The Moorish Wanderer

“Regional Solidarity”: Bums and Workaholics

Posted in Dismal Economics, Moroccan Politics & Economics, Morocco, Read & Heard by Zouhair ABH on September 10, 2012

Ever wonder how much of your taxpayer’s money went to other regions? Of course, if you are from Casablanca, or Agadir, you are entitled to ask if you are from Rabat on the other hand, not so much. Unfortunately however, some budgetary constraints prevent the curious inquirer to get the raw numbers from our administration. And so, I endeavour to crunch these available numbers together to get some idea of how things are computed.

Average regional GDP per Capita in these super-regions is 21% higher than nationwide GDP per Capita.

First, I start with the standard national accounting identity: Y=C+G+I+NX. (Output = Consumption +Government Spending + Investment + Net Exports)

In fact, I can even assume that equality is simplified to Y=C+G+I since most of our exports are concentrated on two seaports at the most (Casablanca alone attracts 42% of total export/import shipping ) and use data from the MINEFI paper on regional contributions to GDP, as well as an HCP survey from 2007. It is without much surprise that 5 regions concentrate about 60% of total GDP (Casablanca, Rabat, Marrakech, Tangiers and Souss) and a little less than half of total population. We can also safely assume productivity per capita in these regions is significantly larger, paradoxically because their respective occupation level of active population would be lower.

Why would I need the national accounting identity to check which regions rely on government subsidies and transfers? Well, it is a matter of simple economics: a thriving region would not necessarily have a high regional GDP – Soussa Massa has a relatively low GDP per Capita, yet it is one of the richest regions in Morocco (4th richest not including Raba-Salé). What matters really is how their regional GDP is formed; a wealthy, productive region should produce its own consumption and pay relatively high taxes – or at least close to nationwide levels.

The following results are based on computations of aggregates per capita: there is a logical enough argument to be made that poorer regions might be over-populated; as it turned out, richer regions tend to have larger populations, they are however more productive, even more so, given the fact their active population is actually smaller, when compared to nationwide occupation rate of active population as well as those of the poorer regions. Per capita results take the demographics out of the equation, and even the odds somewhat.

The initial point made about wealthy regions stems from the standard national accounting equation: regional output is (roughly) consumed, taxes or invested. A good point can be made as to how local output matches local consumption, i.e. food and other goods consumed in one region are not necessarily made there; after all, sea-fish consumed in Marrakesh has to come from a coastal city, and Melons down South in Laayun need to come from another, cooler, watery place. Still and all, productive regions are able to produce enough output to buy them their consumption from other regions. Those too poor to afford anything will have to rely on government subsidies, or else reduce their consumption to subsistence levels. six regions emerge in this case: the Southern provinces, Tadla-Azilal and Taza-Alhuceimas. Their cumulative contribution to total GDP is less than 10%, and their average GDP per capita is roughly that of Souss-Massa.

Taxes and Government spending however are a different place; government money levied from or spent on a region stays there. Unfortunately, we do not have the exact amount of government spendings per region, though the other side of the equation is out there: there is evidence about how much each region contributes to total fiscal receipts; As it turns out, the 5 super-regions contribute about 91.5% of 2011 fiscal receipts, about 138.2Bn that is. So the initial body of evidence is there: the richest regions tend to pay more taxes than they produce output, and if Rabat-Salé is excluded from computations, the 4 super-regions account for 74% of fiscal receipts, versus a little less than half of total GDP. In simple arithmetic, every 100 dirhams these 4 regions paid 19.1 of it in taxes, and these were transferred to other regions.

What is the difference between the South and the two other poorest regions? These have less government spending with respect to their respective regional GDP

The figures at hand are not gross taxes however; these have been netted with subsidies (our Compensation Fund) which makes computations even easier; indeed, national accounting equalities tend to assume perfect funding from taxes to pay for government expenditure. Poorer regions – in this case, the bums are the Southern provinces, Taza-Alhuceimas and Tadla-Azilal would share their output between consumption and government expenditure. This is precisely the case for Taza and Tadla, where Investment per Capita (and at a smaller extent, Net Exports) make up for less than 2% of GDP per Capita. These two regions, by the way, should have received a net 1.5Bn dirhams either as tax cuts, or direct government transfers. But they did not: the local population had to make do.

