Shimon Peres and the Minnows of the Middle East

The Israeli president's departure only highlights the glaring dearth of decent leaders remaining in the region today. 

Today's departure of Shimon Peres from Israel's presidency started me thinking about the passing of truly consequential leaders in Israel and the Middle East and wondering whether we will ever see (or even want to see) such leaders again.

What distinguishes Peres isn't his longevity but his centrality and relevance to Israel's remarkable story. He has had his share of political setbacks, most notably his unfulfilled quest to become an elected Israeli prime minister in his own right. He served twice as prime minister -- once in a national-unity government, in which he rotated the top job with Yitzhak Shamir, and again in the wake of Yitzhak Rabin's assassination -- but he never won a popular mandate.

But this omission makes Peres's career even more extraordinary. I'd be hard-pressed to identify another political figure who played such a critical role in any democracy over such a long a period of time, despite not winning its top leadership post. In America's history, Benjamin Franklin comes to mind. And so might Alexander Hamilton, had not Aaron Burr cut his life and career short.

Charles de Gaulle famously said that the cemeteries of France were filled with indispensable men, though he clearly would have counted himself (with good reason) as one of the truly indispensable. And it's hard to imagine Israel's story without Peres. Peres did not found modern Israel as de Gaulle founded the Fifth Republic, but if you took him out of Israel's national narrative, the country would have been much the poorer.

Peres has been there and done that in nearly every aspect of Israel's political, security, and economic life. He was a member of the Knesset for 48 years, longer than anyone else. He served in 12 cabinets, including as deputy minister of defense under David Ben-Gurion, treasury minister, defense minister, foreign minister, and vice prime minister. In 2007, he was elected Israel's ninth president. And Peres wasn't just serving time. He's considered to be the father of Israel's nuclear program and has been central in matters of Israel's security and peacemaking for well over half a century.

His detractors, of course, believe his contributions exaggerated and in the case of his signature effort -- forging the Oslo accords -- dangerous. They mock his narcissism and political ambition. But deriding a leader for ambition and self-regard, particularly after 70 years of public life, is thin criticism. Peres is Peres. And, despite all his flaws and imperfections, for the most part he has transcended his detractors.

Peres may never have the grandfatherly authority of Rabin or Ariel Sharon, or the true greatness of Ben-Gurion, his mentor. But he has won the affection and gratitude of his country and a central place in Israel's history.

Peres was preceded in the presidency by Moshe Katsav -- a man convicted of rape and now doing serious jail time; and he'll be succeeded by Reuven Rivlin, a longtime Israeli politician and Likud Party stalwart known for his hawkish views, though also respected for his commitment to democratic principles. His election is unlikely to elicit much excitement either inside or outside of Israel, since Rivlin lacks Peres's stature and weight on the international stage. These are indeed depressing bookends.

But the bad news doesn't end here. With Sharon's passing and Peres's departure from official Israeli life, the country is passing through a leadership transition from a founding generation to a younger set of leaders who -- while savvy politicians -- lack the moral authority, vision, and judgment that characterized those of an earlier time. Netanyahu, Barak, Olmert (now convicted of embezzlement and facing serious jail time, too) and Netanyahu again were all immensely talented, capable executives -- but their potential for effective leadership and governance looked better on paper than it ever did in practice.

Sure, we tend to glorify and idealize the so-called giants of old. And I'm sure there are more than a few Israelis who wouldn't want to see the likes of a Menachem Begin or Sharon again. But none of this significantly alters the reality that at a time when Israel faces profound challenges and is in desperate need of leaders with vision and courage they are nowhere to be found.

And if that's true for Israel -- a remarkably resilient, productive, and dynamic democracy -- it's much, much worse for an angry, broken, and dysfunctional Middle East that seems to lack leaders and institutions, to boot. Make no mistake, notwithstanding our Hollywood obsession of being rescued by The One, unless you have accountable leaders who can rise above narrow sectarian, corporatist, and ethnic politics and think about the interests of the nation as a whole, there's very little chance of producing good governance, let alone major political and economic reforms.

