Over-building in Tunis.

Over-building in Tunis.

Cross-posted from Colorado Progressive Jewish News.

Notes to a presentation at the Magreb Center, Washington, DC, April 24.

Thank you to the Magreb Center – for Nejib Ayachi for inviting me back. Pleasant surprise. I would note that not accidentally, this panel discussion takes place at the same time as the annual meeting of the World Bank and International Monetary Fund here in Washington DC.

I would add here, that thanks to the help of the Tunisian Community of Colorado – small but active – I was able to spend nearly a month in Tunisia from late November to late December of last year.

My visit to Tunisia was both promising and unsettling. Promising, because the political atmosphere was more open that it has been in half a century.

Unsettling, because the course ahead, as with other great reforms, is not entirely clear and from the point of view of political economy, not much has changed, if anything, but minor tampering with the model that just collapsed.

Classic transition moment

Tunisia is going through a classic transition moment…a moment of opportunity, a moment of risks. Are the changes far-reaching? Systematic? Or are we witnessing yet another example of “all the change necessary to maintain the status quo” more or less similar to what happened in the Philippines in the late 1980s, in Indonesia a decade later: a broad based democratic movement that brings down a dictator but which is followed by little substantial economic or social change?

Has the Arab Spring run its course, stumbled in a sequence of frustrated political reform and civil war, or are we just seeing “Round One” of what will be a long period of turbulence, of struggle for economic and political reform?

A brief rundown of the history of the Tunisian economy is worth noting.

Since the mid 1800s – even before 1881 when Tunisia was occupied by French troops and made into a protectorate – Tunisia has been increasingly integrated into the world economy as a peripheral or semi-peripheral zone providing foodstuffs, basic minerals (phosphates) and tourism to a mostly European core. This relationship has been most accurately expressed in its relationship to its main European trading and political partners – France and Italy – who have long cast an eye on their Magrebian trading partner. A full 75% of Tunisia’s exports go to these two countries and this has been the case for a long time. Both contested to control Tunisia, first as a colony and later within the framework of modern globalized relations.

The challenge ahead

The challenge/goal of the anti-colonial movement before independence and the post-independence Bourguiba years was clear: how to move beyond – to transform this relationship and the Tunisian economy itself, how to move beyond the historic limitations set on the country’s socio-economic structures by colonialism.

One could say that partial yet limited progress was made. Habib Bourguiba, the founder and first president of the Republic of Tunisia, might not have been a great democrat but he gave his newly independent country a number of precious gifts – a modern educational system that took up at times 50% of the country’s budget; a civil code, that admittedly with some limitations was the most liberal vis a vis women’s rights in the MENA countries, and a country where the separation between religion and the state was clear cut. While Islamic texts are respected, the idea that shari’a law would guide the Tunisian legal system was rejected.

The political-economic program that the country implemented during the Bourguiba years is referred to by Stephan J. King in his valuable volume The New Authoritarianism in the Middle East and North Africa as ‘the old authoritarianism’. Its aims, region wide, were rapid industrialization, social justice and greater equality; the government Bourguiba established was characterized by state intervention in the economy, redistributist economic policies, ‘primary’ (or key) coalitional support among the lower classes and the promise to use the power of the state to improve the living standards of the general population.1

This model did ‘deliver’ economically in some ways, but stalled by the early 1980s. The slowing of the Tunisian economy was laid at the feet of the state’s intervention in the economy, although the fact that the global economy itself had slowed down and Tunisia’s export possibilities to Europe had shrunk some was downplayed.

The years of recently ousted President Zine El Abidine Ben Ali are associated with the rise of what King calls ‘the new authoritarian model’ which was characterized by one-party authoritarian states, economic liberalization, accepting of World Bank, IMF structural adjustment criteria, extending the prerogatives of the market and limiting the role of the state in economic activities. The old coalitions broke down to some extent and new ones made largely of coalitions between international finance capital and their local partners took shape.

Structural adjustment results hardly earthshaking

To some extent, the new model tried to address some of the limitations of the former one emphasizing a marriage between the state and private enterprise. But a careful analysis of the new model as done by Karen Pfeifer2 suggests that the results were never that dramatic. At best, they resulted in growth without development, a lopsided growth in which investment went into overbuilding urban areas, especially the Tunis region at the expense of the country’s interior, a sharp polarization between rich and poor, growing unemployment and stagnant wages for the country’s working class, and the erosion of the position of the country’s smaller agricultural producers.

