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Jefiey A.

Coupe

M . C o p i~a PhD. d & t e at Michigan State University'

khistory suggests that dictators come in h u ~ one whase personal


objectives oJen conjict with [economic]growthpromorionand another whose interesa
dictate a preucaption with economic dmlopment. f i e theory that determines which
kindof dictaiorship will prevail is missing. Absent this theory. the choice of a dictatorship
can be viewed as a risb investment; economic outcomes may be very good or very bad
but are slpeb uncertain
-Economist Robert J. B m (IW6)l

rTqhe experience of the U.S. Agency that is hdamentally unresponsive. This paper

1 for International Development


(USAID) in the Kingdom of
Morocco prompts three questions.
First, does USAID support for World Bank
structural adjustment, combined with program
argues that incongruitiesbetween USAID'S
liberalizationsupport,U.S. foreign policy and
uneven reform implementation by the
governments of King Hassan II underlie
Morocco's post-adjustment underperformance.
emphases on "open markets and om Not only is USAID'Sreform-implementation
societies" enable governmentsto o v e m e record mixed,but policies such as privatization
constraints to economic reform? Second, has disguise a fbndamental dilemma: how to
structural adjustment resolved M o m ' s debt privatize and rationalize the Moroccan
crises, liberalized a longstandingU.S. regional monarchy. Once posed, the question becomes
ally, and rid it of comption? Third, is open- less one of state versus market than of how to
marketloperrsociety policy a viable liberal organize industrial structure, political
blueprint or, conversely, a self-determinedand obligations in the polity, and associational ties
historical process of development and change? in ways that make the economy work towards
Much of what follows is a criticism of the societal objectives. Complicatingthe
excessive liberal hetoric of U.S. foreign policy privatization of the monarchy and the libelal
and the reality of a Moroccan political system path of development are the Royal Court's

'The author thanks anonymous reviewers as well as Louis 1. Cantoni and Jim Werner for suggested
corrections. Clark University professors George Billias, Theodore von Lane and Robert Hsu are also
thanked.
*Robert J. Barro, Getting it Right: Markets and Choices in a Free Society (MITPress, 1996). p. 3.

150
COUPE: COURTMG U.S.A.I.D. M K M G HASSAN'SMOROCCO
HIS MAJESTY:

strategiesfor keeping power during economic I969 and I980 (16-1 7 percent of GDP) and a
crisis and for making monarchical interests negative agricultural trade balance." After
coincide with unbalanced growth. 1973, nationalized foreign h s enjoyed
rationed state credit, leading nonetheless to an
MOROCCO'S ECONOMIC CRISIS uncontrolled expansion of state subsidiaries by
Beginning in 1978, Morocco began 92 percent between I973 and 1977,' and
working with the World Bank on debt negative net transfers fiom state companies to
reduction but with little initial success. the Treasury (-5.7 billion Dirham PHI).'
Morocco attempted two early stabilization While phosphate revenues permitted state
plans with the IMF, the first(1978-80) investment,they also h d e d sharp increases in
consistingof a cap on government civil service employment and consumer food-
expendituresand raised tariffprotection, subsidy programs.' Thus,total debt as a
followed by a second (1980-83) coupling percentage of GDP climbed from 20.24
devaluation with fiscal stimulus.' Both failed. percent in 1975 (7.36 billion DH) to 134.7
As in many countries, political pressures percentofGDP in 1985 (161.18 billion DH).'O
thwarted preemptive economic adjustment. State interventionsbecame as costly to
When the military conflict broke out in the maintain as King Hassan's political clienteles.
Western Sahara in 1975, world phosphate
prices were at m r d highs. The next year,
world phosphate prices fell and the Saharan
conflict cost $1 million a day (40-45 percent of 6World Bank, 1982,pp. 4-5.
the budget and a forgone 4Gpercent reduction 'To its final report, the Joahri Commission
appended a 1977 letter from then-Prime Minister
in state debt).' In bolstering political patronage, Ahmed Osman imploring his ministers to check the
King Hassan promoted an agrarian class that growth of new public enterprises. See Kingdom of
benefited h m irrigated agriculture and large- Morocco, Offce of the Prime Minister, "Rapport
dam construction.' However, this policy bias GCntral: Relation Etats - Entreprises Publiques."
led to the neglect of dryland agriculture, (Rabat, Morocco), December 1980,esp. Annex 11.
'Treasury payments to the enterprises ( I 1.3 billion
stagnation in manufacturing growth between DH) represented 10 percent of the budget deficit.
Berrada's list of 33 firms (Between 22 percent and
100 percent state-owned with assets of 1.611 billion
'The World Bank, "Kingdom of Morocco: DH) reveals that no dividends were paid by major
Combined Project Completion Report for Industrial companies and monopolies in the transport,
Trade and Policy Adjustment Loans I and 11," agricultural, energy and tourism sectors.
(Washington: IBRD, May 1988). Abdelkader Berrada, "Etat et Capital Privt au
'See Michael Brzoska, "Military Trade, Aid, and Maroc (1956-1980),"Ph.D. dissertation.
Developing-Country Debt," in G. Lamb and V . Mohammed V University (Rabat, Morocco),
Kallab eds. Militory Expenditure and Economic November I 9 9 I , p. 76.
Development, World Bank Discussion Papers 'The civil service grew to 500,000, dominated by
no. 185. Washington D.C. 1992,pp. 79-1I 1 ; Mark teachers (lO0,OOO) and securitylanny ranks
A. Tessler and John P. Entelis, "Kingdom of (200,OOO)-up from a mere 50.000 at Indepmdence
Morocco," in D. Long and B. Reich eds.. The in 1956. Food-subsidy costs rose from 760 million
Government and Politics ofthe Middle Eost and DH per year on average between I976 and 1980 to
North Afiica (Boulder: Westview Press, 1986), p. nearly double during the 1981-85period (2 percent
390. of GDP).
5 10
Rtmy Leveau, Le Fellah Maroccain: DPfinseur du Brendan Horton, Morocco: Analysis and Reform
Tr6ne (Paris: Presses de la Fondation Nationale des of Economic Policy (Washington: IBRD,1990). p.
Sciences Politiques, 1977). 118.

151
~

MIDDLEEASTPOLICY,VOL. V, VOL. 1, JANUARY


1997

As a regime employingeconomic policy Although the state w o k towardsa


for political purposes, the Moroccan state or modicum of economic development,
&en (treasuy)was the mter of distributive outcomes are inequitable. King
government failure, but it failed as Moroccans Hassan has named every holder of high
attempted to reclaim their economy and build economic positions since the mid- 1960s," such
up their infrastructure. The makhm is a that %y 1978,68 individuals or families
historical term that,in the minds of many controlled 55 percent of industrial capital, of
analysts, remains relevant in the present day. which one-thirdwas in the hands of only 10
Characterized by the "domination of a central gr0~ps.l'~'The drawback of these oligarchies,
governnient ruled only by its 'mison d'ifuf'and as Hutchcroft (1993) described the Philippines,
a passive and instrumental 'propertyless' is that "the state is more often plundered than
rnass,"'l historically the maklmm was headed plundem."ls In Momcco, 7,500 landowners
by a sultan who led Morocco as an extension owned the bulk of arable and irrigated land.
of his royal court The contemporary Between 300 and 2,000 families owned the
Momccanadministrationisalsoakintoa counhy, and the royal family held one-fifth of
private fiefdom with no separation ofpublic all Elites consumed 65 percent of
and private. In contrastto the weakly national income. On the downside, thousands
institutionalized (pa!rimonial) regimes of of Momcans leave clandestinely for Europe
Afiica, the Moroccan system of pa!mnage, each yeaq the 1980 illiteracy mte stood near 60
rent-seeking and conuption forms the basis for percent;and 80 percent of r u d households
political control; they are not endemic and generate no surplus income. The Moroccan
state-weakening,but planned and state state is security-strongyet policy-weak in
promoted." In other words, M o m ' s handling war and the rapid acquisition of
political institutionsm institutionally ~~ _ _ ~ ~ ~

