Populism and centralized authority threaten to undermine Tunisia’s democratic transition. Rather than again turning to the government for unilateral decision-making and to the public sector for job creation, reforms should be undertaken to remove legal barriers that limit business development and investment, and to promote transparency in government and business operations. At the same time, this transition must encourage participation from a broad range of society, including business associations, other civil society organizations, and political parties. Such a course will support Tunisia’s nascent democracy while allowing the private sector to be the engine for desperately needed job creation.
By Abdulwahab Alkebsi*
Against all odds, the Tunisian and Egyptian people have stood up and, at a breakneck pace, toppled long-standing regimes. In an amazing display of peaceful revolution, citizens persevered and withstood an onslaught of state apparatuses that have kept them in fear for decades. The new face of the Arab – young, vibrant, proud, educated, organized, connected, and hungry for democracy, liberty, and freedom – has replaced stale stereotypes of a people mired in political decay. And the claims of Arab exceptionalism to democracy can finally be put to rest.
The Egyptian and Tunisian calls for reform have echoed all over the world and have reverberated across the Middle East – from Morocco to Bahrain, and from Yemen to Lebanon. In addition to “where next?”, today, the pertinent questions are whether and how the success of revolution can be converted into real political and economic gains. Now that the calls for democracy have been heeded, and transformations are taking shape, “what’s next?” Egyptians and Tunisians recognize the importance of consolidating their nascent democracies and harnessing the unleashed energy into real reforms.
Tunisia, however, is now in a race against time. In the midst of a revolution, economic, free market-oriented discourse is on the verge of being considered anti-revolutionary. Talk on the street, in the media, and among the emergent political forces is dangerously close to populist rhetoric that can be potentially ruinous for the Tunisian economy. If populist reforms take the lead in Tunisia, they will limit the private sector’s ability to generate critically needed high-value jobs for Tunisian youth. If they do not find the jobs they need and the dignity that comes with them, the youth who ignited the revolution will be increasingly disillusioned with it.
The Perfect Storm that No One Predicted
The pre-revolution Tunisian economic model was dependent on maximizing foreign direct investment (FDI) in two major sectors: tourism and manufacturing for products (such as auto parts), mainly to be exported to Europe. This model means, positively, that there is significant European investment in Tunisia. The economy needed to provide a competitive labor market to attract the foreign companies, and jobs were created in Tunis and other coastal cities.
However, investments in Tunisia’s infrastructure were concentrated on the coastal areas. Roads and commercial transportation infrastructure did not encourage manufacturers to establish businesses in the interior, as transportation costs were prohibitive. This resulted in a significant disparity in growth rates between the coast and the interior over the past two decades (5-10% on the coast, 0% or less in the interior), and consequently a significant disparity in income, education, and affluence in the two. The economic model that needed to keep labor costs artificially low and the neglect of the interior exacerbated poverty in towns and villages such as Sidi Bouzid and Kaf and led to the spark that ignited the revolution.
On the other hand, the educated young population of Tunis and the coastal cities found employment in the manufacturing plants, tourism industry, and especially in the banking sector and service outlets that mushroomed to facilitate these industries. The emergent “bourgeoisie” increasingly saw itself as part of the West, and in particular, part of France. This was a class with a hungry appetite for the modern “needs” of the latest cell phone technology, video games, and other luxury items of a modern society. It needed to express itself openly and yearned for the democratic freedoms that friends, colleagues, and fellow Facebook netizens who lived in the West had. The regime’s economic model, which prioritized a competitive labor market and ensured low salaries to maintain the country’s FDI and bring in more investors, began to test the status quo – that Tunisians could tolerate curbs to their freedoms in return for job opportunities and stability.
Another major crack in the Ben Ali regime was his decaying power base. First, after Ben Ali took power from an aging and ailing Habib Bourguiba in 1987, a new class of crony capitalists gelled around him and took advantage of close ties with the presidential palace to build wealth and influence. However, many of the opportunists were displaced when Ben Ali married Layla Trabulsi in 1992 and she and her family members took over the role of crony capitalists. The old guard of capitalists, which had presented a deeper and broader support base for Ben Ali, lost the incentive to risk its wealth and wellbeing to defend him when he became threatened.
The new generation of cronies surrounding the ruling family and their in-laws rubbed both average citizens and the broader business community the wrong way. The Tunisian people have been historically modest so that even the rich did not flaunt their wealth in the faces of the poor. Yet the new cronies began driving expensive European cars and rubbing shoulders with the elite of Europe and the Gulf. Vulgar displays of wealth such as owning pet tigers offended the sensibility of a modest people and created unprecedented anger and disgust.
