How Libya’s Civil War Is Rooted in Its Economic Structures
By Jason Pack
Istituto Affari Internazionali (IAI) releases Jason Pack’s overarching meta-analysis of the uniqueness (and unique dysfunctionality) of the Libyan economy.
This analysis claims that the root of the country’s stymied transition and its post-2014 civil war is primarily economic – not political or ideological.
2. Enter the Libyan revolutionaries
The self-appointed, leaderless revolutionaries who participated in the diverse anti-Qadhafi uprisings of 2011 were united behind only one goal: their desire to oust Qadhafi and his henchman, and discontinue their military and governance institutions.
Conversely, most of them supported the existing economic institutions with the understanding that they needed to be purged of corrupt officials and contracts, and could then support the social contract of providing goods and services free of charge to all Libyans.
Qadhafi’s obfuscations had worked.
His opponents wanted to replace the corrupt heads of the semi-independent economic institutions and render outstanding contracts null and void, yet they failed to grasp his ruse – that the very structure of those institutions embedded inefficiency and corruption at the core of the Libyan economy.
2.1 Inheriting an economy without a blueprint
Most Libyans never interacted with abstract entities like the ODAC and never took the economics courses that would have helped them understand the subversive implications of subsidies on petrol, electricity and bread.
Among those very few militia leaders and rebel politicians who had the requisite training or had worked in the higher echelons of the Jamahiri economy, there was no consensus on which economic institutions and subsidies needed to be eliminated.
In fact, many of the political class of the 2011 uprisings, most famously former interim Prime Minister Mahmoud Jibril, were the same economic reformers of the late-Qadhafi era who publicly sought to preserve Jamahiri economic institutions albeit in modified form.
Others who ascended to positions of power in the wake of Qadhafi were connected to local and regional interests which were entrenched in the pre-existing forms of corrupt enrichment provided for by the subsidies and economic opacity of the semi-independent institutions.
More naively, many felt that the economic reforms brought by outside consultants since 2005 had indirectly brought employment, opened up Libya to globalisation and created a sphere of advancement for the educated classes.
Those economic reforms had coincided with increased foreign investment in Libya’s oil sector.
For many, the causation was unclear, and they felt that the reforms created a burgeoning middle class that had paradoxically led to the very revolution in which they were participating.
In this sense, Qadhafi’s ouster was most certainly a result of leaderless multipolar uprisings rather than an ideologically-driven revolution.
Libyan intellectuals who participated in the uprisings, such as Ahmed Jehani, Hamam Elfassi and Abdul Rahman al-Ageli, have argued that there was never any consensus over the future shape of the Libyan state and how resources should be divided up.
They have asserted that a Libyan Economic Agreement (LEA) is needed rather than just the Libyan Political Agreement (LPA) of 2015.
2.2 After Qadhafi, the power of the semi-independents increased
This critical absence of a unifying ideology among Qadhafi’s successors and disagreement about how resources should be divided have prevented the creation of a new social contract.
Without such a joint vision connecting ruler and ruled, there has been nothing to anchor post-Qadhafi reform efforts – hence few reforms have been passed and even fewer implemented.
As a result, the critical moments of 2013–2015 when global crude prices were high and oil was flowing were wasted.
The inefficiencies of the Libyan economy could have been overhauled fairly painlessly then. Instead, money leaked out of the treasury due to increased subsidies and much needed infrastructure was not built.
During 2011, no consensus existed among either the fighters or the political leaders of the anti-Qadhafi uprisings as to the economic system that should be implemented when Qadhafi would be ousted.
It should therefore come as no surprise that when Tripoli fell in August of that year and the temporary constitutional declaration was issued earlier that same month, it did not directly address the issue of Libya’s economic institutions.
Similarly, the topic was not extensively discussed or legislated by post-Qadhafi Libya’s first authority, the unelected National Transitional Council (NTC), or by its first elected body, the General National Congress (GNC).
This behaviour was justified at the time by the fact that first the NTC, then the GNC and later the elected House of Representatives (HoR) and UN-appointed Government of National Accord (GNA) understood themselves as transitional governance authorities.
None of these bodies truly possessed the attributes of unfettered sovereignty or domestic legitimacy rooted in a viable social contract.
Amidst this vacuum of legitimacy, they wished to remain in the good graces of the populace who had shed blood allowing them to come into power.
Therefore, the new authorities resorted to appeasement: putting militias on the government payroll, more than doubling state-salaries, increasing subsidies on consumer goods and creating new semi-independent institutions, such as the Warriors’ Affairs Committee to dispense billions of dollars in an attempt to purchase the loyalty of the most potentially disruptive segments of the population.
