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Does rente hinder democracy in Algeria

Amel Ouchenane

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A rapid look around the world demonstrates that few rentier countries can be classified as democratic states, especially those in the MENA region; therefore, scholars have suggested that oil wealth blocks democratization process. Other scholars linked the lack of democracy in rentier countries immediately to their dependence on oil rent. Furthermore, researchers clarified that rentier states have common characteristics like, weak civil society and low middle-class formation, no taxations on citizens and higher scales of suppression as participating to the dictatorial of rentier states. The aim of this article is to highlight the relation between rentierism and democracy.

Rentier effect Less taxation weak civil society

Algeria is very dependent on oil and gas, which accounts for 95 per cent of export earnings and one third of the national GDP. Oil economists claimed that any fall in oil prices could affect the Algerian economy, social and political stability; Algeria has a significant role in the international oil and gas market. It is the third largest natural gas producer in the Arab world after Qatar and Saudi Arabia, the leading gas exporter in Africa and an energy supplier to France, Spain, Italy, Turkey, US and China.  The Algerian dependence on oil created structural political, economic and social problems, one of them is authoritarianism, which has different manifestations, and the study dismantles this phenomenon in Algeria through three main aspects: political, economic and social through two levels domestic and international.

It is important and critical to understand how rent affects the nature of a rentier state, why oil-exporting countries are considered less democratic. One of rentier state scholars Beblawi argues that rent provides a source of income to oil-exporting countries that grant them to have very low and weak domestic taxation structures. Other scholars like Luciani present similar argument, who claim that high rents liberate the state from the need to increase income domestically. Moreover when citizens, do not pay for taxes, they are much less Demanding of the government, also government expensing on public goods preserves the indispensable support and acquiescence for standing authority, also since the state does not demand a financial contribution from the citizens, they resort to be satisfied with the expense of the state, even when benefits and interest are not equally distributed.

Another important factor which explains the rise of authoritarianism in rentier countries which is the social groups, In addition to minimal taxation in these countries, there are higher amounts of patronage spending, which helps to the government’s staying power. The government also utilizes oil revenues to prevent and stop the formation of certain social groups that would rise the demands and requests on the government for more democracy and less authoritarianism.

The taxation is not only an economic matter but also a political one, taxes means representation, rights and duties..etc. .The ‘neo-classical’ theory of the state developed by Douglass North clarified that taxes are connected with representation and democracy, therefore, less taxation means less democracy. In addition, Adam Przeworski and Fernando Limongi, claim that in rentier states, limited taxation decreases the people’s influence to keep the rulers responsible, because the rentier state allocates jobs, services, money to them. This manner of guarantying political obeisance and loyalty produces patron‐client relations, rather than democratic exchanges, between the governor and people.

In addition, the rentier state’s welfare policies create a huge bureaucracy, which prohibits the emergence of independent civil society. In addition, the revenues can badly affect individuals too, because it transforms to a serious barrier to the morals of work. Furthermore income is no longer a recompense of serious work but it is related to special coincidence and circumstances like chance, hazard.., etc., another important aspect is that  rents help authoritarian regimes with the monetary ability to enlarge their tyrannical security system and to use state‐owned means of communication like media and other propaganda mechanisms to attack  the opposition.

In Algeria, non-oil tax revenues constitute 10.2 %of the country’s GDP this figure is under the average index in developing countries and under the rate in the neighboring oil importing like Morocco and Tunisia. The IMF model 2014 argues that, Algeria has not attained its tax potential and should look into reducing costly tax exemptions. Moreover, according to Algerian statistics, 46 %of wage earners were unregistered workers .Some types of taxes are even non-existent in Algeria like property taxes. In addition,it argues that oil wealth supports authoritarianism through patronage. It faced with expended disturbance, as the very first countermeasure, Algeria agreed to repeat the subsidies for foodstuff, therefore, the import of food products rose by 60 %in comparison to 2010 and the invoice of imports reached 46 billion dollars as a result. Algeria also raised pays of civil workers by 46%. At the same time, the regime was determined to relieve the policies controlling the street vending in order to keep unpaid youth far from the protestation. 

