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Home , Crony capitalism, Economy of Tunisia, State capture, Swiss Leaks

How Fosters : Insights from

Matteo Capasso

No. 10. April 2021

This publication has been funded by the under the Horizon 2020 research and innovation programme under grant agreement no. 769886. EU-LISTCO Policy Paper Series. 10. April 2021 Crisis’. on the projectbetween Ca’Foscari and Columbia (NY) (Venice) ‘ The Global Dimension of the Libyan Arab al-Jamahiriyah (1977-2011). From working as a MarieCurieGlobal Fellow 2022, he will start Durham University on relationship betweenpowerand resistance in the everyday during the Libyan and as aconsultant to the EuroMeSCo‘Connecting the Dots’project. He has received a PhDform to the H2020 project,EU-LISTCO focusing on the political of the EU’s Neighbourhoods; focus on the MENAregion. Matteo previously worked as ResearchSouth, with a particular Associate economy. His current research examines the impact of US-led imperialism on countries of the Global European University Institute (EUI), . He specializes in international relations and political Capasso Matteo international capitalintheinterest ofall. sustain aneconomic agendaaimingto regulate therightsandresponsibilities oflocal and should rethink itsterms ofeconomic engagementbasedonneoliberal premises, andinstead predation andrentierism since thelate 1980s.Insuchacontext, theEuropean Union (EU) on the pursuit of the rate, the push for neoliberal reforms in Tunisia have sustained on thekey role ofthecurrent neoliberal economic modelinsustainingthesedynamics. Based however, proposes to adoptanalternative outlook. It arguesfor theneedto critically reflect as theresult ofalate-development syndrome andunfaircompetition. This policy paper, population. There isatendency inpolicy andacademic circles to characterize state capture class, thesocialandeconomic costs ofthesemechanismsare detrimentalto mostofthe largely characterized by processes ofstate capture andcronyism. While benefitingtheruling Despite thepopularprotests thattook place in2011,thepolitical economy ofTunisiaremains ABSTRACT -2- is a Fellow at the Robert Schuman Centrefor Advanced Studies, is Fellow a MaxWeber at theRobert Matteo Capasso . How Neoliberalism Fosters State Capture: Insights from Tunisia -3- Put an end to free agreements. Put an end to Neighborhood. of the Southern agenda with countries egalitarian economic a more Develop *A longer and more articulated version of this policy paper is forthcoming, see Capasso (2021) ‘From (2021) ‘From Capasso see forthcoming, of this policy paper is articulated version more longer and *A In: Journal of ’ Furthering Neoliberal Governance in North Human to State Capture: Labor and Society. STATE CAPTURE? BEYOND THE LATE- CAPTURE? BEYOND STATE SYNDROME DEVELOPMENT pauper- and informalization progressive the of nature the on focus analyses mainstream When (Diwan capture state of issue the to it link and stress often they economy, Tunisian the of ization policies pursue authorities political how demonstrating in lies argument main Their 2019). al. et and the state, private capture To . great economic with receive favours them to that allow accu- to order in institutions formal of abuse systematic the on rely and collude actors public – The paper is divided in three main sections. In the first one, it examines how mainstream analyses partThe second has capture state how explains Tunisia. capture in state of problem the present main two provides section The last development. of conditions neoliberal under Tunisia in emerged this impasse. overcome policy suggestions to Ten years have passed since the so-called ‘,’ but there were no festive celebrations marking festive celebrations but there were no Spring,’ passed since the so-called ‘Arab Ten years have - erupted against the govern have protests 16 January 2021, nationwide Since Tunisia. in these revolts importantly,more and, ment currentthe during country the plaguing crisis economic the to reaction in - pandemic. Unfortunately,global govern long-standing the fall of that led to discontent of the wave Northand - results—mean East desired Middle the the in ments produced not has (MENA) region Africa paper, I argue, in fact, that the freedom. In this policy and political conditions ing better socio-economic whose , and capture state of processes by characterized remains Tunisia of economy political isThere population. the of most towards consequences detrimental have costs economic and social - a late-develop as the result of state capture characterize to academic circles and in policy a tendency an alter- adopt to proposes This policy paper, however, and unfair market-. ment syndrome model economic neoliberal the current of key role the rethink to need the for argues It native outlook. in sustaining these dynamics. Based on Tunisiathe pursuit of theprofit, push for reforms neoliberal in its rethink should EU the context, a such In rentierism. and predation sustained has 1980s the since sustain an economic agreements, and instead free-trade on engagement based terms of economic the interest in local and international of regulate the rights and responsibilities agenda aiming to society. of the majority nature and for of the interlinkages and the role reveals how it in EU-LISTCO lies The importance to research this of areas in resilience undermining) (or fostering in actors external and regional, national, between local, recommends paper mainly (ALS/CO). policy orders this As a result, contested or statehood of limited for the EU to: – INTRODUCTION* EU-LISTCO Policy Paper Series. 