A Failure to Communicate

Why doesn't Israel understand the Arab Spring?

Last week, I traveled to Tel Aviv for the Herzliya Conference to speak on a panel about the upheaval seizing the Arab world. The conference is a gathering of the top national security minds in Israel and a venue where officials engage in high-level discussions and often announce major policy decisions. As someone who has spent 12 years involved in the politics of the Arab-Israeli dispute, it was my goal to explain how this conflict affected what I call the Arab Awakening and how Israel should react to recent events in the Middle East.

Merely addressing this crucially important topic, however, ignited anger and skepticism from all sides. A campaign launched by Palestinian activists and amplified by Syrian-leaning newspapers in Lebanon urged Arab participants to boycott the conference. I also received messages on Twitter demanding that I not attend, with some going so far as to say that I was condoning "Israeli apartheid."

In the end, I was present for the final day of the conference, where I spoke in a morning session as part of a five-member panel. The panel's title -- "The Rise of Political Islam Across the Middle East: Arab Spring or Islamist Winter" -- itself reflected a failure to grasp the grand scale and nature of change under way in the Arab world.

Arabs are not faced with a choice between democracy and an Islamist takeover. In fact, most Islamist parties in the region have records of being supremely democratic and suffered under autocratic regimes for demanding reforms when other parties did not. Contrasting the Arab Spring with an Islamist takeover is therefore a false dichotomy -- the people of the region are craving representation, and Islamists have long supported participatory governance.

At the heart of the changes in the region is a democratic impulse common to us all. Both Islamists and secularists share the desire for democratic institutions and personal freedoms. Now that groups like the Muslim Brotherhood have been elected, I noted, Islamist-led democratic transitions in Egypt and Tunisia are a reality. If Islamists want to remain in power, they will, like any other party, have to deliver on popular demands and practice inclusion, tolerance, and respect for women and minorities.

I stressed that what we are seeing in the Middle East today is much more significant than the rise of Islamists. In effect, we're witnessing what columnist Rami Khouri has called "the birth of Arab politics." For the first time, people across the Middle East are organizing political parties, engaging in the decision-making process, and daring to participate in peaceful popular protests on a massive scale.

Such a development, in my view, must be celebrated and facilitated by Israel. I warned the Israeli audience that, if they disparage the new Arab politics, they will only undermine Israel's narrative that it is "the only democracy in the Middle East." Indeed, I went on to say, it is the responsibility of Western and Israeli policymakers to exorcise themselves of their "autocracy addiction" and instead work to build real stability in the Middle East. Israelis must embrace democratic change in the region. Anti-Israeli sentiments may become more prominent as popularly elected governments take power, but it is better to address these challenges head-on than to ignore them, I asserted.

Since the outbreak of the Arab Awakening, the prevailing impulse in Israel is to circle the wagons and turn away from the turmoil in the region. However, I argued, there is a need to look over the horizon. Rather than noting the efforts of transitioning countries to democratize or welcoming new leadership in the region, Israel, itself a democracy, is characterizing the spread of representative governance across the Middle East solely as a threat. Prime Minister Benjamin Netanyahu's description of the Arab Spring as an "Islamic, anti-Western, anti-liberal, anti-Israeli, undemocratic wave" reflects the prevailing security-first mindset.

Ultimately, no one has "lost the Arab Spring to the Islamists," I argued. The democratic opening in the region represents a chance for all to gain, and Israel too has a role to play -- by making a renewed effort to resolve the Palestinian issue. Arabs will not forget that their national narratives are intertwined with the Palestinian narrative, I explained. That is why lasting peace with them requires lasting peace with Palestinians.

The immediate reaction to my opening remarks was an attentive silence. Throughout my short trip, the overwhelming sense I received was that Israelis remain highly skeptical of changes in the region and are understandably fearful of what they will bring. This sentiment was echoed in the remarks at Herzliya by the director of military intelligence, Maj. Gen. Aviv Kochavi, and by Defense Secretary Ehud Barak, who spoke from the podium about turmoil in the region and the immediate threats it poses to Israel. "We are facing a Middle East which will be more hostile," Kochavi noted.