In Algeria the informal economy is predestined at 6 billion USD, which means 13 %of GDP outside the oil and Gas sector and provides jobs to nearly 2 million people22 %of the active force, any attempts to stop this business without inserting a real development and job creation had proved to be costly and risky. In addition, the government assigned fundamental amounts of money for interest-free loans for young people. Only in 2011, more than 50.000 small enterprises giving jobs to 70.000 young people were created with the financial help of the government; according to IMF, the Algerian government gaveto its citizens more than 23 billion dollars in public grants and retroactive salary and benefit increases. Algerian spending increased by 50% in 2011. The abundance of its financial reserves, standing at 182 billion dollars as of December 2011, which makes the Algerian regime able  to expand and develop  its patronage policy and facilely buy off popular opposition .

Therefore, the oil rents accrue directly to the state, which has discretionary power over how the revenues are spent. The state can subsequently afford to buy off or repress political opposition. The regime can purchase consent and acquire a form of legitimation through government expenditure on a welfare system. This includes spending on education, health, social security, employment, infrastructure and investment in the private sector.

Repression and the military role

 In this concern, Ross argues that there are at least two reasons why resource wealth might lead to larger military forces and elite. The first one is self-interest improving the self-defense and the capacity to respond militarily also get rid of the constant fear of the others and their  pressure so this is what an authoritarian government will do so. The second reason is that resources wealth provoke conflict and there is always a need to the military role to keep order

In the geopolitical Mediterranean context, Algeria represents a key country. Because it is the largest and most populous North African state and it has large oil and gas resources, in the mid-1980s under the Chadli presidency, Algeria started to give up the striped economy and became closer to the western model. Also during the social and economic crisis in 1988 the regime was convinced that it is time to adopt political reforms, but the process failed and the military dominated with a western support, France was especially against the rise of the Islamic Front The issues disturbing western countries are: security of investments, the fate of liberal economic reforms, an anti-western regime at the frontiers of Europe, and the access to oil and gas resources.

The Algerian army presented itself as the defender and the protector of democracy and as a credible partner for western interests. The Algerian army is still able to use the saving of energy resources and the readiness to improve the economy and to support from the West, which in turn will guaranty the existence and the survival of the regime. Furthermore, after the coup attempt, France gave $550 million in help to aid Algeria import food and a western consortium provided $1.45 billion in credits this aid could be explained as a payment to the Algerian military for a job well done.

The United States also supported the Algerian military, because of the oil company presence in the Algerian Sahara, the United States encouraged its oil and gas multinationals to invest in Algeria, the army preferred the security of the oil and gas production system.  The economy has been liberalized especially in the gas and oil domain, where companies are strongly investing; therefore, new pipelines have been established between Algeria and Europe. The Algerian military took the control of the country. From an economic perspective, persons near to the regime are earning hugely from the economic reformation, the generals themselves became very wealthy. Furthermore the economic reforms aid the regime to narrow the first on society as ‘private monopolies supersede  public monopolies and are caught by those with close relations to the powerful generals , from a political perspective , the regime is capable to survive due to the series of feral  inhibition and repression, façade democratic steps and outside help .

3/The luck of modernization effect through cultural and social change: it suggests that the oil wealth fails to create the social and cultural changes, which a democratic government demands due to some reasons:

Rentier states have low and weak developed industry capabilities, they lose the information they need to formulate development policies.

Being progressively independent of society, they are unaware, ignorant, of society and indifferent to the preferences and preferences of their populations.

There are ‘allocation’ and not ‘production’ states, therefore the state sector increases in immensity and importance –sometimes it become inactive, entrepreneurship is not promoted, and ‘rent-seeking,’ is in coalition with the state, is the important  key to social mobility.

Rents are used by the state to encourage obeisance and that way they block the formation of free social network and groups that could make demands and push for democracy.