The new “ruling family,” as Tunisians refer to it, also expanded its influence to encroach on other businesses and dominate the private sector, through corruption, extortion, and intimidation. In the process, it suffocated what was once an innovative private sector that would have been the main source of job and wealth generation. The combination of a covetous crony capitalist class, invasive and permeating corruption and intimidation, and an economic model that skewed the labor market needs to serve foreign investors alone, turned the real private sector sharply against the regime.
Critically, Ben Ali’s military support began to deteriorate as well. Bourguiba had ruled Tunisia putting into practice what he had preached: “keep the imams in the mosques and the army in the barracks.” The Tunisian model of secularism (Laicite) had always kept any Islamism out of the Tunisian political sphere, and was combined with keeping the military at arm’s length from state affairs. This was even more pronounced during Ben Ali’s rule as he further limited the army’s size and influence. This had the unintended consequence of keeping the army from jumping to the defense of the Ben Ali regime – most attribute the success of the Tunisian revolution to the neutral position of its military and its leaders’ refusal to put down the revolution.
The ubiquitous security services became demoralized as Ben Ali neglected the forces that fell under the Ministry of Interior, in favor of a much smaller special security force of privileged and well-trained agents connected directly to the presidential palace.
The ruling Constitutional Democratic Rally (known by its French acronym, RCD) had been an important apparatus for patronage and state allegiance and influence for Ben Ali’s predecessor. However, Ben Ali gutted the party institution and replaced it with direct relationships with the leadership. He also left it as a bloated behemoth of 80,000 public sector-salaried employees, with no real allegiance to Ben Ali or the state. Ben Ali lacked the charisma and paternal respect that party activists had for the founder of the Republic, Bourguiba. Once the regime fell, the “rank-and-file” of the ruling party left their positions in the RCD and returned to their public sector jobs. They were not indoctrinated to defend the regime.
The private sector’s voice was supposed to be represented by its employers’ union (known for its French acronym, UTICA). However, most businessmen and women felt that UTICA had ceased to serve as an advocate for improving the economic environment of the country, and instead, some accused its leadership of becoming too associated with the Ben Ali regime. In the process, Tunisian public policy development lost an important voice and the real private sector withheld from investing aggressively in the economy. Most kept their dinars in safe liquid investments, instead of in productive industries that would generate the healthy jobs that Tunisians needed.
One of the oldest and most powerful institutions in Tunisia had been the Tunisian General Union of Labor (known for its French acronym, UGTT). Throughout Bourguiba’s rule and most of Ben Ali’s, the UGTT was an integral ally of the state that, while able to effectively bargain for workers’ rights, was a stalwart ally against the Islamist threat. This relationship, which had permeated the Union from its top-level leadership through its rank and file, radically changed over the past decade. Ben Ali strengthened his relationship with UGTT leaders through a patronage and power-peddling system. In the process, a chasm grew between the leadership and the rest of the Union, with leaders losing the loyalty of middle management and the rank-and-file.
Finally, although France had been seen as the protector of the Tunisian regime, the perception of France and its stature as a world power had deteriorated in the eyes of Tunisians. They felt that France would not be able to keep Ben Ali in power, despite the role French companies played in the Tunisian economy. This perception emboldened many Tunisians and strengthened their hope that the Ben Ali regime would be allowed to fall. Psychologically, France was not in the political calculus of the revolution, although it remained in the economic formula.
The Fall of a Regime
All these factors contributed to the precipitous and unexpected fall of the Ben Ali regime. Once the revolution was ignited by the poverty-ridden interior regions, the educated middle class of Tunis and the coastal cities quickly joined and gave the revolution a freedom flavor, demanding the liberty and dignity that they had been dreaming of for years.
The old rich class of crony capitalists that felt betrayed by Ben Ali and his family turned against its erstwhile partners in the patronage system. They were happy to be rid of the new cronies who had displaced them, and enjoyed stepping aside to watch the new crony class of the first lady’s family be humiliated.
The mid-level management and rank-and-file of the UGTT revolted against its leadership and joined the revolution, framing the discourse as one demanding rights for workers and citizens. The UGTT brass had no choice but to join its membership in opposition to the regime. In the process, the UGTT gave the movement national structure, with offices across Tunisia’s 24 governorates (welayat) and the manpower and discourse that sustained the revolution.
The bloated RCD was in no position to defend the regime and quickly disintegrated, its rank-and-file fleeing to their old positions in the government, leaving the RCD carcass to be easily frozen by the new Minister of Interior.
The security apparatus initially cracked down hard on the demonstrators, but it quickly became apparent that morale was very low among the police.
And perhaps most importantly, the military refused to use force against the protestors. The military’s decision not to be involved directly led to the departure of Ben Ali and his family and to the success of the revolution.
