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The Politics of Profit in Tunisia:Utility of the Rentier Paradigm?

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The Politics of Profit in Tunisia:Utility of the Rentier Paradigm? WorldDevelopment, Vol. 22, No. 3, pp. 427--436, 1994 Pergamon Elsevier Science Ltd (I) Printed in Great Britain. 0305-7SOX/94 $7.00 + 0.00 0305-750X(94)E0016-D The Politics of Profit in Tunisia: Utility of the Rentier Paradigm? EVA BELLIN* Harvard University,Cambridge, Massachusetts .Swnmary.- The analysis of rent-seeking in developing countries has shed light on the nonproductive character of business classes and the parasitic nature of state elites in many settings. The "rentier para­ digm" however, is problematic in assuming that all manifestations of state intervention and private cronyism are inherently subversive of efficient growth. Evidence from Tunisia suggests that government mediation of profits, and even extensive cronyism, can be compatible with productive investment and growth if appropriate political conditions prevail. The nature of state structure and the logic of the regime's sustaining political coalition will determine the developmental impact of state economic man­ agement. 1. INTRODUCTION hailed for spotlighting a serious problem that plagues many Third World countries - the prevalence of par­ For more than a decade much of the development asitic cronyism in business-state relations that sub­ community has retreated from its faith in state-led verts both economic development and state capacity. development, advocating a central role for the private Still, as an analytic category the term "rentier" is prob­ sector in the development process. Disenchanted with lematic in two ways. First, it assumes a clear distinc­ the sluggishness and inefficiency associated with pub­ tion between productive and unproductive engage­ lic sector growth and inspired by Schumpeter' s vision ment of resources that is actually difficult to define of the ideal-typical entrepreneur, development experts objectively (that is, without getting mired in endless became persuaded that channeling resources to the normative debate). 3 Attempts to borrow a narrow, private sector would release productive energy, non-normative definition of rents from economics heighten economic efficiency, and fuel rapid growth only expand the boundaries of the rentier class to the in the Third World. In stark contrast to the bloated, point of analytic disutility (at least for the political sci­ bureaucratized, and politically hamstrung enterprises entist). Second, the pejorative connotation of the term of the public sector, the private sector came to be seen rentier smuggles in from neoclassical economics an as the crucible of efficiency and productivity and so its inherent distrust of government mediation of profits, expansion was widely championed. leading one to assume that such mediation, by defini­ But given such idealization of the private sector, tion, subverts efficient economic growth, societal reality was bound to fall short. More often than not autonomy, and state coherence. In fact, whether gov­ empirical investigation into the character of private ernment mediation of profits produces these untoward sector actors in the Third World failed to tum up a consequences is actually determined by two interven­ class of productive, autonomous entrepreneurs cut in ing variables: the nature of state structure and the the image of Schumpeter's ideal-type. More common character of the regime's sustaining political coali­ were hosts of "crony capitalists," businessmen in tion. The truth is that government mediation of profits, league with (if not doubling as) state bureaucrats, even extensive cronyism, can be wholly compatible focused primarily on harvesting government-medi­ with the goals of efficient growth, autonomy, and ated rents rather than engaging in truly productive enterprise. 1 This "rentier syndrome," pervasive in much of the developing world, had troubling implica­ *My thanks go to John Waterbury, Atul Kohli, Nicholas tions for economy, polity,. and society. Slowed van de Walle, Thomas Callaghy,.and an anonymous reviewer for their helpful comments on¥: earlier version growth, emasculated social forces, and incoherent of this article. Two prior versions were presented at the states were just three of the evils typically associated 1991 American Political Science Association conference with its uncurbed growth. 2 in Washington, DC and the 1992 African Studies The delineation of the rentier syndrome should be Association. Final revision accepted: November 8, 1993. 