For all that, Tunisia, along with isolated other examples, was held aloft as an IMF/World Bank poster child, an ‘example to be followed’, etc. All that came unglued with the social explosion known as the Arab Spring, which as is well known, started in Tunisia. Is it a case of the operation of neoconservative economics in Tunisia was a success but the patient – the Tunisian development program – died?

Other factors that came into play:

True the IMF/World Bank policies are not the only reason for the failure of the Tunisian economy to deliver. Other factors came into play:

The collapse of communism in 1989 re-directed what might have been infusions of investment capital away from Tunisia to central and eastern Europe.

A number of Eastern European countries with their technologically advanced industries and educated work forces became Western European trading partners at Tunisia’s expense, especially Poland, Hungary, the Czech Republic and Slovenia

As in the past, Tunisia finds itself trapped in European economic dilemmas. As the European economy stalled and slowed, it affects Tunisian exports and tourism.

Although far away from the more sensitive Middle Eastern political zones, the Tunisian economy is sensitive to political developments throughout the region. War and instability a thousand miles to its east, to say nothing of the situation in neighboring Libya and Algeria, has dampened investment and tourism.

Even where aspects of the economy have been successfully modernized and made more profitable, as with the phosphate industry, it has resulted in social upheavals, unrest and environmental crises. In its modernization program, the Tunisian mining work force went from 20,000 to 6,000 in less than a decade. There was little recycling of the profits to fuel other sources of developments in the mining district. And in 2008, a strong precursor to the 2010 uprising took place in the mining district, centering at Redeyef; it was nothing short of a regional rebellion.

What do the changes mean?

What can we say for ‘sure’ about the changes of the last year? Few trends are clear:

The old order has been overthrown, a new transitional government has been installed through generally smooth and fair elections – the constituent assembly

The former dominant political party – the Neo-Destour renamed the Rassemblement Constitutional Democratique – has been dissolved.

There are certain shifts – I would argue not that significant – in the country’s relations with the United States and France, a tilt a bit towards the U.S., a bit away from France – but given the great number of French economic interests in Tunisia, it is questionable just how much or how little this shift indicates. Strategically, Tunisia’s position remains fundamentally unchanged.

Economic model ignored

On the other hand, less attention has been paid – a least by the international press and from what I can tell from the new Tunisian elite – to the economic model. It is as if the country has gotten ‘half a loaf’ of change: greater democracy, yes; but the other half, the promise of greater economic development, has not yet been achieved.

There has been far less open discussion of how to get out of the economic crisis – what might be the short term and long term directions, if any. But if the economic crisis is not seriously addressed the whole project of Tunisian democracy could be jeopardized.

Instead, much political energy in Tunisia has focused upon what might be called ‘cultural questions’, issues which are by their nature, much more divisive.

During my stay there:

Every day for a month strikes and protests over unemployment, wages and working conditions broke out throughout the country in virtually every sector – public and private,

The economy was spinning out of control and foreign companies were pulling out in droves,

The unemployment numbers were getting worse,

And while the Tunis region was generally calm and safe, outside of the capitol there was a pervasive breakdown in law and order.

And the Salafists – whose historic roots in Tunisia are exceedingly weak – were on the move, expanding their base, bullying and threatening many, with virtually no attempt to rein them in on the part of the new government. One could see their targets: gaining a foothold in the mosques, the educational system, the media

Let us recall for a moment, the root causes of the region-wide socioeconomic rebellion called the Arab Spring.

There were three elements that seemed to span the region from Morocco to Afghanistan:

Poverty – as expressed specifically in unemployment and low wage rates;

Political repression which has been pervasive throughout the region be it in more conservative or more left leaning countries;

And truly impressive – one might even say ‘world class’ levels of corruption.

Religion – whether women should wear veils or whether ‘moderate Islam’ would be a viable model for national development had little to do with the uprisings. But then, as often happens, those who make revolutions do not necessarily come to power, and the ‘revolutions’ themselves, evolve economically and politically often into something that is unforeseen by those who took to the streets in the first place.

The concern here is this: unless the economic and political causes of the Tunisian revolt are seriously studied and addressed, it is very likely that there will be another social eruption, this one angrier and more disruptive than the last. The ‘window of opportunity’, the good will offered to those in power is fast shrinking. As the social crisis continues to grow and expand, the choices of the new government begin to narrow: engage in significantly new economic policies or, as Ben Ali did 20 years ago – intensify the repression.

At the time, the October elections were finished, the three-party coalition led by Ennahdha had taken political control of the Constituent Assembly. The political discussion had turned away from the economic crisis and was shifting in a polarizing fashion to cultural and religious questions, where it seems to have largely remained.

