Thread by @AhmedMJehani

Twitter Thread - #NewStartforLibya

Ladies and gentlemen, the political and economic situation in #Libya today makes life hard for everyone, for #Libyans, our neighbours and the rest of the world. But we may still have hope that this can change.

I tweet today, not as a representative of any institution, faction or interest group but as someone who only wants the best for Libya; and #Libya surely deserves much better than she has had for the last fifty or so years.

I want to give you a summary of ideas that I have been developing for some time with a group of friends, professionals and academics which has become something of an informal think-tank.

We have recently called this narrative “a New Start for Libya”, hoping to culminate in a nation building project, with international support.  

#NewStartforLibya

I have discussed them with most of the major players in the current Libyan situation including @UNSMIL, the UN Security Council Panel and many Libyan politicians.  I now hope these ideas can generate wide public debate.

In some ways these ideas are simple and straightforward, but in others they represent a radical change from the mainstream analysis that has been repeatedly applied to #Libya since the fall of #Qadhafi in 2011.

Mainstream analysis sees the current mess as brought about by warring factions, fractious tribes and impossible politicians, using ideological and legal narratives.

Mainstream analysis of the Libyan crisis mostly starts from 2014, rather than 2011 or before, and tend to fall prey to these narratives perpetuating confusion around Libya and feeding its conflict.

No doubt factions can be warring, no doubt tribes can be fractious and everyone knows politicians are impossible; I can confirm that from personal experience.

But the root cause of Libya’s problems is not these factions or tribes but a fundamentally rotten economic system.

It is the rotten economic system which brought some of these groups into being and which has helped to finance and nurture them ever since.

It is an inherited system of unaccountable patronage and clientelism over #Libya’s economy using centralised expenditure of oil revenues, perpetuated and legitimised beyond the Libyan revolution in 2011.

This system threatens to keep Libya fragmented in a vicious cycle of conflict, capital flight and social and economic collapse, undermining any attempt towards peace and stability in the country and wider region.

Without addressing the need for massive and fundamental changes to the underlying economic structure, inherited from Gaddafi, it will not be possible to put a workable and lasting political agreement in place.

I will apologise in advance for the length of this thread. Perhaps it's better read as an article. But twitter presents excellent opportunities for collective thinking. I hope all concerned about #Libya can pitch their views in the relevant tweets.

This tweet session will be organised into 5 Chapters:

1 - 2011 Revolution; Dashed hopes
2 - How we got here; #Gaddafinomics
3 - A New Start; a new economic #baseline
4 - How to Start
5 - Learning from History

Chapter 1 - 2011 Revolution: Dashed hopes

1.1 - I want to start not quite at the beginning but with what happened during the 17 February Revolution and its aftermath, in which I was very much involved, and explain how the great hopes for #Libya in 2011 were dashed.

1.2 The situation of #Libya with its oil reserves and overseas assets was very different from most post‐revolutionary situations.

This ought to have been helpful, but it actually hindered development of proper governance before AND after 2011. #Libya is a country with plentiful financial resources but appalling financial controls.

1.3 The plentiful financial resources meant that donors in 2011 had far less leverage than usual in #Libya and they were not in a position to insist on commitments to structural, legal and institutional reforms and their relative weakness made them reluctant to be too involved.

1.4 That said, from the start of the Revolution and for some time after the end of Gaddafi there was considerable international goodwill and help for the National Transitional Council, or #NTC.

1.5 Most importantly, there was a significant act of international financial intervention with the introduction of the UN asset freeze in 2011. This act could have been been a basis for a fundamental change for a sustainable post-conflict #Libya, but the opportunity was missed.

1.6 A Temporary Financial Mechanism or TFM was established and donors committed assets to a trust fund to be used to supply basic goods and services to the #NTC controlled areas.

1.7 The TFM provided order and appropriate governance structures to manage expenditure in #Libya’s newly liberated regions. It also provided a potential framework for the #NTC’s new institutional structures and it continued to operate until the liberation of Tripoli.

1.8 In September 2011 the #NTC gained access to the country’s financial records, and soon realized that it was facing a huge budget deficit for 2011 as a result of the decline in oil revenues brought about by the conflict.

1.9 Although this meant that there was pressure to unfreeze the international assets, the Executive Office took a clear policy decision to do so only gradually.