Meeting the Revolution’s Expectations
Although it is probably too early to predict how the Tunisian revolution will affect the lives of the Tunisian people, let alone the rest of the Arab World, January 14, 2011, will go down in history as a day that gave the Arab people, after decades of complacency, a voice in running their affairs and choosing their leaders. There are many reasons to be optimistic, yet cautious, at this important juncture.
The perfect storm of revolution must be met with a perfect storm of steps leading to democratic consolidation. What has emerged in Tunisia since January 14, although euphoric and exciting, has been worrisome. Ironically, the dire economic conditions that were the impetus for the Tunisian revolution are in danger of becoming exacerbated by the emergent revolutionary discourse. The perilous populist policies that are being demanded, considered, and adopted in the current revolutionary fervor, will result in capital flight, loss of more jobs, and economic disaster for Tunisia.
The current transitional government, led by Prime Minister Mohammed Ghannouchi, stumbled out of the gates – initially keeping sovereign ministry portfolios in the hands of politicians associated with the former regime and later appointing new governors for Tunisia’s 24 governorates without consultations with the political forces in the country.
In the process, the government has lost crucial political capital and leverage and has had to respond to the demands of the street – of subsidies, higher salaries, higher pensions, and a bigger public sector. These populist calls for reform are being voiced by a new opposition of political party and labor leadership. Such leaders know very well what they are against, but due to years of an oppressive political environment, they are ambivalent to the need to articulate solutions to Tunisia’s economic ills. In a country that is resource poor, any government programs, including the popularly demanded subsidies, will have to be supported by tax receipts that are becoming scarcer due to the drop in tourism and other business activities in the country. Needless to say, this is a perilous course for the new country to take and obviously untenable.
The picture does not have to be so dire. If the necessary reforms are applied properly, the recent political changes in Tunisia may foster a better business climate for the domestic private sector and bring in foreign investors that will view a democratic Tunisia as an opportunity to do business relying on the rule of law, instead of on the whims of an autocratic government and its corrupt crony capitalists.
Devoid of resource-dependency, Tunisia’s economy is refreshingly dependent on the productivity of its workforce and the ability and innovation of its private sector to become the engine that generates high-value jobs for this workforce. A democratic state that is dependent on revenues generated from its citizens and businesses will necessarily become accountable to its citizens – its raison d’être. This healthy dependency and a new social contract that is the basis for any democracy, is combined with Tunisia’s other advantages: valuable human capital, with an educated and hardworking youth population; connectivity to the developed world and awareness of international ethics and values; a pious yet secular middle class; a reform-minded private sector that has suffered from corruption; and a professional military that has the mindset to protect the country, but stay out of its politics.
Moreover, Tunisia is a relatively small society of about 10 million citizens of homogenous ethnic, linguistic, and religious backgrounds, and historically known for its people’s tolerance and temperance. The country has the industrial, commercial, and workforce potential and a natural market of over 100 million citizens of North Africa, from Egypt to Morocco, that share its culture and history, and will look to it as a model for their own development. In short, Tunisia has the potential to become a leader in the Middle East region.
Creating the Perfect Storm of Reforms
The question that faces all of those who want a bright future for Tunisia is what reforms will be necessary to move this nascent democracy into a 21st century economy. The country’s leaders must come together and develop their own roadmap, but it is clear that any plan would have to include some basic elements, including:
Devolution of Power – The old economic and political model will have to be altered to emphasize regional development and infrastructure needs. The new nation should adopt a decentralized model of governance to offer solutions that are more in-tune with local contexts, by allowing for local elections of governors, and building local accountability and avenues of local input by citizens.
Legal & Regulatory Reform – There is an urgent need to harmonize and simplify the laws that govern the local economy and investment, laws that were, by design, opaque so as to create confusion and allow an elaborate, corrupt patronage system. Reducing legal and regulatory burdens has a direct influence on consolidating democratic governance and improving economic growth. As legal and regulatory burdens increase, opportunities for corruption also increase; for instance, bribes may be demanded to hasten the process of registering a business, or potential entrepreneurs may be discouraged from starting a new business because of harsh rules regulating exit from the market. Such consequences undermine the growth of the private sector and the strength of the rule of law and transparency.
Onerous regulatory barriers that discourage entrance into the formal economy, weak rule of law, and weak or non-existent property rights also increase the occurrence of informal sector work. The individual that arguably sparked the Tunisian revolution – Mohammed Bouazizi – was restricted to informal sector work for these very reasons. Businesspeople such as Bouazizi perform legitimate work and provide legal goods but are confined to the informal sector because of a restrictive regulatory environment and the burden of entry into the formal sector. In countries like Tunisia with sizable informal sectors, taxes are not paid, corruption runs rampant, citizens are unable to participate in public policymaking, resources are poorly allocated, and the list of negative consequences goes on.