wakened by the monarchy and security 13


apparatus in order to serve a private oligarchy RCmy Leveau writes, "No Moroccan entrepreneur
has been able to occupy an important place in the
of elite families. State intementions do not private sector without the personal consent of the
supplant the private interests of the state elite; sovereign." See Rtmy Leveau. Le Sabre et le
they promote them. Turban, (Paris: Francois Bourin. 1993), p. 72.
14
Zakya Daoud. "Privatisations B la marocaine,"
~ ~ ~~
Maghreb-Mashrek (April-June 1990) pp. 84-101.
15
See Paul Hutchcroft, "Selective Squander: The
11
See Simon SchwartPnan, "Backto Weber: Politics of Preferential Credit Allocation in the
Corporatism and Patrimonialism in the Seventies," Philippines," in S. Haggard, C. Lee and S. Mawfield
in J. Malloy ed.. Authoritarianism and Corporatism eds., The Politics of Finance in Developing
in Latin America (Pittsburgh: University of Countries (Ithaca: Comell University Press, 1993),
Pittsburgh Press, 1977), p. 98. See Abdelhaye pp. 165-198. In Morocco, this is a historic pattern.
Moudden, Malfhurian Development and Political The Royal Court (mechouar) stood separately from
Weakness of Morocco's Industrial Bourgeoisie, the khassa (elites) who served as the mechouar's
Ph.D. dissertation, University of Michigan, 1988. outward face and vice-versa See Abdellah Laraoui,
12
Waterbury states: "Only under some regimes arc Les origines sociales et culturelles du nationalisme
[elements of cormption] the ingredients of regime marocaine (Casablanca: Centre Culture1 Arabe,
survival and an essential source of its cohesion." 1993) pp. 71-125.
John Waterbury, "Endemic and Planned Cormption 16Estimatesof royal wealth are imprecise, yet 20
in a Monarchical Regime," in A. Heidenheimer, et percent is oAen cited. See Howard LaFranchi,
al. eds., Political Corruption: A Handbook (New "Europe Slow to Invest in North Africa," Christian
Brunswick: Transaction Publishers, 1989). p.355. Science Monitor (Jan.27.1993). pp. 10- I 1.

152
COUPE: HIS MAJESTY:U.S.A.I.D. M KING HASSAN'S MOROCCO
COURTING

industrial and agricultural state property." Only Hassan after the 1978-79Iranian revolution. At
in the depths of crisis did Morocco seek IMF that time, U.S. banks including David
assistance for a debt-reduction package of Rockefeller's Chase Manhattan and Walter
stabilizationand sectoral reform." Wriston's Citicorp were suffering h m
mounting losses in hand Latin America"
AID AND US.FOREIGN POLICY Reagan named former Chase Manhattan
In the 1980%the United States courted executive Joseph Vemer Reed to serve as the
King Hassan tI mainly for strategic reasons, US. ambassador to Morocco (1981-85), and
and development assistance soon followed. Walter B. Wriston, the chainnan of Citibank
Thrwgh the early 1990%US. economic (1 970-M), as chairman of his Economic Policy
assistance to Morocco exceeded military Advisory Board (1982-89)." In January 1984,
assistanceat around $100 million per annum, Citicorp and the Banque Nationale de Paris
with development assistance doubling from (BNP) chaired a steering committee
roughly $20 million per annum in the 1970sto representing 200 commercial banks (the
over $40 million in the 1980s." The Reagan London Club) which rescheduled $500 million
administration developed strong ties to King of Moroccan debtn
Defense and security relations became
17
intertwined with debt and debt reduction. The
The makhzen exhibited four traits: (a) "an
authority of superposition invoking the divine right
United States valued King Hassan's moderate
for the purpose of imposing relations of allegiance stance on the AJabIsraeli conflict. In 1983,
on territorial communities and independent religious M o m signed a military base-access (transit)
groups," (b) the conversion of allegiance to agreement mentioned favorably in State
submission as military and bureaucratic powers Department congressional presentations.
expand, (c) revenue-extraction and arbitration of
property right disputes, and (d) a state power which
Algeria's mediation in Iran, which led to the
"hindeds) [sic] an accumulation of wealth" with freeing of U.S.hostages, coupled with Libya's
which autonomous centers of power could threaten involvement in the bombing of a German
the "sovereign's eminent right" (Raqaba). See Alain discotheque, brought the United States to
Claisse, "Le Makhzen Aujourd'hui," Le Maroc reassess its relations with the regional alliances,
Actuel (Paris: CNRS, 1992), p. 286.
18
World Bank structural-adjustment policies split between the Moroccan-Libyan alliance
advocate a prior orthodox, macroeconomic
stabilization of current accounts and fiscal deficits
20
via devaluation, subsidy cuts and austerity budgets. King Hassan received Shah Reza Pahlavi in exile
After cuts in government consumption, structural and attacked the Islamic revolutionaries in Iran and
reforms follow, with emphases on export Moroccan sympathizers at home. See also Anthony
promotion, market forces, private-sector investment, Sarnpson, The Money Lenders: Bankers and a
and policies that reduce economic intervention by World of Turmoil (New York: Viking, 1981).
21
the state (privatization and liberalization). See Morocco's close relationship with Citicorp was
Nicolas van de Walk, "Review Essay: Adjustment akin to the personal relationship between the royal
Alternatives and Alternatives to Adjustment," holding company. Omnium Nord-Africain (ONA)
African Studies Review vol. 37. no. 3 (1994), pp. and PARIBAS (Banque de Paris et du Pays-Bas).
103- 179. The King's son-in-law. Fouad Filali, received his
19
Economic assistance levels fell from $103.3 training at Citicorp in New York before heading
million in 1990 to only $38.5 million in 1995, with ONA in the mid- 1980s.
projections of $27.8 million for both 1996 and "Africa Research Bulletin, Morocco: Debt
1997. See USAID, "USAIDhlorocco Country Rescheduling Talks (December 15, 1983-January
Program Strategy, 1995-2000," p. 35. 14, 1984), p. 71 13.

153
MIDDLEEASTPOLICY,
VOL. V, VOL. 1, JANUARY 1997

(Oujda Agreement, 1984-86) and the Algerian- Guaranty program underwrites private bank
Tunisian-Mauritanian alliance of 1983. loans for lowcost housing. A 1996 request for
Shortly before the April 1986 bombing of $1.29 million will support democracy-related
Tripoli, General Vernon Walters and CIA projects:' USAID aid levels were small in the
Director William Casey visited King Hassan early 1980s, ($159 million) relative to France
on the occasion of his birthday. Fearing ($584.4 million), Germany ($167.1 million),
reductions in U.S. military aid, King Hassan OPEC countries ($918.4; 197681) and the
broke with Qadha!i and opened public World Bank ($645.0 million, 1980-1982). By
discussions with Israel." This 1986 shift in the mid-l990s, USAID provided only 4 percent
regional alliances coincided with the of donor assistanceu
reopening of IMF standby facilities. The At the field level, USAID and the World
United States has since viewed King Hassan as Bank did not agree on many policy issues in
a spokesman for tolerant Islam, in contrast to M o m . The USAID mission in Rabat
the Islamic militancy in neighboring Algeria voiced doubts about the political feasibility of
Moreover, the United States values King an IMF plan to cut Morocco's outstanding debt
Hassan's role in mediating ArabIsaeli peace, in half over a tweyear period. In the early
despite Reagan's tepid responseto the 1982 198Os, USAID decided to "stay abreast of
Fez summit. The United States has backed a IBRD [World Bank]and IMF negotiations,and
planned U.N. referendum of selfdetermination ...where we believe it appropriate, we will
in the western Sahara and has recently worked independentlyassociate ourselves with such
with Germany on a negotiated settlement to the mmmendatjons."y USAID equally
War. acknowledged its limited influence on
Within the foreign-policy community, Moroccan policy:
USAID has a lower profile and mandate.
USAID'S development-assistanceprogram USAID is not and cannot be the leader in
comprises loans and p t s , with PM80 Title I addressingthese immediate.enormous
Food for Peace lending and Section 416 Food problems. It can encourage, stimulate,
for Progressadministered by the USDA since educate, cajole and assist the Government
to maintain its commitment to the reforms
1990. Morocco has used these programs to
designed to address them, and it can
h c e U.S. wheat imports (between $20 and
incl-ease specific efforts to help implement
$56 million, 1985-93), while USAID them. But unlike the Ih4F and the World
programmed local curretlcy eamed from these Bank, it cannot apply the leverage that
Title I sales for the agricultural investment accompanies the availability of large
budget. Title II programs that give financial TeSOUTceS.n
humanitarian relief through projects in m a t e d
and child health had been a minor but 24
important program mniponent in drought years Congressional Budget Presentation, I996
Morocco, p. 3 18.
(between $2.1 million and $18.1 million, 1985- 15
USAID, "USAIDhIorocco Country Program
1993). In addition, the Housing Insurance Stratem 1995-2000,"pp. 11-1 2.
1 6 USAID, "Country Development Strategy
Statement, FY 1985 Morocco," (January 1983),p.
2J
This was not the beginning of Israeli-Moroccan 16.
17
relations. King Hassan met with Yitzhak Rabin, USAID, "Country Development Strategy, FY
who came to Morocco incognito in the late 1970s. 1988,"p. 4.