1.10 This was because the governance and public financial management systems of the transitional government were not equipped to deal with a potential windfall of more than USD 160 billion.

1.11 The gradualist policy was made plain to key international actors and formalised in a UN Security Council Resolution.

1.12 The @WorldBank and @IMF public financial management review team visited Tripoli in October 2011.

1.13 The meetings were very positive and the review team witnessed that many key technocrats in the Ministry of Finance and the Central Bank of #Libya were active and working, which greatly increased their confidence in the new regime.

1.14 At this time, the autumn of 2011, everyone seemed agreed that good financial controls were essential.  So how did this change?

1.15 Once the Elkieb Government assumed leadership of the country, expectations started to rise.

Although levels of oil production increased, the Ministry of Finance was concerned by a budget deficit of 19 billion dinars or approximately 20% of GDP.

1.16 The Elkieb Government thus started down the road of setting aside the policy of prudence.  They sent a letter to the UN Security Council asking for the immediate release of all international assets.

1.17 Having started down this slippery road they were unable to stop; events overtook them and overtook them quickly.

1.18 On 5 December 2011 the UN Security Council granted the new transitional government its wish and thus undermined the previously agreed policy of prudence.

1.19 Soon after, the Governor of the Central Bank declared that the government had been granted access to more than USD 100 billion in assets and this created a huge challenge for the Transitional Authorities in managing expectations.

1.20 On 17 December 2011 the Finance Minister went on national television to explain the immense pressure that the government was under to issue cash handouts and raise public salaries.

1.21 The Minister expressed deep frustration with the request to increase public wages given that up to 80% of the labour force was employed in the public sector and that more than half of the public sector workers were not productive or indeed even active.

1.22 The Minister defied the pressure exerted from different armed groups and issued statements that the government would not succumb to these pressures but would maintain fiscal prudence.

1.23 One day later a group of armed revolutionaries surrounded the Prime Minister at his office and asked for payments to be transferred to them.

1.24 He issued a statement to confirm that he would personally ensure that all revolutionaries registered at any military council or local council would receive payments once their names had been registered with the government.

1.25 Thus by January 2012, only four months after the end of the conflict, a large cash hand out program had been established and the government’s wage bill had increased by 50% compared with 2010.

1.26 By June 2012 more than 240,000 individuals had registered as ex‐combatants and were pressuring the government to give them cash handouts.   By 2013 oil fields were shut and more cash was demanded.

1.27 Most of these demands were accepted and the result has been significant damage to the economic stability of the country in addition to a much raised security threat.

1.28 In effect the country has been paying the very people who undermine security to undermine it some more. The terrorism, conflict and absurd political chaos, is the inevitable consequence. It is hard to imagine a more destructive policy.

Chapter II: How we got here? #Gaddafinomics

2.1 I now want to turn to matters before the Revolution and to tell you a little about something I have called “#Gaddafinomics”; the underlying mindset and behaviour system of Gaddafi's inherited model of a State, the #Jamahiriya.

2.2 This is a heavily centralized rentier economic system, custom designed by Gaddafi for control and stabilisation of the Libyan State.  Its main purposes were to maintain both centralized control of the state and the economy and to ensure the stability of its bizarre regime.

2.3 A system where monopoly of force was vested in Gaddafi himself, not in constitutional rules, and where power was highly devolved and fragmented across the population, but organised geographically and administratively as ‘committees’ receiving finance from oil revenues.

2.4 To understand the Libyan economy one must understand #Gaddafinomics because the truth is, #Libya remains rooted in #Gaddafinomics. ‘Committees are everywhere’ was the Jamahiriya Slogan. Indeed they are & remain masked as Gvmnts, ministries, agencies, state owned companies etc

2.5 Unfortunately it is a uniquely perverted model of dictatorial economic management which has distorted mindset and incentives of the #Libyan people, and produced dysfunctional institutions over more than four decades, transmuting into worse forms over 2011, 2014 and 2017.

2.6 The essence of power in #Gaddafinomics is the centralized control over the oil revenue flow‐of‐funds into and from the public sector, which accounts for almost 90% of Libya’s economy, coupled with centralized control over its institutions, legal system and laws.

2.7 On the one hand this was done with full impunity, whereby Gaddafi abdicated his formal and legal responsibility in the management of #Libya’s economy, but remained in defacto control over the key sovereign, fiscal and monetary decisions of the State.

