100 Days Are Already Over, Mr Benkirane
So Tuesday the 29th was the day His Majesty the King gave audience to PJD premier and (elections) conqueror Abdelilah Benkirane to form the next government. The mounting opposition, inside and outside parliament will be stiff and resolute no doubt. The 100 days of honeymoon a maiden government usually enjoys with the press and the people will not be for PJD’s to expect: parliamentary opposition already gathers bitter election losers PAM and RNI have announced their decision to join the opposition, and their self-styled ‘natural party of government’ streak will fuel their resentment toward PJD.
Outside parliament, various civil society groups will also pressure PJD because of the party’s own conservative line on art, gender equality and other issues that alienates them the support, or even remote sympathy from liberal groups. Even those who voted for the party, from all the walks of life with different and pressuring expectations, will not wait long, and I wager many have set the bar very high when it comes to the next government’s performance on the job. And I count myself among them: I abhor the party, their ideology, their social conservatism, and right from now, 2016 should be their demise, but on the merits. They prove to be an adversary of substance (contrary to shallow Istiqlal, RNI or PAM for instance) and that alone is great news, because now a real debate is going to take place.
7% is not going to be achieved for the next straight 5 years. As a matter of fact, it has never been observed ever since 1960 -save perhaps for 1967/1971- and it is very unlikely to kick in again in the next decade.
Above all PJD neglects the effects of GNI growth on decile households: they have pledged a 40% increase in GNI per capita over the next 5 years. But are they going to provide the same increase in GNI to median households as well? This, of course, remains to be seen, and it is easy to check on their promise:
1/ wait for the release of HCP annual survey on social indicators (among others, income distribution)
2/ check whether the trend of impoverished median has been stopped, slowed down or reversed
3/ check whether real GNI per capita per decile below median is positive.
Perhaps Dr. Najib Boulif can shed some light on his party’s proposed 40% increase: assuming their forecast for 7% is not going to happen before 2016, then how will they allow for the 40% increase in average GNI per capita?
Now, assume the next government will do whatever they can to get a certain growth rate between 2013 and 2015, so as to accommodate both 2012 projected rate at 5%, and PJD’s statement on 2016’s projected growth at 7%. Algebraically, it makes no sense: the new government still needs to perform a 7.5% average growth over the three-years period:
That is, of course, the best possible projection, given a very stable (linear, in fact) growth rate at 7.5%. Unless the next Finance Minister prepares for some mini-recession and two-years-long boom to perform a 7.5% average growth (for instance, 4% in 2013, 9% in 2014 and 2015) which might not be a smart move after all – but then again, PJD will have to renege on their commitment to increase average income per capita otherwise.
There is also another occurrence I should perhaps mention, one that wouldn’t reassure on PJD’s supposed economic competence: Mustapha Ramid, an outspoken PJD leader and likely minister in the next government, has dropped in during a Radio interview that his government will not shut down alcohol shops, but would stop delivering licenses to new ones. Supposedly, this is to enforce a certain quarantine on alcohol sales, on the grounds of religious prohibition. This might be alright, but by doing so, PJD is hurting two sides of the Alcohol market: consumers and local producers.
The argument goes as follows: first, assume the administration in charge of delivering licenses to alcohol shops and bars has a precise model that helps pricing these licenses (these are purchases one way or the other, of course) and thus, establish a certain barrier to entry more or less built around projected gains from using this license. So far, these permits limit alcohol-selling markets to an oligopoly, with known profits and exogenous prices (set by the same administration). If indeed no additional licences are sold, then perspectives of incumbent license-holders just become brighter: they know that for a certain period of time, no additional competitor will enter the market and force a redistribution of the existing rent, and instead, they will just keep on sharing the same -if not a larger- alcohol consumption among themselves. Good news for alcohol vendors, bad news for consumers, and PJD has unwillingly helped those they seek to phase out.
Even if the administration does not have a built-in model to price these licenses, the result still holds: incumbent vendors increase their share of profits and surpluses, while consumers have to submit to the paid price, or worse, go for contraband alcohol, hazardous and dangerous.
The other end hurt by PJD’s resolutely ideologically-biased policy is the local production of alcohol in Morocco; in facts, by imposing more and more taxes on their product, they basically help alcohol imports (and these are not always subject to fiat taxation, not as easy as it could be with locally-produced goods) and thus increase slightly trade balance: total imports of alcohol last year were about MAD 500Mln worth of alcohol beverages. At the same time, some MAD 1.14Bn of taxes have been levied on the same class of products (and PJD caucus attached and defended amendments specifically designed to level up these receipts) most of which goes after locally-made beverages. La Vie Eco newspaper reports that these taxes have virtually forced closure of businesses (thus leading to job destruction not that easily replaceable) even before PJD took office, their relentless parliamentary activism to force amendments on alcohol taxes have resulted in job losses, just think of what their mistaken ideology could do to other businesses suspected to harbour Haram activities: Hotels, Bars, Restaurants…
It is worth mentioning that Moroccan consumers across deciles value: the fourth 20% decile household would spend on average MAD 43 on these beverages, the top 20% MAD 601. But the striking feature is the income-elasticity relative to alcohol: 1.33 across deciles, and while it is understood behaviour toward alcohol consumption is not uniform across households, but urban dwellers as well as rural denizens (Grand Casablanca and Doukkala Abda residents for instance) have a higher than average income elasticity. (numbers are available on HCP households surveys)
This tedious explanation illustrates my point: even if PJD’s policy increases alcohol prices, all data points out to a stable or increased consumption of beverages, provided the +40% in average income is acquired. I fear Professor Najib Boulif has not had a harder look at the regression tables provided by HCP in their household consumption surveys. And there goes my initial argument: it is true the new batch of PJD representatives and maiden ministers earned prestigious degrees and high education, but when it comes to practical, evidence-based policy, Mr Ramid goes off-roads and his fire-and-brimstone rethorics does nothing but harm the economy with no alternative policy to make up for the welfare loss. As for Dr Boulif, his admission of failure to secure the 40% raise in GNI per capita also translates his party’s early loss of what could well be the next election’s campaign theme: the party’s economic competence.
And as they say: