Costly squabbles: The solution to Tunisia’s economic problems lies in political consensus

This post was written by Niveen Wahish (ERF Communications Officer)

In three years of transition, the Tunisian economy has suffered tremendously, mainly because of the political situation. This message was at the heart of a policy seminar, organized by the Economic Research Forum (ERF), on “The Performance of the Tunisian economy in light of the ongoing political transformations”.

Moez Labidi (University of Monastir)

Moez Labidi (University of Monastir)

According to Moez Labidi (University of Monastir), Tunisia’s growth rate has dropped to around 2.5-3 per cent in 2013 compared to 5.6 per cent in 2010. In his presentation titled “Tunisia’s Macroeconomics; waiting for political stability and structural reforms,” Labidi listed the number of problems faced by the Tunisian economy during the transition and since the revolution in early 2011. To start out, the pressure on the local currency prompted the Central Bank to use the foreign reserves in order to stabilize the exchange rate. Reserves today are sufficient for only 103 days of imports compared to 2010 when they were sufficient for 147 days of imports. Unemployment is at 15.9 per cent; and this figure doubles among university graduates. Over and above, Labidi highlighted the fact that policy makers were being faced with social challenges, which involved an urgent need for jobs and investment, and the high expectations of Tunisians; while in reality the government had limited resources. The government sought refuge in easy solutions that caused deterioration in fiscal balances. As a matter of example, massive spending on wage increases, public sector hiring and bailing out the businesses after the revolution are factors, among others, that led to a major growth of public expenditures in 2013. On the other hand, poor governance in the democratic transition process resulted in what Labidi called “distrust shock”, which affected negatively the structural reform agenda. He acknowledged that while the transition governments succeeded in avoiding a credit crunch, they failed in creating what he called a “confidence shock”. The latter would have urgently allowed for reforms, thus creating more flexibility for public finances and positive consequences on the structural reform agenda, and accordingly the investment agenda.

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Socio-economic policies and the efficiency of democratic reforms

This post was written by Kaouthar Gazdar (PhD in Economics, University of Sousse), Hajer Kratou (PhD student in Economics, University of Carthage & University of Auvergne) & Zeinab Sabet (GDNet)

The fourth and last session of the workshop’s first day had a special focus on economic and social policies, and the efficiency of democratic reforms.

Eberhard Kienle (CNRS Paris/IEP Grenoble)

Eberhard Kienle (CNRS Paris/IEP Grenoble)

The session introduced two papers by Eberhard Kienle (CNRS Paris/IEP Grenoble) and Pierre-Guillaume Méon (Université Libre de Bruxelles). In his paper, Kienle examines the economic and social policies in Tunisia and Egypt in the aftermath of authoritarianism. Despite the intricacy of the Arab spring, it seems fair the assumption that large scale popular protests and the related transformation of political regimes were prompted by a combination of socio-economic and political factors. In a nutshell, authoritarian government had over years and decades prevented numerous actors to articulate their grievances in ways that would have allowed alleviating and addressing them effectively. Many of these grievances were related to socio- economic developments that widened the gap between income and opportunities on the one hand; and expectations based on past experience, official propaganda and comparisons with the outside world on the other.

Kienle challenges the idea according to which democratic regimes guarantee that such potential is actually translated into practice. In fact, and alike authoritarian regimes, democracies may fail to meet the expectations of the ruled. Less repressive by nature, they may even be challenged more quickly and more easily than their authoritarian predecessors or counterparts. According to him, the most important challenge for elected rulers in Tunisia and Egypt, besides the establishment and consolidation of democratic rules, is the formulation and implementation of economic and social policies that avoid past errors, and improve or secure the welfare of all within a broadly accepted framework of social justice.

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The Future of the “Arab Spring”: Between Islamist and Secular forces

Marwan Muasher (Carnegie Endowment for International Peace)

Marwan Muasher (Carnegie Endowment for International Peace)

“This is not an Arab spring, in my view, nor is it an Arab inferno. It is a process of change that was bound to happen, but one has to be realistic about its chances.”

These are the words of Marwan Muasher, currently VP for studies at Carnegie Endowment, summing up his views of the emerging events in the Arab world and whether they can lead to any lasting outcomes. His speech was part of the third plenary session of the Economic Research Forum (ERF)’s 19th annual conference, providing an outlook for possible scenarios that could result from the rise of Islamist parties to power.

The Battle between Islamist Forces & Secular Elements

Following the overthrow of autocratic regimes, the uprisings started shaping up into a battle between political segments -namely Islamic forces and secular elements- that have surfaced after years of being kept under the lid. However this battle disregards the very essence of the revolutions, which originally set off as battles for pluralism; to consolidate democracy and solidify everybody’s right to be included.

One promising outcome of the revolutions, however, is that the people now have developed the savvy to question, criticize and claim power. Bringing down regimes that have been around for decades in a mere two-week time is an unmistakable threat to the “Holiness” of the rising political forces, especially the religious ones such as the Muslim Brotherhood. The problem with these political forces, Muasher explains, is that their ideologies and slogans have never been put to the test during the previous regimes. Now that they’re in the spot light, promises of reform and slogans like “Islam Is the Solution” must be translated into detailed programs of action in order to gain credibility.

The Economy: Beyond “Bread before Freedom”

Muasher argues that the old regimes’ economic reform programs weren’t wrong, but were incomplete. The problem with the “Bread before Freedom” argument is that it makes way for corruption; they weren’t supported with a proper political system, represented in a strong parliament that works in parallel with the government to address problems and abuses when they arise.

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