Development economist Tilman Brück is the newest head of the Stockholm International Peace Research Institute (SIPRI), which has partnered with the Gulf Research Center in Dubai for Arabic language translation of its material. Additionally, the Centre for Arab Unity Studies in Beirut, Lebanon has just published an Arabic translation of the 2012 SIPRI Yearbook.

Brück spoke with Arabic Knowledge at Wharton about the Arab Spring, and how private businesses can play a key role to help stabilize a conflict-torn society.

A transcript of the conversation follows:

Arabic Knowledge at Wharton: Considering development economics is your specialty, what could some Arab governments have done differently in order to prevent social upheaval?

Tilman Brück: The fascinating thing about the Arab Spring is why did it take place when it did. Poverty and unemployment have been rising for decades. The people have been cheated by their governments for decades. The pressure for change has been in the streets for decades.

Syria has been a brutal dictatorship for many years now. People there had relatively little internal freedom, economically or politically. And the ruling elite squandered the nation’s wealth. They had plentiful oil for many years and they wasted it all to buy repressive stability. Now that the oil has run out, the people realize there is no future with these leaders any more. But why did the misery last so long before the people stood up? This development has been quite clear for many years now.

I imagine in every country, there’s a different story. For example, in Egypt, education was provided for the people. Egyptians are very well educated but there were still no jobs. It used to be that few people were well educated and that the government restricted the good jobs to those who were well educated. Then they had a program where they dramatically expanded first primary and then secondary education for much of the population. People rose through primary school, rose through secondary school. But you still couldn’t get a job. The good jobs were still kept for government supporters, the ruling elite. Now the masses were educated and frustrated. Perhaps the pressure had risen to the point where the lid couldn’t be kept on the pot anymore. But it could have happened ten years earlier or ten years later. I don’t think any theory really explains the timing of this revolution.

Arabic Knowledge at Wharton: You co-wrote an article, "Small Business, Entrepreneurship and Violent Conflict in Developing Countries." Any lessons for the MENA region?

Brück: We know a lot about how violent conflict impacts the economy in general and why it inhibits people’s well-being and human development. But we know very little about how violent conflict impacts entrepreneurship and business in particular. When we look at reconstruction from conflict, fragility or even uncertainty or revolutions like the ones in the Middle East, we know very little about what the role businesses and entrepreneurs can play. In many situations, the state is neither the most stable nor capable actor. The state is often embroiled in shootings, arrests, infighting and squandering of public money. To turn to the state and say, "Lead the reconstruction effort," is then very naive. They were a big player in leaving open wounds in society to begin with.

The other big player in the economy is businesspeople and entrepreneurs. In the poorer countries, it’s more about the self-employed and agricultural workers such as farmers who have to live and work and survive, no matter what the government does or if there is a government. In situations with extreme instability, like Somalia or Yemen or Mali, the one thing people still do is grow, trade, buy and sell. That’s about survival if nothing else. If we can strengthen that somehow, if we can help that, that’s often the best way to stabilize an economy. In the long term, if we can build the private sector into a vibrant sector beyond stabilization for emergencies, that’s a great potential. There’s very little research at this point on how to do that. That’s still not very well understood.

Arabic Knowledge at Wharton: Building the private sector in these countries with newish governments, such as Egypt and Libya, seems to be quite important. Any suggestions?

Brück: I think the problem with some of these Arab countries is they are really the new Eastern Europe. The state governments in these countries were extremely interventionist. These are really socialist countries in all but name. In the 1950s, they were probably socialist in name but nowadays, you have a combination of government and military elite running most of the economy, but these are not very good entrepreneurs. They’re entrepreneurs all right but they didn’t get their money because of their market-oriented, enterprising attitudes. They got their money because they have the most influence.

In talking of supporting the private sector, it’s really tricky. The state is biased, weak, fragile and corrupt. If it’s crony capitalism, how do we support the private sector without getting our hands dirty and stabilizing the corrupt elites?

We also know the completely free markets don’t always yield an optimal social outcome, either. So we know at some point, we have to start interfering. We also want to build a tax base that’s clear and transparent.

Helping the private sector is as much about recognizing the limitations of the state and transforming the state. We’re not talking about subsidies for the private sector or teaching them how to be good entrepreneurs. It’s more about creating enabling environments to allow the private sector to foster and allow the governments to be strong as well. In the majority of the Arab states, that’s something the government has failed to do for many years. Egypt is the worst example.

Arabic Knowledge at Wharton: One of your fields of study is the economics of terrorism and post-war reconstruction. This seems to be especially relevant in nations like Iraq, Afghanistan and Libya, which are essentially recovering from a civil war and they are still hindered by acts of terrorism. What are the economic issues to terrorism?

Brück: There are three different fields, which I think are relevant to answer your question, and I study one of them in depth. First, what economic factors drive terrorism? There is the hypothesis that in countries where there’s a lot of poverty and inequality, there’s more terrorism. Yet at the same time terrorists are often very well educated. This is an interesting paradox, which much research has focused on.

The second topic is the structure of terrorism. How are the terrorists organized, how do they plan their attacks, how are they funded? If you want to put it one way, terrorists are entrepreneurs themselves, entrepreneurs of fear. Al-Qaida is basically a large multinational franchise organisation where leaders benefit financially and in reputation if their franchisees commit terrorists acts.

The third area deals with the effects of terrorism on people. A related question asks how governments should respond to terrorism so as to minimize the negative effects on the economy of both insecurity and of security policy. These are the topics that I most work on.

One very reassuring research findings has been that whatever terrorism we have seen in the last few years, especially with al-Qaida-type terrorism, the economy has been quite resilient to it. In 9/11, London and Madrid with the catastrophic numbers of people that have died, the larger economies have been able to withstand these attacks very successfully in economic terms. In my view, the attackers of 9/11 are effectively deadly anti-globalization campaigners. The al-Qaida terrorists want to transform societies in their model. That’s really what they’re saying if they have a message at all. But the resilience of our economic system is one thing that stands out — and which must frustrate the terrorists a lot!

But one thing that hasn’t been so clear is what should the state do to protect us. How should we protect ourselves? How much should we protect ourselves? How much should we accept as the cost of security? What is the tradeoff between security and freedom and democracy and the justice system and so on? I think these debates are not very advanced yet in most countries.

A lot of voters are worried about terrorism. But it’s not clear how many civil liberties they’re willing to forego in exchange for better protection. Part of the problem is that we don’t really know what offers us protection. This is not really very well understood. For instance, there is very little rigorous research on the security effect of different approaches to policing compared to how much research there is on the different approaches to reducing unemployment — or on how to fight diseases for that matter. In the security field, there is no tradition of evidence-based policy making; in part because there isn’t much evidence of what works and what doesn’t work.

Arabic Knowledge at Wharton: The mission and research focus of the institute changes constantly in response to political situations. Under your leadership, what will be the research focus?

Brück: I think we will be responding to emerging security threats. On the one hand, we have several useful products we’re very proud of and we’ll continue to develop those, such as our military spending data or our arms production data.

On the other hand, there are also new challenges. While the international arms race and nuclear proliferation are still important topics, with nuclear warheads continuing to point East and West, we are increasingly facing new threats from non-state actors. The Taliban and al-Qaida are just two examples. Mali today is the new refuge for international terrorists. They’ve taken over more than half the country. Now there is an area the size of France in northern Africa which is ruled by terrorists. They can use that area as their playground, breeding ground and training ground. It is quite scary really!

Having non-state actors take our failed states was not something that policy makers considered as an option during the Cold War. Back then it was simpler, when any country was either my country or your country. There might have been territories that were fought over in Latin America, Africa and Asia, fueled by East-West rivalries. But now we have a situation where we have actors that are not at the state level but which are threatening us deep in our home territories like the way terrorists work. And that’s a very different security situation.

And one in fact where military solutions are not very useful. The U.S. failed in Vietnam to resolve a particular East-West situation with military force. Slowly we learned in the Cold War that military force doesn’t resolve system differences. In both Iraq and Afghanistan, I think we’ve learned that we cannot accelerate other people’s paths towards freedom and democracy with force. While the Cold War was a symmetric conflict, we now have an asymmetric conflict. We’ve learned that force doesn’t help in a symmetric conflict and now we’ve learned that force doesn’t help in an asymmetric conflict either.

It’s really just time to reconsider the role of the military in our society. What is it protecting us from if is powerless in both symmetric and asymmetric conflicts? Why do we need the military and what is the purpose of the strong militarization in our society if not to resolve these key security issues?