2.8 On the other the #Libyan people relinquished their own rights and responsibilities towards state and society in exchange for stability and unaccountable entitlements in the oil rents system, risk free, so long as they didnt threaten the political system.

2.9 Key amongst these entitlements were wages and subsidies, where jobs became lifetime appointments and wages became fixed stable incomes, without any legal responsibility or practical requirement to actually do any meaningful work.

2.10 This has continued until the public employment system grew to the monstrosity it is today, accounting for more than 2/3rds of the Libyan workforce.

2.11 #Gaddafinomics became the foundation for an implicit social contract between the State and society, or “#Jamahiriya” as he termed it, and central control of funds became the overriding driver for all formal legal institutions.

2.12 This always means that command and control by the regime from Tripoli, the essence of the regime’s survival, replaced all other rights and duties and all rational economic decisions.

2.13 The situation brought about by #Gaddafinomics was fortified by full monopoly control of both money and guns by #Qadhafi himself

2.14 It produced a highly centralised but still fragile bureacracy and a hollowed State, with extraordinary distortions and contradictions in all institutions, political, economic and social life.

2.15 These distortions were legitimized by "law", that is by legal text procedure, and by what might be termed “malprocess” but in reality had no grounding in law in its normal sense, where rights and natural justice act as foundations.

2.16 This gave Libyan institutions a veneer of legitimacy, but left them as a mass of legal and operative contradictions in practice. This issue has been highlighted by @GhassanSalame as a key mindest issue blocking any meaningful Libyan national agreement.

2.17 These highly distorted relationships fueled by dependency on centralized oil flows created a massive imbalance between the State and Society which was and remains value-subtracting from both.

2.18 Values and ethics in the Libyan system were completely distorted, subverting rational economic incentives as well as justice and competence in every sphere.

2.19 Reality became split between a shallow highly fragile formal one and many parallel, informal realities rich with reslient institutions, including a thriving black market, illegal immigration, a militia/war economy, massive capital flight havens, social governance models etc.

2.20 These parallel realities are behind the current absurdities amd contradictions of the Libyan situation and provide both negative and positive aberrations:

2.21 The negative ones include intense fragmentation, multiple parallel governments and free‐fluxing alliances between ideological foes, giving us the full force of terrorism, organised crime, intracine tribal conflicts etc.

2.22 The positive ones include organic coping mechanisms and resilient social bonds which with a thriving informal market economy have enabled the Libyan people to survive the chaos of recent times.

2.23 #Gaddafinomics is the force hollowing out of the formal political and economic institutions even before 2011, bringing the state to a halt by 2010. They are the main drivers of the zero‐sum conflict and continuous collapse since then.

2.24 The Central Bank of #Libya has played a key role in this disaster. The whole system is held together by a total dependence on the central flow of funds from the Central Bank.

2.25 This institution collects all the oil revenues and is the central manager of the zero sum mindset, incentives and bad behaviour of #Libyan society and its institutions.

2.26 The Central Bank, as the fiscal agent of #Libya’s treasury nationally and internationally, has become the de‐facto government, effectively responsible for the decision‐making and implementation of a rotten fiscal and commercial policy.

2.27 This naturally eliminated the roles and responsibilities of both the legislative and executive powers in making and implementing policy. Things are reportedly worse on allegations of corrupt relationships between politicians and the Bank.

2.28 Making government irrelevant in this way has not only produced parallel governments, it has perpetuated the crisis, undermining the Libyan Political Agreement and the overall transition to a constitutional State.

2.29 It has has transformed would be “governments” and by extension, society, into clients of the Central Bank, which has in turn, become an unregulated cash box.

2.30 An unregulated, unelected institution collecting oil revenues and then managing the allocation and distribution of the money amongst the interest groups that compete for funds.

2.31 While the Central Bank has taken on this role, by doing so it has helped to make the fragmented public administration almost entirely superficial and defunct.

2.32 The attempt to leave the pre‐existing “#Gaddafinomics” structure in place after the Revolution was fundamentally flawed from the outset and more or less guaranteed a bad outcome that we are struggling with today.

Chapter III - A New Start

3.1 So how is #Libya to put things right?

3.2 To end this diabolical, predatory system, and transition to the #Libya we aspire to, the process MUST put in place a baseline for a new #Libyan political economy, based on rights, not central patronage.

