Deconstructing TuniLeaks: Part Two: Economic Consequences.

Nawaat: So far the topic of corruption surrounding the (Ben Ali, Trabelsi) family seems visibly dominant in the cables. Do you think we are dealing with institutional corruption that could harm the relationship between Tunisia and the West in general, at least on an economic level?

Professor Rob Prince:

1. A deep, structural economic problems in Tunisia

As I respond to your question…at the moment in the Tunisian interior, in Sidi Bouzid, there have been four days of protests – what the government of Tunisia calls “riots” or “social unrest”; and now I read that similar protests have begun in Kasserine and elsewhere. The Sidi Bouzid events appears to have been a spontaneous uprising of people in the region over economic and social issues after a poor lad in his early 20s, one Mohammed Bouazizi poured a can of gasoline on himself and then lit a match in front of the police station there. Tunisian friends relate that this is the third young Tunisian in about six months, who chose to protest the grim economic and social prospects in the country by burning themselves to death.

I cannot put into words, how sad it makes me to see a photo of Mohammed Bouazizi seeming to be running down the main street of Sidi Bouzid his body nothing more than a ball of fire while Zine Ben Ali parrots old and worn nonsense about non-existent economic miracles and complains that those who criticize his regime’s human rights record are exaggerating.

Then there are more than 50 others, in Tunisia and in Europe who are on hunger strikes, also protesting both the socio-economic situation in the country as well as the overall repressive atmosphere. And all this comes after what I can only call the “social uprising” in the Gafsa region centered around Redeyef in 2008, which was a “warning shot” to Ben Ali that there are deep, structural economic problems in Tunisia that need addressing.

Other than 200 people were tortured, imprisoned, with a fair number of them still in jail, including the journalist Fahem Boukkadous, virtually nothing has happened since to suggest the Tunisian government takes the economic crisis serious: no development plan, a few insipid crumbs of promises of economic aid from Ben Ali’s advisors, that is about it.

Combine such painful news of economic woes with its opposite: that two families – that of the president Zine Ben Ali, and his wife, Leila Trabelsi – are accumulating wealth at a breath-taking pace; indeed, I read this morning that Ben Ali has squirreled away more than $5 billion in foreign bank accounts and a more sober picture of Tunisia’s so-called “economic miracle” comes into perspective: a precious few are making a fortune at the expense of the multitude whose situation is deteriorating as a generalized impoverishment grows. So, the Philippines has its Marcos family, the Congo Mobutu, Saudi Arabia its royal family, and now we can add to the picture the Ben Ali-Trabelsi family clans of Tunisia! Quite an honor!

The social explosion in Sidi Bouzid reinforces the opinion of those voices in the Tunisian opposition who have argued that Zine Ben Ali’s government is facing a full blown socio-economic and political crisis, one which it is questionable the government can or will survive.

2. Will TuniLeaks affect Tunisia’s economic relations with “the West”

How will the TuniLeaks, the corruption they expose, affect Tunisia’s economic relations with “the West” (the USA, Canada and the European Union?)

Again, while the WikiLeaks documents are embarrassing – and evidence that the United States embassy is aware of the scope of the corruption – there is not much here that is not known to Tunisians or close “Tunisia watchers”. Certainly the cables verify the word “on the street” and much that has been published on line and in the French press. But I think the question should be somewhat rephrased to: if this corruption has gone on for so long and has been so pervasive, why has it taken until now for Europeans and the US ambassador to Tunisia to take note of it?

It appears that, despite all their talk of “transparency”, foreign economic interest can and does tolerate rather substantial rates of corruption in Tunisia without much complaining. At what point has the level of corruption reached such heights that even Tunisia’s Western partners have finally said “enough is enough” and “we need more caution in our economic relations with Tunisia”. Well they haven’t said it yet – but it appears they will rather soon.

And here look at the relationship between the growing economic disparities of the country – which have long existed despite the rosy propaganda “the economic miracle mirage” – and the reality. It is the intensification of Tunisia’s social crisis which has more and more exposed the level and nature of corruption, and that the U.S. State Department has, at long last, noted all this in the released cables, is of course a positive development, one that re-enforces what others have been saying for a long time.

The US does so as it begin to perceive threats to its economic and security interests that has resulted in all these developments.

For my work, I have just finished reading an excellent book – quite serious and frankly not easy reading- on the Savings and Loan crisis in the United States in the late 1980s, early 1990s by William Black, a former federal bank regulator here in the USA. Its title is “The Best Way To Rob A Bank Is To Own One“; one could make a slight change to make this relevant to Tunisia: “The Best Way To Rob A Country Is To Be President For Life”…

But at some point, the social crises of Redeyef and Sidi Bouzid will spill over onto the beaches of Sousse and Djerba, the villas of Sidi Bou Said. Social unrest and tourism have never been particularly good partners. That is why at Sidi Bouzid, as at Redeyef, the government of Tunisia (GOT) moved so quickly to “localize” the problem, cutting off foreign and press access in both places. That is why the GOT has pursued such a vicious policy against Fahem Boukkadous, only the last of many Tunisian journalists to suffer repression. Thanks to his reporting the events of Redeyef became known beyond Tunisia, in France and then, really worldwide.

I was reading on-line reports that several journalists from Tunis hoping to report on Sidi Bouzid were arrested, one badly beaten up by the government security forces. Still, in this age of the internet, it will be impossible for the GOT to keep a lid on what is unfolding at Sidi Bouzid, now in its third day of protesting, with reports of a large number of arrests. The word is out.

