Missing Links

Arabs in Foreign Lands

What the success of Arab Americans tells us about Europe, the Middle East, and the power of culture.

People of Arab descent living in the United States are doing far better than the average American. That is the surprising conclusion drawn from data collected by the U.S. Census Bureau in 2000 and released last March. The census found that U.S. residents who report having Arab ancestors are better educated and wealthier than average Americans.

Whereas 24 percent of Americans hold college degrees, 41 percent of Arab Americans are college graduates. The median income for an Arab family living in the United States is $52,300 -- 4.6 percent higher than other American families -- and more than half of all Arab Americans own their home. Forty-two percent of people of Arab descent in the United States work as managers or professionals, while the same is true for only 34 percent of the general U.S. population. For many, this success has come on quickly: Although about 50 percent of Arab Americans were born in the United States, nearly half of those born abroad did not arrive until the 1990s.

That immigrants do better than their compatriots back home is of course no surprise. What is far less common is for immigrants to perform that much better than the average population of their adopted home. This fact should prompt important debates that transcend how Arab immigrants are faring in the United States.

Consider, for example, the popular notion that cultural factors loom large behind the Middle East's appalling poverty. Cultural explanations for why some succeed when others fail have a long history. In 1904, German sociologist Max Weber famously argued that the "Protestant ethic" was more compatible with capitalism than religions such as Confucianism and Taoism. Of course, the Asian economic miracle forced a revision of these assumptions. The same thing happened to "Asian values," the idea that cultural factors explained the region's phenomenal rates of economic growth. The Asian financial crisis of the late 1990s gave that cultural theory an even shorter shelf life.

The Middle East's poor economic and social performance today has also prompted explanations of some malignancy in the prevailing culture. The respected Harvard University historian David S. Landes wrote in his 1998 book, The Wealth and Poverty of Nations, that the ill that plagues these countries "lies with the culture, which (1) does not generate an informed and capable work force; (2) continues to mistrust or reject new techniques and ideas that come from the enemy West (Christendom) and (3) does not respect such knowledge as members do manage to achieve."

Such views are common, given the inexcusably poor performance of Arab nations. In the last two decades, no region besides sub-Saharan Africa has seen income per person grow as slowly as in the Middle East. At the current rate, it will take the average Arab 140 years to double his or her income. Asians, Europeans, and North Americans are expected to double their incomes in the next 10 years. The total economic output -- including oil -- of all Arab countries is less than that of Spain, the Middle East's unemployment rates are the highest in the developing world, and its literacy rates rank near the bottom.

But if cultural impediments are behind the Arab world's disappointing performance, what explains Arab Americans' incredible success? The answer, of course, is opportunities and institutions. Arabs in the United States have access to ample opportunities to prosper and can rely on powerful institutions to protect their civil, political, and economic rights to do so. Indeed, the census data show that Arab ancestry mixed with markets and meritocracy creates a potent fuel for success.

Of course, many will explain the success of Arab Americans by pointing out that people who emigrate tend to be younger, more motivated, ambitious, and entrepreneurial. The Arab immigrants who are doing so well in the United States, according to this view, would have made it anywhere.

Sadly, that isn't true, either. Otherwise, how does one explain why Arab immigrants in Europe are worse off than those in the United States? Why are leaders of Arab communities in France warning that social and racial tensions are in danger of creating a "social and political atom bomb"? Sure, France may be an extreme case, but the situation of Arabs in the rest of Europe is hardly better. In general, Muslims living in Europe -- of which Arabs constitute a significant proportion -- are poorer, less educated, and in worse health than the rest of the population. In the Netherlands, the unemployment rate for ethnic Moroccans is 22 percent, roughly four times the rate for the country as a whole. In Britain, the Muslim population has the highest unemployment rate of all religious groups. The failure of Arabs in Europe is particularly worrisome given that 10 of the states or entities along Europe's eastern and southern borders are home to nearly 250 million Muslims -- most of them Arabs -- with a birthrate more than double that of Europeans.

This census data should prompt soul-searching in many quarters. Cultural determinists may want to revise their theories of Arab backwardness. Arab leaders should be ashamed when they see their emigrants prospering in the United States while their own people are miserable. And Europe should wake up to the possibility that it may have less of an "Arab problem" than a "European problem." Then again, maybe the cultural determinists have an explanation for why Europeans are so predisposed against Arab success.

Missing Links

It's the Illicit Economy, Stupid

How Big Business taught criminals to go global.

