Economic Advice That Can Hurt the Poor
With International Monetary Fund (IMF) managing director Christine Lagarde in Tunisia today, the stage is set for ideological war over the progress of democratic revolutions.
Until 27 year-old fruit seller Mohamed Bouazizi committed suicide by immolation in the provincial town of Sidi Bouzid, Tunisia was packaged as an IMF success story. In 2008, dictator Zine El Abidine Ben Ali was embraced by Lagarde’s predecessor, Dominique Strauss-Kahn: ‘Economic policy adopted here is a sound policy and is the best model for many emerging countries.’
Ben Ali’s regime was the ‘best model’ for two other Washington institutions: the State Department just a few blocks from the IMF headquarters, and the Pentagon. From within Hillary Clinton’s lair, as WikiLeaks revealed in 2010, ‘The United States and Tunisia have an active schedule of joint military exercises. US security assistance historically has played an important role in cementing relations.’ (Clinton is a leading candidate for World Bank president, to be chosen in mid-2012.)
Also in 2010, the IMF celebrated Ben Ali’s commitment ‘to reduce tax rates on businesses and to offset those reductions by increasing the standard Value Added Tax (VAT) rate,’ which hurts poor people most. The IMF advised the tyrant to ‘contain subsidies of food and fuel products.’ While squeezing the poor, the IMF diplomatically turned a blind eye to widespread corruption by Ben Ali and his wife’s notorious Trabelsi family, the two families’ extreme level of business concentration, the regime’s reliance upon murderous security forces to defend Tunisian crony capitalism, and the hedonistic lifestyle for which Ben Ali’s clan had become famous.
The informal sector is vibrant in Tunisia, about half the size of the formal Gross Domestic Product, but doesn’t contribute to the 18 percent VAT rate. So like in South Africa where the state just announced tax filings by a record four million people, the pressure is intense for authorities to bring survivalist home-production businesses into the net. Police harassment worsened, and Bouazizi killed himself after his fruit cart was overturned and goods confiscated. He had borrowed $200 the night before to buy the produce, and with the meager earnings, he supported a family of four. He died of the burn wounds last January 4.
Before long, another self-immolation occurred, politically, when the notorious sex pest Strauss-Kahn allegedly raped a 32-year old Guinean maid, Nafissatou Diallo, who fought back with a charge that, ultimately, could not be prosecuted in the criminal courts, though a civil trial looms.
But the legacies represented by both immolations continue: high-risk pro-dictatorial neoliberalism and courageous popular resistance. A month ago, Strauss-Kahn’s successor Christine Lagarde, also a former French finance minister, visited Abuja to offer neoliberal advice to Nigerian president Goodluck Jonathan on fuel subsidy cuts. Lagarde was effusive about Jonathan. ‘I was extremely impressed’, she said, ‘with the energy and pace at which he wants to transform the economy.’
However, as for Nigeria’s very low fuel price, as the BBC reported, ‘The IMF has long urged Nigeria’s government to remove the subsidy, which costs a reported $8 billion a year.‘ Lagarde also emphasized this ‘reform’, and the result was nearly Tunisian in scale: a national popular struggle, Occupy Nigeria, that shook the country to the point of Jonathan’s overthrow before civilized society – the trade unions – called off protests, agreeing to a government fuel price concession.
The preceding paragraphs are based upon leftist ideological argumentation, but this is not the only narrative about Tunisia. The Third World’s most celebrated neoliberal is probably Peruvian economist Hernando de Soto. He blames the series of revolutionary uprisings in North Africa on limited access to capital.
In an interview last year, de Soto told us, ‘Bouazizi immolated himself in a terrible suicide because he never got a right to the land his house was built on, which could have been used for credit to develop his business, for example, to buy a truck. He was never able to get an official right to put a stall in a public place and so, he never had a property right to it. The only way to get the police to accept it was to pay off a bribe of several dinars every day. When they take that away from him, the space, he knows he does not have much of a future anymore.’
De Soto also blames Islam’s Sharia law for the inability of Bouazizi’s mother to benefit from belated municipal recognition of his home: ‘When he died, she wasn't able to pass the title from his name to her name, because the paper that recognises the property is hard to transfer and in the process, someone could do very dirty tricks. Should she wish to sell it, to rent it, to use it as a guarantee to get capital for credit, she's got a problem. The kind of papers that the Municipality dishes out are not good enough for the bank. So women are not protected because of Shariah laws of the country, where property would go to the eldest son, even if the son is not able to benefit from the asset.’
