Flagging winds of American idealism across the Middle East

What a change two years have brought to the Bush administration's "forward strategy of freedom in the Middle East."

After the fall of Baghdad in April 2003, Ken Adelman, a member of the Pentagon's Defense Policy Board, expressed his hope that it "emboldens leaders to drastic, not measured, approaches."

But now the long, hard slog in Iraq has tempered American enthusiasm for promoting massive revolutionary change in the greater Middle East. The significantly scaled-back administration hope was recently characterized this way by Deputy Secretary of Defense Paul Wolfowitz: "What you would hope is that governments can be encouraged on a path of gradual reform."

Washington has concluded that it is in no position to alienate existing regimes whose support it needs in pursuit of stability in Iraq, combating terrorism, and reviving the Israeli-Palestinian peace process. The Arab kings and presidents-for-life who, 20 months ago, were excoriated as the biggest impediments to reform are now being embraced as agents of change.

The new approach was in full view at the Forum for the Future in Morocco last weekend, as Secretary of State Colin Powell met with 20 Arab counterparts to discuss democracy promotion efforts. In a dramatic retreat from previous grandiose claims, Washington is now concentrating on provision of technical and economic assistance, such as funds for small business development, microcredit aid to entrepreneurs, and a host of educational programs. Literacy campaigns and conferences on women's rights and the environment are to lead the region into a new democratic age.

At core, the basic assumption of the Bush team seems to be that the regional elites are anxious to promote structural economic reforms but simply lack the know-how.

The problem in the Arab world isn't lack of capital - certainly not in a region flush with energy income. Nor is the Arab world lacking the expertise to pursue reform. The 2003 UN Arab Human Development Report, compiled by leading Arab thinkers, pinpointed poor governance as the main source of the region's woes. The solutions they proposed have been left unimplemented because there is no will to pursue them, not because of a lack of trained personnel. The problem remains the entrenched elite who are determined to retain power and will neuter any reform effort before it encroaches on their prerogatives.

Genuine economic reform involves creation of a system based on the rule of law, with an independent judiciary prepared to enforce contracts and respect property rights - something that strikes at the heart of the crony system defining most Middle East economies. Real change would entail an end to official corruption and require the state to relinquish its most important lever for controlling society - its ability to subsidize consumer goods and offer deals to reliable, connected regime loyalists. Moreover, given these regimes' lack of political legitimacy, they're reluctant to undertake deep-seated economic reforms that initially may provoke domestic unrest.

This is why Egypt and Algeria experimented with limited privatization measures in the early 1990s - only to abandon them quickly when it became clear that the political foundations of their regimes would be undermined by such reforms.

The economic model for reform can only work if the US and Europe pressure these states toward viable change, and not remain content with a series of small-scale programs. Preferential trade agreements, foreign assistance, and access to US markets should be contingent on progress made toward meaningful reform. The US experience with Latin America - especially Mexico during the 1980s and 1990s - and that of the EU toward its eastern periphery, makes it clear that when political reform is linked to economic benefits, regimes can be induced to introduce changes that lay the basis for democratic transformation.

The West should link aid to reforms designed to reduce state controls over both political life and economy.

Following the fall of Baghdad, neoconservatives predicted that regime change in Iraq would unleash a tide of democratization that would not only wash over America's regional foes like Iran and Syria, but force even erstwhile allies like President Mubarak in Egypt and the princely class in the Gulf to embrace reforms. Now, Mr. Powell claims victory when Arab states, including Egypt and Saudi Arabia, are willing to take part in a conference like the weekend's forum.

The 9/11 attacks demonstrated that the root cause of Islamist terrorism was a dysfunctional political order that succeeded only in producing unpalatable dictatorships, stagnant economies, and militant ideologies. For a brief moment, the administration was transfixed by a vision of using US power to remake the Middle East. But a crestfallen America entangled in Iraq seems to have abandoned its idealistic aspirations to the point that it now favors working with the same unsavory regimes that promise the chimera of stability.

• Ray Takeyh is senior fellow at the Council on Foreign Relations and Nikolas Gvosdev is a senior fellow at the Nixon Center.