I recently asked a Swiss banker, "How much harder is it for you to move $50 million and keep it hidden from authorities today than 10 years ago?" He smiled and replied: "The main difference is that now I charge more."

That's discouraging. Apparently, the­ anti-money laundering laws that many governments enacted after Sept. 11, 2001, have changed little. Indeed, according to Edwin Truman and Peter Reuter's study for the Institute for International Economics, in the United States, where these new protections are most stringent, money launderers face only a 5 percent chance of being convicted in any given year. Anywhere else, the chances are even less.

Laundered money is, of course, not the only illicit international trade that governments are unable to stop. Despite a long-standing war on drugs, the total size of the global drug trade probably doubled between 1992 and 2002. For most of the 1990s, an average of 500,000 people crossed illegally into the United States each year. The hope was that the border controls enacted after 9/11 would make that number drop. It hasn't. Half a million people are still entering the country illegally every year. The same is true in Europe, where tighter immigration controls have failed to yield any significant reduction in illegal immigrants.

Governments have failed to stop a wide range of illegal commerce. Fifteen years ago, the trade in pirated goods was almost insignificant. Today, it is valued at $400 to $600 billion a year. No insurgency anywhere in the world seems to have much difficulty procuring the weapons it needs, which is one of the reasons that the illegal arms trade is worth $10 billion. International human trafficking comes to another $10 billion. Stolen art, according to Interpol, is worth $3 billion a year. In the last decade, all of these illegal international trades have grown in size and scope.

The explosion of money laundering offers a glimpse of the total size of the world's illicit economy. Money laundering has grown at least tenfold since 1990, reaching $1 to $1.5 trillion today. Considering that legitimate global trade roughly doubled in the same period, from $5 to $10 trillion, it's easy to see that the illicit economy is significant, vast, and surging.

Of course, smuggling, trafficking, and international crime have always existed. But this familiarity creates a dangerous complacency because it treats today's illicit trades largely as irritants, rather than systemic threats. In the 1990s, revolutionary changes in politics and technology reduced the obstacles that distance, borders, and governments imposed on the international movement of goods, money, and people -- legal and illegal. These changes allowed regional traffickers to become global traffickers. And, as the reach of criminal enterprises expanded, governments failed to keep up.

Now the criminals are only becoming more sophisticated. Because, as illicit industries become big business, they naturally adopt the strategic thinking of big businesses everywhere: diversify, politicize, and legitimize. First, like any normal corporation, traffickers diversify to reduce the risk of having all their revenues come from just one -- in this case, illegal -- enterprise. Second, traffickers spend vast sums to gain the support and protection of politicians and government officials. And third, they invest heavily in reputation-enhancing activities -- churches, sports teams, art exhibits, social work, and media.

The intense diversification of groups engaged in illicit activities into legitimate businesses -- the Moroccan human trafficker who doubles as a real-estate mogul in Spain, or the Russian arms smuggler who owns a bank in Cyprus -- blurs the line that traditionally differentiates legal and illegal business activities. This blurring is further complicated by the close association that international criminal networks develop with politicians and bureaucrats at home and abroad. Indeed, in many instances, the relationships are so close that government officials replace the national interest with that of the criminal enterprise. For example, during most of the 1990s, Vladimiro Montesinos was in charge of Peru's security, working closely with the U.S. Drug Enforcement Administration and the CIA. He is now on trial accused of heading major international trafficking rings in weapons, drugs, and money laundering. A.Q. Khan, the father of Pakistan's atomic bomb, was selling nuclear technology to North Korea and Libya not to further his country's national interest, but to line his own pockets.

All big businesses -- especially those whose industries are heavily regulated -- invest in lobbying or government relations. Why shouldn't criminals do the same? Their "industry" is the most regulated of all -- indeed it is banned! Therefore, the return on their investment in government influence and protection offers the highest returns.

The same applies to philanthropy. Successful businesses invest in club memberships, patronize the arts, and are coveted donors for charities. Wealthy criminals do, too. Walter C. Anderson, an American who was accused of hiding $450 million in offshore accounts to evade taxes, argued that the money went to his Panamanian foundation, which was devoted to advancing human rights, arms control, and family planning. Pablo Escobar Gaviria, the legendary Colombian drug kingpin, was the main funder of sports clubs and other charitable activities in Medellín.

Criminals have always tried to grow their businesses, influence politicians, gain social respectability, and buy into legitimate enterprises. The difference is that they are now able to do it on a scale and with consequences that are without precedent.