While Tunisia has already implemented some legal and regulatory reforms – it ranks the 55th easiest place to do business in the world – it will need to improve how it deals with construction permits, registers property, facilitates obtaining credit, protects investors, and enforces contracts if it would like to improve in that ranking.
Anti-Corruption – Global Integrity considers Tunisia to have very weak institutions, particularly identifying weaknesses in government accountability, anti-corruption, and rule of law. Perceptions of corruption lent fuel to Tunisia’s popular protest; the country ranked 59 out of 178 countries on Transparency International’s 2010 Corruption Perception Index, with a score of 4.3.
Tunisians have to make combating corruption a national priority and address it from an institutional level, including a robust respect for the rule of law. This means investigating the supply and demand sides of corruption, and putting into place an incentive structure that limits corrupt behavior. Transparency in decision-making means not only addressing opportunities for corruption in government institutions, but also supporting businesses’ understanding of corporate governance. Good corporate governance can help firms establish a transparent relationship between owners and managers, strengthen the role and capacities of boards of directors, and ensure the protection of minority owners’ rights. There are many linkages between improving private and public governance, as the core values of corporate governance – fairness, transparency, responsibility, and accountability – are also the core values of democracy.
Public Sector Reform – The public sector in Tunisia is currently bloated and inefficient after years of bad policy and the perceived need to provide government jobs to alleviate public anger. Despite the initial need to “stop the bleeding” and the knee-jerk reaction to street pressure, a reverse course has to be taken and public sector reform has to be both a national priority and a concentration of international assistance. Current levels of public sector employment, let alone its expansion, are an untenable strain on resources and a drain of the Tunisian ability to innovate and become competitive in a global market. In a new Tunisia, there is no escaping the fact that the private sector needs to be the engine of growth, competitiveness, and high-value job generation. In addition to improving the public sector through streamlining its functions, enhancing its administrative and bureaucratic capacity, and making it more transparent and accountable, improved governance of state-owned enterprises (SOEs) would increase the efficiency and effectiveness of the public sector.
Civil Society Capacity Building – There is an urgent need for capacity building on democratic governance and management for Tunisia’s civil society, as it is currently mushrooming under a culture that is deficient in these values. Moreover, these civil society organizations need capacity building on strategic planning and advocacy techniques so that citizens from different positions on the political spectrum can compete peacefully in the marketplace of ideas and enrich Tunisia’s democratic experience. Of special need is enhancing the capacity of civil society organizations that represent a diverse, reform-oriented private sector, including chambers of commerce, associations, and think tanks. This is necessary so that the private sector is able to harness its innovative, solution-oriented approach and infuse a new language into the national discourse that is currently pushing the country away from the need to generate jobs for the youth.
Political Party Building – There is currently a healthy debate among the political parties, on the street and in the media, which is allowing a collective venting of frustrations that have been suppressed for decades. What is plainly absent from the current political conversation is discussion on economic solutions to the national ills that led to the January 14 revolution. With critical elections on the horizon, these political parties need to start building an issues-based narrative and are in need of help in developing economic platforms so that the electoral competition will move from a heated discussion of ideologies and personalities, and into a competition based on best solutions to Tunisia’s developmental needs.
Political Transformation – Insofar as the country can develop politically, government, the opposition, and civil society, with the assistance of the international community, must work hard to ensure the adoption of a democratic constitution. In addition, leaders will be preparing the groundwork for free and fair elections for the selection of a representative government that will strive to fulfill the aspirations of a new nation.
Yet the quality of a democracy also lies in allowing the voice of the people to guide the everyday decision-making of those in power. The nature of institutions that govern those in power, and mechanisms available for citizens to participate in decision-making, become a significant factor in a democracy’s ability to deliver for its citizens.
This can only be attained by making sure that the new policymaking process for the country includes input from diverse actors within Tunisian society – political parties, civil society, labor, and importantly, the voice of the private sector. Crucially, the enormous excitement generated by the revolution and a “perfect storm” of favorable conditions have to be harnessed into positive energy to realize Tunisia’s golden chance.
The private sector’s political engagement early and often is crucial to attaining the developmental goals of the nation and for Tunisia to gain its place as the economic powerhouse of the region. In Tunisia, Arab youth got its voice to demand democratic change. Tunisia can be the test case for a new development model for the entire region; a new kind of contagion, leaving behind dictatorship and economic stagnation and moving forward with healthy improvements in economic growth, high-quality jobs, and democratic, accountable governance.
END QUOTE:
It’s condescending and foolish to suggest that people dying for democracy aren’t ready for it.
~Nicholas D. Kristoff, NY Times
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