The success of the people power movements in Egypt and Tunisia has been infectious. Large-scale protests have broken out in Algeria, Bahrain, Iran, and Morocco.
Libya was one place I did not expect to see major protests. After all, it is an “oil-rich” country, with GDP per capita income tracking at around $15,000. In case you’re wondering, that’s twice the income per head of Tunisia and three times that of Egypt. Libya also has a nasty and delusional dictator who could be expected to use extreme violence to keep power. So I didn’t expect any revolution there.
But a revolution is taking place as we speak. People have risen in revolt across the country. Protesters seem to have liberated the eastern half of the country, while Tripoli – the capital (on the Western border) – is in a state of military siege. Gaddafi was as ruthless as I would have expected, and sadly, quite clever – knowing Libyan soldiers might not shoot their people, he brought in foreign mercenaries to do the dirty work.
So why did this happen? Why are people willing to risk life and limb in a supposedly rich country? I did some number crunching to see if I could get an answer. The chart below shows the relationship between per capita income (y-axis) and barrels of oil produced per person per year (x-axis) of major Middle Eastern oil-producing countries.
As you can see, the relationship is linear. Countries that produce more oil per person have higher per capita incomes. Libya fits the trend very well. And Libya actually fares better in the Human Development Index, ranking 53rd, compared to Saudi Arabia at 55.
So what, then? Qualitative factors seem more important here. Libya’s unemployment rate is astonishingly high. The government admitted it was 20% in 2009; other sources suggest it may be as high as 30%. Whichever one, it easily beats those of neighboring countries, including Egypt and Tunisia. What’s more, a huge chunk of the workforce is state-employed, and massive state layoffs have taken place in the last few years.
I suppose a lot of people in Libya are frustrated that they can’t get a job (or a good job) in a country that produces 86 barrels of oil per person per year. They’re probably also tired of their hyper-eccentric dictator, whose romanticized portraits dominate landscapes and interiors across the country (I’ve been watching Long Way Down, the documentary of Ewan MacGregor and Charley Boorman’s trans-African motorcycle journey. When they are in Libya, you see Gaddafi portraits everywhere. Humorous, but disturbing).
I expect Gaddafi to be gone soon. He is completely without allies now (sanctioned by the Arab League). Hopefully, he will go without too many more people having to die.
After that, it’s rebuilding time. The good news is Gaddafi’s regime has a secretive fund that may be worth as much as $70 billion. That’s serious money for a small country of 6 million people. Libya could become an extremely attractive market in short order.
Written by David Gates for Emerging Markets BlogFollow @davidegates