On the other hand, the Southern regions are a riddle when it comes to national accounting; its taxation is a record low, and the assumption behind national accounting does not stand. And that is so because the tax aggregate used for that matter was net of subsidies. Think of it as a reversed budget balance: G – T instead of T – G. One additional step would be to propose: T - (G_0 + G_s) where G_s is government subsidies expenditure. The balance is the net government transfer the region benefits from.

So what is the score? It is always difficult in view of the numerous shortcomings of proposed methods, but it is clear the remarkably high Southern GDP per capita (30,000 dirhams) which marks these regions as the third richest is solely due to large government transfers, in this case 7.2Bn dirhams in 2011 – .89% of GDP, 17.1% of subsidies dispatched to 3.5% of total population. The bums in this case, those who benefit from government transfers, are the Southern provinces.

Regional solidarity is an admirable principle, and should be encouraged at every level of government business. But it assumes transparency in these transfers, and some kind of economic logic to it. In this case, transparency is a vain word – let us not forget the assumptions behind all these computations are very formal, and that means reality might be a lot dimmer, i.e. actual transfers are higher. And the proposed newly redrawn regional boundaries will certainly not help.

The political ramifications of unequal and unjustified (from an economic point of view, anyway) government transfers from hard-working citizens to others will exacerbate resentment, and there is no doubt unscrupulous politicians will seize upon this if and when an electoral advantage would weigh in. Another way to look at it is instead to push for larger devolution; fiscal autonomy would then show how each region actually does in terms of economic performance, and a dedicated federal fund can then be set up to support those regions with structural difficulties, on the grounds of economic support, not back-room political strategies as it is now.

Flip-Flop Or Incompetence: The 7% Controversy

Posted in Dismal Economics, Moroccan Politics & Economics, Morocco, Read & Heard by Zouhair ABH on January 13, 2012

Do you know the guy who goes through the figures and crunch numbers together to tell you that they don’t add up, even though nobody cares? That’s me.

During the electoral campaign, I took the trouble to read, then compare party manifestos, including that of the senior partner in the maiden government, PJD. I was very sceptical of their promised 7% annual average growth rate, given that the current and future performance of domestic output does not allow for more than 6%, and if we are at all to keep with the current level of inflation, a 5% would do no harm.

The graph was taken too literally

But (mis)informed commentators only now caught up with the fact that in the minds of Najib Boulif and Mustapha Khalfi the 7% pledge was not for all next 5 years; it was a “target rate” for 2016 (page 16):

1. معدل النمو المستهدف 7 في المائة

Following their definition of ‘target rate’ is some sort of aim the economy works its way up to reach: 5% in 2012, 5.5% in 2013, and so on and so forth, until it reaches 7% in 2016. I don’t know, but a) I have been told that a target rate is an average the policy-maker wants to stick to as closely as possible, and b) growth does not work like it is some sort of cumulative aggregate. GDP in value and volume does, but its rate of change does not.

I am sorry, but a target rate is not something a policy maker works their way to reach in a defined time-frame, it is a standard they don’t want to deviate from. Economists know it, and it is only right to ask the question whether Najib Boulif and Mustapha Khelfi are trying to spin their way out of an incoming flip-flop, or plain incompetents.

I very much doubt they are incompetent: Najib Boulif was a prominent back bencher in the Finances parliamentary committee, and is a professor of Econometrics and Economics of Energy at the University of Tangiers, and Mustapha Khalfi has spent some time as an intern in Capitol Hill. They have dealt with pretty major issues, and such a trivial definition of target rate is well within their intellectual grasp and working experience. That is why I would go for the flip-flop. And a major one, if I may say so.

My Blogger pal Abmoul did ask the question: why bother about GDP growth predictions? These are important for a host of reasons, but since we are considering government policy, the one we are interested in is surely the projected receipts from growth. The story goes very simple: high growth means a lot of business, a lot of consumption, and a lot of transactions. Because there are taxes on almost all of these economic activities, their steady increase means more receipts for the Inland Revenue Services; and in fact, a 7% growth will deliver more tax receipts than a 5%.

