The world is in a big shift now from manufacturer-centered innovation, which has been the paradigm since the industrial revolution, to user-centered innovation. Business models have to adapt to this, and the policies of governments have to adapt to it, too.

You have these manufacturers following the traditional ‘

find a need and fill it’ model, the idea that the manufacturer’s job is to go out and look for user needs, come back and develop the products for the users. Market researchers go out to find needs, and then the internal R&D department develops the solution. They spend money doing that, and out of it comes the need for intellectual property. This is because the only way a company can benefit from spending R&D and market research money is by selling whatever they develop at a profit. User innovators are different. When innovation switches to users, users actually benefit from an innovation by using it.

Can you give an example of user innovation to illustrate this?

Take the heart-lung machine that was developed by a surgeon. He benefited because he used it. He built it for his practice. The inventors of the mountain bike were also users, and so were windsurfers. The guy who builds an innovative mountain bike gets to ride it.

On the other hand, a manufacturer doesn’t get any profit from innovation unless he sells it. So if a medical equipment company built the heart-lung machine, they wouldn’t benefit until they sold it. The user has in-house use, and the user can be an organization like a hospital, a company making equipment for itself to use, or it can be an individual, somebody who’s building a bit of sports or cooking equipment for their own needs. They build it to solve their own problem.

What’s driving this change in the way designs develop? Is it that people have access to more technology?

Users are more connected on the Internet. They have design tools that are digitally-based, so what’s happening is that the cost of user innovation is going down. Also, the cost of collaboration among groups of users is going down. When that happens, users start to collaborate, they start to innovate together, to share without IP - like open-source software. And the result is that in many areas, they’re showing they can actually drive manufacturers out of design - they can do so much better than manufacturers at designing. The user is the center of the story here; he innovates in collaboration with others.

Paul Krugman, recipient of the 2008 Nobel Prize for Economics, is a professor at Princeton University. He writes opinion pieces for New York Times twice weekly and has authored several books including, most recently, “The Great Unraveling.”

There were a lot of indications that a crisis was coming, but decision-makers seemed to ignore them until things got really bad. Why was that?

The first thing is that when people are making money, telling them that it’s not based on well-grounded fundamentals is not a popular position. Nobody wants to hear it. This is always true when you have a bubble and too many people are profiting from the bubble to want to listen. I think there was also a deeper problem among policymakers and many economists, which was an excessive belief that markets are efficient. We saw this proliferation of financial markets, of various kinds of financial derivatives - a rapid increase in the sheer scale of the finance sector. And the assumption was that this all had to make sense, despite substantial evidence that it did not. So most people just didn’t look, even though there were quite obvious clues in the data that something was very wrong. Most people simply chose to ignore that.

What caused the financial crisis?

One reason was simply a prolonged period without a major crisis. The roughly 25 years between the second oil shock and the coming of this crisis bred a lot of complacency. Nothing really bad happened to the global economy and so people took more risks. They forgot that bad things can in fact happen. There were too many risks, too much leverage and too much debt.

The second thing that happened was the change in the nature of the financial system. Twenty-five years ago we had a system that was centered on conventional banks, which were quite tightly regulated; there was limited ability to take risks. Since then we had the growth of a much more complex, much harder to pin down financial sector, with conventional banks making up less than half the total sources of credit. This new system was unregulated, it lacked a safety net and there was no explicit insurance. So we found ourselves exposed to a banking crisis in a way that hadn’t happened since the 1930s.

The remote, mountainous stretch of desert between Yemen and Saudi Arabia seems an unlikely place for a political tug-of-war. But for years now, the Saudi government has been trying, in fits and starts, to fortify the 1,300 kilometers of barren land where the two countries meet.

In 2003, Riyadh began building a 10-foot high security barrier there, as part of a drive to crack down on terrorist attacks at home (after Saudi authorities traced explosives from recent attacks back to its southern neighbor).

But Yemeni President Ali Abdullah Saleh argued the fence violated a three-year-old border agreement, so construction stopped. When building resumed briefly in 2008, it reportedly sparked a standoff between Yemeni border guards and Saudi troops.

