Libya Tribune

How Libya’s Civil War Is Rooted in Its Economic Structures

By Jason Pack

This paper claims that the root of the country’s stymied transition and its post-2014 civil war is primarily economic – not political or ideological.

PART ONE

Abstract:

As Libya’s struggle for post-Qadhafi succession enters its ninth year, international peace-making efforts remain doomed, so long as they fail to address the root causes of the country’s malaise: flawed economic institutions and the lack of a social contract.

The economic structures established during the Qadhafi period deliberately incorporated inefficiencies, redundancies and a lack of transparency.

Not only has this system survived unreformed, but paradoxically, the ensuing political vacuum after Qadhafi’s ouster has helped it become more entrenched.

Benefiting from this vacuum of oversight and ringfenced by international policymakers, various economic entities can now be considered semi-sovereign institutions, arguably more critical to resolving the drivers of conflict than even the competing political factions.

The way forward, therefore, requires developing a deep understanding of these structures. The international community should pivot towards an economic-focused approach to peace-making.

The first step is to commission a mapping of Libya’s economic structures.

Introduction

Libya finds itself in a familiar position: embroiled in a low-intensity civil war, fuelled by outside actors, with no end in sight.

A realisation has gradually dawned on most Western policymakers concerned with Libya: the root of the country’s stymied transition and its post-2014 civil war is primarily economic – not political or ideological.

This perspective has long been maintained by a select group of experts for years, but only in the past months have enough Western and Libyan policymakers adopted concrete proposals based on this perspective to establish momentum for this “economic approach” in Western capitals.

Previously, guided by the wrong advice or prevented from making bold decisions by the international powers to which they answered, UN mediators and Western countries’ special envoys have tried in vain to negotiate with elected and unelected political bodies, attempting to secure the necessary compromises for a political solution.

Their efforts have frequently been perceived as wrong-headed, biased, or corrupted by political pressures and monies offered by regional states, especially those in the Gulf.

They have chalked up their Libyan interlocutors’ recalcitrance to inadequate incentive structures, and responded by offering ever more valuable carrots.

The carrots have frequently strengthened the intransigent actors – in particular those with unique access to the structural levers of power, such as the Tripoli-based Central Bank Governor Sadiq al-Kabir and the Speaker of the Tobruk-based House of Representatives Aqilah Saleh – teaching them that not compromising makes them more powerful.

This slow-moving train wreck has been a lesson in how-not-to-do-diplomacy.

However, for the most part, and with the exception of Cyrenaica’s strongman and Libyan National Army’s leader, General Khalifa Haftar, the Libyan interlocutors who have populated the halls of the various international peace conferences in Skhirat, Paris and Palermo, have not wielded significant real power on the ground.

They remain beholden to various militias and economic actors who have not been invited to directly participate in peace-making efforts, and who could never be appeased with small carrots.

The real power players, the militia leaders and the heads of Libya’s economic institutions, have been absent from the peace conferences.

They have also been sitting on the motherlode of carrots – literally free money – doled out either as subsidies or as preferential access to foreign exchange.

This largess comes directly from Libya’s budget via its semi-sovereign economic institutions.

Only the leaders of Libya’s semi-sovereign economic institutions working in concert with a coalition of technocrats from the more neutral international powers like Germany, the US and the UK can fix the current impasse.

However, they cannot do so until the scope of the problem and the various institutional competencies are comprehensively studied and catalogued.

Future peace-making efforts, international conferences, or even direct elections are doomed to failure if they do not address the root causes of Libya’s malaise: bad economic incentives and flawed institutions.

The way forward requires a deep understanding of the structures of the Libyan economy and their origins.

An overview of that highly complex topic, explains why a comprehensive investigation making the intricacies of Libya’s economy transparent to all is an urgent international priority.

1. Libya has institutions – They are just the wrong ones

The historical literature on Libya asserts that from the late Ottoman period onward it has been the paradigmatic “stateless state”.

No serious historian of Libya is immune from this rhetoric: Lisa Anderson, Dirk Vandewalle, John Wright and my earlier writings all expound the unique reasons for Libya’s 20th century statelessness. And yet this scholarly axiom (Libya’s statelessness) is only partially true and misses the real reason for Libya’s uniqueness.

Yes, the extent of Ottoman control of Libyan territory was quite limited and the tanzimat, the Ottoman economic and constitutional reform programme that began in 1839, reached the country only in the late 19th century and was unevenly enforced.

Yes, Italian colonialism differed from its French and British cousins by tending to destroy Ottoman and tribal institutions, while avoiding building non-settler institutions.

