Jan. 14 (Bloomberg) -- Two years to the day since protesters toppled Tunisian dictator Zine El Abidine Ben Ali, triggering revolts across the Arab world, euphoria has clearly turned to disappointment. Building Arab democracies with open economies is proving much harder than was, perhaps naively, anticipated.
Tunisia, Egypt and Libya have become trapped in a vicious circle in which instability hampers economic recovery, while lack of growth and jobs in turn fuels instability. In all three countries, failure to break the circle this year could mean ceding the field to radical Islamists who reject modernity, or lapsing back into the corrupt crony-state systems that so many people risked their lives to escape.
Yet the Arab Spring has not failed. Democracy in the Middle East need not lead to the spread of failed states and radical Islam, and it is not too late to respond. What’s needed is a bigger and more focused effort, along with a healthy serving of patience.
History offers a telling comparison. It was also two years after the end of World War II when George C. Marshall said in a speech at Harvard University that “the rehabilitation of the economic structure of Europe quite evidently will require a much longer time and greater effort than had been foreseen.” He proposed what became known as the Marshall Plan, arguing that the alternative would be “hunger, poverty, desperation, and chaos.”
Marshall understood the need to buttress Western Europe in the face of the threat posed by the Soviet Union. Events today in Syria and Mali -- as well as the standoff between the U.S. and Iran, and the one between Israel and the Palestinians -- demonstrate a similar imperative to stabilize North Africa. For starters, ordinary Tunisians, Libyans and Egyptians need to believe that the economic development promised by more moderate political parties, whether Islamic or secular, will materialize if their policies are given a chance.
The job of making that happen inevitably falls to the countries themselves. We will look at each in subsequent editorials. Yet the outside world also needs to strengthen its commitment.
Start with the money. The Arab Spring countries have received help, but a small fraction of the amounts pledged by the Group of Eight and the Gulf nations at Deauville, France, in May 2011. In a shameful act of grandstanding, the meeting’s French hosts produced a headline number of $70 billion, with $38 billion to come from international institutions and $32 billion from donor states. Even those sums pale in comparison with those of the Marshall Plan, which totaled $740 billion in today’s money, according to calculations by economic historian Niall Ferguson.
North Africa does not need, and cannot have, Marshall Plan-scale financial aid: Libya is awash with oil and gas revenue; Egypt is ambivalent about outside help; and the poor state of the global economy constrains the ability of donor countries to throw money at foreign problems.
The real sin of Deauville was to raise unrealistic expectations, already stratospheric in the Arab Spring countries, and then to disappoint them. When pressed over the failure to deliver new money, the Deauville donor states responded in October by setting up a $165 million transition fund (which rose later to $250 million). This fund is to be shared among five nations (including Morocco and Jordan), whose populations total almost 140 million. That effort, again, inspired more disappointment than hope.
The World Bank and other international organizations are doing their part, but a better Deauville is needed, one that offers a stronger and more coordinated Marshall Plan-like vision, as well as some (nonfictitious) money, investment insurance, trade guarantees and other instruments to encourage investment and major infrastructure projects.
Such a framework should be shaped to boost regional trade. Low levels of cross-border commerce within North Africa (accounting for just 4 percent of total trade, according to the African Development Bank) costs these economies an estimated 2 percent to 3 percent of gross domestic product -- a legacy of their myopic and paranoid dictators, most of whom have now departed. Now is not the time to forge a new pan-North African organization, but integration should be tackled aggressively in achievable pieces.
Top of the list is border security. Weapons and radical militants are flowing across frontiers, smuggling is rampant, and the governments are scared. Last month, Libya closed its southern borders and declared the region a restricted military zone. Libya alone is two and a half times the size of Texas; it lacks the tools and expertise to police its desert frontiers. As a result, Libyan arms have made their way to Mali, Syria and Gaza. The U.S. and the European Union can provide the training and sell the technology required to stanch the flow. They can also help create a regional framework to coordinate border-control efforts.
A Deauville-plus framework should also be used to encourage and coordinate cross-border investment laws and bilateral trade deals -- an area where the EU has considerable expertise. That’s a lot to ask, given that the governments in Tunis, Cairo and Tripoli all have yet to adopt their own investment codes. Yet common targets for a shared trade framework might help speed the process.
Projects already under way to improve road links and to integrate energy grids have big potential benefits -- creating the ability to export power not just to one another but also to Europe, for example -- and deserve a high-level push. Similarly, the EU should accelerate its Mediterranean Solar Plan, which aims to build 20,000 megawatts of solar-power capacity in North Africa by 2020, creating an estimated 235,000 man-years’ worth of jobs in the region.
A lot of focus to date has rightly been on supporting civil society and nonprofit organizations. These, too, should be tackled in a more regional context. In December, the German Marshall Fund started a new project to do just that, showing the way.
North Africa can’t have a full-blown Marshall Plan. It can’t wish away issues of religious identity, and joining the EU -- which guided and funded the post-1989 transition in central and eastern Europe -- is not under discussion. Still, one look at a future Middle East represented by Mali and Syria should be enough to demonstrate that a distracted Europe and U.S. are failing to rise to a historic challenge, at huge potential costs.
What’s required in North Africa is a tiny fraction of the commitments, in both resources and energy, that were made through the Marshall Plan after 1947 and, after 1989, to integrate the ex-communist bloc. Of course, North Africa is not Europe, and big risks and hurdles are involved -- just as they were in negotiating Russia’s acquiescence to the breakup of the Soviet empire. Yet creating successful, stable democracies in North Africa anchored firmly in the modern global economy is surely worth a bigger effort than we have made collectively until now.
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