Libya: into economic tyranny

by Dr Tristan Learoyd

Western Neoliberals have a problem. Libya has dispatched with its tyrant and its new government doesn’t want to play ball. The Libyans are being defiant, they don’t want foreign loans and they have the means to make their nation a success.

The IMF and World Bank have indebted the globe through their loan conditions of privatisation, slashed public spending, fiscal control and free trade. They have decimated economies from Indonesia to Nicaragua with their loans, conditions and dogma. Why would the Libyans want to take on IMF relations of that kind when it has high quality crude in abundant supply, a per capita GDP that resembles Eastern Europe, and minimal national debt? [1,2] Thus, the Libyans have been stating they do not need loans from the West: “we don’t need loans”, defiant former Libyan central bank governor Farhat Bengdara told the World shortly after the Rebels captured central Tripoli. [3]

But write off the Neoliberals at your peril, as post-conflict/post-disaster confusion is the realm of the Neoliberal. How he thrives on it: from hurricanes to tsunamis, peaceful succession to war, if there’s the green glimmer of a dollar note the neoliberal will come to town. [4]

Libya’s frozen assets

There are two huge domestic problems that face Libya: one, it has startling inequality with pre-war employment of 30% in a unvaried economy, history suggests it will need central planning from a social government with a domestic plan to solve such problems; and two, the country’s infrastructure will require significant investment following the civil war. [1] Oil exportation will be required to raise the revenues to build such infrastructure, but the problem is that the oil industry will also require post-war investment.

Unfortunately, for the West, Libya doesn’t have to turn to the World Bank or IMF to find the money to kick-start its oil exports (if there is any money left in either institution), as the country has £168bn of its own stashed in foreign banks. However, the problem Libyan’s have is that those assets were frozen when the civil war started, and assets worth at least £90bn of the £168bn are located in European banks and in US and European government bonds. The Rebels will have to form an interim government which is considered reliable before such funds are released. [3]

Stuart Levey, a former US Treasury undersecretary, describes Libya’s predicament: having the assets remain frozen could be used “as a point of leverage for the US and its allies to ensure that they have a legitimate government they can trust in Libya they can give this money to”. [3]

Of course ‘legitimate government’ to the US and its allies means a government that opens up its markets to foreign investment – in other words to multinationals – eliminates tariffs and enters into a cycle of bargain-bonanza cheap state sell-offs in oligarch wallet-swelling cycles of privatisation. Therein lies Libya’s dilemma, the foreign firms want in and the assets are frozen by their respective governments.

It is no surprise that British businesses are lining themselves up for a slice of the action in post-war Libya with firms such as BP, Weir Construction and G4S private security ready for entry. [5]

Professor Paul Sullivan of the National Defence University in Washington states that “Libya may have the toughest transition of all of them in north Africa… there really seems to be almost no understanding among many there about how to transition to a vibrant economy and democracy. Platitudes and hopes are not policies that can be implemented.” [3]

One can only presume that the other Arab Spring nations will have a ‘smoother transition’ because they don’t have oil reserves, and will just have to take foreign loans with conditions attached and then be dictated to by the West. It is likely that the ‘transition’ referred to above means the kind of “shock therapy” economics of privatisation and austerity unleashed with such devastating results on the Southern Cone in the 1970s and 1980s and on the European Eastern Block and Russia in the 1990s.

What constitutes a ‘vibrant economy and democracy’ in the eyes of the West is likely to mean ‘laissez faire’ economics combined with a heavily subdued political democracy; such as in Western Europe and the US, where we vote for a personality who will have little control over the economics of the country – if elected – in a largely futile and meaningless process known as a general election.

Into economic tyranny

This is the faceless economic tyranny of neoliberalism. Neoliberalism pretends to be “laissez faire” but in fact there is more “do” than “leave” in neoliberalism. The legal constructs of contract and property rights required to enable “laissez faire” are immense, and coercion by corporates in and outside of the complex legal framework makes neoliberalism the mirror of its results, a barbaric undemocratic economic doctrine often on a par with those employed by tyrannical leaders – such as Moammar Gaddafi. [6,7]

Since the overthrow of Allende’s Chilean Government in 1973, new regimes have to have their economics nailed-on to defeat the neoliberal agenda and its Western cheerleaders, and thus deal effectively with their own domestic economy and inequities. If the Rebels don’t want to go the way of the many emerging nations before them, and want the nation they have fought – and are still dying – for, they need to work out an economic plan, and fast. At least there is hope for the Libyan people in reports that the damage to their oil fields has been less than expected. [8]

[1] http://www.albawaba.com/business/many-challenges-ahead-libya-post-gaddafi-economy-390087 Accessed 28/08/11

[2] http://www.nytimes.com/2011/02/24/business/energy-environment/24oil.html?pagewanted=all Accessed 28/08/11

[3] http://www.iol.co.za/business/international/oil-rich-libya-not-looking-for-a-loan-1.1126333 Accessed 28/08/11

[4] Examples of neoliberalism involvement in the aftermath of disaster/confusion, for example: Hurricane Katrina, the 2005 Tsunami, Chile’s 1973 Coup and Poland’s 1990 failed succession from communism to social democracy.

[5] http://www.guardian.co.uk/world/2011/aug/28/as-gaddafi-topples-big-british-companies-queue-to-get-back-into-libya Accessed 28/08/11

[6] The immense legal constructs that enable “laissez faire’ dogma was examined in depth in the aftermath of the last Great crash by, amongst others, John Hale.

[7] The inequality of neoliberal nations can be seen in both Injustice by Dorling (2009) and The Spirit Level, by Wilkinson and Pickett (2010).

[8] http://www.reuters.com/article/2011/08/25/libya-imf-idUSN1E77O1T820110825 Accessed 28/08/11