The unrest that began in Tunisia has managed to sweep away two powerful Arab regimes, foment civil war in Libya, and now threatens to destabilize the seemingly impenetrable rule of oil-rich Gulf governments such as Saudi Arabia.

Amid the din of chanting crowds on the Arab world's streets, difficult questions have emerged about future leadership, and finding solutions to the social and economic problems that ignited the protests. Global economies are also being affected by the continuing leadership vacuum left by deposed regimes in Egypt and Tunisia, and violence in Libya, Bahrain and Oman, as rising oil prices tied to the region's unrest spark inflation fears.

In addition, though the regional unrest is only two months old — a blink in time in the context of history — scholarly analysis of these events yields a number of potential leadership lessons, from understanding the use of social media as a means of communicating with constituents to learning how to identify and deal with unrest brewing within your organization.

But those hoping for a quick resolution to the unrest need to grasp the serious nature of leadership dilemmas that have only begun to confront the region, says Wharton management professor Peter Cappelli, who was invited by Bahrain in 2003 to advise the small Gulf country on how to reform its labor markets.

"This is the big and depressing reality," Cappelli says. "If tomorrow you just waved your hand and, bang, there's a new government in place that is democratic and representative, the main outcome is that over the next year or so there is going to be only frustration, because people's expectations are enormously high. They have no real experience with democratic institutions, and they don't know that moving from an autocracy to democracy is not going to make everybody's lives better off overnight."

A History of Revolt

Observers trying to figure out what will happen in the Middle East should look to Egypt, as it has crafted a political history from revolt, says Eve Trout Powell, a professor of history at the University of Pennsylvania. In an interview with the School of Arts and Sciences, Powell notes Egypt has experienced two prior revolutions, one that ended British rule in 1919 and created its parliamentary system, and an officer's revolution in 1952 that ushered in the era of strong presidential leadership. "Egypt has a history of political activism and political revolt," Powell said. "This is a country that knows how to rise up and articulate its needs when necessary."

Some business leaders in the Arab region express a growing cynicism about the role the Egyptian army has assumed since the ouster of Hosni Mubarak. Army officers have introduced a number of proposed constitutional changes aimed at bringing transparency to the Egyptian electoral process. But it has also come under media scrutiny for its extensive business holdings, the use of US$40 billion in U.S. aid it has received since 1979, and criticism for beating protestors in Tahrir Square.

"All I see is superficial change," says Mishal Kanoo, deputy chairman of The Kanoo Group, one of the largest family-owned group of companies in the Middle East. "We've lost one tyrant, but we don't know who's next. Is he going to be replaced with another tyrant? I can name country after country where the military has come in, and I have yet to see them go away."

In Egypt's case, Powell says, Mubarak's departure after 30 years in power has put the Army into a situation it has not been in before. "It sent one of its own out — Hosni Mubarak was a war hero — it has never faced the kind of organization it is seeing from a much younger population, it has never had to cope with the pressures of the economy in the way it has to today," she notes.

"The role of the Army becomes crucial, because it is the only institution holding power," says Wharton finance professor N. Bulent Gultekin, former Governor of Turkey's Central Bank. "Will they allow a process or help a political process? In Turkey, the army made serious mistakes by staging coups, but at the same time, they pulled out, and managed in a way. The Turkish army has a role of leading society. That remains to be seen now in Egypt."

Cappelli says the best outcome will be if the country's military stakeholders and business community begin providing resources to develop political leaders. "Not just people who are representative of a narrow interest, but really have citizenship in mind as their goal," he says. "And not just who will be prime minister, but also the sort of people who will be the ministers running different agencies."

The Problem with Autocracy

Concern about political stagnation in Egypt, Tunisia and elsewhere is justified, Cappelli says, because despite U.S. intervention and help, the most recent example of regime and political change in the Middle East is still shaky at best.

"Look at what has happened in Iraq," Cappelli says. "We have elections and you get a lot more turmoil for a while, because the people who are in power are not necessarily — at least the initial group in power — are not necessarily good citizens. Their initial approach is to be pretty thug-like themselves. They try to do things unilaterally; they don't want to compromise, they don't have a national view. They're just there to represent their region or their sect, or their religious group. It's an unpleasant process, democracy."

"It's very challenging, there's no doubt about that," Gultekin adds. "The problem with autocratic regimes is that they do not allow peaceful, orderly transitions. The virtue of democracies is they allow their own alternatives to grow and take power. So consider what we saw in Iran's revolution [in 1979]. It had its own unique conditions, the Shiite structure and the power of its clerical class. But the lack of political leadership and institutions created a vacuum. And the same thing is true for Egypt right now. It's a very uncertain period right now, as no real leader has emerged. It's going to be about who will be the most organized."

Kanoo says an approach that would work best for Arab societies is one of gradual changes that maintain the position of the leadership, but allow for a widening of avenues for political debate and discussion. Kanoo offers the examples of Jordan and Bahrain, whose parliaments he says are criticized for not providing any opposition to the government. Changing the portion of appointed members and elected members of parliament so that they would be equal would be one step, he says, until a complete shift to elected parliamentarians is complete.

In addition, Kanoo says leadership must develop in the Middle East that accepts the scrutiny of a free press — currently, most Arab nations rank at the bottom of the Press Freedom Index compiled by Reporters Without Borders, with the United Arab Emirates holding the top ranking, at 87th in the world. "We have to build up the press," Kanoo says. "What is the point of having elected or appointed representatives without a Fourth Estate to hold them accountable? This way, you start to have a counterbalance."

