Picking Up the Pieces

How the international community can help cement the dramatic progress of the Arab Spring

By Lael Brainard
This commentary was published in The Foreign Policy on 15/04/2011

Across the Middle East and North Africa, unprecedented upheavals are creating historic opportunities to expand the circle of democratic societies. But the success of emerging democracies like Egypt and Tunisia will hinge on building strong and inclusive economies that improve people's lives. Alongside our partners in the Middle East and Europe, the United States stands ready to support these democratic transitions through renewed multilateralism. As economic leaders convene in Washington this week for the G7 and G20 finance ministers meetings, we hope to advance this partnership.

Over the last two decades, under their previous authoritarian governments, Egypt and Tunisia moved toward market economies and privatization, but corruption and weak institutions created an uneven playing field, with the benefits of growth not widely shared. Where reforms occurred, implementation was often inconsistent. Whether it was a new firm seeking a license, a new university graduate applying for a job, or a newly married couple securing a loan, the rules of business, employment, and finance were unclear. The status quo too often protected incumbents and excluded new talent.

Today, the change under way in the Middle East calls for rethinking and reorienting the international community's engagement. These transitions are ultimately about allowing people to unleash their opportunities and expand their freedoms -- both political and economic. We can unlock sustained and shared growth by tapping the potential of a young generation, expanding the private sector, and creating accountable institutions. To be effective, our multilateral efforts must be guided by three main principles.

First, our support must directly expand opportunities for those who were left out or left behind. This means investing in young men and women. Youth are the largest and potentially most dynamic segment of the population, but they face unemployment rates near 30 percent and are often trapped in low-wage work. In Egypt alone, nearly 650,000 new job-seekers are entering the labor market every year in search of better opportunities. As transition economies respond to these pressures, they must resist a return to the models of the past: The public sector can no longer provide jobs for an expanding workforce in the face of scarce resources. Instead, a growing private sector, especially small- and medium-sized enterprises, must emerge as the source of sustainable jobs.

Second, resources must be linked to homegrown reforms. Recent events have demonstrated that citizens are demanding greater accountability and equity. Our investments must strive to improve economic governance and support a level playing field by promoting transparency and key reforms. In a more open environment, citizens would have access to fundamental information on budgets, laws, and public-sector finances. In an environment defined by predictable rule of law, their rights and contracts would be honored. And our programs must partner with and invest in civil society to promote accountable institutions.

Finally, our engagement will need to be long term and multilateral. Economic transitions will take many years, and formidable challenges lie ahead. While short-term assistance on the recovery is important, to be truly effective in underwriting a new, more inclusive growth model, we must be prepared to work through the setbacks and scale up successes. In Indonesia, for example, the Kecamatan Program, which started in 22 villages to provide financing to local villages for community-driven poverty reduction, has today been scaled up to more than 30,000 villages.

In 1989, after the fall of the Berlin Wall, as Central and Eastern European countries left communism behind, the world turned to the multilateral development banks to assist with these transitions through development investments, technical assistance, and support for reforms. In 1998, as Indonesia moved away from an authoritarian state, we relied on these banks once again. The world confronts a similar opportunity and challenge in the Middle East. The United States has recently led efforts to recapitalize the multilateral banks, enabling them again to provide critical support in a time of transition.

The World Bank, International Finance Corporation, and the African Development Bank have more than $4 billion potentially available for Egypt and Tunisia over the next year alone. This assistance will be an important pillar of broader U.S. engagement in addition to our bilateral efforts. The international community is also exploring how the European Bank for Reconstruction and Development can reorient its mission to support transitions in the Middle East and North Africa.

The young democracies in the Middle East and North Africa must deliver on their promise to their people. This journey has begun in Egypt and Tunisia, where a new growth path must be built on the strength of small businesses, thriving classrooms, and active communities. Through an enduring commitment to inclusion and reform, these countries can become cornerstones of a prosperous and dynamic region.

Lael Brainard is U.S. Treasury undersecretary for international affairs.