West must help Tunisia to nurture democracy

By Joseph Stiglitz

Published: May 25 2011 13:25


In his speech on the Middle East on Thursday last week, Barack Obama rightly put a spotlight on the immense economic difficulties facing Egypt and Tunisia. These countries enthralled the world as their populations bravely overthrew despots. But the hard journey of reform is just beginning – and many of the biggest challenges are economic ones.


Both countries need the west badly. It is time for the US to match action to words and provide the economic assistance they need.


The economic woes did not begin with the revolutions. In fact, they may have been the catalyst for revolt. Both Tunisia and Egypt faced serious youth unemployment even before the US recession turned global. Rising food and oil prices compounded the economic problems, making discontent more acute. And so people took to the streets.


Now, the despots are gone. But a democratic dividend for the economy has been elusive, and so far matters have only become worse. Tourists have been scared away, and especially Tunisia has felt the strains of the war in Libya – the country of 10.5m has opened its doors to nearly 150,000 fleeing Libyans. And since Libya was a major trading partner (after the European Union), the war has been another blow to Tunisia’s economy. Further, although the poverty rate in Tunisia is relatively low (about 4 per cent), there are pockets that persist.


Time is of the essence. Last week, I visited Tunisia and met academics, economists, businessmen, journalists and government officials, including the prime minister. The excitement about the new democracy was palpable. But I also felt a nervousness: what if the west does not answer the call for economic support? In six months’ time, if the economy sinks further, forces arguing against liberal democracy will gain strength. The youth who led the revolutions may become angry again, and give up hope.


The Asian Development Bank and the World Bank have already started to address these economic issues – a quick response for which both institutions should be congratulated.


But more is needed, from the US and others. We have long had strong assistance programmes for Egypt, but we have sometimes neglected Tunisia, partly because it has at times had impressive growth – in the second tier behind the Asian tigers – in spite of authoritarianism and corruption. That has set the bar even higher for the revolution – Tunisians know what they can achieve, if they had some additional assistance at this critical time.


There is good news: the amount Tunisia needs is tiny, and its government includes many capable technocrats in the civil service and at the central bank.


With this commitment and knowledge, Tunisia can shape its own successful economic programme. In pursuit of this, the country has formulated a three-part request, which has garnered support from leading American and European economists.


The first aspect focuses on financial assistance. The government estimates it needs $5bn a year for each of the next five years, an amount roughly equal to a few weeks of fighting in Afghanistan and Iraq. Some of this money would help deal with the influx of refugees, and make up for the other economic calamities since the revolution. Some would help reinvent government, including badly needed reforms in the bureaucracy. Some would address festering social and economic problems, such as poverty. Some needs to be devoted to public investment in infrastructure and education.


But a measure of success will have to be job creation, and in all countries, small and medium-sized enterprises are key. I would like to see an innovation and enterprise fund, with which the US would help Tunisian start-ups by contributing both money and the ingenuity of its entrepreneurs. We need to show that technology is not just a tool for overthrow – it can also help create a new, vibrant economy.


Debt relief should also be on the agenda. Many proud Tunisians don’t want to ask for it – they see these debts as their responsibility. But money used to service debt is lost for direly needed investment in Tunisia. At the minimum, we should offer a rescheduling. Even better would be a debt-for-equity swap. We could reinvest what we receive back in Tunisia – perhaps in the innovation fund.


Secondly, Tunisia is asking for market access. It already has access to Europe for its goods, except in agriculture, one of its key industries. But negotiating trade deals is slow and contentious. Time is working against us – and them. We need an “Open Access for New Democracies”, a transitional programme providing Tunisians with unilateral access to our markets, much like Europe’s EBA (everything but arms) initiative. It can be of immense benefit to Tunisia, with little if any cost to us – and it sends a strong, much-needed signal that the US cannot only fight for democracy, but also work for it.


It would also be of enormous benefit if we could take in a few well-educated Tunisian workers on a temporary basis. If Tunisia can open its doors to so many Libyans to help their revolution, can’t we take, say, 30,000 Tunisians? Their remittances would provide additional resources.


The final pillar of Tunisia’s request is for something we do well – people-to-people programmes and exchanges to build ties, especially with the youth of this new democracy. One idea is a special allotment of fellowships – Fulbrights, or even better, a new set of “democracy fellowships” to bring larger numbers of Tunisians to study in Group of Eight countries. A second is enlisting US corporations (like Google and Facebook, which played such an important role in sparking the revolution – acknowledged in the “thank you Facebook” graffiti near the Interior Ministry where the revolution started) to help create an innovation ecosystem, providing venture capital funds, innovation prizes, etc to help create new SMEs.


Exchanges will also bolster the civil society that helped create this revolution and should – in both the Arab world and the west – play a major role in ensuring its success. In spite of decades of authoritarianism, Tunisia is lucky in having a thriving civil society, which can be vital in creating a robust democracy.


This week the G8 meets in Deauville. This provides an important opportunity for the US and other powerful countries to show that they will provide the support Tunisia deserves.


On its own, Tunisia has done more to advance the cause of democracy than any of the west’s military actions in the Middle East. The US spent $3,000bn on a war in Iraq that has got us nothing. The return on investment for helping Tunisia is likely a million times more.


What we do is not just for Tunisia’s sake but ours, too. A stable, prosperous, and democratic Tunisia is in everyone’s best interest – an example for others to follow. Failure should be inconceivable. Spending a little money and opening up our markets will be a wise investment – in peace, democracy and security, in a region that has gone too long without them.


The writer is a recipient of the 2001 Nobel Memorial Prize in economics, and professor at Columbia University


Copyright The Financial Times Limited 2011.