Tunisia's Democratic Future: Political and Economic Freedoms

Last week I participated in a conference on Tunisia’s democratic future. The conference was attended by the heads of major political parties, including Rachis Ghannoushi of Ennahda and Nejib Chebbi of the Progressive Democratic Party. Below are my remarks.

Tunisians’ expectations today are higher than they ever have been. They want and deserve the freedom to participate in elections and policymaking, the right to access information, meaningful work, the ability to provide for their families, and more. How can Tunisians work to meet such expectations?

We’ve been talking over the past two days about elections and political parties, the role of religion in society, labor, and democratic experiences from around the world. Now, I want to reinforce three ideas that I think can help us understand the linkages between Tunisian citizens’ economic and democratic expectations: First, economic growth is only sustainable and broad-based when paired with democracy. Second, democracy is only sustainable when underpinned by democratic institutions. And third, the same institutions that support democracy, support a market economy. And I would love to discuss the concrete role the private sector can play in Tunisia’s democratic future.

So first, the quality of growth is crucial, and growth is only sustainable and broad-based when paired with democracy. This is evident to us by considering the revolutions in Tunisia and Egypt. On the surface, both economies seemed far from desperate. For Egypt, GDP was growing at 7.2% before the international financial crisis and at a little over 5% in 2010. Tunisia’s economy has grown by an average of almost 5% over the past decade, though it had been in decline recently. Doing Business Indicators were improving – Out of 183 countries ranked, in the last year alone Egypt climbed from position 99 to 94, and Tunisia from 58 to 55. FDI was impressive by regional standards, and Tunisia was particularly lauded in this respect.

But what did citizens feel? Their salaries were not increasing. Their job prospects were not improving. Life was not fulfilling for most people. To make matters worse, citizens witnessed crony capitalists and regime favorites exploiting the limited privatization that authoritarian rulers embarked upon, benefiting from corrupt institutions. What it comes down to is that Tunisia and Egypt did not have competitive market economies because ruling regimes would not allow the values of democracy to curb corruption, allow the free flow of ideas, and support the rights of individuals.

This leads me to point number two, if growth is only sustainable when paired with democracy, democracy is only sustainable when underpinned by strong institutions. We see many countries around the world that claim to be democracies. Yet for true democratic consolidation to occur, institutions must ensure that society operates on the basis of transparency, accountability, fairness, and responsibility. Without the institutions that ensure these core values, democracy is subject to the whims of individuals. Citizens may be able to select a set of leaders through elections, but without institutions, democracy will not deliver between elections.

In addition, many times leaders, once elected, rely on weak institutions so that they can make unilateral decisions. And in fact, many use populist rhetoric to appear as though they are acting in the interests of the people. A turn to populism has proven fateful for nascent democracies and post-revolutionary countries. Poster children of populism such as Venezuela, Bolivia, and Iran have seen their economic freedom scores drop in the past decade so that they now find their states lingering at the bottom of rankings on ease of doing business and perception of corruption. Their anti-market policies have squandered natural resources, exacerbated income inequality, and undermined the development of civil society. Government handouts have kept the people dependent on the state, taking away the independence that is so necessary to hold the government accountable in a democratic system. No one wants to see Tunisians vote in elections this fall, only to be plagued by economic stagnation, unemployment, popular frustration between polls, and newly entrenched, unilateral decision-makers.

The connection between economic and political reform is clear – my third point is that the same institutions that support democracy support a market economy; they are inextricably linked. The best democracies flourish in market economies because of those shared foundational principles of transparency, accountability, fairness, and responsibility. If any of you here today are businesspeople, you can see, for instance, the parallels between the values and principles of corporate governance and democratic governance. Let’s consider concrete examples. It is impossible to have civil liberties without economic freedoms. The court that ensures one’s civil suit is settled fairly is the same court that upholds one’s property rights – essential for conducting business. The pluralism that allows the formation of political parties also fosters associational life, important for the business community. The institutions that support fair and transparent political contests also support fair and transparent economic competition. And the same system of governance that includes the public in decision-making, by definition, includes business among this diverse constituency. It is clear that in places where democracy and the economy are thriving, there are underlying conditions that support the both.

Tunisia knows from experience that GDP is not an indicator of broad-based economic prosperity and societal happiness. So what are citizens’ expectations and how can the private sector help Tunisia to meet them? To make a meaningful difference, democracy must deliver in three ways: government must produce outputs: social services, security, justice, and so on; government must facilitate economic growth to improve standards of living; and government must be responsive to public needs and demands. As a key component of civil society, business has resources, human capital, and problem-solving capabilities that can benefit society as a whole and help democracy to deliver. A politically engaged private sector can improve policymaking, represent legitimate economic interests, and defend democratic rights and institutions.

Here are just a few examples. Private sector advocacy, via business associations, can help reduce barriers to business, which in turn encourages entrepreneurship and the development of SMEs – essential for job creation. Public-private dialogue can help to injecting the values of entrepreneurship and civic education as well as provide a feedback mechanism on labor market needs for national education curriculum. Private sector collective action can be a strong force in combating corruption, through voluntary ethics codes. And by adopting internal corporate governance principles, companies can become models of good governance. It will take many years for former state-controlled economies to be transformed into market economies. But short-term international loans and debt relief are not enough to set Tunisia’s economy on a path of economic growth. Market-oriented reform will require much more, including a serious effort to bolster democratic institutions.