However, despite these and more modern efforts to prevent state-building or undermine existing institutions – certain institutions, notably those built from the 1950s–1970s and relating to the economy – have survived and even thrived in Libya.

Before examining why that is, we must look at how Libya has frequently been a graveyard for political, governance and military institutions – leading to the myth that its proverbial statelessness and institutional void extends to the economy as well.

1.1 Deliberately partisan, but directly powerful political institutions

The statelessness argument for Libyan history ignores that the British Military Administration (1942–1951), the Sanussi monarchy (1951–1969) and the Qadhafi regime (1969–2011) all built a plethora of institutions in Libya.

The institutions which survive are those whose partisanship and power was the most indirect.

Those were usually the economic institutions whose means of delivering patronage was circuitous, whereas Libyan political and military institutions have tended to be overtly partisan.

The purpose of the most powerful of these institutions, like:

(a) King Idriss al-Sanussi’s Cyrenaican Defence Force (his Praetorian Guard of Eastern tribesmen founded in 1945 and deriving from the elite units that fought with the British against the Italians during WWII) or

(b) Qadhafi’s Popular and Social Leadership Committee (his council of loyal tribal elders founded in the wake of an attempted coup attempt by Warfalla tribesmen in 1991)

was to strengthen a social segment that already favoured the existing ruler.

Those overtly partisan governance institutions have long since faded away, overturned by waves of exculpatory violence by those who they disadvantaged.

1.2 Semi-independent vs independent economic institutions

Yet, the economic institutions that were established with essentially the same aims in mind (strengthening/rewarding a social grouping loyal to the ruler or appeasing/buying off the populace) have not disappeared the way their political counterparts have.

This is because like Qadhafi’s Jamahiriyya, the sham direct democracy system brought into being from 1973–1979, the inner-workings of Libya’s economic institutions were deliberately masked by the dominance of informal structures of authority over formal structures – a paradox which epitomised Qadhafi-era Libya’s uniqueness.

Because of this dominance of informal types of power (i.e. personal, tribal and geographic connections to Qadhafi’s inner circle) rather than the formal power relationships of governance (as rooted in the official structures of the Socialist People’s Libyan Arab Jamahiriyya), the partisan and corrupt functions of Libya’s economic institutions were masked by layers of inscrutability.

To help create the complexity and opacity on which Qadhafi’s Libya thrived, myriad committees, agencies, holding companies, public monopolies, and boards were established.

These institutions took a few different forms:

(a) utilities like General Electricity Company of Libya (GECOL) and the Libyan Iron and Steel Company (LISCO);

(b) development/infrastructure funds like the Economic and Social Development Fund (ESDF), the Office of Development of Administrative Complexes (ODAC) or the Housing and Infrastructure Board (HIB); and

(c) free zones and special ports like the Misrata Free Zone; and many other categories.

Each institution recruited from specific communities and favoured the needs of specific geographic areas or preferred businessmen.

In theory, Libya’s alphabet soup of semi-independent economic bodies was accountable to the General People’s Congress (GPC), the supposed font of all official authority in Qadhafi’s Libya.

In practice, the GPC held no power at all and was simply a rubber stamp for Qadhafi and his inner circle’s whims.

Qadhafi appointed cronies or key powerbrokers to run these semi-independent institutions, then funnelled them money, while rarely checking in on their outcomes.

Outside of the ambit of the GPC and Qadhafi’s patronage networks, only two economic entities existed with a genuine degree of independence.

They both trace their origins to the Sanussi monarchy period, when they were established in line with international best practices, as fully “independent” institutions.

Before oil money flowed into Libya in the 1960s, power was quite diffuse, the surveillance capacities of the state quite limited, and genuinely independent institutions quite feasible.

The Central Bank of Libya (CBL) was formed in 1956.

It derives from a UN institution, stood up during the decolonisation process – the Libyan Currency Committee, which was created as a technocratic commission with complete independence from political authority.

The National Oil Corporation (NOC) was founded in1970, i.e. in the highly politicised early Qadhafi years.

Yet it derives its institutional structure from the Libyan Petroleum Corporation established in the late Sanussi period, which sought to allow independent technocrats to remove the then rampant corruption from the tendering and concessions processes and rationalise Libyan participation in international exploration and production consortia.

to be continued

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Jason Pack is the founder of the consultancy Libya-Analysis and was previously the executive director of the U.S.-Libya Business Association.

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The Istituto Affari Internazionali (IAI) is a private, independent non-profit think tank, founded in 1965 on the initiative of Altiero Spinelli. IAI seeks to promote awareness of international politics and to contribute to the advancement of European integration and multilateral cooperation.

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