Barak struck a more hopeful note, arguing that democracy in the Arab world will be a positive development in the long run -- yet short-term fears seem to dominate the Israeli psyche. "The skies are clouding over what is known as the Arab Spring," he said.

But I also heard from Israelis who realized that Israel cannot hide from the events shaking the region. Throughout the day, Israelis approached me to commend what I had said, with one going so far as to remark: "This is what Israelis need to hear." These Israelis were, notably, the ones whose horizons went beyond the borders of Israel. They were trying to see changes in the region from the perspective of the Arab people aspiring for democracy, rather than only through the lens of Israel's security concerns.

The day after speaking at Herzliya, I traveled to Ramallah for meetings with notable Palestinian leaders. There, the overwhelming sentiment was one of hopelessness. In fact, one highly connected Palestinian said this was the most difficult period for his people since 1948. He also expressed concern that Palestine's young population -- almost half of which is under age 20 -- had not experienced the heady, nationalist struggle of Yasir Arafat or the hope of the Oslo Accords. This hopelessness, especially among the young, could lead to increased radicalization and more protests.

The entire trip was an important wake-up call. It highlighted the degree to which each side is isolated from the other. Interestingly, some Palestinians and Israelis united over their criticism of me: Palestinians and Arabs lambasted me for attending the Israeli-run conference, and many Israelis remain skeptical of my message that the events of the Arab Spring are not necessarily threatening to Israel. But the divisions between the two sides are becoming more deeply entrenched, and these barriers to engagement will make a future peace agreement more elusive. The world is changing around us, and we must too.

Uriel Sinai/Getty Images

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Embarrassment of Riches

Natural resources would seem to promise easy money. Welcome to the dark side.

Can great wealth do more harm than good? Everybody enjoys moral tales about Richie Riches made miserable by the worship of Mammon at the expense of family, friendship, and self-respect. But can wealth (in particular, natural wealth) be a liability for a whole country?

Actually, the question is relevant for a startlingly large number of economies in transition ranging from Saudi Arabia and Iraq to Venezuela and Russia. And while the consequences of being the resource king of the neighborhood are mixed -- Angola barely survived the consequences of generous deposits of oil and diamonds, while Chile has thrived on mountains of copper -- the dilemma known to economists as the "natural resource curse" does offer insights into the delicate, complex process of development.

Let's get one thing settled. Yes, a whole host of countries (in no particular order, Canada, Australia, the United States, Malaysia, Norway) have managed very nicely indeed with big natural resource endowments. But happy endings (or, for that matter, happy middles) seem more the exception than the rule. Why?

Resource-rich countries typically depend heavily on just a few commodities to pay for imports, to service foreign debts and to fund government services. Nothing inherently wrong with that, save one thing: Natural resource prices are far more volatile than the prices of most industrial goods and services.

Oil, of course, is a great example: The price of a barrel (adjusted for inflation) has topped $100 twice since 1998 -- and slipped to less than $20 in between. But what goes for oil also goes for most hard-rock minerals. Copper tripled between 1998 and the peak of the 2008; tin hit $38,000 a ton in the early 1980s, then sunk below $5,000 early in the new millennium. Nor have crops -- especially the tropical food crops that spell the difference between a strong economy and a week one for a number of small countries -- been immune to the roller coaster ride. Coffee prices increased five-fold between 2002 and the spring of 2011; cocoa tripled between early 2007 and early 2010.

Now, countries could offset the impact of this volatility in all manner of ways, most of which come down to saving in boom times and spending in lean. And some (like Norway, Chile, and even Russia) do just that. But most developing countries lack the political will or the institutional constraints to take the long view. Typically, they become trapped by commodity price cycles, over-committing on the up side and suffering the consequences in terms of budget deficits, currency volatility, and inflation when the balloon deflates. Among other problems, the resulting macroeconomic instability makes it difficult to attract investment in manufacturing and services: arguably just what these countries need to diversify away the impact of commodity price volatility.

There's a related problem for commodity exporters called "Dutch disease." It was named (by The Economist magazine) after the problems encountered by the Netherlands when vast natural gas fields were discovered offshore in the late 1950s. Gas exports brought a bonanza of foreign exchange earnings, tending to drive up the exchange value of the Dutch currency. And that, in turn, made other Dutch exports (notably, manufactured goods) uncompetitive in foreign markets - which made manufacturers and their employees very unhappy.