Let’s consider a simple example: consider an economy with a GDP of 100 this year. Next year, it can grow to 5% or 7%. This means GDP is either 105 or 107. The budget taxes GDP at, say 20%.

Case 1 – 5% growth: tax receipts increase from 20 to 21

Case 2 – 7% growth: tax receipts increase from 20 to 21.4

That’s 0.4 additional gain for the treasury thanks to higher growth. In order of magnitude, 7% GDP growth delivers, ceteris paribus, 8% more receipts for the budget i.e. 26Bn per annum. It also allows the treasury to keep on borrowing: high growth also means high liquidity, and a very convenient way to avoid the latter to turn its growth into inflation is to basically deviate some of it into public debt. 7%, everyone benefits from it, and more importantly, the budget can afford to expand its balance sheet.

Why is it so important for PJD then? Because they have committed to a lot of spending, and above all, they also committed to a 3% limit on deficit per GDP. Again, high growth enervates this limit in absolute numbers: consider the same example, with a GDP of 100. The government cannot go beyond 3 in terms of budget deficit, but if they can deliver a 7% growth, their future deficit limit is 3,21 while it can be only 3,15 in a 5% growth setting.

Compounded gains from higher growth go as high as 20Bn by 2016

By my account, PJD has pledged some 70Bn annual additional spending, and they need to be financed up to 50Bn in additional taxes. Now, the only way to make the tax increase look small is to get a high growth; these are initial figures; when matched with growth rates, their weight decreases relative to total wealth when growth goes higher: 50Bn represents 7% of 700Bn (about the size of GNI in 2010) but only 6.3% of the economy grows at 5%, then 7%. By contrast, if the economy growth 5% in the next two years, tax burden is 6.5%. 14Bn makes all the difference – that’s an annual MAD 2300 per household. Suppose that the government wants to keep the same level of fiscal pressure (about 23.6% of GDP) a reasonable assumption, given PJD’s pledge for a 3% GDP deficit limit, then how can they have to assume a higher GDP growth to anticipate higher receipts.

And so, by spinning their way on that 7% pledge, PJD admits implicitly it will fail to reach their spending commitments. Farewell programs to reduce unemployment by two basis points (200,000 individuals) or doubling public investment.

In a sense, the pre-Constitutional Referendum discourse was right: political parties are not fit to run the country, let alone its economy. But what is more worrying is that no one, so far, has proven to be fit to run the country: PJD opposition-turned government coalition maker has conceded much of the economic policy-making apparatus, and got mixed up in its electoral promises, their junior partners have been part of almost all coalitions for more than a decade, and even at the highest level, mismanagement has led to unsound policies (labelled “Grand Designs“) that impoverished middle classes have to endure, those very middle classes that constitute the bedrock of any liberal society.

Who is in command? Is there a plan? And if indeed there is, is the body of evidence robust enough to show it benefits the many, not the few?

The Case For Progressive Deficit Reduction

Posted in Dismal Economics, Moroccan Politics & Economics, Morocco, Read & Heard by Zouhair ABH on November 14, 2011

To put the question simply: “are deficit hawks bad for Morocco?” Obviously, we are heading towards fiscal consolidation, and whatever government formed after elections will have to ditch part (or all) of its electoral manifesto. In normal times, and that applies fully to Moroccan politics, a government does not carry out its electoral promises. But it is now more obvious that spending commitment will be cut, that even existing spending will be cut as well; furthermore, we can trust the next Finance Minister and their team will trigger social resentment with their target spending freeze.

