skip to Main Content

Tunisia is a classic example of the failed IMF/World Bank development model

It is Wednesday and I have been quite busy today on non-writing things, including a very long lunch (yep), which may lead to progressing the development of the – MMTed – project. I also was thinking about Tunisia today. And, of course, I listened to some great jazz. So only a few snippets today as usual but hopefully something of interest.

The UK Guardian and Tunisia

There was an Op Ed in the UK Guardian last weekend (August 1, 2021) – Tunisia shows that democracy will struggle if it can’t deliver prosperity – by Simon Tisdall, who is a long-standing writer and now assistant editor of the newspaper.

The last time I looked into his writing was in 2018, when he sought to write an obituary on Angela Merkel’s political career (October 28, 2018) – As Angela Merkel’s star dims, Europe is facing perhaps its biggest challenge since 1930s.

He praised Merkel’s contribution based on her “clear political principles” and the way she united Europe through her “steadiness, safety and continuity.”

Yes, I wonder what the Greeks think about that.

I wonder what all those who have been unemployed for years think about that.

I wonder what the Mini-Job holders in Germany think about that.

Anyway, it was obvious the article was really expressing Tisdall’s pro-EU, anti-Brexit stance.

So I was prepared for the worst when I started reading the article on Tunisia.

I wasn’t disappointed.

Or was it that I was?

As part of work I have been doing on the African nations that are still weathering the dysfunctions derived from their colonial past, I have followed the situation in Tunisia rather closely.

I last wrote in-depth about Tunisia in this blog post – The IMF and the Germans wreaking havoc in Northern Africa (February 5, 2018).

Based upon my past research, there is no way I would not have written the Tisdall article.

I recalled what I knew about Tunisia.

Tunisia has been a demonstration case of the failed development model championed by the IMF and the World Bank.

Had that model been applied to the now advanced nations in the early stages of their development they would have never reached that status.

But Tunisia’s ‘free market’ reforms following the overthrow of the last dictatorship was held out by the IMF as a model development process.

On June 17, 2013 – IMF Survey : IMF Loan Aims to Help Tunisia Boost Growth, Protect Poor – told us that the reform process aimed “at restoring fiscal space, rebuilding foreign reserves, reducing banking sector vulnerabilities and fostering more inclusive growth.”

The usual mantra.

In response to the question: “Youth unemployment in Tunisia stands at 30 percent. What should the country do to boost job creation?”, the IMF Mission Chief for Tunisia replied:

The authorities’ economic program includes reforms that encourage private sector development, especially reforms of the investment code and the business environment. The government has also launched a number of training programs that could help reduce skill mismatches in the labor market and, hence, lessen unemployment among college graduates.

Not a job in sight.

The following graph shows the overall and youth unemployment rates since 1990.

And the regional disparities are profound – the urban youth unemployed is bad enough, but the rate in the less prosperous interior regions and cities is very high.

That sort of economic reality signifies a failed state.

So the IMF response was just the usual guff where the IMF wants public resources transferred into private largesse in the hope that the latter sector will suddenly create high quality, well-paid jobs.

Tunisia was in the classic trap.

The nation depletes its local productive resources (crude petroleum, wire, cheap textiles, olive oil) to feed an export-led growth mania and import refined petroleum, gas, motor vehicles, etc.

Overall, the trade deficit is composed of low value-added exports and high value-added imports.

Add a substantial foreign debt denominated in … courtesy of the poor policy choices from the previous dictatorship and the quest for foreign exchange becomes paramount.

Add the idea that global tourism is the answer to obtaining foreign exchange – which involves forcing local wages down while having to import high value-added commodities to service the luxury hotels and feed the tourists and things get worse.

The Korean economist Ha-Joon Chang (2007) wrote in his 2007 book – The Myth of Free Trade and the Secret History of Capitalism (Bloomsbury Press) – that (xx-xxi):

This neo-liberal establishment would have us believe that, during its miracle years between the 1960s and the 1980s, Korea pursued a neo-liberal economic development strategy …

The reality, however, was very different indeed. What Korea actually did during these decades was to nurture certain new industries, selected by the government in consultation with the private sector, through tariff protection, subsidies and other forms of government support (e.g., overseas marketing information services provided by the state export agency) until they ‘grew up’ enough to withstand international competition. The government owned all the banks, so it could direct the life blood of business—credit

… The Korean government also had absolute control over scarce foreign ex- change (violation of foreign exchange controls could be punished with the death penalty). When combined with a carefully designed list of priorities in the use of foreign exchange, it ensured that hard-earned foreign currencies were used for importing vital machinery and industrial inputs. The Korean government heavily controlled foreign investment as well, welcoming it with open arms in certain sectors while shutting it out completely in others, according to the evolving national development plan …

… The popular impression of Korea as a free-trade economy was created by its export success. But export success does not require free trade, as Japan and China have also shown. Korean exports in the earlier period – things like simple garments and cheap electronics—were all means to earn the hard currencies needed to pay for the advanced technologies and expensive machines that were necessary for the new, more difficult industries, which were protected through tariffs and subsidies. At the same time, tariff protection and subsidies were not there to shield industries from international competition forever, but to give them the time to absorb new technologies and establish new organizational capabilities until they could compete in the world market.