427 428 WORLDDEVELOPMENT capacity so long as appropriate political conditions their capital in joint ventures with the state), the public prevail. sector dwarfed the private sector in terms of industrial This argument will be developed by drawing investment, topping 70% of gross fixed capital forma­ upon the Tunisian case. The article will trace the tion in nearly every industrial branch throughout the development of private sector industrialists in course of the decade (Romdhane and Signoles, 1982, Tunisia, testing the applicability and utility of the ren­ p. 73; Gouia, 1976). tier paradigm in describing this class and its relation­ But the state's enthusiasm for playing the leading ship to the state. The article will show that although role in the Tunisia's industrialization was to wane by Tunisian industrialists technically qualify as "rentier," the early 1970s. For reasons explored elsewhere their close relationship to the state has not resulted (Bellin, 1992), poor harvests and fiscal crisis helped in significant losses of growth, autonomy, or capacity precipitate the fall of the state's most ideologically for Tunisia thanks to the nature of state structure committed etatise elite, leading to their replacement and the logic of the regime's sustaining political coali­ by a new executive team committed to a more "lib­ tion. eral" strategy of development. The new elite declared that henceforth the private sector would take the lead in national development; the state would act only as its 2. THE DEVELOPMENT OF PRIVATE handmaiden and guardian. The hope of this elite was SECTOR INDUSTRY IN TUNISIA to corral the energy and resources of private sector entrepreneurs into industrial ventures and ultimately The development of an indigenous class of private hand over the major responsibility for the country's sector industrialists is a relatively recent phenomenon industrialization to that class. As then minister of in Tunisia. The country arrived at independence national economy Chedli Ayari announced: ''The state equipped with a small industrial base but the lion's seeks to create a generation of industrialists who will share of industrial ventures were owned either by be the masters of the country tomorrow" (Signoles, European trusts and banks or foreign nationals 1984, pp. 790-794). (Bellin, 1991, p. 47). During the early years of inde­ To entice Tunisian entrepreneurs into undertaking pendence, the young Tunisian state did try to en­ industrial ventures, the state resorted to a wide battery courage the development of an indigenous in­ of by now familiar measures. These measures dustrial bourgeoisie, offering easy credit, generous tax included generous tax breaks, easy credit, protection breaks, and substantial tariff protection to potential from foreign competition, licensed monopolies for investors in industry. Tunisian entrepreneurs, how­ production for the domestic market, guaranteed prof­ ever, resisted these inducements in droves, preferring its (through controlled, cost-plus pricing), and guaran­ to risk their capital in real estate and commercial ven­ teed government contracts where possible. In short, tures that could be bought on the cheap from departing the state's strategy was to sweeten the prospects of colons (Romdhane, 1981, p. 200). As a result, invest­ profitability in industry by offering entrepreneurs a ment funds earmarked by the state for industrial pro­ host of opportunities to harvest special rents, 5 rents jects went begging and the industrial sector as a whole available thanks to government intervention in the stagnated between 1956--61 (Gouia, 1976, p. 209). By workings of the market. These measures, it was the early 1960s the threat of negative growth was suf­ hoped, would lure risk-averse entrepreneurs into the ficiently strong to persuade state elites that a new terra incognitaof industry. strategy for the country's industrialization was neces­ The results were not disappointing. Private sary. Rather than rely upon initiative from the private investors responded to these inducements with enthu­ sector, state elites decided to take responsibility for siasm. Over the next decade or so the number of Tunisia's industrialization themselves. private sector industrial enterprises tripled, rising The 1960s was a decade of state-led industrializa­ from a low of 865 in 1970 to a high of 2,866 in 1983.6 tion. State technocrats launched industrial ventures in Private sector enterpreneurs tended to cluster in ven­ nearly every sector (from heavy, "industrializing tures that were technologically simple, least capital industries" 4 such as steel to lighter, consumer-oriented intensive, and most immediately profitable 7 but their industries such as food processing). By 1969 the state presence was felt in nearly every industrial sector. The had established more than 80 public sector industrial private sector's contribution to the economy steadily enterprises, producing everything from sugar, clothes, grew, accounting for nearly 45% of all industrial and ice cream to phosphates, ovens, and tractors investment by the mid 1980s and soon surpassing the (Ayadi, 1969, pp. 4-5).
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