The Edge of Risk
ECONOMY
Middle East
Revisiting Marshall: Hope for
Private Sector Growth in the
Middle East
March 3, 2015
The hope for a transformation of the Middle East into more open and dynamic
states has foundered on the rocks of extremism and despair.
But that sweeping judgment misses some quiet, positive change in those states
where the “Arab spring” remains an inspiration and where greater empowerment
of individuals to pursue their economic and political interests is still possible.
However, bloated, rigidly hierarchical public sectors across the region, along
with associated risk-averse work cultures, are not conducive to innovation and
the development of new economic sectors. The public sector’s instinct for self-
preservation often impedes the needed shifts in mindset and culture that allow
economic activity to be generated by private citizens, rather than provided by the
state. There are segments of the population that embrace risk and work cultures
congruent with developed economies, but they are the exception rather than the
rule.
Arab leaders in the public and private spheres understand well that
economic growth and access to opportunity are vital for the region’s future.
Some are working to dismantle old mindsets and to enable fresh thinking and
action to free up the talent and wealth of the region.
Over the past three years, we have tested the proposition that the Marshall
Plan—the big idea that transformed post-war Europe sixty years ago—has
relevance for today’s Middle East. Of course the analogy has its limits—there’s
no France and Germany to reconcile, and Europe’s task was to rebuild an
advanced economic and social system, not build from scratch new institutions
and behavior.
But in several key ways, the message of the Marshall plan resonates well. Arab
elites are eager to take new approaches to stimulate their economies. They know
the region has underperformed in generating economic growth because the
private sector has been controlled by authoritarian regimes, or by weak states
that did not provide the necessary enabling environment. They know well that
youth unemployment is an enormous threat to stability within countries and
across the region. And many in key positions welcome American know-how,
entrepreneurial spirit, and experience—even if they may find fault with American
policies in other respects.
Arab leaders understand that economic
growth and access to opportunity are
vital to the region’s future.
Of all the smart things the Marshall Plan stands for, private sector development
is an essential one. The Marshall Plan team wanted Europeans to take recovery
into their own hands, to identify key sectors for growth, and to not rely on
government handouts to get labor back to work. Across the Arab world,
particularly in the Mediterranean area, history, culture and human capacity all
favor a dynamic private sector. Trading, building and inventing new
technologies are Arab legacies, and need to be revitalized for the 21st century.
But politics in the past decades have undermined some of the region’s natural
potential. Anti-colonial attitudes, the false promises of Arab socialism and panArab movements, the frictions of inter-Arab and Arab-Israeli problems have
impeded the development of an independent business sector. Highly centralized
and secretive regimes had their trusted circle of industrialists, but discouraged
initiative, and prevented educated but socially marginal groups from entering the
economic sphere.
To embrace the Marshall spirit, Arab leaders will have to accept that the
transformation of economies requires some significant shifts in thinking about
the role of individuals, state-society relations, risk management, and more subtle,
cultural norms about work, about freedom of expression and action, and about
winners and losers. Some of the smaller, resource-poor countries—Tunisia and
Jordan in particular—are moving in the right direction. New political actors will
need to learn some basic economics and build a better regulatory, legal and
financial “ecosystem” for innovation and entrepreneurship.
A more strategic principle that the Marshall Plan unleashed—regional economic
integration—will remain aspirational for now. But leaders with some imagination
and vision would be wise to consider how the Arab world can rethink the
potential benefits of integration, and make a virtue of the unifying elements of
language and history to build a more resilient, equitable and open region, and to
give hope to its beleaguered citizens.
The American role in this process will be dramatically different than it was sixtyfive years ago. The financial capital to jump start new economic activity can
come from the region, not from the U.S. taxpayer. The private sector should be
more prominent in working with their Arab counterparts, and government
bureaucracies should be kept at bay.
The broader political objectives that were implicit in Europe—shared values of
democracy and freedom from ideology and oppression—will need to be managed
quite discreetly. But there should be no doubt that advancing private sector
development is part of a larger process of transformation. Over time, it’s the
best route to stability and security.
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