MONGABAY.COM
Mongabay.com seeks to raise interest in and appreciation of wild lands and wildlife, while examining the impact of emerging trends in climate, technology, economics, and finance on conservation and development (more)
WEEKLY NEWSLETTER
|
|
Libya
Index
Mainly because of Libya's strategic role in World War II,
the Libyan government had come to depend on foreign patrons for its
financial needs. During the Italian occupation and in the immediate
postwar period, first Italian and then United States and British
grants kept the Libyan administration solvent. After 1956 the need
for direct foreign subsidies declined as the international oil
companies began to invest heavily in Libya--causing substantial
capital inflows. During the 1960s, the investments of the previous
decade began to pay off, and the country experienced the fruits of
rising oil wealth. This trend not only reduced the government's
need for foreign assistance, but also generated a huge increase in
taxable domestic income. However, Libyan physical and human
resource development continued to lag, necessitating sustained
reliance on foreign technical assistance. This pattern of
dependence on foreigners to perform crucial skilled functions,
which subsequent governments have been unable to eliminate, has
made Libyans acutely aware of their subordinate status in the world
economy in relation to the industrialized West.
Consequently, the Qadhafi government has assigned high priority
to the achievement of what it perceives as "true economic
independence." This theme has been one of Qadhafi's staple
arguments and underlies much of the post-1969 revolutionary
government's economic policies. Qadhafi's other principal economic
objective has been to promote equity, which he equates with
socialism. Because of Qadhafi's unique conception of the character
of the state, his distrust of the private sector, and his
abhorrence of the profit motive, he has maintained that it is only
through massive state intervention that economic independence and
equity can be attained. Thus, the state has taken control of
virtually all economic domains since Qadhafi came to power.
Soon after the revolution, a major Libyanization drive was
initiated, which involved the expulsion of the remaining Jewish and
Italian communities and the nationalization of the country's banks,
insurance, and petroleum-marketing companies. Other measures were
enacted to restrict the activities of foreigners in commerce and
industry.
Throughout the 1970s, the government expanded its role to take
control of Libya's economic resources. The public Libyan Petroleum
Company (LIPETCO) was supplanted in 1970 by the National Oil
Company (NOC), which became responsible for implementing policies
decided upon in the Ministry of Petroleum before the latter was
dissolved in March 1986. Similarly, the government exercised
effective control over water rights and created a large number of
state-owned enterprises to oversee Libya's basic infrastructural
facilities, such as highways, communications, ports, airports, and
electric power stations. Public corporations were also created to
run the state airline and to import certain restricted goods. The
public import company, the National Organization for Supply
Commodities (NOSC), was given a monopoly over the import and sale
of many basic consumer items. In 1975 the government became the
sole importer and retailer of motor vehicles. The domestic
marketing of certain commodities and the provision of certain
services were restricted to the public sector. By 1977 these
included construction materials, livestock, fertilizers, fish
fodder, insecticides, insurance, banking, advertising, and
publishing.
Since the late 1970s, the Libyan government has accelerated its
assault on the private sector in a determined attempt to stamp out
what it identified as bourgeois exploitation. This renewed effort
followed the codification of Qadhafi's economic theories in the
second volume of his The Green Book, published in 1978 (see
The Green Book, ch. 4). Many of the regime's most radical
economic policies began soon after that date. The first concrete
manifestation of Qadhafi's new economic militancy occurred in 1978,
when he outlawed rental payments for property, changing all
residential tenants into instant owners. The private sector housing
and real estate industry was thus eliminated, and the new owners
were required to pay monthly "mortgage" payments--usually amounting
to about one-third of their former rent--directly to the
government; however, families making less than the equivalent of
US$500 a month were exempted from this obligation .
Qadhafi initiated another major innovation in 1978 when, during
a speech, he urged workers in both the public and private sectors
to take control of the enterprises in which they worked by
following his dictum: "partners, not wage laborers." This new idea
went much further than an earlier law in 1973, which had merely
instituted mandatory profit-sharing. Now workers were urged to
involve themselves in the day-to-day management of the enterprises
in which they worked. Within 3 months of this speech, workers in
180 enterprises had formed "workers' committees" which, in
principle at least, ran these concerns.
The most ambitious of the 1978 measures, however, was the
attempt to do away with all private commerce, retail as well as
wholesale. In that year, the responsibilities of the NOSC were
considerably enlarged because the state took over responsibility
for the importation of all goods and control over all foreign
exchange transactions. In theory, all private commercial
transactions became illegal as the state began to open centralized
supermarkets run by local people's committees with the aim of
undermining the numerous neighborhood shops that previously had
catered to the daily needs of most Libyans. Eventually, there were
230 such state-run supermarkets in various parts of the country.
Although no one expected such a small number of stores to replace
fully the thousands of private sector merchants, state planners
hoped that the stores would constitute enough of a market presence
in each location to exert a downward pressure on private sector
prices for competing goods.