Still and all, being a deficit hawk -a structural deficit hawk- could well be the most progressive stance one might take when it comes to the current state of public finances, the proposed remedy to make their way out of it, and more generally in the whole fiscal and budget policy a government can have. This brings about the question of the government’s own policy: do they have models and procedures to estimate precisely how much they can borrow? Let me ask rephrase the question: does the Finance ministry have an econometrics model as a benchmark for its policy? If so, why isn’t it made public? Surely the model is of no national security interest, and it would actually help the public debate if ministry officials were to release it into the public domain. Perhaps the next government will be kind enough to be more open about it…

Budget Bill 2012 - remember, you have read about it here first

The 2012 budget bill provides for a 61Bn borrowing to pay for expenditure -and narrow the deficit gap a bit. In terms of central budget it represents 20% of all receipts (excluding SEGMA autonomous departments) and 18% ex-SEGMA expenditure. So far, official reports have been confident in the budget and its sustainability, because (at least on paper) ordinary receipts still match equivalent expenditure: levied taxes still can cover pay-wage, stationery requisitions and investments; the orthodox balance is thus still observed: 170Bn in tax receipts vs 172Bn current expenditure. But then again, the balance is observed on paper; because there is already a 2Bn ordinary deficit, and the negligible amount of any possible primary surplus seriously impairs public finances sustainability. It is a bit worrying to notice that the 2012 Budget bill relies on dividends, rent and miscellaneous receipts to inflate artificially the primary deficit to 17Bn.

But a good point can be made about these figures: the government has engaged in what it has considered to be vital to the national interest (and I am not making this up, you will find below a reference to this flimsy argument) to subsidize goods and hire unemployed graduates to keep things stable. The 2012 deficit can easily be dealt with once growth picks up pace beyond the 4.5%-5% GDP forecast. In effect, the government made provisions for extra expenditure – as reported in BO n°5978 page.2122 (p.52 on pdf) such:

Vu l’Article 14 du décret n°2-98-401 […] relatif à l’élaboration et à l’exécution des lois de finances;

     Considérant la nécessité impérieuse d’intérêt national,

     Sur proposition du ministre de l’Economie et des Finances

[…] Décrète: […]

Article Premier – Des crédits supplémentaires d’un montant de 18 Milliards […] sont ouverts au titre des dépenses de fonctionnement du budget général de l’année budgétaire 2011.

“Imperious necessity of National Interest nature”: the money needed to subsidize further strategic goods was considered then a national security issue, supposedly. The decree also shows how much power the Moroccan executive wields, and how much money it can levy whenever it suits them. But the truth is, the public finances have been endangered with no serious case that the levied 18Bn were indeed required, and whether swiftly reforming the compensation fund wasn’t a considered move. The decree, it seems, embodies the utter failure of any political power in Morocco to take reasoned decisions, and betrays a lack of hindsight on behalf of the ruling class. The technocrats, the Grandes Ecoles graduates, the well-educated bunch took fright from stepping up and ultimately got it wrong.

There is another reason piling on debt or deficit is endangering Morocco’s future; by HCP own projections’ account, there are 10.6Mln young Moroccans aged less than 17. This generation makes up for 33% of total population, and they are in the process of being loaded with a mortgage even before they get out of school and go into active life. The national public debt should now stand at around 416Bn, that means MAD 13,000 per Moroccan inhabitant. But to the younger generation, the burden is heavier: MAD 17,000 per young Moroccan, almost 40% in excess of the debt per capita among the 30-60 age bandwidth; And a substantial amount of this debt (90%) is domestic; paradoxically, a domestic debt is more dangerous to the future generations: while foreign-held debt is more related to sovereign risk, domestic debt impairs future performances and growth perspective; a high public debt could well trigger a rise in interest rates, and new entrants on labour market will have to cope with it.

In that respect, the next government will have not only to cut the deficit and halve the debt. It means reducing discretionary and unnecessary spending, and above all, a deep and far-reaching structural reforms in fiscal policy. The difference between a liberal deficit-hawk and a conservative one is how they will deal with fiscal policy; It did show that Minister Mezouar and Head of Government El Fassi were very modest when they set on creating a modest 2Bn “solidarity fund” in the scrapped version of the bill. Incidentally, 2Bn is more or less the amount of unexpected expenses, or tax receipts in cars. The Finance minister assured the public on numerous occasions that he had secured the funding, another argument that strengthens the point made: conservatives will not raise taxes and reform tax regulations.