154
HIS MAJESTY:U.S.A.I.D. M KINGHASSAN'S MOROCCO
COUPE: COURTING

In 1983,USAID officials saw "little organizations and local government. A


likelihood of the U.S. Government engaging cursory examination of these six aspects are
the key decision-makers(essentially the King illustrative of USAID's policy-support role.
and his immediate Palace entourage) in a
dialogue on major macmemnomic issues." Balance of Payments. During a non-
Consequently, they argued that "by judicious preemptive crisis stabilization,the U.S.
selection of a few topics, the carehl positioning government assisted Morocco in easing its
of our program elements,the sustained overall financial obligations. In 1983-84,the
cultivation of informal relationships, and first- Moroccan government required $700 million
rate analysis introduced with sufficient delicacy in concessional fmancing to meet obligations
and persuasiveness, it should be possible to after debt rescheduling.* The United States
influence the direction of various increased balance-of-payments support through
developments of a sectod nature."" programming, rescheduling bilateral aid and
Given these limitations, USAID focused consolidating Morocco's debt." In December
on policies designed to address long-term 1983,the United States rescheduled bilateral
development consbaints in the areasof debt in a global agreement covering all U.S.
dryland agriculture,healWpopulation, energy agencies. During a November 1983 donor
and private-sector development. USAID meeting to rally balanceof-payments support,
sought lower foodgtain deficits, lower USAID pledged an additional $32 million in
population growth rates, better basic health Housing Insurance Guaranties and PL-480
care,improved energy and conservation Title I supplemenMignificantly less than the
planning, in addition to export-led growth via extra pledges h m France ($175million), the
the private sector to "promote open markets World Bank ($150million) and Saudi Arabia
and open societies.'ln During the adjustment ($100 million)." As an active member in the
period, USAID's program aided economic donors' Consultative Group, the United States
reform in six areas: and other donors and international financial
(a) balance of payments, (b)technocratic organizations in 1985 agreed to provide $3
capacity building, (c) privatssector/export billion per annum during the 1985-87period, at
promotion, (d) divestiturefliberaliion, a time when Morocco could not pay back its
(e) administrativereorganization, and $13 billion debt--equivalentto its annual GDP.
(0restructuring social policy (safety net). Abdellatif Joahri, the finance minister,
These aspects of economic reform are equally
significant, in that they imply a fundamental
restructuring of the political regime toward a
30
more indirect and impartial system of Congressional Budget Presentation. Fiscal Year
economic governancewith greater 1985, p. 105.
31
As of September 1995.Morocco had received
participation by the private sector, societal $450 million in various loans, of which $447
million have been utilized, $229 million repaid, and
$199 million outstanding with interest collections of
$3 I9 million. See U.S.Department of State, "Status
28
USAID, "Country Development Strategy, FY of Loans by Country as of September 30, 1995," p.
1985 Morocco," p. 15. 542.
29 32
Congressional Budget Presentation: Fiscal Year See USAID, "Country Development Strategy
1987, p. 213. Annual Budget Submission, FY Statement, Morocco, Fiscal Year 1986"(January
1992, Morocco, p. 13 1. I984),p. 21.
MIDDLE
EASTPOLICY,VOL. V, VOL. 1, JANUARY
1997

requested this January meeting in the face of professionalsand for the organizations
default." representing small and medium enterprises.'

Capacity Building. The withdrawal of state PrivateSector/Export Promotion. The


interventionismdoes not mean fewer but, Afiica/Near East bureau's "open-rnarket-open-
paradoxically, more state institutions, society" policies facilitate state withdrawal and
informationand authorities for well-functioning the orderly bansition to private savings and
markets." Capacity-building is not simply a investment, notably in export sectors.
matter of increasing technical competence but Moreover, the United States promoted U.S.
of strengtheningthe institutions connecting business as Morocco liberalized its laws
government and societal organizations that governing foreign investment. USAID worked
improve information,accountabilityand to reduce international market-information
countervailing power." costs, to minimize export risk and uncertainty,
USAID interventions improved the to improve technical business training, and to
analytical power of linemanagement staff, and increase microenterprise credit access. The
AID-sponsored public forums bringing vehicles for reform were projects that provided
technocrats, academics,businessmen and mining, foreign-exchange facilities and export-
consultants together in public dialogue. insurance programs to private exporters."
Numerous AID projects pvided d k t USAID used developmentassistanceto
technical assistance to ministriesengaged in promote private horticultural exports, to train
economicr e f m . The agency financed the new businessmen and to spur the creation of
analyses of monetary markets, anti-trust laws microenterprisesand the encouragementof
and price deregulation for the Minisby of women entreprenem."
Finance and its Pricing Directorate. USAID
funded direct technical support to the Minishy Divestitudl.ibemlhation. Morocco
of Agriculture, which undertook a detailed conducted a ten-year debate on issues of
analysis of the cereals subsector arid its divestitwe. Slow deliberation has been due to
liberalization. Additional monies provided (1) the political resistance of public-sector
support for Morocco's emerging authority
governing export quality control, technical 36
training to fimye private and publiesector Among the projects are the Economic Policy
Analysis Support project (1985-92, $8.2 million).
the 1989 Price Deregulation program ($20 million),
the Planning, Economics and Statistics for
Agriculture ($12.3 million. 1983-93). the Cereals
33
Africa Research Bulletin, "Morocco: Meeting with Marketing Reform project and the Training for
Creditors," December IS, 1984 -January 14, 1985, Development project ($21.5 million). See
pi 7559. Congressional Presentation, Fiscal Year 1991.
37
On an explanation of this paradox of orthodoxy Congressional Budget Presentation, Fiscal Year
see Miles Kahler, "Orthodoxy and its Alternatives" 1986, p. 1 15.
38
in J. Nelson ed. Economic Crisis and Policy Choice These USAID projects include the Private Sector
(Princeton: Princeton University, 1990), pp. 33-61. and Export Promotion project ($36 million, 1986-
Karl Polanyi. The Great Transformation (Boston: 88), the Agribusiness Pornotion project (199 1-98,
Beacon Press, 1957). $18.3 million), the New Enterprise Development
35
See Peter Evans, Embedded Autonomy: States and project (1991-97, $14 million), and the Micro-
Industrial Transformation (Princeton: Princeton Enterprise Development project ( I 993-98, $ 14
University Press, 1995). million).