The hostility of Qadhafi toward the private sector was based on
his view of merchants as nonproductive parasites; he ignored their
role as distributors. In fact, many state proclamations explicitly
stated that government policy was designed to do away with the
whole merchant class. One newspaper editorial emphasized that "One
of the goals of these consumer centers is to cut down on the huge
number of merchants who are a burden on productivity." The only
type of private sector enterprises that the government did not
actively seek to eliminate were small service-providing firms,
which were not viewed as inherently exploitative. By 1980 it was
clear that Qadhafi's assault on the private sector was not
proceeding as fast as he had hoped. Even in a time of relative
wealth--oil revenues were nearing their peak and the state had
enough revenue to fix the prices of certain goods--the public
sector was unable to satisfy demand for many consumer items. The
unsatisified demand left room for private sector activity at
various levels of legality. Continuing his attack on the private
sector from another angle, in 1980 Qadhafi demonetized all currency
notes above one dinar (for value of the Libyan dinar
(LD), see Glossary).
His action was designed to encourage those holding large
quantities of dinars to deposit them in the nationalized banks--
thus increasing state control over private sector assets. Many
individuals with large cash holdings were reluctant to deposit
their savings, however, since withdrawals in excess of LD1,000 were
prohibited. They also feared that large deposits could be used
against them as evidence of their having engaged in illegal
commercial transactions. The main result of the 1980
demonetization, therefore, was a rise in conspicuous consumption,
as individuals sought to transfer their savings into material
goods, and an increased demand for black market foreign exchange,
as persons sought ways to export their dinars.
Most of the post-1977 economic policy innovations of the
Qadhafi government were designed to inhibit the private
accumulation of wealth and promote an equitable distribution of the
national income. The principal vehicles for fostering economic
independence in this period have been two five-year plans (1976-80
and 1981-85), which were aimed at directing investment to areas
that would contribute to economic autonomy (see
table 5, Appendix).
In the 1976-80 plan, agriculture and industry received the largest
share of investment, whereas the 1981-85 plan allocated more funds
to industry and public works, with agriculture coming in third.
Most of the planned agricultural investment has been directed
to the development of oasis agriculture and irrigation. Ambitious
schemes were launched during the 1970s to use the underground
fossil water resources of the Tazirbu, Sarir, and Al Kufrah oases
to grow wheat and animal fodder crops
(see
fig. 4). Similarly, work
has begun on the Great Man- Made River (GMMR) scheme to tap desert
aquifers to bring water to the coastal agricultural areas where
shrinking aquifers and rising salinity threaten to lay waste to
historically productive agricultural lands.
Industrial investment has been concentrated on several large-
scale projects at industrial centers along the coast. Existing
industrial facilities are located at Marsa al Burayqah, Misratah,
and Ras al Unuf. Further expansion of these facilities as well as
the creation of new ones was a principal objective of the 1981-85
plan. Most industrial projects were designed to create downstream
petrochemical employment, satisfy internal demand for processed
petroleum products, and take advantage of cheap energy to build
export-oriented manufacturing capacity.
The contrast in approaches between the relatively conservative
development plans, with their emphasis on investment and resource
mobilization, and Qadhafi's more radical "socialist" policies,
which seem to sacrifice efficiency for equity, produced inherent
tensions in economic policy-making. In certain respects, the
pursuit of equity has hindered Libya's quest for economic
independence by discouraging private sector growth.
The political climate of Libya in the mid-1980s placed numerous
obstacles in the way of private sector development. The 1978 law
requiring all enterprises to be run by workers' committees made
effective management almost impossible. Furthermore, since workers'
committees rarely accepted economic efficiency or profitability as
valid objectives, many enterprises no longer had a clearly defined
role in the economy. The result of such policies has been to stifle
most dynamism in the private sector. Consequently, when the
government needed to ensure the accomplishment of key economic
tasks, which it was incapable of doing for itself, it had no choice
but to turn to foreigners.
Those Libyans possessing managerial experience or engaged in
performing key economic activities prior to 1978 became
increasingly alienated by the subsequent directions of government
policy; many even left the country. Thus, with a severely
handicapped domestic private sector and few competent Libyan
managers, the completion and operation of practically all key
industrial projects depended on foreign expertise. Furthermore,
because the post-1978 economic environment had provided little
incentive for the training of Libyan managers, there was little
likelihood of easily reversing the shortage of indigenous managers.
Some foreign observers have suggested that the sharp drop in
oil revenues, which began in the early 1980s, may lead to a re-
evaluation of many of Qadhafi's more radical socialist policies.
Such reassessment could reduce some of the private sector's
problems and actually contribute toward economic independence.
There were some indications that this was indeed happening in the
mid-1980s, as many projects of doubtful economic value were
postponed.
Because of declining revenues, the government has been unable
to finance much of its ambitious drive to replace the private
sector. The expansion of the state-run supermarket system ended as
funds grew tighter. By 1985 the stores were unable to supply most
basic consumer items, thus failing to drive down private sector
prices. Similarly, the government was compelled to expel many
foreign workers who had been the mainstay of the economy. Between
1983 and 1987, the number of foreign workers in Libya fell
drastically, going from more than 560,000 to about 200,000. This
decline was achieved primarily by cutting the number of unskilled
foreign laborers employed by the public sector to perform basic
service tasks--jobs that many Libyans could fill. Whether the
increased demand for labor in the wake of these expulsions will
result in a greater Libyanization of the work force, or merely in
a rise in the number of unfilled jobs will depend largely on how
much the government relaxes its restrictions on private sector
employment. In the mid-1980s, few public sector funds were
available for hiring Libyans at the higher salaries they would
require.
Data as of 1987
|
|