The income effective national tax rate is less than 4%; when compared to the tax brackets (from 10% to 38%) one can easily notice how many loopholes have been set up for taxpayers to deduct or escape taxation, and there is nothing wrong with it. But the trouble is, these loopholes are not evenly distributed; in fact, they are hardly there for any social equality purposes, and their distribution is anything but fair; The ab absurdo argument can be made that even a fiscally conservative policy of uniform effective income tax rate can out-take the present performance. A uniform 6% EIT (Effective Income Tax) can yield 45.6Bn instead of the existing 28.5Bn. For sure, the top 10% still gets away with less taxes relative to their income, but at least everyone will be on equal footing with the uniform 6% income tax.

Agriculture has benefited long enough from a generous fiscal amnesty; the Budget bill allows the minister to revoke the amnesty well before December 2013 and institute a flat tax on large farms. These are less subject to fluctuations, and they are already subsidized for their export-oriented goods. In effect, there are some 107Bn no tax is imposed on, and whatever effective receipts are more than welcomed.

The narrative in the next months is going to be about excessive expenditure in the Moroccan government. It would be wrong for anyone to buy into it just because it is half-true. It is wrong because on the other side of the balance sheet, there are only too much loopholes and exemptions around for the government to close and end; the deficit is a problem, but cutting expenditure alone is not going to solve it.

Fiscal Policy? What Fiscal Policy?

Posted in Dismal Economics, Moroccan Politics & Economics, Morocco, Tiny bit of Politics by Zouhair ABH on July 3, 2011

Sometimes, reading the budget from top to bottom does not tell much about the policy the government of the day is set on pursuing. So other documents come in handy, like the fiscal expenses report attached to the budget law; It shows how articulate government policy is in its effort to stir the economic variables deemed to be important in a certain direction, so as to achieve a certain policy objective. It might be interesting to have a look to these figures, because it is a cause of concern for me: it seems the Finance Ministry cannot make up their mind on the proper policies, especially on fiscal policies, and end up every year squeezing its receipts, and not in a good way.

Caring Government.

Assuming that the broad ideological objective is to relieve Moroccan taxpayers (households and businesses alike) from the burden of excessive taxation, and that such policy is bound to increase welfare among the communities and the economy as whole, the least Finance Minister Salahedine Mezouar and his staff can do is to make sure there would be some sort of equitable effect across classes and sources of revenues. Though the supply-side economics can be beneficial -up to a point- these policies have unfortunately been damaging, rather than healing income dispersion and discrepancies. It seems budget policy -at least since 2003- is to hope for high growth figures, so as to reduce income inequality. The 2007 tax cuts are an even more obvious faith in an economic growth robust and long enough so as to reduce poverty and income dispersion, indeed, HCP study “La croissance est-elle pro-pauvres au Maroc ?” (2009) reports:

“Il en résulte un indice de croissance pro-pauvres inférieur à l’unité (0,930) et un taux de croissance d’équivalent pauvreté de 44,7% inférieur, de son côté, au taux de croissance observé (48,0%). Rappelons que lorsque l’indice de croissance pro-pauvres est compris entre 0 et 1, les riches bénéficient plus que proportionnellement de la croissance que les pauvres. C’est exactement ce qui s’est passé entre 1985 et 2007″. (p.2)

Suffice to say that what holds for extreme levels of poverty is particularly true when it comes to the difficulty, for the real middle class in Morocco (and the lower, working classes too) to benefit this growth. That supply-side economics of his makes the 2002 and 2007 governments more pro-Business than ever, but with no obvious positive effects on the vast majority of ordinary Moroccans.

