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Libya’s Economic Potential

It would appear Libya is about to enter a new chapter of its history. As Max points out, the transition is unlikely to be easy and the emergence of a western-style democracy by no means a given. But, should such a thing come to pass, Libya’s economic potential is enormous.

Libya has the ninth largest oil reserves in the world and its production, before the revolt against Qaddafi began, was 1.6 million barrels a day. Its proximity to Europe and its low cost of production–only $1.00 a barrel in some fields–make it highly attractive for new exploration, and two-thirds of Libya has yet to be fully explored for oil.

Because Libya’s population is only 6.4 million, it can be a low-tax state, thanks to oil, and still build the infrastructure a modern economy needs. And the population is well-educated. Libya has the highest HDI (Human Development Index) in Africa, a UN metric that measures life expectancy, literacy, education and standard of living. At 0.755, it is a little higher than Mexico’s. With political stability and the rule of law, it could easily develop modern light industries to supply European markets, as it already has the human capital needed to do so.

And its tourist potential is unparalleled. Libya is an easy flight from anywhere in western Europe. Its winter climate is mild and it has great beaches, some of the longest on the Mediterranean. The Sahara Desert, which covers much of the country, has prehistoric rock carvings and paintings and magnificent scenery (think David Lean’s Lawrence of Arabia). It has some of the most impressive Roman ruins to be found anywhere in Leptis Magna, one of the great cities of the Roman Empire, and birth place of the Emperor Septimius Severus, who lavished the wealth of the empire upon it.

If Libya can develop a modern, reasonably democratic political system, it could quickly develop into a first-world country. That, of course, is a very big if indeed with the history of kleptocratic government in the Arab world. But South Korea did it in the late 20th century. South Korea was far poorer in 1960 than Libya is now and had been devastated by war in the previous decade. It, too, had been saddled with a miserable government. It had no oil to provide easy capital and needed to maintain a vast military establishment to defend against North Korea. But today, South Korea is a modern, prosperous state. Libya can be also–and soon.

 


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