156
COUPE: COURTING
HIS MAJESTY:
U.S.A.I.D. IN KING HASSAN'S MOROCCO

managers, (2) the government's d e s k to attract USAID's 1988 feasibility study identified
quality investors, (3) the financial constraint of financial institutions that might support
cleaning up debts crossing state and private decentralization, notably various market
sectors,and (4) the financial-technical instruments (municipal bonds, etc.) and public
constraints in preparing f m s for sale. In 1985, incentives such as industrial mnes ($1 million,
Morocco sent the largest delegation to a 1990-93)." USAID followed with the Urban
USAID privatization seminar in Washington, Development Management and Finance
but only in 1988 did the Parliament pass a law Project ($5 million, 1986-89), designed to
slating 1 12 enterprises for sale. improve municipal finance and urban planning.
USAID'S Morocco Privatization Sector-
Assistance Project provided a $20-million cash Social Policies. Beginning in the early 1970s,
grant to be conditionally disbursed. This the population was falling through a d e t y net
assistance has fimded publioenterprise audits during the droughts of the decade and the land
of internationalstandards, privatization concentration in rural Morocco. Societal
m g i e s for individual f m s and an adviser to pressure on the state, however, was reduced by
the Minisby of Privatization. Given the outmigration to Europe and the expansion of
privatization program's goal to broaden the informal sector (estimated at 60 percent of
economic stakeholding through public share the economy). In the north, illicit smuggling
holding, concurrent reform of the financial and hashish traffickingothewise sustained the
market was initiated. USAID fhded a economy. During the contraction (1 978-89,
Financial Market Reform project, hiring a per capita incomes fell in real terms from about
financial consultant to advise the financial $63 1 (1981) to $5 15 (1985) as Momcw left the
sector and the Central Bank. The project ranks of middle-incomecountries."'
worked on the monetary market, the bond Consequently, there has been a reversal in
market, a market for mortgages, and the social mobility, which pushed a poor
Casablanca capital market. Consequently, population to the brink while some 100,OOO
USAID was instrumental in linking financial- Moroccans holding graduate degrees remain
market reform to divestiture policies. unemployed. Popular urban protests broke out
in 1981,1984 and 1990. Services deteriorated
Administrative Reorganization. In theory, with cuts in social spending.
the fiscal austerity inherent in World Bank USAID led initiatives to restructure the
stabilization policies puts p " s m on delivery of publicly provided social services
governments to decentralizeand to rely more whose budgets were cut in the adjustment
on local financing. At the extreme, fiscal process. USAID placed its emphasis on long-
federalism shifts most of the decisions term population planning and primary health
concerning the selection and provision of services,particularly for women and children.
publicly budgeted goods to local USAID also conducted feasibility studies for
communities. Since 1976, the Moroccan state privatizing health services. In the area of
has reversed state centralitation and promoted
locally elected bodies. Although USAMs 39
policies are mostly a response to urbanization, Congressional Budget Presentation, Fiscal Year
1990, p. 179.
emphases on the local provision of goods and 40
USAID. "Country Development Strategy
services are connected to the austerity budgets. Statement, Fiscal Year 1988." p. I .

157
MIDDLEEASTPOLICY,VOL.V, VOL.1, JANUARY 1997

housing, the United States used the Housing analyses of pricing and cereals markets were
Investment Guaranty Program to improve the used to make policy decisions.
shantytowns of Tetouan and Ben M'Sik In the larger macroeconomic scheme, the
(Casablanca) through the private construction U.S. government and various donors aided
of affordable housing. These policies, in M o m ' s orthodox stabilktion efforts in the
addition to others promoting microenterprise, depths of economiccontraction. Since 1986,
dryland agriculture,and economic stake the macmresults have been impressive, if
holding, direct resourcesto those not served by qualified. Export values doubled h m $2.17
state policy." billion in 1984 to $5.01 billion in 1994, yet they
have not kept pace with imports($3.91 billion
REALITYCHECKSANDTHEWAR to $7.18 billion for 1984-94 period).
USAID and the World Bank applauded Investment as a percentage of GDP has
Morocco's record on adjustmentcum- avetaged 22-23 percent. This rate is lower than
liberalizationr e f m s in the early 1990s. the 30 percent neceSSary to drive high
However, their own closer examinations economic growth. Current-accountdeficits
revealed mixed policy results: insufficient were reducedh m -$1.69 billion in special
levels of economicgrowth, investment and drawing righb (SDRs) in 1982 to -$382
institutionalRfom thatwere undercut by million SDRs in 1993. Much ofthis
inequity and population increase. improvement,however, was due to
Both USAID and the World Bank claim remittances sent home by Moroccan workers
achievements in policy-based lending by living a b d ($2.3 billion in 1993) -an
working collaborativelywith the Moroccan amount that offset the bade deficit. Total
government. USAID witnessed &t external debt mains high at 260.4 percent of
mortality drop from 120 deaths per thousand in GDP, but has been reduced fiom its 1985 high
1983 to 71 deaths per thousand in 1988. of 389.1 percent. Gross Domestic Product per
immunization coverage for children under five capita stagnated h m $974 in 1980 to slightly
was extended from 50 percent to 87 percent. above the decade debut at $1,060 in 1990. The
Contraception was practiced by 36 percent of unemployment rate stood unabated at 16
women of childbearingage in 1988, up from percent in 1992 for the general population and
19 percent in 1983. Energy conservation 30 pemnt for young adults." Manufkturhg,
efforts by USAID saved approximately $10 once comprising 16 percent of GDP, now
million annually (1987-89), and USAID accounts for 18 percent. However these
finand efforts to develop a cost-effective changes are due partially to shifts in global
energy model for the Minishy of Energy and textile regimesthat hvor North f i c a n over
Mines." Private busies accessed export East Asian impom independent of economic
markets and potential partners overseas. And refonn in Morocco. More problematic,
~~ ~~~
reductions in government consumption came at
41
The USAID projects include the Population and
Family Planning Support projects (1-111) (1 970-91,
43
S38.5 million), the Population and Child Survival International Monetary Fund, International
project (IV) (1989-96, $21.3 million), and the Financial Statistics Yearbook 1995; I.M.F.,
Family Planninghfatcrnal Child Health project (V) Resilience and Growth through Structural
(1993-99, $8 million). Adjustmenl: The Moroccan Experience
42
USAID, "Action Plan: 1991,* p. 2 I . (Washington: IMF. 1995), pp. 4, 5, 19.

158
COUPE: COURTING U.S.A.I.D. IN KrNG HASSAN'S MOROCCO
HIS MAJESTY:

the expense of state investment,education and liberalization. One group of economists ranks
social programs." M o m 121 in the world in terms of
What appears is a mixed economic economic freedom, behind Senegal, which
result-low economic growth undercut by experienced adjustment-implementation
inequity and population inc-with problems." Morocco's lack of open markets is
performance driven by both exogenous and seconded by the lack of an open society,
endogenous factors. The major exogenous running m t e r to USAID'Shopeful policy
boost for adjustment resulted from Morocco's statements. USAID might be criticized for its
participation in the U.N. alliance during the short project-time horizons and ideological
Gulf War.AAer the war,Saudi Arabia program shifts (from a priority on privatization
canceled $2.7 billion of Moroxan debt. In to health and population). One can also cite
1992, the Paris Club of public creditors agency ineffectivenessdue to congressional
generously rescheduled loan repayments on oversight (i.e.buy-American laws, bans on
$1 1.5 billion of debt. This prompted Piem USAID'Sworking with Morocco'scitrus
btellier, the regional IMF director, to declare sector, and new congressional plans to cut
an "end of adjustment." The United States population programs). But USAID'Spolicy
granted waivers of $1%.4 million through its shortfalls in opening markets and societies via
Foreign Military Financing Program over a the institutional changes discussed above are
fiveyear period ( 1989- 1993):' T h e due to the monarchy's selective
by the international financiers and Western implementation of market reforms as well as to
countries not only eased debt service, but put the multiple goals of U.S. foreign policy.
Morocco in a position to attract foreign These both tend to promote security and
investment.' These were not policy-induced foreign investment (a truncated liberalism)
gains, but rather politically fabricated ones that before liberal i n ~ t i t ~ treform.
i~~l
were far from the policy trenches of USAID Beginning with the political side of the
institutional reform. equation, the terms "civil society" or "open
society" raise suspicions when attached to
LIBERALIZATION: A CLEAR PATH? development programs or governments' own
USAID has not been as successhl in its programs for promoting their liberal images
programs supportingMorocco's economic abroad. If civil society refers to the
associational life situated between the family
4b
and the state," monmhies encounterhvo
In 1989, USAID commented on strained IMF- definitional problems with this post-
Morocco relations as IMF conditionality specified a
budget deficit of only 4.5 percent of GDP, in part to Enlightenment construct. The obvious
boost public investment from 3. I percent in 1989 to
3.7 percent in 1993.
45 bl
Department of Defense, "Foreign Military Sales, See "Economic Freedom: Of Liberty and
Foreign Military Construction Sales and Military Prosperity," The Economist vol. 338, no. 7948
Assistance Facts as of September 30, 1994," (January 13, 1996), 21-23.
b8
{Washington D.C.), pp. 32-33. For in-depth discussions of civil society, scc
%et foreign assets climbed from 453 million DH Michael Bratton, "Beyond the State: Civil Society
at the end of 1989 to some 14,836 million DH at the and Associational Life in Africa," World Politics
end of 1990 and total international liquidity rose 41, no. 3 (April 1989) 407-430; Adam Seligman,
from S488 million to $2,066 million in the same The ldea o/Civil Socjep (New York: The Free
period! Press, 1992).