The centralization of government and the ambiguity of efficient regulatory frameworks feed corruption and patrimonialism that have a negative effect on the law and the transparency of rent distribution.

An autocratic regime seeks to create loyalty through patron–client networks, which rise political stability and guarantee a certain degree of legitimacy. Such networks include the award of personal support in the format of public sector jobs and the distribution of public resources through permits, projects and contract. These activities will increase the level of corruption and decrease transparency and accountability.

 In Algeria, the economic development was not connected to the democratization process. Part of the manifestation can be found in Algeria’s social structure. At independence, the class structure was comparatively united and combined, in the last decade; Algeria gave most of the chances for economic development.  Within a mixt elite consisting of political parties, bureaucrats, and, much of the population was attached to the state through patronage networks and the economic interests of the private sector. In addition, trade unions were strongly under governmental control. As a result, the social grounds for opposition was very tight. When compression to reform spread, it did not come from the working or middle classes but from students and religious groups.

Therefore, The social structure in the rentier countries generally and Algeria specially is enfeeble, the social force with the powerful interest in the economic liberalization have to improve political pluralization, specifically  the bourgeoisie, however combining those most menaced by it specifically  workers, peasants and civil servants. Therefore, rentier states aimed to prevent the formation of a democratic coalition because they extremely menace the bourgeoisie, its ability leading force, and in combining the working class and peasants made them unavailable as shock troops of democratic revolution. Moreover, rent clientelist mentality and networks aimed to individualize political activity as actors look for personal wining through privileged relationship to power, therefore frittering the potential class action necessary for democratization process.

Conclusion

The article concludes that  the plenty of the oil prevents democratic transition and supports the strength and immovability of an authoritarian system, through providing for  dictator monetary capability to repel any democratic efforts, The case study on Algerian authoritarian regime demonstrated how an tyrannical system whose economy is largely dependent on oil and gas rents acted in the political crises, therefore the Algerian example shows well how oil wealth have played a significant role in blocking the social opposition to increase through repression and patronage, therefore rent is a structural variable in explaining authoritarianism.

Amel Ouchenane is a member of the organization of Security and Strategic studies in Algeria. She is also Research Assistant at the Idrak Research Center for Studies and Consultations. Ms. Ouchenane was researcher at Algiers University from 2011 to 2018. (Department of International relations and African studies).

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Middle East

War in Libya: A rare instance of US-Russian cooperation

Dr. James M. Dorsey

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There is little that Russia and the United States agree on these days. Renegade Libyan Field Marshal Khalifa Belqasim Haftar may be a rare exception.

As Mr. Haftar’s mortars rained on the southern suburbs of the Libyan capital Tripoli and fighting between his Libyan National Army (LNA) and the United Nations-recognized government expanded to the south of the country, both Russia and the United States stopped a call for a ceasefire from being formally tabled in the UN Security Council.

Russia, which has joined US allies that include the United Arab Emirates, Saudi Arabia, Egypt and France, in supporting Mr. Haftar because of his grip on Libya’s oil resources and assertions that Islamists dominate the Tripoli government, objected to the British draft resolution because it blamed the rebel officer for the fighting.

The United States gave no reason for its objection. Yet, it shares Russia’s aversion to Islamists and clearly did not want to break ranks with some of its closest Middle Eastern allies, certainly not at a time that the UN was investigating allegations that the UAE had shipped weapons to Mr. Haftar in violation of an international arms embargo.

The significance of US-Russian agreement on Mr. Haftar’s geopolitical value goes far beyond Libya. It reveals much of how presidents Donald J. Trump and Vladimir Putin see the crafting of a new world order. It also says a great deal about Russian objectives in the Middle East and North Africa.

Messrs. Trump and Putin’s preference for a man with a questionable human rights record who, if successful, would likely rule Libya as an autocrat, reflects the two leaders’ belief that stability in the Middle East and North Africa is best guaranteed by autocratic rule or some democratic façade behind which men with military backgrounds control the levers of power.

