Economic Visions in Transition Times
Lebanon’s economy has been weakening since the financial crisis of October 2019. The roots of the current crisis are to be found in the country’s political economy. This approach dates back to the end of the Lebanese Civil War, and involves deeper integration in the global economy and private-sector growth. At the same time, the ruling economic and political elites, supported by various regional and international actors, have depended on a sectarian political system and Lebanon’s liberal economics to expand their power and wealth. This paper seeks to analyse the evolution of Lebanon’s political economy after the end of the Civil-War and its increasingly neoliberal policies, policies which led to the current social and economic crisis. Finally, the paper looks at lessons that countries exiting war, such as Libya, could usefully learn from the Lebanese experience.
This paper examines a new developmental model in Morocco on the initiative of King Mohamed VI, one for addressing the multiple challenges that the country faces. The paper reviews the mechanisms used to elaborate this new vision, the proposals issued by experts to boost the country’s development, as well as the challenges ahead in the implementation of this new strategy. The author asks whether the model can provide lessons for other countries facing similar challenges, and whether it might even be a useful model for Libya despite obvious differences in contexts. In particular, the Moroccan experience provides a case-study in how Libyans could create together an inclusive and participatory roadmap. That roadmap might offer a common vision for Libya, despite its demographic diversity and political divisions.
Libya’s civil war and complicated transitional situation have highlighted the need for Libyans to discuss and agree on a new vision of the country’s political economy and state model which would be less path-dependent and more reflective of Libya’s long-term peace and development needs. This paper examines one of these visions, the developmental state model, and its translation in two countries: Ethiopia and Rwanda. The paper discusses the foundations of a developmental state, followed by its main achievements and shortcomings in Ethiopia and Rwanda, and reflects on how these experiences could be useful in discussions on Libya’s political and economic transition today.
Libya may benefit from studying Russia’s experiences in its early transition. Because of its far better macroeconomic situation, Libya’s transition should be easier. The main warning from Russia is that macroeconomic instability must be avoided. Russia escaped after having strengthened its Ministry of Finance and central bank. It solved its fiscal problems by adopting a simple tax system with few taxes with broad tax bases and relatively low tax rates. The IMF was crucial in Russia’s resolution of its macroeconomic problems. The greatest success of the Russian reforms was the early formation of a fully-fledged market economy by liberalising prices, markets and enterprise formation. By contrast, state attempts to promote competition policy tended to be counterproductive, as any state agency was inclined to reinforce monopolies. The most successful part of the privatisation was the sale of small and medium-sized state-owned enterprises by regional and local authorities. It was less important how they were sold than that the sale took place. Oil dominates both the Russian and Libyan economies. A major drawback in Russia was that a few businessmen made fortunes from arbitrage between very low domestic prices and high international prices. Russia broke up its national oil company early on and privatised the resulting companies. Economically, this was a tremendous success, but the new owners of the oil companies were never accepted by the Russian people or the government, which caused legal, economic and political havoc, resulting in their renationalisation. A crucial Russian failure was not building an independent judiciary, because it would have been vital for the establishment of real property rights. It should have been a priority.
In this paper, Chile’s economic policy experience of the last 50 years is set out, in the search for valuable lessons for countries in transition, like Libya. Chile has faced two transitions in this period, one from democracy to military rule (in 1973) and the second back to democracy (in 1990). The first transition phase may offer lessons to countries experiencing a change from a socialist economic regime to a free-market one. The second transition shows how the new democratic government, in Chile, was able to skilfully navigate many pressures and tensions to nominally change the country’s economic agenda, while, in reality, leaving previous economic policies intact. Among the key lessons are the need to construct adequate institutions, big and small. These include a regulatory framework for the financial sector, fiscal discipline, and an independent Central Bank. These institutions were crucial in Chile in providing an adequate macroeconomic framework for fostering investment. Other lessons include the importance of trade and financial openness for economic growth in small economies. Another key lesson is that specific policies can be good at certain stages in development, but that there is a need to change them as a country develops. Chile had social policies, which changed too slowly as the country started to thrive in macroeconomic terms. The lessons gained from Chile’s experiences might prove instructive to countries experiencing political and economic transition such as Libya.
This paper examines the application of the development state model in Malaysia from 1971 to 1990 and highlights how its successes and failures could serve as a useful example for countries undergoing a transition phase, such as Libya. The paper shows that the political transition and the application of the developmental state model in Malaysia allowed it to successfully tackle poverty and inequality in general terms, and to restructure its economy by eliminating the ethnic division of labour and restructuring ownership and control of wealth by the different races in Malaysian society. Consequently, this model can be considered relevant to meeting similar conditions in other countries experiencing a transitional phase in the redevelopment of the nation, of which Libya is a prime example.