What Obama Got Wrong

I'll start off by saying that I really loved the President's speech in Cairo today. Admittedly, I am an American who already has a tremendous respect for the work that President Obama has been doing to try and re-orient the country back towards a pragmatic, centrist position. But I think he hit the right notes almost across the board in quoting the Qu'ran, using a small flavor of Arabic, and more honestly addressing the Israeli-Palestinian problem than any other president since the first George Bush. He even referred to Palestine, a tremendously big deal for those who pay attention to such things.

What I didn't like were the policy recommendations towards the end of the speech when it comes to economic development. And here, I honestly chalk that up to the almost complete lack of nuanced understanding of the region from an economic perspective that is so pervasive among the "intelligentsia" and policy formulators in this country. I can almost hear local Washington think tanks or State Department spouting off the truisms that come with "analysis" of Middle East economies- not enough investment in education, need for entrepreneurship, etc, etc. Sadly, this is the one area where President Obama's vision for the Middle East diverged not one iota from the Bush administration's. I know having worked on the blighted from the beginning Broader Middle East project of 2004.

The fact of the matter is that illiteracy has largely been eradicated in the region, according to UNESCO, with the exceptions of a few countries (it continues to be an issue in Morocco and Yemen). Females in the region are being educated to an equal if not greater extent than their male counterparts and more often than not continue on to higher education in greater numbers. The reason the statistics still look a bit screwy is that you have a "lost generation" of females in particular who missed out on the mass wave of educational investment in the late 1970s/early 1980s. Women over 35 are likely the ones to remain illiterate. Well and good if you want to reach those segments of the population, but that requires a whole different set of policy responses than simply expanding primary education.

As for entrepreneurs, yes, it is a problem perhaps that you don't have more Bill Gates in the region. MEED a few years ago ran a cover story on this same issue. But the REAL problem here is not a lack of ideas as much as a lack of capital. The fact of the matter is that with the exception of the Gulf, perhaps ironically, bank lending remains largely tied up in claims on the government. Across the region, but especially prevalent in North Africa, most banks don't lend. And that is largely because of 1) the financing requirements of the state and 2) (and more importantly here) the fear of the banks that they will not be repaid. The Gulf, beginning in Saudi Arabia in 2003, got around this issue with a really basic, self-evident premise- the government instituted direct deposit. With paychecks going directly to one's checking account the banks could ensure that repayment on loans happened before anything else. How simple is that? With direct depositing, lending to the private sector flourished between 2003-2008. (I am not sure where lending stands this year yet.) And, as a result, private sector growth in much of the Gulf far outstripped government and oil growth. Not exactly rocket science.

So, my suggestion to the President would be to drop the summits and the focus on illiteracy and get down to business. Some of the best "exchanges" the region had with the US under the Bush administration was negotiating FTAs with the US. Give the region an incentive to change instead of meetings to attend.