It is a vision of the region promoted by representatives of UAE crown prince Mohammed bin Zayed who sees authoritarian stability as the best anti-dote to popular Arab revolts that swept the region in 2011 and more recently in Algeria and Sudan are proving to have a second lease on life.

Underlying the Trump-Putin understanding is a tacit agreement among the world’s illiberal, authoritarian and autocratic leaders on the values that would underwrite a new world order. It is an agreement that in cases like Libya reduces rivalry among world powers to a fight about the divvying up of the pie rather than the concepts such as human and minority rights that should undergird the new order.

Moscow’s support for Mr. Haftar serves Russia’s broader vision of the Middle East and North Africa as an arena in which Russia can successfully challenge the United States even if Messrs. Trump and Putin agree on what side to support in a Libyan civil war that is aggravated by the interference of foreign powers.

Russia national security scholar Stephen Blank argues that Mr. Putin’s strategy is rooted in the thinking of Yevgeny Primakov, a Russian Middle East expert, linguist and former spymaster, foreign minister and deputy prime minister.

Mr. Primakov saw the Middle East as a key arena for countering the United States that would enable Russia, weakened by the demise of the Soviet Union and economic problems, to regain its status as a global and regional power and ensure that it would be one pole in a multi-polar world.

“In order to reassert Russia’s greatness, Primakov and Putin aimed ultimately at strategic denial, denying Washington sole possession of a dominant role in the Middle East from where US influence could expand to the Commonwealth of Independent States (CIS)” established in the wake of the demise of the Soviet Union to group post-Soviet states, Mr. Blank said.

Messrs. Primakov and Putin believed that if Russia succeeded it would force the United States to concede multi-polarity and grant Russia the recognition it deserves. That, in turn, would allow Mr. Putin to demonstrate to the Russian elite his ability to restore great power status.

Syria offered Russia the opportunity to display its military prowess without the United States challenging the move. At the same time, Russia leveraged its political and economic clout to forge an alliance with Turkey and partner with Iran. The approach served to defang Turkish and Iranian influence in the Caucasus and Central Asia, Mr. Blank argued.

Similarly, Russia after brutally repressing religiously inspired Chechen rebels in the 1990s and despite the lingering memory of the Soviet invasion of Afghanistan, has in line with UAE precepts, proven to be far defter than either China or the United States at promoting politically pacifist or apolitical loyalist Islam in a complex game of playing both sides against the middle.

Russian engagement runs the gamut from engaging with militants to cooperating with Muslim autocrats to encouraging condemnation of activist strands of ultra-conservative Islam to hedging its bets by keeping its lines open to the Tripoli-based Government of National Accord (GNA).

Even if Russia may be walking a tightrope in balancing its relationships with Mr. Haftar and GNA Prime Minister Fayez al-Sarraj, like in Syria, it is positioning itself with the backing of the UAE, Saudi Arabia and Egypt as the potential mediator that maintains ties to both sides of the divide.

Said Russian foreign minister Sergei Lavrov: “We believe that Libya’s future must be determined by the Libyans themselves. We are convinced that there is no alternative to an inclusive intra-Libyan dialogue… Our work on this track proceeds in this spirit and the belief that there is no alternative to preserving the sovereignty and territorial integrity of Libya.”

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Battling for the Future: Arab Protests 2.0

Dr. James M. Dorsey

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Credit: Institute of Security Studies

Momentous developments across Arab North and East Africa suggest the long-drawn-out process of political transition in the region as well as the greater Middle East is still in its infancy.

So does popular discontent in Syria despite eight years of devastating civil war and Egypt notwithstanding a 2013 military coup that rolled back the advances of protests in 2011 that toppled Hosni Mubarak and brought one of the country’s most repressive regimes to power.

What developments across northern Africa and the Middle East demonstrate is that the drivers of the 2011 popular revolts that swept the region and forced the leaders of Egypt, Tunisia, Libya and Yemen to resign not only still exist but constitute black swans that can upset the apple cart at any moment.

The developments also suggest that the regional struggle between forces of change and ancien regimes and militaries backed by the United Arab Emirates and Saudi Arabia is far from decided.