159
MIDDLEEASTPOLICY,VOL. V, VOL. 1, JANUARY 1997

quagmire is that the state itself is a royal h i l y militarization of society (195,oOO soldiers) and
that “Tamilializes” associational life. The a security apparatus that monitors the streets.
second complication is that the monarchy Since the beginning of structural
controls state clientelism (or patronclient ties), adjustment, the state has mainstreamed the
which extends beyond the level of the royal fringes of the political system,mainly by
family, yet does not constitute a “complete increasingthe human costs of not playing the
substitute for institutionalized politics.’%* game. In 1990, at the La Bade conference,
Jackson and Rosberg (1982)argue, these social King Hassanrefused Franqois Mitterrand’scall
institutions tend to last only as long as the for greater democracy in Africa. Despite
individuals themselves, but in Morocco they domestic and inkmatid p m s m to raze the
axc solidifiedby alliances of marriage. Thus Tarmarart prison, to tespecthuman rights and
King Hassan’s system of state clientelism is “a to call elections, the monarchy has m n d e d
structurebetween ‘civil society, and the very little power. In an effort to improve its
[Hobbesian]‘state of name’*’- anarchy.” image, the state created a Consultative Council
And it is the latter that Momcans most fear as on Human Rights (CCDH), but the body has
the succession to the h n e nears. not addressed issues raisedby Morocco’sthree
The relevant points for past and future human-rightsorganizations.” Rather than
USAtD programs are that (a) organized implement a new fiamework for “civil
society is deceptively pluralist with a limited society,’*King Hassan has given a greater
social base;(b) associational life has been voice and organization to a liberal wing of the
destroyed as much as it has been reworked state elite by sponsoringthe creation of
during crisis and limited reform; and (c) policy regional associationsheaded by them. This
coalitions are formed with great difficulty in modem-dayk h s u (elite) has historically
such a system. The destruction of civic life was sewed as the PalaCes liberal “outward face,”
most evident under the governments of Rime and they take their public role seriously. Yet
Minister Maati buabid and Interior Minister Morocco illusbates Peter Ekeh’s reminder to
Basri ( 1979-1983), which cracked down on all USAID that in pmrevolutionary France,“the
opposition forces, ranging from the Islamists, term civil society was another word for high
communists,students and opposition parties to society,...the ruling groups concerned with the
labor-union activists. In the World Bank’s intens&of king and country.l*’* These
efforts to reconstnrct it, they arguably advocate associations have yet to demonstrate any
more flexible labor laws when the current laws ~ ~~ ~

have never been respected. These laws are so 51


flexible Fez employersarbitrarily lock w d e r s Susan E. Waltz, Human Rights and Reform:
Changing the Face of North Afiican Politics
out, and the state itselfhas paid civil-service (Berkeley: University of California Press. 1995).
wages below the official minimum wage 2
Peter Ekeh. “Historical and Cross-Cultural
during the adjustment period. Formal Contexts of Civil Society in Africa,” in USAID,
associational life is overshadowed by the “Civil Society, Democracy and Development in
Africa,“ workshop proceedings. Washington D.C.
(June 9-10. 1994), pp. A21-A45, citing Reinhard
Bcndix, John Bendix and Norman Furniss,
49
Robert H. Jackson and Carl G. Rosberg,: Personal “Reflections on Modem Western States and Civil
Rule in Black Afiica (0erkeley University of Societies,” in R. Braugard ed.Research in Political
California Press, 1982). p. 40. Sociolog,y, vo1.3 (Greenwich Conn.: JAI Press,
50
Ibid., 40. 1987).

160
HIS MAJESTY:U.S.A.I.D. M KING HASSAN'S
COUPE: COURTNG MOROCCO

political weight, independence or consolidation mining/quany rights and keeps accounts out of
outside rerouted Palace patronage." While the Parliamentaryview. Without liberal
"enlightened"elite are promoted, the state has inspiration, the state decentralized Casablanca
condoned, if not fostered, violence between to prevent social mobilization after the 1981
Islamist and socialist students on university urban riots. Where the state has enacted legal
campuses (Fez, Oujda) in an attempt to defend changes in the 1990s that grant foreign and
a "moderate" middle ground. domestic companies accessto arbitration, these
In terms of constitutional and democratic reforms (much like USAID-supported legal
reform, rigged national elections took place in changes for small enterprises) stop short of
1994 without the formation of a coalition judicial overhaul. Businessmen have legal
government. King Hassan and the political privileges not availableto many Moroccans,
parties now await the planned bicameral yet the Palace elite enjoy W o m h r n
assembly scheduled for spring-1992 elections." prosecution for embedement" In the area of
But Moroccans are pessimistic that significant education, USAID supports assistance to
change will occur, given that the constitution private technical and vocational institutes for
does little but reinforcethe monarchys history business and administration. Yet these elite
of tinkering with the number of Parliamentary owned schools,which h i s h skills neceSSary
seats and rules for their contest without any for global economic competitiveness, show few
significant broadening of Parliamentary signs of critical discourse, Islamic education,
power." student political organization or the teaching of
There are implications that USAMs philosophy (which was banned in universities
liberalizationefforts are being overshadowed through the 1980s). The by-products of top
by the monarchy's choice of governance down restructuring may not be in keeping with
strategy and a general incapacity to m c h the the intemts of most Moroccans, particularly
poor. Where USAID assistance supports those hurt by ignorance, poverty, corruption
decentralization,the interior minister manages and repression.
the accounts of local collectives, enforces Although USAILys efforts have improved
collectively owned lands, monopolizes the delivery of social services, the cuts in the
health, education and investment budgets may
have detrimental effects on Morocco's long-
SI term development- Consequently, USAID'S
The presidents of these associations include Bou
Regreg (June, 1986) Mohammed Aouad, King
limited efforts have not resulted in significant
Hassan's counsel; Mohammed Ben Aissa, Morocco's extensions of social services to the urban and
ambassador to the United States; Grand Atlas
(Mmakesh), Mohamed Mediouri, King Hassan's
56
chamberlain; Angad al-Maghrib al-Sharqi, Ahmed Mohamed Mekouar, the former director of Royal
Osman, King Hassan's former brother-in-law, Air Maroc was not punished for embezzling some 1
Casablanca Carriire Centrale, Haj Belyout billion DH (approximately $ 1 1 1 million; S
Bouchentouf, Princess Asma's Father-in-Law. US=9DH), much as former Finance minister
54
See Dale F. Eickelman. "Reimagining Religion Rheghaye was not severely punished for sums taken
and Politics: Moroccan Elections in the 1990s." pp. from the public purse during his tenure in office
253-273;1. William Zartman, "The Challenge of during the 1970s. The Mekouar case is mentioned
Democratic Alternatives in the Maghrib," pp. 201- in BCatrice Hibou, "Les enjeux de I'ouverture au
2 18 in J. Ruedy ed., Islamism and Secularism in Maroc," unpublished working paper, no. IS (April
North Africa (New York: St. Martin's Press, 1994). 1996). Fondation nationale des sciences politiques
55
See Susan Waltz. op.cit. pp. 114-1 IS. (Paris, France).