3.3 With regards to the economy, #Libya needs to adopt a new decentralised “social market” economy with a properly functioning transparent social security system if it is to prosper.

3.4 This would replace the #Gaddafinomics system of oil revenue flows controlled by the Central Bank, with its current system of rent seeking and favours, by an open market economy, enforced by the rule of law within a decentralised governance system .

3.5 This new economy would be underpinned by an integrated framework of foundational fiscal rules in annual oil revenues and public assets, enshrining rights and responsibilities for:

Society (family basis),
Individual citizens,
Local governments and
Central government,

3.6 The rules would provide a framework of guarantees for
1- Unification of a smaller central government,
2- Social security for all libyan families,
3- Equitable local partnership in governance, and finally
4- Equitable national voice and participation for individual citizens

3.7 This new economic approach needs to be started with or even to precede the new political arrangements.  The political cannot succeed without the economic.

The rights-based economic #baseline:-

3.8 The fundamentals of this new approach fo would be based on a series of economic rights.

3.9 The first of these, and as a priority so that everyone will know that they can make ends meet and survive, would be a right for all Libyan households, and particularly the family, to Social Security.

3.10 This would be given as a Right to a Universal Family Basic Income (FBI) for all Libyan households, funded out of current oil revenues.  It would entirely replace the existing distorted entitlements to salaries and subsidies, which would need to be wound down and abolished.

3.11 Unlike other international UBI experience, this is not envisioned to pay people not to work, but the other way round;

To liberate the Libyan economy from bad behavior incentives and institutions created by the wage and subsidy entitlements, so Libyans can create real work.

3.12 The #Jamahiriya system still in place distributes UBI to the populous, masked as salaries in a public employment system, without a real basis for a proper civil service system or labor market principles and mechanisms.

3.14 The proposed Family Basic Income fiscal rule would legitimise an equitable framework of social security monthly payments to all #Libyan households as a national annual commitment from oil revenues, outside of national and local budget politics.

3.15 It would not be paid in exchange for public employment, but rather, to ensure basic subsistence for peaceful coexistence as well as compliance with the law, giving government monopoly over legitimate use of force in society, & removing social ‘insurance cover’ for infractors

3.16 The second right would be recognition of the right of all #Libyan Citizens to a share in the state owned assets above the ground for production.

3.17 This would replace the previous distorted Central Government monopoly over the economy and the devolution of asset‐ ownership instruments would be honored directly by the Central Government;

3.18 The third right would be the recognition of the right of all #Libyan communities to equitable partnership in the management of Libyan wealth, not subservience to Central government patronage from Tripoli. Partnership, not Patronage.

Local #Libyan cities and communities have a right to deliver security and public services to all resident #Libyan citizens in their localities, as well as to have full autonomous control over their local economies, creating jobs and managing growth.

This right would be enshrined and guaranteed by a fiscal rule, enshrining a fixed share of annual natural resource revenues to all local governments directly against local budgets and projects of municipal corporations, with own balance sheets.

3.19 Therefore, Just as with regard to the economy so with regard to the political structure, #Libya needs to adopt a much more decentralized approach.

3.20 We have recently seen local mayors and communities doing excellent work in #Libya in spite of the current difficulties.  #Libya is a diverse country and needs to recognize that much of its government should be carried out and perhaps can only be carried out at local level.

3.21 #Libya needs to adopt new decentralised political arrangements, with clear boundaries between what is to be done at national and at local levels.

3.22 This must happen if the security situation is to improve and the normal services expected of government are to be provided.  

It must happen for a proper division of labour between national armed forces and security agencies, and local ones, to ensure a lasting balance.

3.23 Local communities would become responsible for many of the things that are currently the unfulfilled responsibility of the central government.

3.24 They need a monopoly over legitimate force in local domains, for example, to be in control of their police.

3.25 They will need control of local budgets and to be responsible for the delivery of social services such as health, education and housing.

3.26 This principle says that local communities have a right to manage and develop their
own economies, by receiving and controlling their own recurrent and capital budgets, as a real share in the flow of funds from natural resources.

3.27 This principle means that local communities have a right to manage and develop their own economies, by receiving and controlling their own recurrent and capital budgets, as partners in the flow of funds from natural resources

3.28 This right therefore establishes local government as a core duty of Libyan communities to enable dissolution of militias and reconciliation at local levels, to enable institutional unification of the national security apparatus.

