There are many problems with the Bush Administration's Middle East policies. The greatest, however, has been its failure to conceive and pursue a grand strategy toward the region. As a result, many of America's policies are mutually contradictory: They hinder one another and make it harder to achieve our principal goals in the region. Just as America tailored its policies toward every other country during the Cold War to support the strategy of containment, it must now fashion a similar strategy toward the Middle East if it is to meet the challenges that are rooted there.

At West Point, Annapolis, Sandhurst, St. Cyr, and wherever else strategy is taught, the first lesson is that any strategy must begin with an idea of the end state the strategy seeks to create. The end state that America's grand strategy toward the Middle East must envision is a new liberal order to replace a status quo marked by political repression, economic stagnation, and cultural conflict.

During the Cold War, policymakers worried about conflict among the region's states escalating into conflict between their superpower backers. It was assumed that the best way to achieve stability in the region was to focus on its international relations. Consequently, America ignored problems festering within Middle Eastern states and let Arab autocrats rule as they saw fit. Those problems have produced Islamic terrorists seeking to harm the United States and its allies and desperately unhappy populations increasingly willing to challenge illegitimate and insecure regimes.

The Arab states' economies are stagnant. Many have failed to diversify beyond oil and now suffer from crippling unemployment and underemployment. Many of their citizens have retreated into religious revival, often of particularly noxious new hues. Arab educational systems, meanwhile, produce graduates qualified to do little of value to society. The problem is not just the predominance of Islamic learning in their curricula, but a teaching method that reveres rote memorization and smothers creative thinking, interdisciplinary learning, and other entrepreneurial skills. Politically, the Arab autocracies have largely ossi- fied into massive bureaucracies that provide virtually no services to their people, no outlets for them to express their grievances, and no hope for political action to address their many difficulties.

This situation is not unique to the Middle East, or even new. Indeed, it is broadly similar to the problems that have beset many traditional societies confronted by modernity. In most cases, transformative reform of virtually every sector of life has been the only "solution." That means economic reform in accordance with free-market principles. It means educational reform to produce graduates who can compete in the global economy. It means social reform that adapts traditional values to modern necessities. It means establishing the rule of law. And it means making government more responsive to people's needs and more reflective of their beliefs and aspirations.

East Asia, Latin America, and now South Asia and Eastern Europe are all in some phase of this reform. While hardly a panacea, reforms have vastly improved conditions in all of those regions. There is no reason why they cannot do the same in the Middle East. There is every reason to believe that they will -- and, quite frankly, no one has ever proposed a better alternative. Helping the Muslim Middle East undergo such a transformation will be a long and daunting task. Change must be led principally from within the region's states, will require overcoming countless obstacles, and will have no guarantee of success. But until someone can pose a better solution, transformation is the only one that we know can work.

To harmonize the cacophony of its current policies in the Middle East, the United States must now make political, economic, and social transformation -- of friends and foes alike -- its foremost objective. On some fronts, most notably in Iraq, the administration is obviously committed to transformation, though it has been plagued by poor tactical decision- making. On other fronts, the administration's policies have actually been antithetical to the cause of reform.

Iraq. For better or worse, whether you supported the war or not, it all starts with Iraq now. All of America's policies and interests in the region are tied to Iraq's fate.

The issue can be stated fairly simply. If some day Iraq becomes a stable, pluralist society, others in the region will eventually follow. Democratic dominoes would not begin to fall overnight, of course. Rather, Arabs (and others) would finally have a model of a "liberal" Arab state that reflects Arab history, traditions, culture, and values. Its existence would provide a powerful counterargument to the claims of the region's autocrats and Islamists. And as has been the case elsewhere in the world, its success might slowly help convince others to adopt a similar system in their own countries. It would be akin to how Japan showed other East Asian nations over a period of decades that democratic principles can coexist with East Asian traditions, values, and aspirations, and so made the transformation of East Asia possible.

On the other hand, liberal reform in the Middle East might well be doomed if Iraqi reconstruction fails. Autocrats and their Islamist opponents alike could claim that if America cannot make democracy work in Iraq with 150,000 troops and $300 billion, there is no chance it can work anywhere else in the Muslim Middle East. And many other Middle Easterners (and Americans and Europeans) will agree.

If America fails in Iraq, the most likely scenario would also be the worst-case scenario. Iraq almost certainly would slide into chaos and civil war and destabilize many, if not all, of its already fragile neighbors -- the great oil-producing states of Saudi Arabia, Kuwait, and Iran; our NATO ally Turkey; our Jordanian friends; even our Syrian foes. America and the world would be lucky if those governments merely survived, let alone reformed themselves as the grand U.S. strategy should seek.

The Israeli-Palestinian conflict. Keeping the Arab-Israeli peace process moving forward is central to the grand strategy for transforming the Middle East. That will be doubly difficult with Hamas in power. The United States must now exert itself to curb Hamas' violence and undercut its appeal to the Palestinian people. Above all, policymakers must hold the new Palestinian government accountable for its behavior. The Palestinian Authority signed a series of important agreements with Israel that created the foundation for eventual statehood and immediate benefits in the form of trade, aid, and political engagement. Washington must make crystal clear to the Palestinians that the continuation of those benefits is contingent upon the new government's continued adherence to all of the terms of those agreements (including those requiring the disarming of militias). The onus must be on the Hamas government and its supporters: Either they give up their terrorist war against Israel, or the international community will give up on their new government.

At the same time, the United States should lead an international effort to increase all forms of assistance to nongovernmental organizations and civil society groups within Palestinian society to provide the Palestinian people with basic services and necessities, coupled with micro-enterprise loans and infrastructure development. The goal should be to jumpstart the Palestinian economy, and so weaken Hamas' hold on average Palestinian families for whom it provides jobs, money, food, and medical care.

Rogue regimes. Iran, Libya, and Syria have long been among the biggest supporters of a range of international terrorist groups, and all have participated in terrorist attacks against Americans at one time or another during the past 25 years. Likewise, all have supported efforts to subvert and destabilize various governments in the region. In short, they have helped cause or exacerbate terrorism from and instability within the Middle East.

After a decade of sanctions, the United States and Great Britain used economic and political incentives to persuade Libya to stop supporting terrorism and give up its nuclear program in a verifiable manner. It was a triumph for Western diplomacy and should be a model for U.S. dealings with Iran, and perhaps Syria as well. However, while the Libyans have largely kept up their end of the bargain, the Bush administration has been rather niggardly when it comes to making good on its promises to Tripoli. Such stinginess makes it more likely that the Iranians and Syrians will reject something like the Libyan deal and continue to defy U.S. diplomatic pressure. It also makes it less likely that America's European and Asian allies will back such deals, if they question our commitment to provide benefits in return for good behavior.

In the case of Iran, after losing many opportunities over the past four years, the Bush administration finally appears to be taking important steps in the right direction. Helped greatly by Iranian President Mahmud Ahmedinejad's offensive rhetoric, the United States has succeeded in isolating Tehran and convincing the U.N. Security Council to address the Iranian nuclear program. It has, meanwhile, gained a degree of diplomatic credibility with the international community by making some small but important concessions. These are encouraging developments. But it is absolutely vital that the United States be willing to make larger concessions, if necessary, to lock in an agreement under which the Europeans, Russians, Chinese, and Indians -- Iran's biggest trading partners -- would wield the big stick of economic sanctions if Tehran does not change course, and offer generous rewards if it does. If the administration is unwilling to make the concessions necessary to secure such an arrangement, then it will squander all of the recent momentum -- a pattern it has repeated too often in the past.

Friendly regimes. Since 9/11, America has finally faced up to the fact that even its friends in the Muslim Middle East are part of the problem. It is worth remembering that 15 of the 19 hijackers were Saudis, and much of al Qaeda's core leadership is Egyptian. In Saudi Arabia, Egypt, Jordan, Morocco, and other countries allied with the United States, economic distress, political stagnation, educational failings, and a sense of cultural threat have combined to produce terrorists and populations sympathetic to their goals (and sometimes even their methods). It is not enough just to press unfriendly countries in the region to end their support for terrorism and halt subversive activities that destabilize the Middle East. It is critical that friendly governments embark on a gradual process of reform as well.

The Bush administration has embraced this cause rhetorically and has even made some small steps in the right direction. Washington pressed Egyptian President Hosni Mubarak hard enough to convince him to hold elections that were more competitive than any previously seen in Egypt, and the administration even followed the French lead in demanding Syrian withdrawal from Lebanon, thereby sparking the "Cedar Revolution." Likewise, the administration created a Middle East Partnership Initiative designed to funnel modest amounts of money to some regional states to help them move in the direction of change, and is planning other initiatives as well.

These are useful steps. But they are so tentative and so under-resourced that they mostly demonstrate the administration's failure to make this effort the centerpiece of American strategy toward the region. The Bush administration has a bad habit of saying all the right things but failing to live up to its own rhetoric.

As with its adversaries in the region, the United States must use big carrots and big sticks to promote reform among its allies. America must provide very sizable inducements to governments that adopt progressive reforms, and penalize those that refuse.

The handling of U.S. aid to Egypt is an obvious example. Although the Bush administration pressured the Mubarak government, it was only willing to use small sticks and no carrots. The result was an election that was certainly better than any in the past, but hardly a great leap forward for democracy. What's more, many of the rules governing this election could actually make the long-term prospects for democratization worse, not better. It would be much better to work out a long-term plan for political and economic changes in Egypt and then tie American aid to such a "road map." The precise nature of these steps could be left largely to Cairo, to ensure that average Egyptians do not believe the United States is forcing changes on them. But Washington would still need to certify that the steps were progressive. Of greatest importance, America should be willing to increase its aid to Egypt beyond the current level of $2.1 billion per year, as long as Egypt moves along a progressive path, and decrease it if Egypt fails to do so.

Likewise, America must move aggressively and creatively to help reformers throughout the Arab world. Prodding governments to move in the right direction is barely half the battle. Ultimately, the West cannot impose reform on the Middle East, U.S.-led efforts to do so in Iraq being the exception that proves the rule. If some form of liberalism is to take hold in the Muslim Middle East, it will have to emerge from Arab society itself. It will have to be seen as authentic, and that automatically disqualifies "made in America" reforms. It will also have to be consonant with Arab traditions and values, and that too can only come from Arabs themselves.

Kenneth M. Pollack is director of research at the Saban Center for Middle East Policy at the Brookings Institution.