Given the huge task faced by President-elect Obama to save what he can of the US economy and start restructuring, what does that mean for the rest of the world, concerned by what is perceived as a growing Islamic fundamentalist insurgency against the west and western ideas?

The world leadership, not just the west, is failing to make headway against security collapses in Sudan´s Darfur, in the Democratic Republic of the Congo, in Somalia, in the islands of insecurity across Central Asia and the Russian border, in southern Thailand, in the southern Philippines. Just when we need strong United nations intervention forces with multilateral support, but only in the context of strong political strategies, we are instead economically and militarily nearly flat on our backs and incapable of the political leadership that is needed.

Most Arabs and most Muslims, as in the west, are tired of conflict, want to focus on economic development and on building their houses, schooling their children and on buying their motor-bikes, cars, mobile phones and hand-held devices, browsing the internet, visiting shopping malls and planning holidays. Against western perceptions, people are actually walking away, mentally and physically, from extremism, conflicts and politics and many will walk away from religion too if it becomes too tainted with these things. They won’t argue, they will just drift away.

Most of the rest of the world is getting on with life and increasingly fed up with stories of Muslim fundamentalists, warring tribes and the underlay of rebel movements that seem increasingly intertwined with local gangsters, and warlords, all of which seem to belong more to medieval history books, rather than the 21st century.

But the west and Obama have to understand that Muslim fundamentalism cannot be defeated by military means. The struggle for the hearts and minds of the Muslim world cannot be fought by proxy by Western armies. The militarization and westernization of the battle for Muslim modernization can only result in defeat for the West, undermining the rising political power of Muslim modernizers in the emerging middle and working classes of North Africa, the Middle East and Asia.

These growing social groups, with their companies and small and medium enterprises, are the ones leading the modernization of the Muslim world. They are the only ones who can win the battle for progress, which has to be won by non-military means.

It is the coincidence of underdevelopment with economic and social backwardness and poor education that gives the greatest advantage to fundamentalist extremists, gangsters and warlords, but the west must desist from tactics that make such groups stronger.

It is sadly true that so far this battle has brought Islam itself into disrepute, arousing Islamaphobia in the West and a wave of prejudice against Muslims. In the end Osama Bin Laden and the fundamentalists cannot hijack Islam. They do not represent the majority. By the same token the West cannot hijack the saving of Islam. That is a task for Muslims.

Muslim leaders, their global position reinforced economically and politically by the emergence of a more equitable New Economic Order, now have to use their increased economic leverage to persuade the West to change track.

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The end of the Bush presidency and the arrival of President Obama provide the opportunity to do this. But it is an opportunity that could easily be lost if the US is overwhelmed by domestic pressures and if the new foreign policy team fails to break the Bush mold.

The war in Afghanistan can easily be lost there, but it cannot be won in Afghanistan alone. The focus is moving from the Middle East to Asia. The terrorist target is moving more squarely against the one thing that can marginalize and defeat them – economic success. The Mumbai attacks emphasized this, as well as trying to drive a wedge between India and Pakistan.

Despite many unresolved contradictions, fundamentalist extremists are being squeezed out of the Middle East where most countries have tightened security and are increasingly battened down against them. Once the main US and British forces leave Iraq the foreign extremists still there lose their rationale. Their time in Iraq is running out.

Pakistan is now the weakest link in the Muslim chain. It is the base for Al Qaeda and a secure haven for the Afghan Taliban. It is developing an insurgency of its own led by a coalition of the Pakistan Taliban, tribal groups and political elements opposed to the new government, that is spilling over into India and risks spreading into Central and Southern Asia.

Moreover Pakistan has an economic recession (one of the few Muslim countries in this position), a weak democracy and a new government trying to establish its leadership.

A large scale internal guerilla war will not solve these problems. It would make them worse.

The wind of change is blowing throughout the Muslim world, especially in the North Africa, the Middle East and Asia. A wave of petrodollar liquidity has bolstered the Gulf States, strengthening new economic and investment links with the Middle East countries, Asia and Europe. But those who politically manipulate Islam and this multiplicity of separatist, criminal and tribal interests seem to understand what the wind of change means for them. It means loss of power and money. It means the end. They must try to stop or delay the new economic development.

Those who use Islamic fundamentalism as a mercantile trade label, and who make coalitions with fundamentalists when it suits them, will have no interest to do so if they can no longer hold onto local power or make money that way.

So the development strategy deployed must focus on breaking these links and creating alternative opportunities for their followers, so that the sons and daughters of gangsters and warlords will have other options. More carrots and less sticks.

The coming battle for the hearts and minds of Muslims and the economic and political future of Muslim countries will be lost or won in Pakistan. Muslim countries and the West should focus hard on how to support and help Pakistan before it is too late. The majority of Pakistanis have already voted for change. Now they need the material means and support to achieve it, and help to strengthen their leadership, capacity and civil society.

That’s how you win a modern war: by fighting the war on want. Security and policing issues become subordinated to political and economic strategy, instead of the reverse.

Dr Terry Lacey is an Indonesia-based development economist who write on modernization in the Muslim world, investment and trade relations with the EU and Islamic banking.(terrylacey2003@yahoo.co.uk)