward with free trade, parliamentary democracy and CNN doesn’t wash with the unemployed young men of Damascus, Cairo or Algiers. Islamic fundamentalism is the alternative to the shambolic cronyism of the ruling Arab elite.

This is Mr bin Laden’s ace, and the western world’s problem. If America retaliates, which it must, how will such retaliation be received? If we are lucky, a grand coalition of Arab states against Afghanistan/Taliban may hold in the same way as it did in the Gulf War.

But three fundamental factors have changed since then. First, Arab populations are younger and more desperate. Second, the intifada in the West Bank is not going to go away. And the third factor is the explosion of pan-Arab cable television since 1991.

Just as instant pictures of the Twin Towers heightened our sense of outrage, live pictures of Israeli soldiers shooting Palestinian children and the new craze of nightly phone-in programmes that take calls have fostered a new sense of common outrage across the 280 million Arabic speakers in the Middle East and North Africa.

Pro-American regimes with large unemployed populations, particularly Jordan and Egypt, may well begin to feel the heat. The Gulf states would not be too comfortable in the event of a sustained US operation in Afghanistan, while Pakistan, smarting from the US’s recent flirtation with India, is a nuclear power with a large fundamentalist population.

At very least, if anti-American feeling on the streets runs out of control, and particularly if Israel uses events of recent days to clamp down harder on the Palestinians, Gulf states may be persuaded to use the oil weapon against the US as a means of assuaging their restless, young population.

This weapon has not been used properly since 1973, when Arab cuts in production made oil prices rise by over 230 per cent.

Although Islamic fundamentalists account for only a very small minority of the total Arab populations, the lack of prosperity and the absence of real political change implies that fundamentalism could become a very real focal point for opposition. The catalyst for any revolutionary movements will be American actions over the coming months.

Remember that the Shah of Iran looked pretty safe until just hours before his departure.

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