The 2011 Budget bill has passed a deficit of MAD 12.13 Bn, a rather modest figure when compared to earlier deficits (but already topped by the unexpected increases in expenses, mainly on subsidies and wages) though it hides some policy decisions that do not seem to be very sound, or if they were, are quite ideological and socially very divisive. Among others, there were MAD 4.2 Bn income tax cuts in 2010 (and an effective MAD 7.6 Bn) only half of which benefited to middle and lower-class households; These cuts are not economically beneficial to the majority, especially when those economic sectors that benefit from these tax cuts (whether on income tax or others) are not productive: over the last couple of years, certain fiscal measures have been taken to boost real estate in Morocco. In 2010, real estate tax deduction amounted to MAD 4.438 Bn that is 15% of all the MAD 29.8 Bn tax cuts plan in 2010 (scheduled for the 2011 Budget) The 39 measures that enabled these cuts benefited only up to MAD 1.3 Bn in social housing (while other cuts benefit to the well-off) while the rest goes in the pockets of property and real estate developers, large housing owners and corporations. The problem does not reside in these categories benefiting from these tax cuts, the real problem is the hypocrisy surrounding the social housing project. This is but one instance of the amateurish at best -if not outright carelessness on the government’s behalf- in assessing the effects of implemented policies.

Jobs for the boys. An annual MAD 10Bn goes into rich pockets

On average from 2003 to 2011, tax cuts and loopholes amounted to MAD 21.75 Bn; Real Estate and Agriculture get an average share of 30% of these measures, while education gets at most MAD 100 Million while the financial sector receives on average a Billion a year. The trend of this concentrated distribution increases markedly with 2007.

As for Agriculture, it is understood the sector employs a large workforce -thus requiring a particular social policy designed to insure the balances in this potentially volatile part of Morocco are left untouched (a left-wing government would try to improve them in favour of the peasants against the cambradores) governments since 2006 have been cutting taxes on agriculture at increasingly higher paces, from a MAD 1Bn exemption in 2003 to MAD 4 Bn.

But then again, doesn’t this square with the idea that government taxation should not fall on this fragile sector? Of course it does, unless these measures were actually helping the affluent farmers, those who can afford dozens of thousands acres of land, mechanized techniques and large markets, both abroad and domestically. As for the small peasant with a few dozens of acres, these tax breaks mean nothing. On the other hand, tax breaks can also be applied, so as to improve the domestic purchasing power (at least, that’s the official argument behind these cuts) it seems that the Finance Ministry has fully assimilated the supply-side economics, since their tax policy also believes in a trickle-down economy, whereby a decrease in costs (and in this particular case, VAT taxes) can generate a lower price for consumers. While this argument might hold -when buttressed with some serious econometric computations, we in Morocco do not observe this, and the starkest example is that of subsidies: indeed, edible oil, sugar, milk and other strategic commodities are subsidised, and yet manufacturing companies are recording high levels of profit, and prices are not always low.

Consider the 32 measures targeting Agriculture and Fishery sectors:

Exonération à l’intérieur et à l’importation d’engins et filets de pêche destinés aux professionnels de la pêche maritime. Art.92 (I-3°);123

Exonération à l’intérieur et à l’importation des engrais. Art.92 (I-4°);123

Exonération à l’intérieur et à l’importation de matériels destinés à usage exclusivement agricole. Art.92(I- 5°);123

Exonération des ventes aux compagnies de navigation, aux pêcheurs professionnels et aux armateurs de la pêche de produits destinés à être incorporés dans les bâtiments de mer. Art.92(I-34°)

Application du taux réduit de 7% avec droit à déduction sur les aliments destinés à l’alimentation du bétail et des animaux de basse-cour. Art.99(1°); 121

Exonération à l’importation des bateaux de tout tonnage servant à la pêche maritime, les engins et filets de pêche, les rogues de morues et appâts destinés aux bateaux pêcheurs ainsi que les appareils aéronautiques destinés aux armateurs et aux professionnels de la pêche en haute mer et utilisés exclusivement pour le repérage des bancs de poissons. Art.123(9°)

Exonération à l’importation des Animaux vivants de race pure des espèces équidés, bovine et ovine ainsi que les caprins, les camélidés, les autruches et les oeufs à couver des autruches. Art.123(12°)

And the list goes on. It seems these tax breaks are very much subsidizing imports of specific items the vast majority of farmers and fishermen cannot afford. Of course, there are some commendable measures to be recorded, like those:

Exonération de la vente des dattes conditionnées produites au Maroc ainsi que les raisins secs et les figues sèches. Art.91(I-A-4°)