Note that Dutch disease may or may not hurt an economy as a whole; not every country needs a healthy manufacturing sector to thrive. But there's a case to be made (especially in the case of poor countries) that manufactured exports generate all sorts of positive spillovers that spur development. For example, large-scale manufacturing creates a demand for sophisticated finance and management, both of which are foundations to economic growth.

Nonetheless, the pernicious effects of Dutch disease are pretty clearly visible in contemporary Russia, which exports little besides oil, gas, and minerals. (The main exception is weapons, but that's a whole other story). Russian industry, much of which was beyond repair in the last, dark days of the Soviet Union, lost all its foreign markets once its former satellites were free to look to the decadent West to buy tractors that started on cold mornings and airplanes that rarely crashed. Today, Russia can't attract investment to build a competitive industrial base for a whole bunch of reasons -- not least of them the fact that revenues from natural resource exports prop up the exchange rate of the ruble.

These arguments hardly seem adequate, though, as an explanation for, say, the Dickensian poverty of oil-rich Nigeria or the vertigo-inducing imbalance of the Saudi Arabian economy, where two young men in five are unemployed and there's an 18-year waiting list for home mortgages. In such cases, the link between resources and stagnation is institutional development (or, rather, the lack thereof).

In very poor countries like Nigeria (or Gabon, Equatorial Guinea, or the Democratic Republic of Congo), resource wealth leads to corruption, which in turn leads to dysfunctional government. Oil and mineral wealth, as opposed to wealth linked to the production of low-margin good and services, makes corruption overwhelmingly tempting. A manufacturer that operates in a competitive global market may credibly threaten to leave (or never show up in the first place) if officials stick their hands out at every opportunity. By contrast, an oil company that can extract crude for, say, just one-tenth of what it's worth on the market has a far greater incentive to pay bribes in order to keep on pumping.

Corruption allows government to build and lock-in authority through patronage rather than through the efficient delivery of services. Indeed, it creates (or at least perpetuates) a zero-sum economic culture in which the most realistic path to success is to skim the cream rather than to make something people actually value. And corruption, it's worth remembering, is a communicable disease, typically infecting everybody from traffic cops to tax collectors if it's understood that the Big Men are on the take, too.

Consider Nigeria, which ranks 133rd out of 183 countries on the World Bank's Ease of Doing Business Index -- largely because its business environment is so hobbled by corruption. It takes the better part of a year and fees equal to ten times the per capita income to obtain an electricity connection. Bureaucracy run amok, you say? Sure, but there's method to the madness, since every bottleneck creates a profit opportunity for the bureaucrat who can grease the wheels of the creaky government machinery.

But even where the result of easy resource wealth is not blatant corruption, it can inhibit growth by reducing the pressure for change. In Saudi Arabia, just 12 percent of working-age women are in the work force -- a culturally driven waste of productive capacity that is perpetuated because oil generates enough income to make it tolerable. Saudi men refuse to do drudge work (or much work at all), and get away with it because the state can afford to keep them on the dole, paying Pakistanis or Palestinians to keep the coffee hot and the streets repaired. Here, merit gives way to family, tribal connection, and feudal order. The process of natural selection broadly writ, in which institutions that encourage productive activity trump unproductive institutions, is blunted.

As I suggested earlier, some countries cope well, or even thrive, with huge natural wealth. And not all of them are rich. Chile, for example, has largely neutralized the budget-busting, growth inhibiting effects of an export sector dominated by copper. But Chile had fairly strong growth-inducing institutions to begin with, and now ranks 39th on the Ease of Doing Business Index. Moreover, as Harvard's Jeffrey Frankel has shown, it's possible to put in place automatic mechanisms that buffer commodity price volatility and reduce the temptation for politicians to play Santa Claus in boom times.

All that said, the natural resource curse is very real, and especially difficult to overcome in poor countries. Indeed, there's a pretty good argument to be made that a lack of resources is, on balance, a blessing. Before you scoff, consider that South Korea's GDP per capita was below that of Nigeria's in the 1960s.