My impressions

For all that, I was convinced of a number of things…five months later, my thinking has not changed much.

  1. That for all its problems that Tunisia has the greatest possibility of emerging from the Arab Spring successfully addressing its socio-economic crisis and to so more effectively than any of its neighbors in the broad MENA region. The relatively smooth political transition was exemplary – much of the rest of the region is now submerged in something approaching civil war
  2. That despite having been hit hard by both the global crisis and impact of 25 years of Ben Ali-Trabelsi rule, that Tunisia has a diversified economy, one of the most educated and technically skilled work forces in the region.
  3. That improving the overall situation of the country a two-track strategy needed to be developed – one to stabilize the country in the short run; another to develop ‘a new vision’, a new direction for the Tunisian economy for the long haul.
  4. That the model of the past 30 years or so needs – referred to by Stephen King as ‘the new authoritarian’ – not just ‘tinkering’ but significant structural changes. Ultimately, despite having garnered a lot of praise, including from the leadership of the World Bank and the International Monetary Fund, that this model has, in large measure, failed on two major scores – it has failed to produce development for broad sectors of the Tunisian population and it has certainly failed to deliver democracy. It was this twin failure, more than any other factors, that triggered the nationwide uprising which quickly grew to a region wide rebellion…for something different.
  5. While not placing all the blame for the collapse of the old system on the structural adjustment policies of the World Bank and the IMF, still, these policies aggravated the economic situation, contributing to the social polarization of the country.
  6. That while a ‘new direction’ is needed to both help the country out of the socio-economic hole within which it finds itself and to strengthen economic position in the future, such a new vision appears to be singularly lacking up until now. The solutions being offered up today, are hardly different from those suggested in the past, which contributed to the collapse in the first place.
  7. That the market alone, the private sector, is incapable of addressing the Tunisian crisis which will require both an increased role of the state in the economy and some limitations, regulations on Tunisia’s openness to global markets – financial, export or whatever, to put it bluntly – some form of state-run capitalism resembling in some ways the model under Bourguiba, in some ways original.
  8. Perhaps the most important – for whatever changes the new Islamic-leaning Tunisian government tries to make in cultural matters, that it is quite amenable to the neo-liberal economic policies of the government it has just replaced and that the economic model will most probably not change much.

And as this seems rather reasonable and rational, I am not in the least surprised that there is no interest or effort on the part of the new government to move in this direction…at least not now and not yet…Such a direction might be considered if the economic crisis deepens so much more…but then as it continues to be heading for trouble, perhaps, new directions will be considered at some point. A pity it will take an even more sustained social crisis for a change of direction to take place.

The World Bank and the IMF could make an important contribution to re-igniting the Tunisian economy at this critical moment. But it needs to be on a significantly different basis than its past support.

In the past, unfortunately, the structural adjustment policies Tunisia implemented at the World Bank/IMF behest intensified country’s economic crisis, rather than improving the situation. I will cite only two examples of this – but am willing to into much further detail in the question and answer:

Privatization – it just doesn’t work; nor does opening capital markets willy-nilly

• The privatization policies were a disaster – they were used by the Ben Ali/Trabelsi families to confiscate state resources for their own private uses and to in part amass the fortunes for which they are now notorious.

• The opening of capital markets – which was supposed to attract foreign investments – never really went anywhere. This was in part because investment capital stampeded to Eastern Europe after the fall of communism, rather than North Africa. It was also because that investment which did enter the country – as was the case in many other places – concentrated in real estate and the financial sector itself in the Tunis region, neglecting the development of the interior and in many cases what might have been modernization of different aspects of the agro-industrial sector.

• World Bank loans did stimulate agricultural development – but in whose interests and at whose expense? It was the bigger concerns that benefited while smaller farmers were undermine, their sector thrown in crisis.

What stands out at present is how little things have changed since. One sees virtually no self-criticism on the part of the Bretton Woods institutions that their policies contributed to the collapse of the Tunisian order, nor frankly, any change in the conditionality of new loans. And if this is the case, the themes that lead to the structural crisis in the Tunisian economy will flare up again, sooner or later… and I fear sooner, rather than later, with the possibility that a precious opportunity – will be lost.

Nor I might add, has there been much indication on the part of the transitional government to move in another direction.

1Stephen J. King. The New Authoritarianism in the Middle East and North Africa. Indiana University Press: 2009, p.31

2Karen Pfeifer. “How Tunisia, Morocco, Jordan and Even Egypt Became ‘IMF Success Stories in the 1990s’.” MERIP Reports. No.210. 1999

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