The Middle East Transition We Need to Talk About

We have been hearing about transitions in the Middle East for years now. There was the hoped-for democratic transition, which has been a bust. There is an energy transition looming. There is, arguably, a water transition afoot as aquifer depletion, surface-water exhaustion, and climate change all combine to make a mostly arid region profoundly more so. But an equally profound transition may be one few are talking about: a labor transition that may reorder the economics, politics, and society of the entire Middle East, from Casablanca to Tehran.

Youth unemployment is startlingly high throughout the Middle East, as many wait years between ending education and starting their first job. Even in wealthy Gulf countries, youth unemployment approaches 30 percent. In places like Jordan, it approaches 40 percent. Over the next three decades, if states are grappling simultaneously with declining state revenue, population growth, and a stagnant private sector, and if they pull even further away from using government hiring to relieve public pressure, it will create a perfect storm.

For the United States, this looming labor transition does more than provide an opportunity for increased relevance in the region. It is also a key differentiator in a world of great power competition. Although some may argue that the energy transition will render the Middle East strategically irrelevant in several decades, a seething region would undermine the global economy and threaten world security. The United States has an opportunity not only to head off the region’s worst-case scenarios, but also to advance its interests in a more competitive global environment.

The economies of the Middle East are diverse. There are wealthy countries and poor countries, and economies that are both large and small. Oil and gas revenues play a role for most. They directly fund many governments; hydrocarbon revenues from those states funneled into remittances and government-to-government grants fund many others.

Amid this diversity are similarities. The region’s public sectors are generally very large, and the private sectors are weak. Many workers have only informal employment, enjoying neither fixed wages nor benefits. Governments use employment not only as a form of patronage, but also as an investment in social peace. Large businesses tend to be successful not because of how they operate but who owns them—either the state or people close to the state. Scaling up has proven enormously hard for most small private enterprises, limiting their positive impacts.

The domestic labor forces are growing quickly as young people flood into the job market. To an unusual degree, the Middle East is entering a period when people of working age are a disproportionately large part of the population, with relatively small numbers of young and elderly. In an ideal world, this condition creates a “demographic dividend,” as taxpaying wage earners sharply outnumber the retired and school-aged who are outside the labor market. But the demographic dividend does not do much when women are excluded from the job market, and it does not do much when organizations cannot be economically productive.

It is here that the United States has a unique role to play. While U.S. business did not create the modern firm, its range and depth of managerial talent is among the best in the world. Businesses and organizations have systems to recruit, identify, and promote talent, and they are practiced at incentivizing workers. The U.S. government, for all of its failings, does awesomely complicated things well. Among its greatest skills are aligning multiple agencies and departments for strategic purposes, contemplating choices systematically, and making tradeoffs with transparency and accountability.

Although few talk about it, most organizations in the Middle East are highly personalized, and managerial talent is rare. One might argue that this is a product of jobs handed out by family and tribe, but the roots are deeper. Genuine performance reviews are uncommon, and all too often, workers feel they will bear the costs of mistakes while superiors will take credit for any successes. Risk aversion is more than pervasive—it is often crippling.

There are some who argue that the issue is hopeless because the failings in Middle Eastern management are cultural rather than educational. Studies such as the World Values Survey suggest that Middle Eastern societies skew heavily toward tradition and respect for authority, and away from self-expression. Yet, these characteristics are both dynamic and influenceable.

Take the Saudi national oil company, Aramco, for example. Aramco has been a constant generator of managerial talent for Saudi Arabia for decades, and Aramco managers have been deployed for complex national projects to do everything from building a new science and technology university to constructing Riyadh’s metro system. Aramco’s focus on talent development stems from its history as a joint venture between four American oil companies (which merged to become modern-day Chevron and ExxonMobil). While it became a Saudi company in 1980, Aramco’s approach to cultivating management expertise has endured.

Across the Middle East, technology has revealed a young population that is creative and entrepreneurial. Some of the CSIS Middle East Program’s recent work has suggested that individualism is sharply rising.

Middle Eastern governments with any hope of successfully navigating the economic dislocations of the next three decades will need to put a heavy emphasis on developing management expertise. States will need to continue their transition from employer of first resort to provider of complex services. They will need to nurture enterprises that can productively employ millions of young people and generate wealth that supports the state rather than draw on the state’s largesse. The issue is more than mere economic diversification. It will require a whole new approach to nurturing human capital, and developing home-grown management talent will be key.

The coming crisis gives regional governments even more reason to partner broadly with U.S. institutions, U.S. businesses, and the U.S. government. Neither Russia nor China have much to offer the Middle East in this regard, and they have little interest in going down that road at all. Instead, they are bent on extracting as much as they can for as little as they can.

For the United States, this task is in its sweet spot. U.S. colleges and universities remain a magnet for people around the world seeking high-quality education, and American universities in the Middle East have expanded a U.S.-style education to tens of thousands more. This should be encouraged further. Multinational corporations play an important role identifying and nurturing local management talent. Finding ways to encourage this activity even more and facilitating temporary assignments in the United States would contribute to this goal. Nongovernmental organizations also provide skills and polish to talented graduates in the Middle East, and more than a decade of humanitarian emergencies throughout the region has created a pool of networked and trained middle managers who are poised to make even greater contributions to their societies. U.S. engagement with this cadre of relief workers and aid in transitioning these managers into other areas of work is a very worthwhile effort.

Of course, creating skilled managers is different from keeping them. The most talented people must want to stay where they are rather than emigrate for more freedoms or economic opportunities. That creates incentives for regional governments to develop effective reform agendas that not only create talent but retain it.

There is no U.S. solution to the Middle East’s coming labor transition. At the same time, being able to make a genuine difference in the region’s human capital development makes the United States profoundly important to rulers’ most pressing needs and differentiates the United States from its great power competitors. Cooperation on labor development will not replace the sorts of security cooperation that has been at the core of U.S. relationships in the Middle East, but it should increasingly stand alongside it. The George W. Bush administration put tremendous efforts into trying to inspire young Arabs, only to find that young Arabs already had aspirations, and the United States was largely irrelevant to them.

We are approaching a different moment, and arguably one the United States is uniquely poised to seize. It would be a mistake to squander the opportunity.

Jon B. Alterman is a senior vice president, holds the Zbigniew Brzezinski Chair in Global Security and Geostrategy, and is director of the Middle East Program at the Center for Strategic and International Studies in Washington, D.C.

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Jon B. Alterman
Senior Vice President, Zbigniew Brzezinski Chair in Global Security and Geostrategy, and Director, Middle East Program