10. April 2021 the SouthernNeighbourhood. them in keep mind thinking when about sources of risks and threats, and the societal resilience of As we shall see, those interlinkages cannot be underestimated in the case of Tunisia, and we should of theinternationalbusinesselite. constituencies of farmers, workers, and low-level civil seeking instead servants, the political support renounced their traditionalthe lower segments of the population. In doing so, the ruling elites further as a belt for the interests of the ruling elites and their international allies, albeit to the detriment of served has neoliberalism words, other In profit. of pursuit the is it but resources, allocate that ities labour fleethenational market. Why?Becauseit is not nationalist enthusiasm or charitable procliv the safer international financial markets (Kadri 2015). As a result, the national resources, capital and open up their markets, the interests of the ruling class become integrated—and thus, dollarized—in of thesedynamics of rentierism.poorer, When less secure countries productionwith weak capacity However, as this policy paper argues,theliberalization of these countries’ lies at the core of theglobal neoliberal economy. ment syndrome, andthepolitical economies ofthesestatesappearasdetachedor not fullypart these interpretations agreethatstatecaptureistheresultof weakinstitutions oralate-develop- to protect ‘too his clan. In other words, the state intervened much’ in the economy. Interestingly, state capturein Tunisia underBenAlihadbeendrivenbyanabuseof regulatory measuresused World Bankconducted astudythatlaidout thisargumentinanemblematicfashion, arguingthat market-oriented society (ClementandSpringborg 2010).Intheaftermathof2011revolts, the fully from theprocess theinherentdegreeofdynamism a of economic , distorting benefit to population their allowed not has this and region, MENA the in development economic rules. Some analysts have argued thatpolitics haveenforcement driven ofclearandimpartial omy is described as based on deals between political and economic elites rather than on the mulate power andwealth.Likemany other statesintheMENAregion, Tunisia’s politicalecon - -4- higher levels of output, profits and growth’ (Rijkers and Freund and Nucifora 2014, 24). spectacularly record and competitors their than larger average significantly ‘on profit:tor were They the aftermath of 2011, linked to the Ben Ali family, represented approximately a fifth of all private sec accompanied by evasion. As a study from the notices, the enterprises confiscated in aged to establish avast and lucrative empire through aprocess of increasing inner circles to around control Ben Ali started investments and private projects. Ben Ali’s clan man- the whereby 1990s, the of end the by economy the in shift significant a to led fact, in process, This the conditionsofworkers. tive and economic measures that, while pushingfor privatization, led to a massive deterioration of legisla of promotion and adoption the supporting from refrain not did (IFIs) institutions financial al ruling elites to consolidate the process of state capture (Brésillon 2020). Both the EU and internation highly disruptive consequences for the country, since the introduction of market forces allowed the The liberalization of the Tunisian economy, which begunwithPresident Ben Ali in the late 1980s, had TUNISIA THE NEOLIBERAL EXPERIENCE IN - - - - Matteo Capasso . How Neoliberalism Fosters State Capture: Insights from Tunisia - - -5- 4% of total , despite generating very large profits (ibid.). ThePanama Papers further show how big industrial tycoons continue operating off- whose operations businessmen Tunisian of the names include the documents and shore accounts, oil and gas, real estate, and financial services (Ben Hamadi et al. 2016). across range of the economy has turned out to be a source of profit and wealth for theprecarious increasingly of acceptance ruling work or of loss (i.e., risks potential of a source as acted also elites, but it has more classes, working peasants and farmers, of resilience thus reduced and working conditions) reaped who elites rent-seeking of control the under remained sector formal the fact, In generally. the benefits of opening the economyto international capital, which significantly affected the distri bution of wealth and power within and among the local population (Hibou 2011). Those differences 2011). (Hibou population the local among power within and and wealth of bution that policies developmental and reforms social and economic of the imbalance in emerged clearly the mar- to leading Tunis, areas and the capital, the coastal in predominantly the state implemented but resilience local hindered only not Such disparities 2018). (Santini regions of the other ginalization 2010. late in they exploded breakdown, as and governance of contestation rounds several to led also the revolution that believed the respondents of most shows, the revolution after conducted a poll As (SIG- (87.3%) disadvantaged the and (85.3%), unemployed the (96%), youth the by induced been had 2011). MA Group - dramati changed policy agricultural of the objectives lexicon concerning the political Moreover, market has the global into Tunisia’s of The integration the 1980s. the end of cally from to unable peasantry, the of impoverishment general a and dependence food structural a created - the reorienta on shift was based This 2019). Bush and (see Ayeb security food their own supply , in investment of benefit the to resources ‘natural’ and economic agricultural, of tion promoting the interests of those who benefitted from state investment in irrigationto the detri- - pro policies those slogan, political simple a being from Far 2016). Safi (El farming family of ment more on producing focused no longer strategy agricultural