161
MIDDLEEASTPOLICY,VOL.V, VOL.1, JANUARY 1997

rural poor. The expansion of Islamic groups the state seeks social partners to enact
such as Islah wal-Tajdid, which provide social institutional reform, the system of cooptation
services to the poor, attests to such that drives “divide and rule” cannot bring them
inadequacy. The largest social safety net, the into a collaborativefold.
family, is torn. In cities youth are pushed into State attempts to draw in unions,
subsistenceefforts that range fiom hawking organizations and political parties are met by
goods in the informal sector and working in divergent group opinions on issues of
textile sweatshopsto drug trafficking, collaboration with the government. The
prostitution, indentured domestic labor and results are often either internal factionalism or a
theft Consequently, calls for human dignity are split between organizational leaderships and
accompanied by perceptionsthat liberalization their rank and file. These dynamics are evident
and liberalism are devoid of moral purpose and in the September 1996breakup of the OADP
denigrate h e r than enhance the individual political party, in a 1995 railroad-workers’
and the community. European xenophobia and strike, and in intemal debates of party
northern immigration restrictions do little to congresses on whether to participate in
arrest these perceptions. The United Nations government alongside Interior Minister Driss
ranksMoroccoalowlllthinhuman l3asri. Changes are visible in a new generation
development, and this constnins the types of of elite, some from the Alawi clan, who are
export industries it can attract and create.n As competent and critical of the older school of
one Moroccan economist notes, markets fail cooptation and corruption.” Yet there is a
because illiterate Moroccanscannot address a widely shared perception that partial reforms
letter and complete a postal transaction without benefit capital more than labor, the uncritical
recourse to assistance. more than the critical, a wrrupt state class more
Finally, in regard to policy coalitions, than the progressive forces within it and
USAID’Sgovernance and market initiatives are foreigners more than Moroccans. This is a
complicated by the “divide and rule” tacticsof fhdamental problem.
the state. Although decision making is
characterized as collsetlsual in keeping with the NOT ENOUGH MARKET OR MARKET
idea of s h u ,many sdjustment policies were ORGANIZATION
formulated without input from constituents. In Tuming to the economic side of the
fact, these policies were first introduced during liberal equation, reform in a number of areas
a 1983 Parliamentary mess.” But now, just as suggests that the institutio~lpolitics of the
Momccan monarchy and its links to global
57
markets have altered neoliberal designs and
Liberation no. 19 12 (June 1994), p. I. othewise blocked libendimtion. Rather than
58
Berrada writes: “The State, failing to succeed in
negotiating a comprehensive social compromise
producing policy results anticipated by
able to create a climate of confidence favorable for USAID, regime politics have produced too
the recovery of business, limits itself to concluding little market, incoherent reform and a high
agreements with ‘active forces’ (of interest [zaouias] concentrationof economic assets. Moreover,
groups) often in disarray, in search of new
budgetary policy measures, qumls among clans
and conflicts of competence without end.” See
59
Abdelkader Berrada, “L’Etat et I’enjeu budgktairc See Prince Hisham Ben Abdallah el Alaoui, ”La
au maroc,” Annales Maroccaines d ‘Economie no. monarchie marocaine tentte par la rtformc.” Le
10 (1994). p. 37. Monde Diplomarique (September 1996). p. 6.

162
COUPE: COURTING HIS MAJESTY: U.S.A.I.D. IN W G HASSAN'S MOROCCO

the latedevelopment context has structured post- 1981 expansion may signal the beginning
Morocco's lmkages with Europe and has of economic separation between state and
influenced the manner by which markets are palace, and the shift to a regime interested in
being introduced. With the growth of corporate economic growth. However, ONA draws
Morocco and the U.S. interest in promoting controversy. For its critics, privatization
b-ade and foreign investment, bilateral donor amounts to nothing more than the
agencies understate the necessity of market "pesodimtion" of the public sector and
organization (not markets) and institutional monopolization of export oppottunities by the
variations of market capitalism in achieving royal family and its affiliated oligarchy to the
socially desirable outcomes. detriment of organized labor. At a minimum, it
As stated at the outset, privatization is the can be said that a system of personal rule does
crux of Morocco's economic bansformation, not produce formalllegal policies and
but neither USAID nor the World Bank talks transparent procedures for dividing public and
about it in these terms. A USAID policy private property in the interest of equity."' For
priority, privatization or, more specifically, example, ONA acquired f h s and merged
divestiture refers to the transfer of state assets with others such as the Centrale L a i t i k du
h m the public to the private sector. But, more Maroc (May 1982)and Onikral-Krystal(1992)
important, it is a sociopolitical process by through deals with the k i & d Nationale
which royal courts become separate private d'hvestissement (SNI). ONA faced few
entities divorced h m bureaucracy and obstacles in acquiring Mor~cco'slargest
parliament." These two processes of private bank, the Banque Commerciale du
privatization and their inherent conflicts Maroc (Bch4). And while the state liquidates
intersect at divestiture policy, where a slim line its hotels, ONA is building new reso& in
separates the property of the state, the royal partnership with a state company, the Caisse de
family and the sovereign. In lieu of elaborating Ep6t et de Gestionl"
on all aspectsof this tension, a cursory As for ONA's supporters, King Hassan's
examination highlights how the two affect son-in-law and ONA's director, Fouad Filali,
USAID'Sassistance.
The political process of privatizing the 61
monarchy, and detennining wha! assets For histories of ONA and its PARIBAS roots, see
M'hamed Sagou, PARIBAS: Anatomie d'une
belonged where, produced the expansion of the puissance (Paris: Presse de la FNSP, 1981);
royal family's financial holding company, Mohamed Said Saadi, L.es groupesflnanciers au
Omnium Nord-Afiicain (ONA), and the Maroc (Rabat: Editions OKAD, 1989); Zakya
restructuring of the state's export platform for Daoud, "Privatisations B la marocaine," Maghreb-
the Royal Domains via the Atlas Fruit Board MoshreL (April-June. I990), pp. 84- 10 1 ;Michel
Laurent, Le Maroc de I'Espoir (Rabat: Editions La
(AFE3). Affiliated historically with the Porte, 1994). esp. pp. 282-3 15.
PARIBAS-EkdIod financial group, ONA's 61
With golf courxs and seaside villas, these luxury
resorts include the large Cabo-Negro resort, the
Manakesh Amelki resort and a proposed 600-
hectare rcsort with two golf courses on the
60
See Jurgen Habermas, The Structural Dahomey beach between Casablanca and Rabat.
Tramformation ofthe Public Sphere (Cambridge The Caisse de Dcp6t et de Gestion (CDG) and ONA
Mass.: MIT Press, 1990) pp. 11-12; Chalmers each provide 50 percent of the financing with
Johnson, MITl and the Japanese Miracle (Stanford: management handled by ONA. See Michel Laurent.
Stanford University, 1982) esp.ch.2. pp. 35-82. op.cit, pp. 282-301.

163
VOL.V, VOL. 1, JANUARY 1997
MIDDLEEASTPOLICY,

defends M o m k largest industrial group by company later announced its interest in


noting that it opened its capital to workers, purchasing minority shares in mining
entered foreign partnerships that "rationalize" companies? In the formal privatization of the
the company, and encouraged the "association SNI industrial podolio, ONA assumed
of the citizen in ONA's development.'w ownership via its subsidiaries,the BCM bank
'Illrough its international division, OPTORG, and the CAA insurance company, which
the company has fiuther integrated Morocco purchased the majority of shares. Open-society
into the global economy. ONA now employs gunr George Soros purchased 2 percent of
23,500 people and produces 1.6 percent of ONA's parent company and 15 percent of its
total GDP. ONA opened 28 percent of its Diwan Holding in pmsale posturing" and his
capital to the public, raising 1.5 billion DH on Quantum Fund appeared on the list of SM
the Casablanca exchange. Along with WAF& shareholders. Despite the opportunity to create
ONA lent credibility to divestitureand capital- a new industrial group from a competing
market reform by issuing stock. Advocates consortium,the SNI sale demonstrates the
note that Royal shares in ONA fell h m over state's reluctance to allow other bases of
30 percent in the 1980s to 17 percent by 1994. economic power to emerge.
Despite capital concentration and a lack of Con- to USAID pronouncements,the
state withdrawal,@Morocco's parallel privatization program is permeated by regime
divestitureof 1 12 state enterprises is viewed politics. Comparingdivestiture outcomes to
positively by the World Bank and USAID. stated goals, the AID-supported program has
State divestiture of 15 companiesand 9 hotels had less success in broadening worker
had netted a total of 5.19 billion DH ($600 ownership and in regionalizingownership. The
million) at the end of 1994. Total capital on the formal program, moreover, diverts attention
stock exchange grew h m 16.98 billion DH in away b m the more informal privatization of
1992 to some 38.98 billion DH at the end of state lands to regime clients. Implementation
November 1994, while volumes increased for has been slowed by bureaucratic infghthg in
both shares and obligations. 'These positive 1995 between the privatization and finance
assessmentsmust be qualified in reference to ministers over the shift to a voucher-sales
stated policy goals and the Moroccan format Insiders and foreign investors lobby
privatization context. for special privileges or a maintenance of the
Among the goals of the Moroccan state status quo. The effort to privatize the C M hank
and USAID were the broadening of economic suffersh m a legacy of conuption under
stakeholdingand the encoqement of
ownershipby thoseoutside the system. With 65
other Palaceaffiliated entrepreneurs,ONA These state mining companies are: CTT,Somifer.
Samine, Sacem, SMI, FPZ, of which the state is the
executives announced their abstention h m the majority shareholder (at 69 percent) only in the
formal divestiture program. However, the SMI.Because minority shareholding is precarious,
potential buyers were believed to be minimal.
ONA's stated mining interest is viewed favorably
%'Association du citoyen au dkveloppement de by Privatization Minister Sa'adi, who foresaw sales
I'ONA,"Le Mafin (May 10, 1994). p.3. by year's end. See Jamal Berraoui. "Les futures
64
Since there is no state independent of King privatisables, une B une," La Tribune du Maroc
Hassan, and assets are being transferred to him, the {June 30, 1994). p. 14.
case for state withdrawal is not yet evident by a '"Al-Billionaire Soros yastathmir fi sharika 'Diwan'
nominal divestiture. al-Maghribiya," no.5602 (March 3 I , 1994), p. 1 1.