If anything, protesters in Algeria and Sudan have learnt at least one lesson from the failed 2011 results: don’t trust militaries even if they seemingly align themselves with demonstrators and don’t surrender the street until protesters’ demands have been fully met.

Distrust of the military has prompted an increasing number of Sudanese protesters to question whether chanting “the people and the army are one” is still appropriate. Slogans such as “freedom, freedom” and “revolution, revolution” alongside calls on the military to protect the protesters have become more frequent.

The protests in Algeria and Sudan have entered a critical phase in which protesters and militaries worried that they could be held accountable for decades of economic mismanagement, corruption and repression are tapping in the dark.

With protesters emboldened by their initial successes in forcing leaders to resign, both the demonstrators and the militaries, including officers with close ties to Saudi Arabia and the UAE, are internally divided about how to proceed.

Moreover, neither side has any real experience in managing the crossroads at which they find themselves while it is dawning on the militaries that their tired playbooks are not producing results.

In a telling sign, Sudan’s interim leader Abdel Fattah Abdelrahman Burhan praised his country’s “special relationship” with Saudi Arabia and the UAE as he met this week with a Saudi-Emirati delegation at the military compound in Khartoum, a focal point of the protests.

Saudi Arabia has expressed support for the protests in what many suspect is part of an effort to ensure that Sudan does not become a symbol of the power of popular sovereignty and its ability to defeat autocracy.

The ultimate outcome of the dramatic developments in Algeria and Sudan and how the parties manoeuvre is likely to have far-reaching consequences in a region pockmarked by powder kegs ready to explode.

Mounting anger as fuel shortages caused by Western sanctions against Syria and Iran bring life to a halt in major Syrian cities have sparked rare and widespread public criticism of president Bashar al-Assad’s government.

The anger is fuelled by reports that government officials cut in line at petrol stations to fill up their tanks and buy rationed cooking gas and take more than is allowed.

Syria is Here, an anonymous Facebook page that reports on economics in government-controlled areas took officials to task after state-run television showed oil minister Suleiman al-Abbas touring petrol stations that showed no signs of shortage.

Is it so difficult to be transparent and forward? Would that undermine anyone’s prestige? We are a country facing sanctions and boycotted. The public knows and is aware,” the Facebook page charged.

The manager of Hashtag Syria, another Facebook page, was arrested when the site demanded that the oil ministry respond to reports of anticipated price hikes with comments rather than threats. The site charged that the ministry was punishing the manager “instead of dealing with the real problem.”

Said Syrian journalist Danny Makki: “It (Syria) is a pressure cooker.”

Similarly, authorities in Egypt, despite blocking its website, have been unable to stop an online petition against proposed constitutional amendments that could extend the rule of President Abdel Fattah el-Sisi until 2034 from attracting more than 320,000 signatures as of this writing.

The petition, entitled Batel or Void, is, according to Netblocks, a group that maps web freedom, one of an estimated 34,000 websites blocked by Egyptian internet service providers in a bid to stymie opposition to the amendments.

Mr. El-Sisi is a reminder of how far Arab militaries and their Gulf backers are potentially willing to go in defense of their vested interests and willingness to oppose popular sovereignty.

Libyan renegade Field Marshall Khalifa Belqasim Haftar is another, Mr. Haftar’s Libyan National Army (LNA) is attacking the capital Tripoli, the seat of the United Nations recognized Libyan government that he and his Emirati, Saudi, and Egyptian backers accuse of being dominated by Islamist terrorists.

The three Arab states’ military and financial support of Mr. Haftar is but the tip of the iceberg. Mr. Haftar has modelled his control of much of Libya on Mr. El-Sisi’s example of a military that not only dominates politics but also the economy.

As a result, the LNA is engaged in businesses ranging from waste management, metal scrap and waste export, and agricultural mega projects to the registration of migrant labour workers and control of ports, airports and other infrastructure. The LNA is also eyeing a role in the reconstruction of Benghazi and other war-devastated or underdeveloped regions.