Tunisian duced large-scale changes. more to (Ayeb and Bush 2019: produce to in need but became instead a strategy those for reforms triggered the pauperization of 93–122). the As economy—such a result, these neoliberal particularlyactivities, working precarious in rise a as South, the of regions long-neglected the in including the increasing participation 2021; Meddeb 2017). smuggling (Capasso in human and oil so- encouraged only not conditions socio-economic of deterioration progressive the result, a As cietal discontent before 2011 2017)(Yousfi but played a significantrole in fanning the flamesof that resulted in the overthrow 2011). and Khiari Ben Ali (Hibou of the popular protests the economic Yet, story. revolutionary successful a as be praised to continued Tunisia 2011, After while , furtherprocess, have elites the transition by hijacking their position entrenched particularly youth unemployment, is on the rise (Schaefer 2018), and currently standing at 35-6% (World Bank 2019). The transitional government seized the assets of the Ben Ali affiliated-clan, re- lo to opened tender for a call in sold being state-linked prosperous several in sulting the surfaceon While structural its the economy, of suggested a restructuring this . cal conditions have not shifted significantly. After 2011, neoliberal reforms and The Ennhanda-led governments. coalitions be pushed by various to continued (SAPs) have Policies policy, tax regressive a including austerity, of logic a on formulated was instance, for 2013, in budget rent-seeking time, same the At 2019). (Erol wages in increase limited a and spending, social on cuts elites vis-à-vis continue theprofiting global economy. an In import this regard, provides evasion tax - ant example. By way of illustration, in 2018 employees paid 5,488.4 million dinars in ; double 2020). (Abderrazek dinars) million 2,713.8 (i.e., them employ that companies the by paid amount the Furthermore, oil companies only contributed EU-LISTCO Policy Paper Series. 10. April 2021 Neighbourhood hasbecome aconcrete source of threatsfor theEU. nomic modelthatalleviates theaggressiveprogression of neoliberalism, whoseimpacton theSouthern is called to provide leadership and emphasize the need for a more egalitarian international political-eco rentierism (Piketty 2020; Mazzuccato 2018). This is a global problem and the EU—now, more than ever— indulge in clientelist practices that help them to stay in office (Standing 2016) via processes of financial documented how neoliberal policies create rentier mechanisms, where politicians use rental income to have studies Recent Kingdom. United and States United the as such economies, neoliberal advanced After all, state capture is not a unique feature of Tunisia, rather this process is a defining feature of more in theagricultural sector). of countries and regions to develop their local and regional trade, rather thanglobal one (for example, Moreover, a bigger focus should be posed on the ways in which EU trade policy can enhance the right bases between Tunisia and the EU, which would allow improving thequality of Tunisian productions. equal on exchange scientific and technological of launch the through place take could This uates. those working on informal markets, small farmers, peasants and young gradlabourers, particularly - ranean. On theother, it requires to identify the necessary conditions to improve the lives of Tunisian promoting the creation of reciprocal conditions of mobility between thetwoshoresofMediter discussions advance could it hand, one the On 2014). Mandate Trade (Alternative issues mobility Such an initiative should begin to focus, for instance, on policy reforms that tackle economic and DA INTHEINTERESTSOF NATURE ANDTUNISIANLABOUR. POLICY RECOMMENDATION 2:FOCUSON THEELABORATION OF ANECONOMIC AGEN Therefore, freetrade agreementsshouldcometo anend. a concrete riskto the socio-economic conditions of Tunisian workers, peasantsandsmall farmers. goods, etc.) for local production, the EU-Tunisiaon imported trade liberalization agenda represents local economy to quotas,tariffs global competition without any form of protectionism (i.e., import the opening By 2020). Hamouchene and (Riahi profits of extraction the for force labour local cheap basic that makeupmost Tunisian diets. In doing so, such agreements will exploit Tunisian for the shift toward creating a dependence on productionimports of fruit and vegetables for export, , it will condition how the Tunisian market is to supply the EU. It will force—for instance—a in deep power imbalances. While inserting the most profitable Tunisian companies into the European enrich themselves further. In other words, it reifies historical and structural economic legacies rooted society exposed to the pressures of global markets and competition, while allowing ruling elites to dictated by its own commercial interests. Such agreements reduce the societal resilience of the local The EU’s approach to and Comprehensive the Deep Free (DCFTA) with Tunisia is POLICY RECOMMENDATION 1:PUTANENDTOFREETRADE AGREEMENTS. two mainpolicyrecommendationsfortheEU: model of development andreducesocio-economic inequalities in Tunisia, the policy proposespaper Tunisian ruling class in cooperation with EU member states and IFIs. To promote a more egalitarian Rather this process has consolidated by under the three decades of neoliberal policies undertaken late-development syndrome and unfair market-competition, as mainstream analyses often highlight. This policy paper arguesthatstatecapturein Tunisia should not be understood as theresult of a WHAT CANTHEEUDO? -6- - - - Matteo Capasso . How Neoliberalism Fosters State Capture: Insights from Tunisia . ------7-

