A customer counts his Egyptian 50 pound notes at an exchange office in downtown Cairo, Egypt, April 19, 2016. REUTERS/Amr Abdallah Dalsh

Entrepreneurship as a foreign policy tool

By Steven R. Koltai and Mathew Muspratt

In the United States, a 10 percent unemployment rate is a catastrophe, the kind of number that gets presidents and parties booted from office. In much of the world, especially in the Middle East and North Africa, a rate three times that — unemployment greater than America’s at the height of the Great Depression — is a fact of life.

From Yemen to Turkey, Algeria to Iraq, young men face staggering odds against finding work. The job market is even worse for job-seeking women, who are not even counted in unemployment figures in some countries. Twenty- eight percent of young people in Saudi Arabia are unemployed. Over 30 percent in Tunisia. Thirty-five percent in Egypt. Nearly 40 percent in the Palestinian Territories. As a whole, the Middle East and North Africa region is home to the highest youth unemployment rates in the world. And those rates are rising.

This is not merely a crisis of percentage. Today, of the roughly 420 million Arabs in the world, two thirds are age twenty-nine or younger. Half of those hundreds of millions are under fifteen years old. By 2025, the populations of Iraq, Syria, Yemen, Jordan, Oman, Kuwait, the West Bank, and the Gaza Strip will be double the 1995 levels. In the words of regional expert Vali Nasr, “Looking at the population numbers in the Middle East today, it is hard to see anything but youth.” Hard to see anything but youth without jobs, he might have said.

A money changer holds bundles of Yemeni currency at an exchange shop in Sanaa, Yemen, June 8, 2016. To match Insight YEMEN-SECURITY/CENBANK REUTERS/Khaled Abdullah

Millions of unemployed young people makes for millions of lives stunted by economic despair. It makes for legions of frustrated, idle, angry, and impressionable teenagers and twenty- and thirty-somethings. It makes for instability and chaos that spills over borders — into Jordan, into Israel, and into Turkey. And, as we know from Paris, more and more, it makes for threats that spill into Europe and into America.

Today, the lands of breathtakingly huge numbers of jobless youth are the lands of extremism and the lands where threats to peace and prosperity spawn. These lands are often “failed states” or, at the very least, “failing states,” especially from the standpoint of their increasingly hopeless and disaffected youth. From al- Qaeda to the Islamic State, terror and instability breed where young men cannot find jobs. Joblessness, not religious, cultural, or tribal strife, is, we believe, the root (though not the only) cause of the chaos that today challenges international security and American foreign policy.

The Peruvian economist Hernando de Soto, whose groundbreaking work ties peace and prosperity to economic opportunity, wrote in 2014 that the “West must learn a simple lesson: economic hope is the only way to win the battle for the constituencies on which terrorist groups feed.”

De Soto is right. In our new book, “Peace through Entrepreneurship: Investing in a Startup Culture for Security and Development” we advance de Soto’s point and argue that the United States government has utterly failed to deal with the foremost under lying cause of extremism: economic dysfunction. But the book also argues that the hope de Soto speaks of can come in great part — in most part, in fact — from a quintessential American value and underutilized foreign policy tool that offers a tremendously potent solution: entrepreneurship.

Young entrepreneurs work at the Amman-based Oasis 500, a seed investment firm which finances start-up firms in the region’s information technology sector, November 2, 2011. REUTERS/Muhammad Hamed

Entrepreneurship is a job-creating machine. Jobs are the foundation of peaceful, civil societies. In the United States the youngest firms, not our established corporations, account for nearly all net job growth. The same is true in poor states and emerging markets, where small- and medium- size businesses predominate. By bolstering entrepreneurship in fragile and developing states, by supporting the innovators, startup companies, and job creators of the Arab world, the United States can generate truly viable economic opportunities for jobless youth and alternatives to the chaos and extremism that threatens America today.

Until now, our response to the problems wrought by massive youth unemployment has been warfare, military advisors, drones, Guantanamo Bay detentions, and vast amounts of military spending. And, as British diplomat and author Rory Stewart writes of coalition efforts to combat the Islamic State: “We already tried counterinsurgency and state- building in the same area of Iraq in response to a very similar group — al- Qaeda in Iraq — in 2008. We invested $100 billion a year, deployed 130,000 international troops, and funded hundreds of thousands of Sunni Arab militiamen. And the problem has returned, six years later, larger and nastier.”

Entrepreneurship is a job-creating machine. Jobs are the foundation of peaceful, civil societies.

In other words, the return on our anti-terror investment is negative. It is time for a new strategy for dealing with the threats that dominate our fears and headlines: terror groups running amok across the Middle East; shootings in Paris and Ottawa; beheadings in Syria (and Oklahoma); hatchet attacks in London; Denver schoolgirls flying abroad to jihad.

As we say in the business world, “Don’t tell the market what it wants; listen to what the market is telling you.” The United States must move away from military-heavy solutions (and military-leaning humanitarian solutions) and away from low-yield traditional economic development projects. We must rebalance our portfolio of investments in fragile and developing regions toward job creation — that is, toward entrepreneurship — and redeploy our agencies and staffing to do so effectively. Simply, the United States must elevate entrepreneurship as a foreign policy tool.

Purchase Peace Through Entrepreneurship: Investing in a Startup Culture for Security and Development by Steven R. Koltai; with Matthew Muspratt.

Steven R. Koltai is a guest scholar at the Brookings Institution and managing director of the entrepreneurship consultancy Koltai and Co. LLC. He is a successful entrepreneur in the telecommunications and event management industries, and from 2009–11 served as Senior Advisor for Entrepreneurship under Secretary of State Hillary Clinton.