164
U.S.A.I.D.M KING HASSAN'S MOROCCO
COUPE: COURTINGHIS MAJESTY:

former director Othmane Slimani, due to the the legal obstacles to microenterprise
fact that 60 percent of the bank's total loans development. As Nobel laureate Douglas
went to seven people, among them Saudi North writes, the long march of economic
investor and arms dealer Gaith Pharaon." As history is down a path from systems of
the CIH awaits a massive cleanup, the ~ ~ l to systems of impersonal
p e r ~exchange
monarchy opted not to punish delinquent exchange with third-party (state) enforcement.
payers such as Alami's PLM-Dounia group, but North cites the largely informal market of
instead granted interest-rate redidom on their S e h u , Momcm, as an example where non-
prior loans!" The sale of nine sugar-processing standardized weights, unmarked prices and
firms was sidelined by the flagging buying quality differentiationsincrease transaction
interest of undynamic sugar cooperatives. And costs to buyers, who must dicker and deal with
the state has moved more slowly in selling 32 market merchants in search of the most
firms reporting negative net profits. reputable." By conbast, ONA has introduced
In light of regime politics and state relatively contained, efficient and impersonal
financial constraints, the privatization process distribution chains to Morocco. The
in M o m has not been able to hlly benefit ulbamodem, "cash and cany" Makro and
h m ideas on alternative market institutions, Marjane supermarkets are internalized markets
property-rightsdistributions, and market of scale which permit efficient exchange. Yet,
organizations that might encourage efficiency it can be argued that the institutionalcontext of
and participatory ownership by cooperatives, the market is not any less personal, given its
collectives, workers and managers. Rather, the non-third-party royal ownership. What is most
state has mostly sold assets in distress to problematic is that the institutional fiamework
organized individuals who have long used the for stable property rights neceSSary to improve
stale for their personal benefit. But, most the S e h u market is missing, while royal
important, King Hassari I1 has incompletely privileges permit efficient market exchanges
privatized the Palace and has yet to promote within the Makro and Marjane supermarkets.
minority shareholder rights within ONA. If The bottom line is that a latedevelopment, top
citizens participate in ONA's creation, it is down, introduction of the market is not taking
unclear how ONA participates in the creation place on an even playing field of property
of the citizen. rights. This is akin to introducing a sovereign
The dual aspect of privatization and the Sam Walton and Walmart to an
rise of Omnium Nod-Afiicain (ONA) also underdeveloped domestic market Like Main
challenges economic theories that stress the Street U.S.A., the shops of entrepreneurs whom
importance of stable property rights and USAID assists may disappear, despite ONA's
USAID programs that attempt to streamline pronouncements to the conbary. Makro and
Marjane undermine consumer sovereignty and
67
Pharaon was also implicated in a deal to take over
69
the BCM bank much as he took over the National See Douglas North, Institutions, Institutional
Bank of Georgia in the United States. See Asharq Change and Economic Performance (Cambridge:
Al-Awsat, no.5520 (January 8, 1994), p. 11. Cambridge University Press, 1990). p. 123; Clifford
68
Le Marin du Sahura, "C.I.H.:Volontt de renforcer Geertz, "Suq:The Bazaar Economy" in Sefrou in C.
le r81e jouC dans Ie secteur bancaire," (January 5. Gee- H. Geertz and L. Roscn cd. Meaning and
1994), p.5; Ashurq al-Awsar. no.6420 (June 26. Order in Moroccan Society (Cambridge University
I996), p. 9. Press, 1979).

165
MIDDLEEASTPOLICY,
VOL. V, VOL. 1, JANUARY 1997

compromise liberal economic models essence, the financial holdings internalized and
emphasizing M o m of choice, monopolized the market and distributed credit
USAID support for refom progmns has to their fbmilial oligarchies. Holding
also met with political inbansigence, as is companies, banks and credit-leasingfirms
evident in the cases of the financial sector and issued over 90 percent of all new stock shares
cerealmarketing. Inthecaseoffinancial during the 1988-92 period, in comparison with
reform, the state has been unwilling to just 10 percent for industrial and commercial
relinquish control over financial firms.
intermediation. Through the 1980% Although the state lifted credit ceilings so
Morocco'ssystem of financial repmion that private credit accounted for 44.546.1
c h e l e d subsidized credit and exchange percent of all credit during the 1991-93 period,
through specialized financial institutions(Sns) the expansion was reined in by Central Bank
to the public and private sectors. The system mewe requirements,lending ceilings and the
suffered fiom mismanagement and debt" monitoring of investment loans to repeat
The financial reforms have two h w e ~ Rather ~ . than~ liberalize interest
components: banking r e f m and financial- rates, the centralBank set interest-@ ceilings,
market development. Prior to December 1992, hoping interbank cornpetition would drive
the state mandated the internationalGxke down the price of money. Instead,high reserve
solvability ratio of 8 percent for requirements, stabmandated obligationsand
undercapitalized commercial banks that had bank collusion conspired to move ratesclose to
only a 4-5-percent reSefve ratio. The banks the ceiling. Former financeminister Sagou
went to the capital market, raising 2.5 billion Criticized a b m a l l y high interest rates and
DH in four (1989- 1992)." ONA and its "surpluses in bank treasuries,'"' and the World
b i d t i Financih D i m Holding also raised Bank lamented a high 1-percent retun on bank
1.792 billion DH during a &year period assets due to the absence of "competition on the
(1990-92)-"more than ktimes the amount asset side of the balance sheet'"' While a
of capital raised by the entirety of industry and missing SeCondaTy monetary market restricts
commerce.'w Among the banks, ONA's BCM the competitive negotiation of bonds,
raised the most domestic capital (1989-92). In corporations "seeking a short-term placement
of treasury surpluses at market prices," must go
~ ~~~~

to a secretive, bank-c~ntrolled"market of
10
King Hassan's investment monitoring committee limited transactions in which the public is not
(CISI) revealed in 1994 that 80 percent of all informed of the inkma rate, the volume, the
investment projects went uncompleted in Morocco. date or the hour of the tmmaction.'m High
Le Matin du S a b r a , "Institutiond'un Comitt
d'impulsion et dc suivi des investissements,"
treasury-bond yields, market opacity and non-
no.8394 (January 1 I . 1994). p. 3. reform have denied foreign and domestic firms
11
Of the fins listed on the stock exchange, the
banks had previously occupied an important place,
13
with the BCM ( I 943), UNIBAN (1 969). the BMCI IMF, Resilience through Growth, p. 23.
(1 972), the BMCE (1975) and the CDM (1 976) and 7'"Jugement dvtre sur la concumnce banmire,"
WAFA (ex-CMCB) (1980). Bcrrada, 1991, fn.310, L'Economiste (May 19.1994). p. 36.
15
462. World Bank, The Kingdom of Morocco:
PiRachid Belkahia, "Les Entreprises et la Bourn." Sustained Growth for rhe Nineties ( 1989). p. 7.
16
Ph.D. dissertation, January 1994, (Mohammed V Alain Demaynadier, "Un marcht financier..."
University, Casablanca), p. 24 I . opcit. (July 22. 1993) p. 48.

