Having founded 14 professional service firms, Jordan-based business leader Talal Abu-Ghazaleh has made his name into a business brand catering to a host of corporate functions around the world, from legal services to management, translation and accounting. He has also gained wide recognition for being among the first proponents of intellectual property rights in the Middle East.

Abu-Ghazaleh has also lent his name to a number of initiatives aimed at encouraging intellectual development in the Arab world, including youth societies, training organizations, a graduate school in business administration, and a business forum. In turn, he has received a number of honors and positions, including chair of the UN’s Global Alliance for Information and Communication Technologies and Development.

Speaking with Arabic Knowledge at Wharton during the latest Festival of Thinkers conference in Abu Dhabi, Abu-Ghazaleh says a deepening economic crisis in Europe and a prolonged recession in the U.S. will do little to prevent the growth of Middle East economies. The Arab model of state control over an economy is a model that Western countries may soon follow, he adds, as they will have to rebuild according to new moral, economic and political principles.

An edited version of the conversation follows:

Arabic Knowledge at Wharton: Why do you think Europe’s problems and the U.S. recession is not part of a global economic crisis?

Talal Abu-Ghazaleh: If you look at it this crisis, it is almost exclusively restricted to the G7 nations, and if you want to be more general, to the OECD countries where they represent the developed world. France is the next victim. Let us not at all exclude any other country. Germany is trying to rescue itself by distancing itself from the euro zone and Europe. If there is one country that has a chance of evading this crisis, it is Germany because it has a certain system of government, which is unlike the other Western countries. There is a lot of state control over the economy, unlike others among the free market economies.

Arabic Knowledge at Wharton: But, regions, including the Middle East, rely on growth in Europe. Isn’t it all interconnected?

Abu-Ghazaleh: I think it is the reverse. This crisis in the West is going to turn into deflation, which means products will be cheaper. We are a market for Western products. The West is not a market for our products. Oil is another story. While there will be a minor shrinkage for the need for oil in the West, that will be more than made up by the greater need in emerging economy countries. Still, I don’t think we will see fewer cars being driven, fewer airplanes and lesser demand for electricity in the West. Only a margin of shrinkage will be in the needs of factories.

I remember the words of former U.S. President George Bush Jr. when the crisis started. He said, ‘We’re in this together and we will come through it together.’ Nonsense. We did not go into this together. This was a crisis precipitated by Wall Street. It was not precipitated by the stock exchange of Cairo, or of Delhi or Shanghai. This was a crisis by the financial markets of the U.S. and of Europe because of the partnerships between Europe and the U.S. There are no partnerships between the West and Arab world. There are markets, and the cheaper the goods are the better it is for our economies.

Arabic Knowledge at Wharton: Didn’t Arab countries follow these Western policies?

Abu-Ghazaleh: That is not true. It’s exactly the reverse and that’s why I feel very comfortable about the future of Arab economies. Arab economies are state-controlled. In the last speech Bush made when he went to Sharm-el-Sheikh (in 2008) he told Arab leaders, take your hands off the economy and business will run itself. Nonsense. In the Arab world, no bank is allowed to leverage its debt more than the limits decided by the central bank.

Arabic Knowledge at Wharton: You’re suggesting the economic model of the Arab world is working?

Abu-Ghazaleh: Absolutely. I think the West is going to adapt to the Arab model and that’s what we have seen now. The U.S. today is imposing leverage limits on banks, which is what we have in our part of the world.

Arabic Knowledge at Wharton: But there continues to be poverty and inequality in the Arab world. Hasn’t the state-led model failed?

Abu-Ghazaleh: The Arab economy is not state-led. It is state-controlled. There are controls; there is supervision and reporting. Every client of mine has to submit a balance sheet to the government. In the U.S. or Europe, a bank does not have to report to anybody except its shareholders. This is the control I am talking about. Banks today in the Arab world are enjoying a boom because they were not able to compete with the international banks, which were able to leverage and lend ten, twenty times their capacity. So if I am not able to lend in order to generate revenue except to the extent I am allowed to by the central bank, I cannot compete in size and I cannot grow as much as major international banks. So now banks in our part of the world are in a better competitive position.

When you talk about the Arab world and failure you cannot generalize. It varies from country to country. Some countries have resources like oil and you cannot say they have failed because we can see here a model of success in the Gulf. There are other countries, which have different levels of success and failure. But this is not because of the economic model, it is because of other circumstances: corruption, inequality, and the political environment.

Arabic Knowledge at Wharton: In the current Arab renaissance, there is a demand for change in the political system. What are the new economic policies that will be in parallel with the new political policies?

Abu-Ghazaleh: I have started a forum on economic policy reform [in Jordan] and we are talking about how to set policies that will have to be observed by governments. We are starting in Jordan as a model and plan to expand to the other Arab countries. We are talking about policies. We are not going to talk who is wrong or who is right.

I borrow a statement form Warren Buffet. When he was asked how to solve the problem of pubic debt and deficit, he said: I would pass a law that every standing government member or senator or parliamentarian during whose time there is an increase in the deficit or debt, he should resign and never stand for re-election again.

Arabic Knowledge at Wharton: But how do you fire a king or a dictator?

Abu-Ghazaleh: These are governmental policies and they have nothing to do with a king. Unfortunately, the problem with the governments is during their tenure they keep things going so that everybody will applaud them. But at the end of the day, they destroy the economy because they know there will be another government that will come later, and they leave the problems to the next government. This is not a question of heads of state. This is a question of government policies.

Arabic Knowledge at Wharton: What kinds of policies need to be implemented?

Abu-Ghazaleh: We are following four tracks. One track is to reduce the public debt, to reduce the deficit, to increase economic productivity and create jobs, and the fourth track is to solve urgent problems like poverty, and environmental issues. For example, productivity — you don’t just create jobs for people in government who do nothing. You need to motivate the business community to create more jobs and that’s done through the tax system, fiscal policies and through governance.

You reduce government debt by ensuring debt needs are not met by debt. Why do you need the debt? Create resources instead of borrowing. Jordan is no poorer than Luxembourg, but why should Luxembourg have a high income per capita? So develop infrastructure instead of borrowing to spend on salaries. If you have any resources, spend them on building infrastructure and environment that creates productivity.

Arabic Knowledge at Wharton: You have said your business has not been affected by what is happening in Europe and elsewhere. Do you think your business can remain isolated form Europe, even if there is a default?

Abu-Ghazaleh: Absolutely, I am lucky now because I can borrow to finance my business at one or two percent rate for dollars. This crisis has been good to me, because it is reducing my borrowing costs.

Arabic Knowledge at Wharton: What do you think could be the solution then to the financial crisis in the West?

Abu-Ghazaleh: These countries have to realize that just like any company, governments can go bankrupt. Governments go bankrupt when they are unable to provide services to their people. They don’t liquidate like a business and close shop and fire employees. But they can’t provide food, they cannot provide jobs, they cannot provide health, or education.

They have to realize that they are at this stage now, and they have to pull their socks up and grapple with the fact that they need to build their countries and their economies on new political, economic and moral principles. They have to realize that there is a limit to how much you own and how much you can spend. What happened with the West is that every politician offered more than he could afford in order to be elected and promised people what he cannot afford. Stop making false promises.