Morocco On The Tipping Point?

Casablanca

Ever since first falling in love with the country in the summer of 1969, I've been returning to Morocco every few years. My most recent trip was this past December, chronicled at my travel blog. I've been there over a dozen times but my insights into the political situation there aren't really that well informed by personal contact with dissidents. There's been very little talk with Moroccans about politics in all those years. Enough so that once the pro-democracy demonstrations in Tunisia and Egypt started yielding results, I felt confident speculating that it was only a matter of time before Morocco, too, would be swept up in a wave of revulsion against the kleptocrats and tyrants who have basically stolen nearly everything the country produces. You don't see it on CNN yet or read about it in the Times but it's starting to happen.

Protests in Casablanca's Mohammed V Square today drew thousands of Moroccans, as evidenced by the many photos and videos being posted online. Participants in the demonstration are demanding government reform and an end to corruption.

Yesterday my friend Melody, who joined us for part of our recent stay in Marrakech asked me "how long I thought it would take for things to explode in Morocco." She offered a hint to help me answer-- an English translation of an analysis by Professor Driss Ben Ali that is essential reading for anyone hoping to understand what's starting to happen in Morocco, as well as in the rest of the Arab world.

Regarding the issue of economic growth, let’s use the example of Tunisia. What happened in Tunisia? The growth rate was fine. Tunisia was mentioned as a model. Its growth rate was around 5%. The Moroccan growth rate is 3.9%. Tunisia was certainly considered the regional model. Suddenly it collapsed. Why is it?

The problem is as follows: Economies are not only about production, distribution is just as important. In Tunisia, production was indeed available. However, as far as distribution, Ben Ali and his family controlled all the wealth. Therefore the real issue is specifically an issue of distribution, regardless of your economic policy and production strength.

This happened several times in history. The last time it happened, it was in Iran. Under the Shah, the growth rate in Iran was 10%. They used to say that the Iranian economy would become the second Japan in Asia, yet, it collapsed! And the Islamic revolution took place. Therefore, when economies reach a strong growth rate, we start noticing social inequality. If our production policy is not accompanied by a policy of distribution, the consequences would be disastrous.

What is the main principle in economics? The principle is that our programs and policies are designed around social coherence, which requires that the inequality gap is not dangerously wide. When we speak of big projects, sure we have some great projects, but Morocco faces two main issues:

One, the legacy of Hassan II. When Hassan II passed away, 60% of Moroccans were illiterate, 5% lived on less than 2 dollars a day, 42% lived in extreme conditions. Therefore, the balance was very negative. During the mid-nineties, the campaign to fight poverty started.

In the last ten years, there were some efforts. Rural areas had better access to water and electricity. Under Hassan II only 12% of rural areas had such access. Today, we have reached 75%. Rural areas now have roads and better access to hospitals. Before, rural areas were completely marginalized, which resulted in rural exodus. Urban areas began to resemble rural areas. So, yes, the nineties witnessed a policy of poverty eradication, in addition to the implementation of the National Initiative for Human Development.

From the outset, this was a good initiative. However, the funds invested in this initiative were not very significant: 10 million, a drop of water in a big ocean.

Second issue: Big infrastructure projects don’t generate immediate returns. In the meantime, if the country does not have a policy of distribution, it will fail. Look at the February 20th protests, which cities encountered violence? Tangiers and Marrakech. These are in fact the two cities that witnessed the highest growth rate. These are also the two cities where the inequality gap is widest. It’s no surprise that the acts of violence happened in these two cities. This is a good indicator to take into account.

To reach a fair distribution of resources, the society has to exert pressure. What is democracy founded upon? Power and counter-power: that is the only way to limit power. Otherwise, look at all these countries that experienced uprisings. Tunisia, Egypt, and Libya: the presidents treated their country’s wealth as their own, because there were no limits. None held them accountable.

In our societies, we have not yet adopted the culture of evaluation. We need to evaluate all the government projects. Not just monitor the projects, but also evaluate their effectiveness. Monitor what is being done, and evaluate the results. This is nonexistent in our societies. Therefore, as soon as individuals are elected to a position and attain some power, they start acting as if power were a property. They begin to put their families and cronies in key positions. We then find ourselves faced with an economy of rent-seekers.

What is an economy of rent seekers? It’s when you have a revenue that doesn’t generate an added value, an economy that is basically non productive.  We are faced with parasites that live on someone else’s account. In our country, some people don’t work, yet they own a few license agreements that generate a good income (licenses to operate cab and bus companies provided by the king on an arbitrary basis). Some enjoy licenses to fish, others are granted licenses to sell alcohol. Who goes out to work in black markets? The ones who don’t have any of the above. At the end of the day, you find yourself in an economy built around parasites.

What a waste! Production is weak. Consumption is high, and each person is looking to take advantage of another. The economy does not generate wealth that benefits everyone. Those who do generate wealth are faced with high taxes. Entrepreneurs are the only ones who pay taxes, others don’t. People working in the black market don’t pay taxes. The black market constitutes 25% of the Moroccan market….and people in power don’t pay taxes either. So how do we create a coherent society? How do we create a strong and large middle class, a fundamental requirement to build a coherent society? How do we ensure political stability? It is not possible to have political stability without a strong large middle class, more transparency and the end of the economy of rent-seekers. This cannot be achieved through advisory councils. No, these are achieved through an authentic social pressure. The government should be held accountable, and the society should be in charge of monitoring. In a democratic society, everyone is held accountable, which explains why democratic societies harbor the most successful economies.

Reading this within the context of Nick Kristof's much-discussed NY Times column from this weekend, a look at Timur Kuran's book, The Long Divergence: How Islamic Law Held Back the Middle East, is a great way to fill in the knowledge gaps about what's happening in that part of the world-- and why speculators are driving your gas prices through the roof. I also recommend following the Global Voices blogger who focused like a laser beam on Morocco. Kristof:

Professor Kuran’s book offers the best explanation yet for why the Middle East has lagged. After poring over ancient business records, Professor Kuran persuasively argues that what held the Middle East back wasn’t Islam as such, or colonialism, but rather various secondary Islamic legal practices that are no longer relevant today.

It’s a sophisticated argument that a column can’t do justice to, but for example, one impediment was inheritance law. Western systems most commonly passed all property intact to the eldest son, thus preserving large estates. In contrast, Islamic law stipulated a much fairer division of assets (including some to daughters), but this meant that large estates fragmented. One upshot was that private capital accumulation faltered and couldn’t support major investments to usher in an industrial revolution.

Professor Kuran also focuses on the Islamic partnership, which tended to be the vehicle for businesses. Islamic partnerships dissolved whenever any member died, and so they tended to include only a few partners-- making it difficult to compete with European industrial and financial corporations backed by hundreds of shareholders.

The emergence of banks in Europe led long-term British interest rates to drop by two-thirds leading up to the Industrial Revolution. No such drop occurred in the Arab world until the colonial period.

These traditional impediments are no longer a problem in the 21st century. Muslim countries now have banks, corporations, and stock and bond markets, and inheritance law now isn’t an obstacle to capital accumulation. So if Professor Kuran’s diagnosis is correct, that should bode well for the region-- and Turkey’s boom in recent years underscores the potential for a renaissance.