Mohamed Zaied & Ivan Ureta
Last updated: 22 November, 2012

“Libya was able to take down the regime of Qaddafi but has not been able to substitute it with another one”

Assessing the post-war Libya situation is not easy. Understanding all the factors implicated in such a context is very difficult. Forecasting Libya’s future is almost impossible. Nevertheless, the end of 42 years of capricious regime would bring some optimism.

Many institutions and analysts have joined this optimistic stream although they have been cautious and prudent. As the IMF has acknowledged, “Libya’s popular revolution of 2011 has unleashed the potential for more diverse and inclusive growth”. In order to unleash such a potential, political analysts like Mills would suggest that the first priority for the Libyan economy is restoring the oil production because oil exports would be a crucial factor for funding the transitional government. Of course speeding up this production may be difficult given that as the IMF also mentions, within the short term, Libya should face difficult and complex obstacles related to the rebuilding of its “economy, infrastructure, and institutions, and responding to the demands of its population, especially for improved governance”.

Building on these arguments, what seems to be clear is that the problems Libya is facing go beyond these recommendations or initial appreciations. An economic boom linked to more and increasingly efficient oil production is not going to make the difference, the substantial and radical difference a country like Libya should be aiming at. Historical, cultural, political, sociological, religious and geographic elements are mingled and they have to be considered to draw a possible future or anticipate some scenarios that should be avoided. Probably the first questions here should be asked to the Libyans: What kind of future do you want for your society, for your country? How do you plan to achieve that? After the revolution, the real revolution is yet to come. Libyans and Libya now have a unique opportunity to think, plan and face the future ahead.

In order to understand the economic system and its development in Libya, we ought to first look into the political scenario since the independence of the country in 1951. During that decade, it was considered to be one of the most underprivileged states in Africa. Its economy relied mainly on some very limited and primitive sources of income, such as cropping seasonal agricultural products and hardly mentioned grazing.

Given the fact that Libya consists of almost 90% Sahara desert where nothing could be cultivated nor grazed, the two mentioned economic activities have remained extremely diminutive and were not really able to be raised for any sort of comparative advantage with its neighboring countries. The Kingdom, thus, relied heavily on foreign aid and the rent that was being acquired from the western military bases, which represented in a way the ‘daily bread’ for the governmental sector. The discovery of oil in 1959 diametrically changed the destiny of the country. It winched Libya from the abyss of poverty to the surface, and for the next nine years the country would witness one of the most brightening times of its history, using the revenue of oil for revolutionizing not only the infrastructure but also establishing the brick foundation for a well-thought and updated educational and health care systems.

On September 1, 1969, Libya would witness a white coup by some of the military commanders who would lead Libya for the next 42 years and would be if not the main, one of the most influential factors for Libya’s economic setback. Mummer Qaddafi arrived during the peak of the Cold War. At that time, there was no neutral position to take. Given the social and cultural background of the country, Libya was driven more for the Soviet side, which resulted in an authoritarian-socialist state.

Economically this meant a total nationalization of the country’s natural resources but also to some of the very few private sectors that were present at that time. Whoever was rich had to give up some of his properties to the poor. For example, many of those who owned a lot of land were forced to give up some of it to others who had no place to stay. Hence, a new economic approach was being crystallized; privatization was banned and in the best-case scenario people had to share ownerships of whatever business they decided to conduct. No one was allowed to open his own business. The shortage of the private sector resulted in economic dead-motives since there was no competition, thus, the state’s industry remained paralyzed and outdated.

Another factor of Libya’s economic setback was that it represented and supported an ideology that was being tested for the first time in history; communism. Libya, until 1991, represented a Soviet sphere of influence within North Africa; thus, it had to comply with whatever being delivered by the Soviets. Therefore, Libya was dragged down by these policies which did not go along with the naturalism of the country, nor with the mentality of its people. The only reason why Libya had been known as ‘socialist’ and not ‘communist’ was for a simple reason: religion. Libyans believe in god, which Communism would not have allowed.

Nevertheless, Libya continued to be one of the richest states in the world during the 1980s. In fact, its GDP per capita was much higher than most of the developed states such as Spain and Italy. Reasons for that were simple; first, it was the so called “Yom Kippur War” which brought the Arab oil embargo in 1973; the Iranian revolution in 1979 and finally, the Iraqi-Iranian war which lasted 8 years. They were all crucial factors in sky rocking the price of oil to $103 a barrel in 1980-81, fueling the Libyan economy.

The scarcity of economic diversity and the absence of foreign and domestic investments continued to be Libya’s rampant cancer until 2003, considering it to be a ‘petrodollar’ country of one blind-eye economy. In spite of the fact that Libya is considered one of the richest countries in the region, its unemployment rate of 20% is the highest in North Africa. This fact illustrates the bad management of the oil revenue, the corruption that was inescapable in order for Qaddafi’s regime to continue, and the misdistribution of the country’s fortune, creating an abysmal social gap between Qaddafi’s clans and the rest of the population.

These political, social and historic dynamics have eliminated almost all chances of developing entrepreneurial attitudes among Libyans, which have impacted the economic performance of the country. This is also one of the most difficult obstacles the new Libya has to face: The “entrepreneurialization” of its government and its society. The other obstacle is going to be related with the lack of experience in creating and managing governmental institutions.

There are some short-term and long-term regulations. The short-term regulations can be crystallized within the following: First, Libya was able to take down the regime of Qaddafi but has not been able to substitute it with another one. This brings the danger of political hollowness if the situation is not rectified as quickly as possible. Until Libya reaches this goal, economic prosperity becomes ‘pie in the sky.’ Not only this, maintaining the security for Libya’s only economic lifeline (oil fields) will certainly be at risk.

What should be done? First, the Libyan National Assembly must recognize that it has obtained the “authority” from the people to govern. It seems that the Assembly does not quite understand the difference between “authority” and “power.” In other words, its members have been over-lenient with armed militias that by now, given the fact that war is over, do not have any sort of legitimacy for carrying their weapons. Therefore, the Assembly must be clearer in its regulation. 

Apart from this issue, but nevertheless always related, are the repercussions of the revolution over public/private properties. Most of the private companies have suffered severe damages and losses in terms of their equipment and machines. Also, much of the infrastructure (which was already poor) – highways, schools, hospitals etc. – has witnessed rigorous devastation. The government, as a second step, must compensate those who have lost their properties or had them damaged, and fix whatever is destroyed within the public sector. Only then will the economic cycle start to roll again.

The next layer of analysis would imply longer perspective. Since the population of Libya consists of almost 75% youth, it brings two aspects to the discussion arena. First, it is the health care system. In order for people to produce, they need to be healthy. Second, it is the educational system. In order for the healthy people to produce, they need to be educated.

Thus, the real revolution is yet to come. This will take no less than a decade to be crystallized. Once Libya obtains the healthy and educated human capital, then the country is going to be able to bring the real change to the country. On the other hand, what the country will be offering at that time, in terms of natural resources, will be a contributing element but never the fundamental factor for the economic development of the country. It is in this way Libya will be considered not only rich but wealthy.