As alluded to above, the problem of Libya’s inefficient semi-independent institutions and their competencies, inter-contentedness and myriad liabilities to foreign contractors was considered an issue that only a permanent government grounded with precise constitutional powers would have the necessary legitimacy to address.
Hence, to many Libyans after the fall of Qadhafi, pre-existing economic institutions whose ostensible roles were to help the Libyan populace by producing electricity or building schools had a greater degree of legitimacy than the new political bodies, which were not overseen by a constitution and whose electoral legitimacy or governance mandate was frequently challenged.
The only main consensus that existed between ruler and ruled on the future post-Qadhafian economy was that the inherited vestiges of corrupt contracts should not be honoured.
The Libyan authorities were well aware of the problems of corruption inside the semi-independents and the masses of dead paper they had issued.
The new authorities of the NTC did not wish to see the sovereign wealth they inherited from the Qadhafi period disappear into the pockets of former-Qadhafi allies abroad by having a full scale restarting of corrupt Qadhafi-era contracts.
However, they didn’t know which contracts were clean and which were dirty. Hence, they issued a blanket freeze on implementation of construction contracts and seized upon one of the pre-existing oversight bodies, as the crucial vehicle to safeguard the country’s wealth.
It was a Jamahiri audit commission, whose formal name was “The People’s Oversight [Committee]” ديوان المحاسبة . Post-Qadhafi, it was renamed the Audit Bureau ( الشعبية الرقابة ). Thus rebranded, the Audit Bureau (AB) was progressively trotted out by post-Qadhafi politicians as the answer to corruption in Libya’s semi-independent institutions.
The quintessential powers of the bureau since 2011 involve inspecting all public works contracts and approving those above a certain amount (traditionally 5 million Libyan dinars).
These are essentially the same powers that the body had before 2011. Tragically, these minor attempts to empower an independent oversight institution have not prevented an outflow of Libya’s billions.
Furthermore, according to US and UK embassy staff present in Libya right after the revolution, no one central office has catalogued or recorded the grand sum total of Libya’s contractual obligations or the destination of ongoing financial outflows.
In fact, Libya’s semi-independent economic, as well as economic oversight, institutions remain roughly identical in 2019 – in terms of competencies and relationships – as when Qadhafi was still in power.
As a result of this structural stasis, the alphabet soup of Libya’s economic institutions saw their degrees of sovereignty and independence, as well as their relative remove from oversight increase over the course of the post-Qadhafi period.
In the Qadhafi-era, the leaders of the semi-independent and independent institutions had to toe-the-line out of fear of imprisonment and murder.
Now they are subject to very little oversight as Libya’s political class have neither the authority nor the competence to police their activities.
The primary reasons for this are twofold:
First, in an environment where the heads of the economic institutions enjoy more legitimacy than elected and unelected politicians, the suitable government entities are unwilling to collaborate to remove them from office when their terms expire.
Second, the militia leaders who dictate what elected and unelected politicians do, benefit from the current economic system presided over by the semi-sovereigns.
As such, the militia leaders pressure Libya’s political class to not interfere in the opacities of its economic institutions.
This is how these institutions acquired semi-sovereignty.
2.3 The rise of the semi-sovereign economic institutions
Amidst the nationwide fighting that has characterised the spring and summer of 2019, Libya’s semi-independent and independent economic institutions have exerted a greater stranglehold over Libya’s economic life than ever, unable to be dissolved due to the lack of a Libyan consensus over what or who should replace them.
Moreover, their complex web of financial liabilities to international contractors and the lack of transparency of their assets makes dissolving them nearly impossible until a complete forensic survey of the Libyan economy is conducted.
The head of each economic institution has an incentive to simply stay in power and enjoy the wealth and power that his position grants him – and yes all of Libya’s major economic institutions are headed by men.
Most institutional leaders understand how to stay in power by continuing to appease the social segment to which his institution was founded to funnel money.
The institutional heads rightly protest that they cannot act independently for fear that their personnel will be attacked by militias, but they also block reform on the grounds that no government body has the legitimacy to carry out such reforms.
Year on year, the percentage of Libya’s budget which is allocated to salaries, subsidies, or spending of semi-independent institutions has increased independent of the overall decrease in Libya’s oil revenues. 35 In fact, from semi-independence in the Qadhafi era, these institutions have become genuinely semi-sovereign.
They do not answer to any Libyan political institutions, and international actors including the UN and foreign countries routinely prioritise them over the political entities that notionally oversee them.
US, UK and UN policy statements since 2014 have called more frequently for Libyan actors to “respect the independence” of various economic institutions than they have called for ceasefires or peace negotiations.
Jason Pack is the founder of the consultancy Libya-Analysis and was previously the executive director of the U.S.-Libya Business Association.
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.