But one fatal flaw in his argument, as shenanigans at Muhammed Yunus’ Grameen Bank and recent suicides by 250,000 over-indebted Andra Pradesh farmers suggest, is that microcredit can just as easily add to the woes of ordinary people, amplifying the deeper economic contradictions. Moreover, Tunisia’s system was structured to diminish the power of citizens in order to sustain a dictatorship, with an estimated 17 percent of one major Tunisian bank in the hands of Ben Ali’s son.
Thus, the poverty innate to the IMF’s best model, Tunisia, cannot be solved by paper rights aiming to integrate poor people into a rotting ‘formal’ economy locked up by political and military elites. The same is true in Egypt, where repression by the post-Mubarak military against progressive democrats has worsened. The majority of parliament represented by Islamic parties is not yet sufficiently powerful to support the democrats – if that is their wont. The re-emergence of political Islam in the Middle East and North Africa, especially Tunisia where progressives do have influence over economic policy, requires new narratives. The revolutionary alliance in several countries between political Islam and democratic civil society, against Washington-backed dictators, has not yet ended.
In a speech last December, Lagarde attempted to coopt the ideas of the Arab Spring. Speaking of Bouazizi, she asked, ‘Who could have predicted that his tragic death would herald a whole new Middle East? Who would have foreseen that this act of desperation against a violation of human dignity would ignite a flame that would eventually illuminate the entire region, toppling governments and leading to mass awakening of social consciousness?’
But for Lagarde, the awakening was dangerous: ‘This is naturally a risky and uncertain period. It is a period when hard choices must be made, when post-revolutionary euphoria must give some way to practical concerns.’
Her concern was partly about Tunisia, where yesterday she seemed to be making progress. ‘It will be important to manage this difficult transition in an orderly way. And here, I want to pay tribute especially to the people of Tunisia, who are going through a smooth and inclusive process of transition. Just as Tunisia provided the first spark of the Arab Spring, so now can it light the path forward for other countries in the region.’
Will that light include the kinds of subsidy cuts and privatization strategies her institution backed in pre-revolutionary Tunisia? After all, said Lagarde in her December speech praising the Arab Spring, ‘We are offering the best policy advice possible. We will provide financial help if requested. And with our technical assistance, we are helping countries build better institutions for a better world. Some examples: We are helping Egypt make its tax system more equitable. We are helping Libya develop a modern system of government payments. We are helping Tunisia improve its financial sector. And we are helping Jordan with fuel subsidy reform.’
Then Jordan will surely follow Nigeria in protest. But in Tunisia the pitch is insidious, for yesterday, interim prime minister Hamadi Jebali was quoted in the local press as ‘commending the IMF's active and constructive support to Tunisia's economy particularly after the revolution.’
But Jebali’s former advisor, and current spokesperson of the ruling Al-Nahda party, Said Ferjani, offered a more balanced view yesterday during a talk in Durban, South Africa: ‘The IMF was bad in describing Ben Ali as a model.’
Although he conceded there were no plans to cut ties to the IMF, ‘We won’t be in a situation where we will be blackmailed by anything. Across Africa they pushed for privatization of the safety net. We will never listen to such things. We will not accept anything that compromises our national interest. The poor people of Tunisia are the prime priority for us because at the end of the day those are our people and we will not bow to any pressure or any kind of policies that would exacerbate the plight of the poor people. The IMF can say what they want but we will do what is right for our people. It’s the aim of our revolution.’
If the likes of Lagarde continue their visits to African capitals – including Pretoria last month when who knows what advice she chummily proffered to South African finance minister Pravin Gordhan – then we need to hear more from Tunisians, Egyptians, Nigerians and so many others about how underlying causes of revolt, especially inequality and neoliberalism, can fuse opposition from diverse traditions. After all, no country exemplifies neoliberalism, inequality and multifaceted protest – and resulting political confusion – as acutely as South Africa.
Patrick Bond and Khadija Sharife are researchers at the University of KwaZulu-Natal Centre for Civil Society: http://ccs.ukzn.ac.za