The border-security issue is still far from settled. Last month, Riyadh was said to be in talks with the German-based aerospace and defense company EADS about a multibillion-dollar plan to make its southern boundary less porous. Details of the plan remain scarce - but Saudi Arabia has clearly become very worried about security threats arising from the tip of the Arabian peninsula.

”Border security on the Yemeni frontier is one of the kingdom’s greatest concerns,” says Christopher Boucek, an associate at the Carnegie Endowment for International Peace in Washington.

He believes that Yemen has become infamous in the region, “as a pathway for bad things; if it’s guns, if it’s drugs, if it’s illegal migration, if it’s cash or bombs - everything.”

Compared to the Gulf’s once booming service sectors like finance and tourism, making money by turning oil into plastic is by no stretch the region’s most glamorous economic project. But if local governments have their way, ventures like the multibillion-dollar polymers complex could arguably play an even more important role in the Gulf’s diversification drive.

Regional plastics production will double to more than 30 million tons per year by 2012, according to the park’s senior vice president - part of a broad push to boost manufacturing along the Gulf. Aside from petrochemicals (like plastics), which are the region’s second-largest export behind oil and gas, local steel and aluminum industries are also heating up.

”We’ve had an explosion in domestic manufacturing in the region,” says Raja Kiwan, energy analyst at consulting firm PFC Energy. “Industrialization forms a huge part of their economic development strategies,” he adds, citing governments in Saudi Arabia, Bahrain, Kuwait and the UAE.

King Abdullah Economic City (KAEC), an expansive $80 billion industrial hub being built on Saudi Arabia’s west coast, is the most ambitious among a host of heavy-industry projects that Riyadh is pursuing. Bahrain, home to the Gulf’s most diversified economy, is trying to expand one of the world’s largest aluminum smelters. And UAE-based Emirates Steel Industries recently announced plans to triple production within five years, through an investment of some $7.2 billion.

The list goes on, and experts say such plans make perfect economic sense. But a handful of persisting strategic problems have them asking whether the region’s industrial-strength ambitions are achievable.

The trouble started when President Omar al-Bashir’s government ordered 6,500 aid workers at 13 organizations to leave Sudan, after the International Criminal Court (ICC) issued an arrest warrant against al-Bashir on Mar. 4. According to the United Nations, those vacating aid groups will leave more than a million people in Sudan without food, water or medicine.

“The situation has already gone from bad to terrible,” says Brian Steidle, a former military observer with the African Union mission in Sudan’s Darfur region. “Hundreds of thousands are expected to die in the next couple of months.”

Richard Goldstone, former chief pro-secutor with the Yugoslavia and Rwanda war crimes courts, believes the reaction by al-Bashir’s government constitutes a serious breach of international law. “His conduct since the arrest warrant indicates criminality at a huge level,” Goldstone says, adding that Khartoum appears to be taking, “a sort of revenge.”

Since 2003, the UN estimates at least 300,000 people have died in Darfur, mainly as Arab militias and government forces have attacked non-Arab, Muslim Africans. About 2.7 million survivors have fled their homes, many taking shelter in huge camps within Sudan that rely on humanitarian aid for basic supplies.

The Arab League has responded to the ICC indicting al-Bashir, but not to Sudan banning humanitarian groups. In a statement, the League simply expressed “deep dismay” at the ICC’s warrant, denouncing it as an affront to Sudan’s sovereignty and requesting that the UN Security Council postpone it for a year.

Amr Moussa, secretary-general of the Arab League, also reaffirmed al-Bashir’s invitation to the organization’s annual summit on Mar. 29-30. Qatar, the event’s host, said it would ignore the ICC’s re-quest to turn over al-Bashir – in spite of mounting evidence that Khartoum has orchestrated the mass killing of civilians.

“I personally have seen government troops in the process of looting, in the process of burning. I’ve seen them attack villages,” says Steidle, who presented photos and other proof of government atrocities he collected in Darfur to the ICC’s chief prosecutor.