I really do regret being so consistently and annoyingly negative. But on the occasion of Peres's exit from public life, I can't help feeling down about how empty the shelves are in the leadership department. And here's why.

Tacitus was right

"The fairest day after a bad emperor is the first," the famous fourth-century Roman historian said. Whatever the hopes and desires for the so-called Arab Spring, it has clearly been a disappointment as far as leaders go. Sure, we should give it more time to coalesce and not succumb to the prejudice of low expectations, or be reductionist about the singularity of the region's cultural and religious traditions. But the trend lines just about everywhere look pretty grim with the exception of Tunisia -- the one purported success story. And yet, that's a country so unique that its still-fragile transition from autocracy to a more pluralist political system isn't really indicative of much beyond its own idiosyncratic conditions.

Things elsewhere in the lands of the Arabs run from bad to worse. It's now been almost four years -- admittedly a tiny increment of time against the broad sweep of the history's clock. But in no place touched significantly by the Arab Spring has there been anything akin to positive transformative change and little of the transactional competence required for basic security and prosperity. With apologies to Clint Eastwood, it's been a story not of the good; but mostly of the bad and ugly.

Authoritarians and/or chaos

Once upon a time, Arabdom was ruled by what I like to call the adversarial and acquiescent authoritarians. The first group are those that the United States confronted (and, at times, consorted with): Iraq's Saddam Hussein; Libya's Muammar al-Qaddafi; Syria's Bashar al-Assad. They were cruel and extractive leaders, who, like most dictators, end up going the way of the dodo. The second were America's boys -- the acquiescents we did business with in the name of stability and interests: Egypt's Hosni Mubarak, Tunisia's Zine el-Abidine Ben Ali, Yemen's Abdullah Saleh, and Palestine's Yasir Arafat.

Arafat left this world first, but the Arab Spring took care of the rest. Clearly, few in Washington want them back. But look at what replaced them.

In Iraq, for lack of better options we ended up putting in power an authoritarian committed first and foremost to the Shiites getting even and staying ahead. In Libya, we've gone from a cruel madman to an arbitrary and destructive tribal warlordism with nobody in charge and no end in sight. In Syria, we have a junior version of a dictatorial father but one who has proven even more lethal and determined to maintain power. In Egypt, a new "democratically" elected pharaoh has arisen amid the adulation of millions of Egyptians who didn't want the Muslim Brotherhood and who seem -- at least for the moment -- to have acquiesced to a centralization of power in exchange for a measure of security, stability, and the hope (because that's all it is right now) of greater prosperity. Yemen is better off without Saleh, but will find it almost impossible to escape the gravitational pull of a weak if not failing state. In Palestine, despite the unity gambit, there's no indication that either Mahmoud Abbas (79, and thinking about his retirement) has the will or the ability to rise to greatness -- not without huge incentives from Israel and the United States. As for Hamas, I won't even waste your time. With the exception of Marwan Barghouti (serving five consecutive life sentences in Israeli prison) there is no Palestinian leader who has national clout or respectability.

Sheikh weight

It is one of the more curious anomalies of today's Middle East turbulence that despite all the talk of democratization, political pluralism, and reform, it is the Arab kings, sheikhs, and dynastic families that have remained the most stable -- seemingly immune to the dramatic changes that have roiled their neighbors. Less extractive rulers, some even beloved by their peoples, and insulated in most cases by oil wealth and Islam, remain in the saddle even while pressures mount. Maybe the key reason is that their peoples look around at the neighborhood and conclude: If that is what the Arab Spring has wrought, we don't want one here. Will the bell toll for the kings and rulers of Morocco, Jordan, Saudi Arabia, Qatar, Oman, the UAE, and Bahrain? Perhaps. Some argue that there isn't one among them who seems willing or able to introduce the kind of change that might better their long-term odds. Others suggest that opening the door to meaningful reforms will accelerate the end of monarchies around the region. Whatever the case, the fact remains that kings, not democrats, look to be wearing the crowns for the foreseeable future. The heads may well lie uneasily. But they aren't going anywhere.

