With the Arab spring bringing into sharper focus the long-standing challenges of inequality and unemployment in the Arab world, the question is what to do. It is clear that in the medium term only a dynamic market-based economy can generate good jobs for the unemployed and, importantly, the underemployed. It might seem tempting in the face of popular pressures to expand the public sectors further, but it is not feasible and not desirable. That said: "In the medium term we are all dead" (this was a famous Keynes statement and he actually said it about that favorite economist phrase "in the long run" but it suits me here).
People who have taken to the streets, notably "lost their fear" and in some case brought about regime change, are rightly expecting changes, immediate positive improvements in their lives. They are not going to wait for that "medium term", especially since "private sector" is often seen as synonymous with crony-capitalism where the few well-connected elites make lots of money, and the rest very little.
So what do governments do in the short run to show a break with the past? How do they provide immediate relief, but relief that leads to development, relief that sets the country on a positive path of growth that benefits the many and not only the few? This is the key question being asked across the Arab World. The answer for those with lower skills probably lies in providing government-funded contracts to small entrepreneurs for labor-intensive upgrading and rehabilitation of basic infrastructure such as roads and irrigation canals. This has been done successfully in Asia and Latin America. For the skilled workers and university graduates whose unemployment rates are very high in many parts of the Arab world (close to 30 percent among some female graduates in several countries), there are fewer programs to point to, but some exist in Europe and North America. The approach involves providing social services through non-profit organizations, for instance setting up kindergartens or early childhood development centers run by NGOs where there is a need for high-skilled employees. In the USA, graduates of universities are being encouraged to teach in poor-performing public schools through what is called "Teach for America". Of course in the deadly medium term, it also involves a critical improvement in the quality of education across the Arab world where the very poor outcomes are now widely recognized and where the Bank is already hard at work with a number of education ministries and organizations. To learn more about the Bank's work in this area, visit the Arab World Initiative (AWI).
With finance and development ministers gathered here in Washington for the Spring Meetings of the World Bank and the IMF it seemed a perfect opportunity to all put our thoughts together and have a discussion about the short-term employment packages. My team is hosting a workshop to hear about experiences from around the world and hear Arab leaders’ views about these experiences. Watch this event live.
But what do you think? What should be done in the short run? Are there initiatives that could be scaled up? What should be avoided, what didn’t work?