Cappelli agrees that such change will be gradual, but only because the process of building civil institutions is a time-consuming one, especially after a period of chaotic change. "When your leaders are people who have come out of armed opposition, and have never really dealt with any problems except through confrontation, they're not going to make very good leaders in civil society," he says.

"It takes a while to develop people who can be capable leaders, in a context where power is dispersed and you have different interest groups, and you have to be able to compromise, negotiate and find solutions.

"Bahrain is different. They had a parliament. It's not particularly open, and particularly the Prime Minister has been there forever. But they have a press that is reasonably open. They do have some of these institutions in place, so you just have to open them up to everybody. But in these other countries, Egypt especially, despite the fact that it's a highly educated population, they haven't had a system that allowed enough participation for people to develop those skills."

Leadership lessons

Examining the region's unrest from outside, a number of academics and leadership consultants have put forward what they see as lessons to be gleaned from the events in the Middle East.

The social-media fuelled protests have revolutionized the practice of leadership, blogs Joan V. Gallos, director of the Executive MBA Program at the Henry W. Bloch School of Management at the University of Missouri-Kansas City, by making it personal, and at the same time instantaneous on a wide scale.

The ability to "forge global alliances, further causes, and foster organizational agendas" furthers the need for leadership, Gallos notes. Leaders have to know and respect their followers, she adds, and pay better attention to social media as a platform to understanding, and communicating with them.

Egypt and Libya have shown that failing autocratic regimes do not know when to leave, write Marc Frankel and Judith Schechtman, principals in St. Louis-based Triangle Associates, an international organizational development consultancy. "The brutal combination of a sociopathic/narcissistic leader surrounded by sycophants creates the incapacity to hear, absorb, and comprehend the message from the streets," they note.

In response to the upheaval, Western governments have failed to clearly state what should happen in the region, they add, and that countries formed by outsiders frequently become problem states. "This is not the time to recapitulate the errors and hubris of the 20th Century; rather we should all cheer for the emergence of countries determined by those who live there."

Roger Anderson, head of the European Corporate Relations Function for leadership consulting firm Linkage International, notes the erosion of a leader's mission and vision has been followed by popular uprising. "We see the pattern repeated in the fates of General Pinochet in Chile, General Franco in Spain, Mao in China, the Shah in Iran, and many others. The parallels between the Shah and Mubarak may be the closest. Both justified their rule with a vision of anti-colonialism, modernization, and economic advancement. Both maintained their rule through the use of military power when the initial power of the vision began to wane. And both faced enormous challenges when a very powerful counter vision swept through the masses of the youth of their countries."

Anderson adds the events in the Middle East are a reminder leaders must adhere to "a powerful, ethical, honest, meaningful, and inclusive vision and to explicitly manage their own actions and those of others," and demonstrates the limits of ruling by fear.

In an interview with Fast Company, business relationship and social media expert David Nour said after watching the unrest, executives should question how social media could be used to benefit their businesses, and where and who should apply it.

Nour added that senior leaders must ask how they can better understand if "revolts are brewing in your organization … Not with policy and 'management by oppression' but open dialogue, courage to fail, and a culture unafraid of retribution."

Short- and Long-term Solutions

However the leadership structure is created, the biggest challenge facing any new government, whether in Tunisia, Egypt or elsewhere in the region, will be to answer the social and economic concerns that ignited the protests.

It is no easy task. According to Bloomberg, Egypt must create 9.4 million jobs in the next decade to provide opportunities for the unemployed and the young workers who will enter the system, a feat that will require its gross domestic product to grow nearly 10% a year.

The automatic assumption is that state-backed benefits and employment programs will increase. In recent days, the Gulf Cooperation Council has reportedly been pooling funds to create an 'Arab Marshall Plan' to address the development concerns in Bahrain and Oman.

But Cappelli says for Bahrain and other Arab countries under pressure, "They can't buy out discontent in a simple way; they have to introduce some serious structural reforms. It's quite a difficult process of transformation, because they have to give more; it has to be more fundamental in order to get things to calm down."

Kanoo agrees that long-term solutions are needed to deal with the concerns that led to the unrest, but subsidies and other immediate relief must be applied too. "You need to have some short-term fixes, because people have a short-term memory, and they want fixes now," he notes. Governments have to consider how exactly they will structure and provide subsidies, he adds, since they are hard to repeal without controversy. "You do need some short-term gains, but it's how you temper expectations."

Cappelli says a better investment of state funds is to develop programs for civil leadership, with skill programs such as understanding budgets, planning and project management. He also proposes exchange programs, so potential leaders get outside exposure to other systems and ideas.

Given that governments under pressure will likely look to create jobs in the state, Cappelli adds among the first steps needed is to open up new opportunities in the workplace and set policies based on meritocracy.

"Everybody should have access to jobs in the military, jobs in the government, universities, and the process, whether it's exams or something else, should be one which is open," he says. "That is something they could do pretty quickly. It's politically painful, because it means you're going to have to cut the power of the people who have influence now to try and get their kids in these jobs. But that's probably the easiest and cheapest way to give people in the street some hope. It's not going to be immediate, but at least you can see a process now where your kids might have better opportunities than you had."