Exonération de l’huile d’olive et des sousproduits de la trituration des olives fabriqués par des unités artisanales. Art.91(I-A-7°)

Application du taux de 14% sur le beurre à l’exclusion du beurre de fabrication artisanale. Art.99(3-a°);121

But that’s about it. And these amount to very little in terms of fiscal expenses, compared to the potential gains when imports taxes are applied to the item delineated above. The same can be said of the fiat exemption until 2014 of the whole Agricultural output from any taxation; such a measure, while seemingly populist and caring, benefits mainly to the wealthy farmers, and adds up to the double-exemption this population benefits from: tax exemption when importing these items the Budget bill considers vital for farming, tax exemption on exports -their main market- and finally, tax exemption on income they derive from these businesses.

Bumpy road ahead: Morocco's CDS is taking up a few dozen bps

The list of strange and unjust exemption is long; suffice to say that this unsound fiscal policy, added to the debt the Moroccan government is taking on to defuse social discontentment, do not allow for optimistic outlook. On financial markets, the Kingdom’s CDS Debt -a good measurement has climbed some 50 basis points up since the beginning of 2011, and is now at the same level it was during the 2009, while it almost doubled over one year. It is also worth mentioning that the fundamentals of Moroccan debt are not the ones to worry about, nor the current level of CDS (compared to other countries like Greece or Ireland) but rather the discrepancies between terms: while all maturities move across time in the same direction, the shorter maturities seem to be more sensitive than the longer ones. It does vindicate the idea that somehow, fiscal and debt policies do not seem to be motivated by any kind of long-term strategy, but the one to prevail, even at the price of abysmal budgeting and subsequent austerity plans.

Best of luck to the next Finance Minister. Oualalou’s and Mezouar’s respective legacies are a tribute to a pro-wealthy policies… and to the present potential mess lurking in the shadows and ready to burst off. Great show Ministers, you have done very well.

The Radical Manifesto

Posted in The Open Society Project, Tiny bit of Politics by Zouhair ABH on March 22, 2011

Political organizations (political parties, trade-unions and the monarchy alike) have focused too long on political symbolism rather than policy agenda. This is partly true because the political institutions in Morocco have not got past the ambiguous distribution of powers, or the perpetual re-assuring rituals that confirm the supremacy of one institution over the others. Very few put together ideas of actually improving public welfare. And if they did so, it has been done so a long time ago, and these policies need to be either profoundly reviewed, or simply cast aside.

I. Political distribution of power: We cannot go on like this. It is a blatant contradiction with basic democratic proceedings to have a monarchy that concentrates all kinds of legitimacy. As it is, hegemonic political power stifles dissent not by repression, but by denying any conceivable mechanism that would allow this opposition to accede to power. As Mohamed Sassi put it most elegantly, the only viable compromise between a hereditary monarchy and a real democracy is a parliamentary kingdom.

I understand there are (few, but they exist nonetheless) Moroccans that would prefer a Republican instead of Monarchical regime. Such political opinion in a genuine democracy not only has to be respected (and as such, any piece of legislation that outlaws it should be aborted) but constitutional proceedings have to recognize it as a potential outcome.

There was an earlier discussion on why I would oppose the scheduled new constitution. The primary criticism, i.e. the appointment process, can be addressed by introducing a constitutional protocol that describes precisely why and how major constitutional amendment can be set. Obviously, the ultimate source of legitimacy resides within the people of Morocco (as Article 2 of the present constitution theoretically recognizes) and they should be the ones asked to put forward their representatives to meet, debate and then –only then- agree on the ‘national consensus’ that would be the underlying spirit of any major constitutional amendment.