The Korean economic miracle was the result of a clever and pragmatic mixture of market incentives and state direction.

The Tunisian development model, loved by the IMF and the World Bank, was never anything like that.

So when we wax lyrical about the demise of democracy in Tunisia, the relevant question is why did the multinational institutions and foreign interests create a ‘democratic’ model that really did little to change the fundamental structural dysfunctions that the previous dictatorship had created.

If anything they exacerbated them.

After I had reflected on the Tisdall article, I saw a Tweet from my MMT colleague Dr Fadhel Kaboub who wrote:

How convenient to grab my NYT quote without asking me or other independent Tunisian scholars about #Tunisia’s struggles in the last 10 years. Like many Western “experts”, Simon Tisdall suffers from a chronic orientalist condition. The Guardian can do better than this.

Orientalism – “is the imitation or depiction of aspects in the Eastern world. These depictions are usually done by writers, designers, and artists from the West.”

Fortunately, I have learned that Fadhel will be providing an expert reply to the UK Guardian article.

So, it seems the UK Guardian will do better.

Good.

Second to none!

The Australian Broadcasting Commission this week ran a program examining the Netflix documentary – ‘The Last Dance’ – about the Chicago Bulls that documented that team’s most successful era.

It seems that the only problem was that the Netflix documentary seemed to find a way to ignore the contribution that Australian basketballer – Luc Longley – made to that team’s success.

He was the first Australian to play in the US NBA.

He was an essential part of the Chicago Teams playing alongside Michael Jordan.

The two-part ABC series records Luc Longley’s memories and his response to being excised from the Netflix documentary.

You can watch the first of two parts – Luc Longley: One Giant Leap | Part 1.

Michael Jordan admits in the second part (to be broadcast next week) that “I can understand why Australia would say, well, why wouldn’t we include Luc and we probably should have.”

I am no basketball fan but the example is demonstrative of what is wrong with so-called ‘American exceptionalism’ which consistently creates problems in the world.

In my sphere I keep reading that Modern Monetary Theory (MMT) only applies to the US or is an American phenomenon.

But I was reminded of an lovely (funny) story from World War 2 that demonstrates how non-US people respond to shameless US self-promotion.

In this article (December 9, 2017) – John Clarke and the New Zealand sense of humour we learn about the liberation of Trieste in 1945.

The New Zealand army “fought a costly street-by-street battle against the retreating German army to take the city of Trieste in northern Italy”.

To celebrate, the US Marines who “had arrived after the battle had finished and that the fighting had been done by the New Zealanders” organised a victory parade and they led the parade through the streets.

The carried a large banner – “US Marines. Second to None”.

The NZ troops came next and upon a large sheet they had written “None”.

Beautiful.

Music – Yusef Lateef

This is what I have been listening to while working today.

I guess I have listened to a lot of jazz in my life to date and explored lots of the fusion experiments that jazz players have created.

This song is from the incomparable – Yusef Lateef – who was an American tenor sax specialist (but also a great flautist, oboist and bassoon player) – is still one of my tracks from one of my favourite albums and it regularly sits on my iPhone when I travel.

I first bought this album – The Blue Yusef Lateef – in the early 1970s (it was released in 1968 on Atlantic).

The track – Like It is – features Yusef Lateef on sax and bamboo flute and reveals what happens when jazz and world music collide.

It is 7 minutes 35 seconds of pure mastery and is music to meditate to while thinking about Modern Monetary Theory (MMT).

It is quite clear from his playing how he was influenced as a young musician by the great Dexter Gordon.

The track features:

1. Kenny Burrell – guitar.

2. Cecil McBee – bass.

3. Blue Mitchell – trumpet.

4. Roy Brooks – drums.

among others.

This UK Guardian – Yusef Lateef Obituary (December 31, 2013) – talks about how he melded world music sounds and motifs into conventional jazz.

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

Spread the word ...
    This Post Has 3 Comments
    1. That is a fun story about the troops from New Zealand and the battle of Trieste. I’m glad they were able to keep a sense of humor in such a terrible war.

    2. Excellent short essay about Tunisia, the Sth Korean example and the reference to and quote from Ha-Joon Chang’s 2007 book – “The Myth of Free Trade and the Secret History of Capitalism.” Sounds like an excellent book. I must get hold of it. Japan also developed post-WW2 like this with its MITI (Ministry of Information and Technology).

      The Canadian social and economic philosopher and historian, John Ralston Saul, also wrote quite a bit about the myths of free trade and advocated sovereign nations reneging on onerous and odious debt. I would add re-nationalisition to that advocated action list but of course the Americans and EU-eans will come and bomb you if you do that… unless you have nuclear weapons. Is it any wonder Nth Korea has nuclear weapons and Iran wants them? This is a valid question whether or not one likes the regimes in those countries.

      “In international law, odious debt, also known as illegitimate debt, is a legal theory that says that the national debt incurred by a despotic regime should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state.” – Wikipedia.

      We can always look at how much Britain stole from India… and China and Africa, Americas and Australasia.

      https://www.aljazeera.com/opinions/2018/12/19/how-britain-stole-45-trillion-from-india/

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    This site uses Akismet to reduce spam. Learn how your comment data is processed.

    Back To Top