Non-Arabs on the march

If there's any hope of the region producing quality leadership look to the non-Arabs: Iran, Turkey, and Israel. I say this largely because, unlike the Arab world, all are politically stable; have tremendous economic potential; the capacity to project military power; and to play key regional diplomatic roles. Israel and Turkey (Prime Minister Recep Tayyip Erdogan's democratic transgressions duly noted) are democratic in character and have ties with the United States; Iran is in a transition that holds significant potential in that regard. All have potentially bright futures (though with significant asterisks, to be sure). With respect to leadership, on paper both Turkey and Israel have the potential to produce chief executives who are accountable, democratically elected, and determined to produce good governance and regional stability. The same might be said about Iran, one day -- but only after there's a profound transition from the domination of the ayatollahs and security establishment to ... well, something else not yet defined. But all three are powerful and serious states with the capacity to act and make decisions. And they are likely to remain so, with futures far brighter than the most significant Arab polities. 

Where are the region's leaders?

Right now, there's not a single Middle Eastern state that can claim a leader who's bold or potentially transformative, and willing or able to risk much in matters of peace or political reform. The chances of a Mandela in the Arab world, or even in Israel, Turkey, or Iran for that matter -- are slim to none. Greatness in leaders is rare by definition. We probably won't see the likes of Anwar Sadat or a King Hussein again. And maybe that's fine: Israelis and Arabs have had it with big men who promise and can't deliver. Indeed, maybe the real dynamic is not charismatic, chest-thumping leaders at all but the less sexy task of developing institutions, building civil society, and channeling the force of public opinion that has become such a dynamic element on the Arab street.

But this will take time -- a lot of time. And in the interim, the conflict-ridden, dysfunctional Middle East is likely to continue to drift, leaderless and visionless. I'll miss Shimon Peres for his humanity, grand ideas, and above all for his commitment to a better future for a region that has seen some pretty dark days. I can only wish we had more like him.

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Please Do Not Teach This Woman to Fish

Why poor countries have too many entrepreneurs and not enough factory workers.

Is there anyone out there who doesn't think small business is the lifeblood of any economy? From Washington to Warsaw, politicians and pundits just can't speak highly enough of plucky entrepreneurs. Even in poor countries, entrepreneurship is one of the most important forces underpinning economic growth, but the best way to raise living standards and reduce poverty is not necessarily to make everyone an entrepreneur. So why do so many costly development programs apparently ignore this fact?

Once upon a time, people who wanted to fight poverty believed in direct approaches that solved identifiable problems one by one. If you wanted to make farmers more productive, you gave them fertilizer. If you wanted to boost manufacturing, you set up factories. To help both of these sectors grow and export goods, you built roads and ports. These kinds of investments quelled hunger and raised incomes in many countries. But recently, an indirect approach arose with promises of still greater benefits.

Daron Acemoglu and James Robinson, social scientists and authors of the bestseller Why Nations Fail, showed through their research that open and inclusive institutions could help economies to grow in a more organic way. This new thinking was embodied in the "golden thread" proposed by David Cameron, the British prime minister. In a Wall Street Journal op-ed in 2012, he suggested that countries pursue the "conditions that enable open economies and open societies to thrive: the rule of law, the absence of conflict and corruption, and the presence of property rights and strong institutions." In other words, given the right environment for business, an economy would bloom on its own.

Cameron's view might have been music to the ears of the newspaper's free-market-loving readers, but it also fit well with an existing fad in the global development community: entrepreneurship. Being an entrepreneur allowed poor people to take hold of their destinies, seizing the means of production -- at least on a small scale -- and realizing their full potential in the economy. High-profile investors based in rich countries, like Acumen Fund and Endeavor, strove to support "high-impact" entrepreneurs in poor countries. And microfinance programs made thousands if not millions of small loans to poor people so that they could start their own businesses.

