U.S. Must Build a Middle Class in Middle East

In the long struggle against Islamic extremism, American political leaders have always known that success would come only through the application of many tools, including economic aid. But this aid comes in many shapes and forms, and billions in poorly targeted “development” assistance to the Middle East often don’t produce the expected benefits. Instead, we should use our money to promote middle-class growth—among the most effective ways to nudge reform throughout the developing world, because a growing middle class usually comes to demand such goods as transparency, accountability, smoother capital flows, and eventually political liberty and freedom of the press. If America truly wants to help the Arab world turn the corner, it should use its influence to foster entrepreneurship, the engine of urban middle-class growth.

A robust venture-capital industry is crucial to the growth of urban entrepreneurialism, but in the Arab world it’s sorely lacking. In July 2006, I met with the four Egyptian runners-up of the Arab Business Challenge—the first large-scale competition of young Arab entrepreneurs, in which each of 17 Arab countries administered its own contest and sent a finalist to a regional challenge in Dubai. The meeting was both inspiring and sad. The exhibits included a prototype Arabic search engine that seemingly produced more accurate results than Google in a live comparison; a medical-device company that monitored at-home patient care to reduce time and money spent in hospitals; a streamlined system to monitor media and advertising penetration rates; and a mock-up of the first-ever Arab-themed video game, with graphics every bit as realistic as those in Grand Theft Auto. The entrants had all the same wide-eyed enthusiasm and free-thinking initiative on which open and thriving societies depend. It was sad, then, to contemplate that the lack of early-stage venture capital meant that these business ideas—which called for $500,000 to $3 million apiece in start-up funding—would remain only on paper.