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HIS MAJESTY:U.S.A.I.D.
COUPE: COURTING M KRJG HASSAN'S MOROCCO

accessto lowcost capital." By 1995, a USAID This rankingof preferences (stabhty over
financial-marketproject closed after receiving efficiency) entails certain costs, which can
little collaboration fiom the Central Bank. be grouped into four broad categories:
USALD's Cereal Marketing Reform economic inefficiency, systematic
Project also encountered the politics of discouragement of the development of
market-based risk-reductionmechanisms;
"business as usual." Despite two agricultural-
maintenance of a flawed subsidy program
sector adjustment loans (ASALs) and two concurrent with lack of action on more
sector-investment loans (ASILs),the cereals sustainable public programs of food or
sector remains highly protected and controlled income assistance;and lack of coherence
from the f m gate to the consumer. Although in the direaim of overall Government of
M o m and the World Bank agreed to a 25 Morocco economic policy, which
percent rate of nominal protection for cereals, supports an increased market
1994 rates exceeded these targets for soft wheat orientation.'"'
(71 percent), hard wheat (42 percent) and com
(49 percent)." The increase was largely due to In April 1996, Morocco liberalized domestic
an arbibary application of a "safeguard clause" cereal marketing, but it is yet unclear whether
that allows prevailing reference prices to legal changes will be effectively
deviate fiom those derived from an "agreed- implemented. These cases feed certain
upon, moving-average reference-price conclusions.
formula.'" While imported quantities of soft
wheat are controlled by the National Cereals KING HASSAN'S ADJUSTMENT?
Oflice (ONICL),domestic purchase of wheat World Bank economic adjustment
had been limited to state-licensed implied that the Moroccan monarchy had to
cooperatives(SCAMSand CMAs). The change not only the prevalent resource
processing of national flour (farine nationale) is distribution and the mechanisms for resource
monopolized by larger industrial mills. allocation, but also the institutional and
Because the state exhibits "Zemrisktolerance" organizational fiamework linking state and
for liberalization in sectors that support rural society. Because of the historic nature of the
patronage and urban food security, grossly makhzen, the logic of the regime (institutions
inefficient subsidy targeting continues to be tying state and society) was consistent with the
tolerated." As the C d s Marketing Reform state's central role in creating and disbursing
project summarizes its experience, privilege. However, King Hassan was
constrained by crisis to enact institutional
changes to avoid economic collapse, while
mitigating the negative side effects that
17
Abderrahim El-Badaoui, "A Bon Dksencadreur. liberalization spelled for his authority. More-
Salut!" Le LibPrule, November IS, 1993, no. 69. p. over, the state elite opposed reforms in areas
24.
78
supported by USAID, with some being tabled
See David Wilcock and Lynn Salinger, and others not meeting initial expectations.
"Moroccan Cereals Policy Reform at the
Crossroads," CMR Project Report #20, U.S.Agency
In Morocco,where USAID has a
for International Development (September 1994). p. substantial history, the shortfalls appear less
28.
79
Ibid.,p. 26.
80
Ibid.,p. 43. 81 Ibid.,p. xiii.

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MIDDLEEASTPOLICY,VOL.V, VOL.1, JANUARY 1997

problematic h m the point of view of mission would fit awkwardly into a unified State
strategy, the unworkability of administering Department where diplomatic functions
complex interventions,or the crosscutting predominate(Helms proposal). What USAID
inconsistenciesin achieving specific objectives. sorely needs is distance and slack h m the
Informational and technical constraintshave mandate of the U.S.State Department policy in
been minimized in AID'Sefforts to improve order to deal with the obdurate characteristics
policy-makingcapacity. Rather, many of the of Moroccan politics. If State's Bureau of
obstacles relate to the political power of the Democracy, Human Rights and Labor
status quo. coOdinateswithusAIDthroughthe
?he export of U.S.business and liberal Democracy Working Group, d m the relevant
ideas brought Dairy Queen, but not consumer U.S.agencies must address the tension between
sovereignty,since U.S. concerns for security the goals of security (stability) and institution-
and foreign investment outpace the concem for alizing change. Deep change within the state
principled institutionalreform. As a truncated, and the society will require more aid
latedevelopment model for Morocco, open- ~-esources, not less. Again, the issue of stability
society/open-marketpolicies are misplaced vis- versus change is complicated, in that the state is
h i s Morocco's political regime and vis-A-vis responsible for weakening institutions. One
U.S.foreign-policygoals, which discount cannot assume, as Huntington did, that the
institutionaldevelopment, Mom's army and sewity are harbingers of
economic adjustment is blurred by the institutional developmentn As for the
inequitable and privileged state control of the makhzen's design on stable democracyand
adjusbnent pmcess, which denies popular, civic culture, King Hassan's equation of
inclusive participation by the majority of "political and social collsensus with the good
Moroccan society. The dynamics of crisis have society... is really the statement of a concealed
prompted a resurgence of Islamic ideals. pref- for a system in which the dominant
The implications of the analysis are clear. class has effectivelytranslated its own values
First, USAID has been a cost-effective vehicle into a factual moral order binding on all.'" Not
for economic refom as a less-politicized only does the security state translate poorly, its
bureau working at the ministerial level of the moral order is widely perceived as cormpt.
Moroccan monarchy. Although USAID If democracy legitimizes the beneficiaries
influenced mource allocations, improved state of liberalization,and s ~ t esecurity simply
functioningand provided servicesto the protects them, there may be few incentives for
disenfranchised, it could not influence large voluntary association and collective action
shifts in resources (e.g., h m irrigated to (e.g., civil society). Apart hdemocracy,
dryland agricultm). USAID has beem less simultaneous inquiriesmust examine the
effective in persuading the state to dismantle its relationship of Islamic community (m) to
mechanisms of resource allocation and
inefficient patronage. 82
The cxmshxb've implications of the Samuel Huntington, Political Order in Changing
Societies (New Haven: Yale University Press.
analysis are also clear. USAID's mission 1968).
13
Frank Parkin, Class lneguality and Political
Order: Social Strati'jication in Capitalist and
Socialist Societies (New Yo&: Pracgcr, I97 1 ), pp.
84-85.

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COUPE: COURTING HIS MAJESTY:
U.S.A.I.D.IN KING HASSAN’SMOROCCO

recent theories of political obligation and to achievement, a quiet revolution. Yet it will not
both markets and capital.” advise the Royal Palace on how to avoid
Furthermore, privatization is a popular gumming up markets, managing
rallying cry, but in the context of representationand distributing inefficient
patrimonialism, it is a ruse. Divestiture has patronage. There are reasons for state
generated resources for distribution to elites withdrawal to go as far as to privatize the
and to a narrow middle class, yet it stops short Royal Palace to make the business of
of unclogging the monarchy. ONA is but a monarchy publicly open and privately
step towards the economic privatization of the contained, much as the state demands of
Royal Court, but inefficiencies remain, such as private business. Thm are also reasons for the
the watering of royal golf courses. More steps United States to go beyond security and
are required to make the Royal Palace more foreign investment in championinga
economically rational, less rent-seeking and liberalism forged through a broader discourse
more profitdriven than it has been in the with Moroccans as well as through
past-while playing by the new rules it lays collaborationwith the competent pool of
down. intellectuals within the Palace’s new “think
USAID’Srole in promoting M o ~ ’ s tank.” ONA’s futurechairmanshipwill test
domestic policy dialogue at the ministerial and shareholder participation in a new economic
associational mid-level is a notable system. Future financial-marketreform will at
least testthe ability of the market to work. The
U4
question remains, to what extent the United
Many are working on these issues from liberal and States, given its regional politics and Moroccan
Islamic perspectives. See M. Umer Chapra, Islam
and the Economic Challenge (Herndon. VA: The
ambivalence over the Gulf War, seeks to
Islamic Foundatiofie International Institute of safeguard one last liberal principle--self-
lslamic Thought, 1992); Deborah Stone, Policy determination-or at least to salvage it by
Paradox and Political Reason (New York: Harper fostering the sine qua non of all institutions:
Collins, 1988); John Horton, Political Obligation bust. USAtD may cajole, but Morocco’s hture
(Atlantic Highlands, N.J.: Humanities Press
International, 1992); Barry Bluestone and Bennett lies in the hands of its policy elites, who now
Harrison, The Deindustrialization of America. Plant run a gauntlet in meeting the future challenges
Closings. Community Abandonment and the established by the World Trade Organization
Dismantling ofBaric Industry (New York: Basic and the E.U.’s Barcelona Accords.
Books, 1982).

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