What for now makes 2019 different from 2011 is that both sides of the divide realize that success depends on commitment to be in it for the long haul. Protesters, moreover, understand that trust in military assertions of support for the people can be self-defeating. They further grasp that they are up against a regional counterrevolution that has no scruples.

All of that gives today’s protesters a leg up on their 2011 counterparts. The jury is out on whether that will prove sufficient to succeed where protesters eight years ago failed.

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Middle East

As Marsha Lazareva languishes in jail, foreign businesses will “think twice” before investing in Kuwait

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IF THERE IS one thing to glean from the case of Marsha Lazareva, it’s that foreign businesses must now think very carefully before investing in Kuwait.

For more than a year, Lazareva, who has a five-year-old son and is one of Russia’s most successful female investors in the Gulf, has been held in the Soulabaiya prison by Kuwaiti authorities. Those authorities claim she ‘stole’ half a billion dollars, a claim she strenuously denies.

Human rights groups and prominent officials, including the former FBI director, Louis Freeh, and Jim Nicholson, former Chairman of the Republican Party and former US Ambassador to the Vatican, have called for her release and expressed concerns about the apparent absence of due process in a country where Lazareva has worked for over 13 years. Both Freeh and Nicholson visited Kuwait in recent weeks with Neil Bush, son of the late President George H. W. Bush. Bush has said Lazareva’s incarceration ‘threatens to darken relations between the U.S. and Kuwait, two countries that have enjoyed a long and prosperous relationship.

Russian officials have been equally concerned. Vladimir Platonov, the President of the Moscow Chamber of Commerce and Industry, confirmed that a single witness gave testimony in Kuwaiti court, and only for the prosecution. ‘I myself worked in prosecution for more than eight years, and I cannot imagine any judge signing off on an indictment like this,’ he said. ‘One fact of particular note is that Maria was given 1,800 pages of untranslated documents in Arabic.’

Serious questions surrounding the safety and future viability of investing in Kuwait are now being raised. Through The Port Fund, a private investment company managed by KGL Investment, Lazareva has contributed hundreds of millions of dollars to local infrastructure and economic development projects during her time in the country. Until 2017, when a Dubai bank froze $496 million without cause, she had worked largely unobstructed.

But as things stand, more foreign investment is unlikely to be forthcoming. Jim Nicholson has said that the ‘imprisonment and harassment’ of Lazareva ‘threatens’ U.S. support. adding that the ‘willingness of the U.S. to do business with Kuwait’ is based on ‘its record as a nation that respects human rights and the rule of law’. Mark Williams, the investment director of The Port Fund and a colleague of Lazareva’s, has called on international investors to ‘think twice before doing business in this country’. 

These comments will surely concern the Kuwaiti government, who said last year that FDI was ‘very crucial’ to the success of its Kuwait Vision 2035 road map. In September 2018, the FTreported that the government planned to reverse its traditional position as an investor in order to diversify its economy, carrying out a series of reforms designed to facilitate foreign investment and assist investors.

But despite these changes, which have propelled Kuwait to 96th—higher than the Middle East average—in the World Bank’s ‘Ease of Doing Business’ report, investors may be unwilling to take the risk so long as Lazareva remains in jail. Lazareva’s lawyers have accused Kuwait of violating international law by breaching a long-standing bilateral investment treaty with Russia. Lord Carlile of Berriew, QC has brought the case to the attention of the British public and the EU, writing in The Times that ‘there is no evidential basis to justify any claim of dishonesty, corruption or any other criminal wrong’. He added: ’Anyone thinking of doing business in Kuwait should read on with mounting concern.’

What’s worth remembering is that Kuwait is an important, long-standing ally of the UK, and a country generally seen as stable and fair. It is equally a major non-NATO ally of the United States, where there are more than 5,000 international students of Kuwaiti origin in higher education. But these relationships, and the investment to which they have historically led, have been cast into doubt. And it now seems certain that relations will continue to sour so long as Marsha Lazareva languishes in Soulabaiya.

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