The point here is that sooner or later these events will affect tourism, both from Europe and from Arab countries (particularly Libya). And the social unrest could have more far-reaching impacts as, at least in principle (and we know unfortunately how little that can sometimes mean) Tunisia’s economic ties with the European Union are based upon improving its human rights situation.

France seems to have a president who cares a lot more about economic contracts with French companies than he does about young Tunisians burning themselves to death, but even here, there is even a limit to how much longer Sarkozy can turn his back on Tunisia’s economic crisis, especially given the strong movement of support for Tunisian democracy in countries like France, with its large Magrebian community, still strong trade unions and generally active social movements.

3. The endemic corruption of the Ben Ali and Trabelsi families

To what degree will the endemic corruption of the Ben Ali and Trabelsi families, their tendency to use the Tunisian economy as their own personal cash cow affect foreign investment, foreign economic relations?

Here, the cables were interesting. They suggest that it is Tunisian investors who have pulled back their capital from investing in the country, while to date, the foreign investors have not yet withdrawn much. This is interesting, but not so surprising. What sectors are we talking about where foreign investment is strong? Mostly tourism and now, off shore oil and gas exploration. At least not yet.

At some point, all the shenanigans taking place in the banking sector will have an impact. Tunisian banks are, it is well known, not in good shape. When the only profitable and well run private bank in the country, Banque de Tunisie, is taken over by the current foreign minister and Mme Ben Ali’s brother, Belgassem Trabelsi, this is taking events a bit too far. The cables express a great deal of concern about this takeover, and some of the other machinations in Tunisia’s banking industry. What will the U.S. State Department recommend to US investors and business concerns? The cable strongly suggest they will urge caution in investment as long as Ben Ali remains in power.

4. The current social crisis

There is something else, though, concerning the corruption and economic developments which is related to the current social crisis gripping Tunisia that deserves mention and thought.

Since the early 1980s, Tunisia has been one of the most faithful pupils to World Bank and IMF structural adjustment programs, and has frequently been praised by the Bretton Woods institutions for their fiscal discipline and market economic policies which is supposed to result in making the country attractive to foreign investment.

As a part of this economic approach, Tunisia has been encouraged, if not pressured to privatize different state holdings and to lift subsidies on food and other basic needs as is typical of loans given with structural adjustment provisions.

What is the result?

• In Tunisia as elsewhere where capital controls have been lifted, investment flows into non productive activities, bubble creating activities, real estate and finance, rather than into less profitable (at least in the short run) infrastructural grown and agro-industrial modernization.
• The lifting of subsidies has gone on for more than 25 years, beginning with the lifting of subsidies on the price of bread in 1984 which triggered what are referred to as “bread riots”, not only in Tunisia, but many places. As salaries have remained stagnant and prices have increased, combined with the growing crisis in unemployment, the lives of the majority of Tunisians have suffered. We are now more than a quarter of a century into such trends
• But most interesting of all has been Tunisia’s process of privatization and joint ventures which has exacerbated the gulf between rich and poor in the country in an interesting fashion.
• Foreign investment itself, although it exists, has been lackluster, especially from Europe and the USA. After the collapse of communism some of the foreign investment in Tunisia hoped to win more or less went to Eastern Europe restructuring. There is some from Arab oil producing countries, true…but necessarily in strategic economic sectors that would lead to growth long term.

It is impressive the degree to which unrestrained and unregulated privatization has been a failure in so many Third World and former Communist countries. Look at the privatization impact in Russia, Central Asia, Latin American countries like Bolivia, Argentina and Chile… and in Tunisia.

It is not that privatization and joint ventures under certain circumstances, are not viable economic responses, but not the way it has happened in Tunisia. There the processes have been dominated by the two ruling families, the Ben Alis and the Trabelsis who more and more monopolize all the contracts and are first in line when the Tunisian government sells of state resources at bargain basement prices.

As long as the families have control of the process, be it in the banking sector, the media or in education, privatization and joint ventures with foreign capital are supported.

As a result, these two families have become extraordinarily wealthy. But there has been another consequence: independent Tunisian entrepreneurs, small, medium sized and even some big investors have been driven from the field, either by hook or crook, by the crude methods of the first lady’s brother, or by more refined but equally self-serving approaches.

Not even Habib Bourguiba – in the end, no great democrat – was so crude. Yes, he seemed to like his palaces and that did represent a certain level of corruption, but Bourguiba’s corruption was pocket change compared to that of the Ben Ali and Trabelsi families today. And if Bourguiba wasn’t a great democrat, nor was he a cleptomaniac, robbing the country blind. For Bourguiba “wealth” was simply the trappings of power. He understood the importance of Tunisia’s economy “delivering” for certain key social milieus and while not immune to nepotism, kept something of a lid on it.

But these past 20 years, nepotism (giving special favors to close family members) in Tunisia’s economy has grown to rampant proportions, icing out of the possibilities for success many elements who did not fair badly in the Bourguiba years. This trend is so developed that a whole strata of businesspeople and entrepreneurs has been adversely affected or ruined. They now find themselves, along with the country’s intellectuals, trade unions and students, into the country’s burgeoning political opposition, narrowing Ben Ali’s political base to a considerable degree.

The TuniLeaks cables suggest that the U.S. State Department has, at long last, caught up with the rest of the world. The cables acknowledge as much. If the cables are accurate, they suggest that the State Department is beginning, however dimly, to understand the political consequences of these economic policies, many of which, while applied in Tunisia are “made in America”…and referred to as “The Washington Consensus”.

The more fundamental question: why did it take so long?

• Read Part One: Deconstructing Tunileaks: An Interview with Professor Rob Prince, University of Denver.