3.29 As a result, the new model protects both the society and local communities with constitutional RIGHTS in national wealth rather than a patronage entitlement, appeasement or subjugation by the central government.

3.30 All natural resources remain the ownership of the Libyan people but it is now allocated to specified shares for FBI and local partnership.

3.31 These three rights, give rise to the final fourth right for the existence now of a new form of smaller central government, to preside over sovereignty of the Libyan State, and manage ownership of natural resources in sub-strata on behalf of all #Libyans

3.32 The new central government must have  clear and limited rights and responsibilities. It should have a monopoly over legitimate force in central domain, as well as continued ownership and control of exports of natural resources

3.33 It should also be responsible for the allocation of oil revenues in accordance with the economic rights for individuals and national and local budgets

3.34 It would be responsible for national defence and security, macroeconomic policy, national energy policy, monetary policy, foreign policy and international relations, as well as strategic infrastructure projects in power and water.

3.35 This right is enforced by the 4th fiscal rule, ensuring a defined share of annual natural resource revenues for the central government to fund its recurrent and capital costs in order to provide national security, peace and stability for all #Libyans.

Chapter IV - How is this New Start to get underway?    

4.1 There is now a need for a short term non‐political technocratic government to fine tune the existing electoral law, perhaps by clarifying the legal interpretation of that law.

4.2 There is also a need to ensure that a prudent and realistic fiscal baseline is in place, one which would allow economic and social policy to be formulated and implemented

4.3 This should for example place restrictions on the extent of centralized funding from oil revenues, and to formalize existing rules with the aim of maximizing devolution.

4.4 This government should be led by a Prime Minister who has no interest in a long term political future and who has given a firm commitment to leave office and to leave politics once elections have been held.

4.5 He/She must be given a free hand to hire and fire ministers on the basis of their ability not on the basis of the desires of the many existing interest groups.

4.6 The technocratic government should also look for an international strategic partner for Libya.

4.7 The government should work on the creation of a Special Zone(s) within Libya where the reach of the Libyan central government would not apply.

4.8 This is another area where the legal framework already exists in Libyan Law so that a technocratic government could activate the concept.

4.9 These are the key requirements for a last interim government to finalise the political transition.

Part IV - Learning from 20th Century History

5.1 I want to finish with a story about a country which was ruled for many years by a ruthless dictator. This dictator in line with the socialist label that he gave to his regime, introduced a wide array of wage and price controls.

5.2 After many years and a long struggle, the dictator was forcibly removed but his controls and economics lived on.

5.3 This was a country where it was not possible to get all of your money out of the bank because accounts were blocked and where one of the least sensible things to do was to work.

5.4 One economist observed “The economy was "organised" that is organised in inverted commas, along lines such that the self‐interest of individuals and firms was strictly opposed to the common interest.

5.5 Working at a regular job was the least profitable occupation, and mere survival necessitated breaches of the law.

5.6 That country was not #Libya but the reports tell of a situation very like #Libya today.

5.7 The country was in fact #Germany which “by the middle of I948 had reached a state of paralysis resulting in near‐starvation for a large part of the population.”

5.8 In June 1948 Ludwig Erhardt, the finance minister, introduced a new currency over a weekend, abolished all of the price controls and cut tax rates substantially; this was the original “social market” economy.

5.9 That same economist reported in 1949: “The immediate effect of the reform was startling. On June 19th, a Saturday, not a single article could be seen or had in the retail shops.

5.10 On June 21st the shops were full of goods: housewares, textiles, cameras, etc.”……“No statistics can give an adequate picture of the change which the German economy has undergone since the reform.

5.11 Only direct observation of the standard of living of households, of the methods of doing business of individual firms, of the road traffic, of the reconstruction work in towns, before and after, gives a true impression of the extent of the revival which followed the reform

5.12 Ladies and Gentlemen, #Libya needs to turn its back on a centralized economy and an overly centralized government just as Germany did in 1948.  

#Libyans need to take shared responsibility for their rights as partners in one nation, not clients of predatory patronage.

5.13 I do not promise that the results would be identical but I can assure you that they would be infinitely better than what #Libya has today. Thank you for your patience

Ahmed
#NewStartforLibya

P.S I will pin a table of contents tweet for easy navigation of chapters