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https://www.palgrave.com/gp/ . London: Routledge. https://inky- http:// - - . ABOUT EU-LISTCO RESEARCH

EU-LISTCO investigates the challenges posed to European foreign policy by identifying risks connected to areas of limited statehood and contested orders. Through the analysis of the EU Global Strategy and Europe’s foreign policy instruments, the project assesses how the preparedness of the EU and its member states can be strengthened to better anticipate, prevent and respond to threats of governance breakdown and to foster resilience in Europe’s neighbourhoods. Continuous knowledge exchange between researchers and foreign policy practitioners is at the cornerstone of EU-LISTCO. Since the project’s inception, a consortium of fourteen leading universities and think tanks have been working together to develop policy recommendations for the EU’s external action toolbox, in close coordination with European decision-makers. The EU-LISTCO Policy Papers are peer-reviewed research papers based on findings from the project.

EU-LISTCO POLICY PAPER SERIES © 2021 EU-LISTCO

This publication is part of a project that has received funding from the European Union’s Horizon 2020 Research and Innovation Programme under grant agreement no. 769866. It reflects only the authors’ view and the is not responsible for any use that may be made of the information it contains. This paper is reusable under a creative commons license ShareAlike under attribution (CC BY-NC-SA 3.0) details of which can be found at https://creativecommons.org/licenses/by-nc-sa/3.0/.

ISSN: 2604-6237 DOI: 10.5281/zenodo.4723389

Edited by the Project: Europe’s External Action and the Dual Challenges of Limited Statehood and Contested Orders (EU-LISTCO) EU-LISTCO Policy Papers are available on the EU-LISTCO website: https://www.eu-listco.net/ EU-LISTCO Policy Papers are also available at https://refubium.fu-berlin.de/handle/fub188/24657

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This publication has been funded by the European Union under the Horizon 2020 research and innovation programme under grant agreement no. 769886.