The recent release of the latest Arab Human Development Report has sparked controversy on certain fronts, such as authorship. But one certainty is that economic development, as the current jargon has it, is largely a case of ownership. Mention foreign investment in the Middle East and one thinks of big-ticket projects, whether it’s a massive tourist complex or a huge industrial endeavor.
Unfortunately, one of the most neglected areas is micro-financing, particularly by Arab states themselves. Getting relatively small amounts of money to large groups of people involves a real payoff: more people who are gainfully employed means more savings, and wealth, and society becomes more economically vibrant and active. Over the long term, there’s a cumulative effect from such micro-financing efforts: it’s called building a civilization. People might become gainfully employed by a big corporation, but one “hit” suffered at the top of such a firm could spell dislocation and disaster for hundreds or thousands of employees and their families.
One of the main maladies in Arab countries, along with the wider Islamic world, or certain parts of Africa, is that too many people are poor, and not productive. It has nothing to do with people’s talents, or capabilities, or willingness to work. It’s simply a case of the economic engine not directing investments to the people who need them.
The Middle East’s oil states have become famous, or infamous, for throwing aid money around, with many, many zeros involved when it comes to the actual figures. Time and time again, such funds have proven to be a measure of short-lived stability, or political accommodation. There might be some justifications involved, but such large amounts, directed at large entities, can also generate considerable official and non-official corruption.
Micro-finance isn’t one of those policies that help us feel “good” about ourselves – it’s also a shrewd foreign policy tool. A hefty amount of micro-financing would put oil states or other rich countries in touch with huge, untapped markets, by energizing both producers and consumers. It’s simply a win-win proposition, whether it’s about politics or economics.
Human development reports are warning us that 18 million job opportunities must be created in our region by 2020, to keep up. Since our recent history of economic policies haven’t delivered the goods, it’s time to embrace new thinking.
The “trickle-down” economics of the 1980s was about cutting taxes to give more people more money. The “trickle-up” economics we need today should be about increasing micro-financing, to give more people more jobs, and more ownership. This means more taxes for the state, and more resources for society. It’s the first step to building a modern civilization, not in sound bite terms, but in the real sense of the word.