From the point of view of economic growth, it did not all go swimmingly. First, the investors from rich countries included many non-profits and social investors who did not pick their targets based solely on profitability. They had their own measures of "impact" that steered their financing, things like environmental preservation, access to sanitation, and employees' incomes. Their investments might have reduced poverty in the short term, but it was anyone's guess whether they would add the most to an economy's productive capacity in the long term. Whenever they totted up their own achievements, they forgot to subtract the counterfactuals -- how much income and how many jobs would their motivated entrepreneurs have produced even without their help?

Along with them came the microfinance programs -- as well as many other aid schemes designed to promote entrepreneurship -- which were often based in rural villages where repayment would be enforced primarily by peer pressure among the members. These programs tended to target women, who were viewed as more reliable stewards of the groups' money. Some women did manage to start their own businesses with the loans they received, but the verdict of research into microfinance's ability to reduce poverty was decidedly mixed.

There was a simple reason for this. By trying to make microfinance less risky and more sustainable, the program managers also made it less effective.

To understand why, consider a common-sense question: How big can a business be in a rural village? There aren't many customers there, and incomes aren't very high either. A business would have to serve several villages to start creating jobs in any significant numbers. Now, consider rural women with families. They may be reliable repayers of loans, but they're much less mobile than single men. Single men can move to cities, or at least cover a lot of ground in the countryside, in an effort to win new customers. By contrast, even women without children face constraints on their movements in plenty of countries.

Microfinance may have given a lot of people a little, but it was never designed to give anyone a lot. Unlike the microenterprises founded in rural villages, businesses that serve lots of customers take advantage of economies of scale in production and distribution. These economies of scale are essential for economic growth. After all, which economy is more productive -- one in which every single person is an entrepreneur, or one in which a minority of entrepreneurs employ the majority of people?

In fact, poor countries already have many more entrepreneurs per capita than rich countries. More entrepreneurship is not what they need; economies of scale are. Indeed, the most productive economies are the ones that balance economies of scale with the benefits of competition. Too many businesses, and workers will fall short of their maximum productivity. Too few businesses, and monopolists will gouge consumers, quash innovation, and fail to serve the entire market.

Cameron's golden thread of economic and legal reform would indeed make it easier for businesses to thrive, but not just the small, rural businesses favored by the global development community. Eliminating corruption and strengthening property rights would be a green light for some of the world's biggest investors, both domestic and foreign. These are the kinds of players who open massive industrial parks, agribusiness facilities, and research centers. With investments in the millions and billions of dollars, they create hundreds or thousands of jobs at a stroke.

Of course, these jobs won't always go to the rural women helped by microfinance programs. Microfinance programs may be one of the best ways to help them, short of having their children take jobs in cities. Nor are these jobs necessarily the ones that fulfill the social goals in the mission statements of Western nonprofit organizations. But they are the kinds of jobs that brought hundreds of millions of Chinese out of poverty and could someday do the same for Indians, Haitians, and Congolese. In these countries, the quickest way to escape poverty is likely to be via bus to the nearest city for a manufacturing job. Hundreds of millions of economic migrants know this, but so-called antipoverty experts are just beginning to understand it.

Unfortunately, lobbying for the policy shifts that will set the stage for mass job creation is not what most people in the global development community are good at. They specialize in micro-level programs that allow them to have a hands-on relationship with the people they're supposed to be helping, not the macro-level changes whose widespread benefits are more difficult to attach to a single human face. As long as that's true, the progress they buy with billions of dollars worth of antipoverty programs will never amount to more than rounding error.

Most of these programs are a lot more efficient at generating heartwarming stories than they are at creating jobs, except perhaps for the people from rich countries who are paid to run them.

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