When it comes to the African continent, Harry Broadman isn’t like most economists. Where many of his colleagues still see a basket case, he believes there lies growing potential that’s worth pursuing even in unsteady times.

“I see lots of investment opportunities in Africa that are particularly attractive in this environment,” says the former adviser for the Africa region at the World Bank. “Because the financial sectors of many of these countries have been delinked from the global economy, they’ve been relatively spared from the strongest effects of the global recession.”

The author of “Africa’s Silk Road,” a 2006 book about the continent’s growing business ties with Asia, today Broadman is the managing director of The Albright Group and the chief economist of Albright Capital Management, a global strategy firm and an investment advisory that focus on emerging markets.

Despite the persisting risks of doing business on African soil, Broadman says that economic links to the Gulf region, and to the developing giants farther east, are part of a growing trend. While the bulk of international business has historically occurred via the rich northern countries, today more big investment deals are happening directly between developing, southern regions.

“What we’re witnessing is sort of the maturation of South-South investment and trade,” Broadman says. “And Africa epitomizes this.”

A growing list of GCC multinationals seems to agree with Broadman’s optimistic view of their neighbor. In February, Dubai-based DP World opened what it calls East Africa’s largest container terminal, on a purpose-built island a kilometer off Djibouti’s coast. Then in March, Kuwait-based Zain Telecom expanded into its seventeenth African country by purchasing a 31 percent stake in Morocco’s Wana telecom for $324 million. That same month, Riyadh also received its first shipment of rice from Ethiopian farmland purchased by Saudi investors as part of the country’s emerging food security program.

The Gulf’s African ventures have traditionally clustered along the continent’s Arabic-speaking northern fringe, in countries like Egypt and Morocco. Since the millennium, however, GCC firms have been announcing more and more projects in sub-Saharan countries, from Guinea to Rwanda.

The pace of GCC investment is picking up speed, topping $15 billion from 2007 to mid-2008, according to one estimate from the Gulf Research Center (GRC), a Dubai-based think tank. Rather than buckling from the global downturn, analysts say it could actually strengthen investment between the two regions.

It’s impossible to say how many workers have lost their jobs here since the financial crisis and global recession made their unwelcome presence felt along the Gulf. But if you want to know how the UAE’s workers are faring, the real estate industry is a good place to start. According to numbers from the International Monetary Fund and SICO Research, in 2007, half of the UAE’s workforce held jobs either in construction or in real estate.

Over the last few months, a number of major contractors, realty firms and developers have admitted to instituting “retrenchments” and “redundancies” – including Dubai’s two big government-affiliated master developers. Emaar Properties, creator of the 800-meter Burj Dubai skyscraper, has said it will adjust its recruitment strategy to suit the worsening business climate. Nakheel Properties, developer of outlandish projects as the palm- and world-shaped islands, has cut at least 500 personnel so far. And Dubai Properties Group, owned by Dubai’s ruler, says it has slashed 600 positions.

Such announcements have focused on middle- and upper-level staff. But it would be naive to think that the 700,000 or so migrant construction workers at the lower end of the job market, who are piecing together half-formed buildings all over the seven emirates, will be unaffected by a wave of layoffs higher up the chain of command.

Mark Blanksby, a lawyer at Clyde & Co.’s construction practice in Dubai, says the newly jobless span the pay scale. “I know of a large number of people being laid off at all levels” he says, “from laborers up to senior executives.”

Blanksby has also been fielding a growing number of calls from developers and contractors paralyzed by the credit crunch, suggesting the emirate’s troubled real estate industry may continue deteriorating. “It’s going to be a very harsh six months,” he adds, “with a lot of contractors realizing that the owners they have entered into contracts with lack the funding to pay for their projects.”

Real estate isn’t the only area feeling the weight of a global crisis. The local financial and banking sectors, among others, have been dispatching employees. And as segments of the emirate’s economy stumble, workers across the job market are starting to worry that they’ll get caught up in the downturn and sent packing.