We need to accept that idea of a Constitutional Convention is not a Pandora box. Under conditions of diversity, convention representatives are all set on an equal footing: political parties, unions, human rights charities, civil society, representatives of civil service (including the military and security apparatus), Islamic scholars, intellectuals and academics. There is no need to be coy, or cautious, or even sceptic on the outcome of such a motley convention: “Loin de m’appauvrir ta différence m’enrichit” as St Exupéry once stated. The process of constitutional reform or change does need a national census, to be sure, but a consensus that is freely discussed and in perpetually put to the question in a never-ending debate. If anything, the worn-out view that we should stick to the ‘consensus’ (broadly speaking, an imposed taboo on he Sahara, Religion and the Monarchy) is the main roadblock to the kind of change Feb20th or anyone angling for a new start are calling for. Dissent does not destroy democracy, and it strengthens it further if present opposition has a potential to become future government.

II. The Social project: the Open Society; Living in a strict Islamic society is a nightmare for non-Muslims. Living in an open society is merely an annoyance for the true believer. Political diversity calls necessarily for social diversity too. The Umma myth has long since crumbled (with the Pan-Arabism Nasserism, as well as the Islamic Internationale. The Moroccan nations (the plural is not a typo, believe me) do have a strong Islamic identity, but this has turned more into a set of rituals (that merged Islamic beliefs and ancient pageantry the Arab conquerors failed to weed out and had to live with).

Harry Popper and The Open Society

Image by bowbrick via Flickr

The open society is indeed a complex thing to define. It is however easier to define what it can avert: it prevents difference to be interpreted as dissent. It allows understanding in order to avoid fear. It prevents the “One Nation” rhetoric from turning into a moral dictatorship. Even though the professed collective set of values or norms does not allow for, shall we say un-Islamic behaviour, diversity (the very essence of an open society) does not allow for individuals, or any institution to stifle other individuals (or other institutions) that do not fall into that collective value/norm.

Individual and Collective freedoms are paramount to whatever majority belief, especially to that fallacious argument of Social Cohesion. Perceived deviant behaviour cannot be eternally repressed: prostitution, drug consumption, alcohol consumption and homosexuality are as ancient deviant practises as more approved patterns of behaviours. State apparatus is much more efficient when it is not tasked with morality enforcing (like Death Penalty). The Radical side needs its ‘Great Society’ project: “The Great Society rests on abundance and liberty for all” bit. On social issues, that means a breakaway from tribal solidarity and submission to the common norms, the emancipation of individuals from the very fetters that stifle their humanity.

III. Economic renewal: Economists in Morocco (those with serious understanding of economics, that is) do their best to disabuse the public: Morocco has slipped into a rent-seeking economy. Its structure does not seek change and renewal. From top to bottom, the trend is in favour of ‘safe endowment’: public service for the unemployed, private monopolies and unproductive investment for the well-off. Numbers are not in favour of Moroccan economics: though we are sustaining good levels of economic growth, benefits of expansion are still concentrated among a core of few privileged (some 10% most affluent that capture 40% of Morocco’s disposable income)

Scheduled state intervention may not be construed as symptomatic illustration of ‘Tax and Spend’ stereotype. It can be easily proved that public finances are under funded (meaning, that new sources of receipts have not been considered yet). Consumption taxes, food and commodity subsidies and Income taxes are not commensurably shared by the community, and as such, profit largely to the more affluent. For all the changes and reforms that need to be introduced, as well as the forward-looking investments that are needed to push our potential further, state finances (expenses and receipts alike) are to be radically altered: out of MAD 219 Billion, only 12.5% is devoted to Public investment, and double this amount (24,8%) goes to pay wages. In addition, real executive power bypasses ministries and departments, which creates an addition burden on the taxpayer. And yet, there is a need to double the budget for reforms and projects public authorities need to undertake: there is a need for funding downsizing and improving the civil service recruitment, provision for legislation and coercive actions against private monopolies (the proposal of temporary nationalization of SNI-ONA and its subsidiaries for instance) and the implementation of social investments such as the introduction of the universal benefits program.

These expenses are necessary to improve our exports (which destroy value rather than create it) and our terms of trade. We also need these undertakings to catch up a long-lost 1 point GDP growth over the last 20 years (which would have placed our GDP per Capita on par with that of Tunisia’s) And finally, these investments are more than needed to expand our GDP potential and move from a catching-up process to a productive and innovative venture.

[More to come on that open society bit. The idea of a Moroccan diverse society and consciously admitting so might bring some benefits]