Whenever the dollar price rises, liquidity in banks disappears, or prices surge, the usual debate intensifies, leading to the familiar question:

What economic system will save the country?

Some believe that the solution lies in capitalism and fully opening the market, as if a free market is a magic wand. Others nostalgically yearn for socialism, viewing it as the last refuge for social justice, insisting that the state should control everything as it did before. However, the harsh truth that we must confront, which may seem tough for those who see themselves as technocrats, is that Libya today does not suffer from a “choice of economic system.” Instead, it faces a state crisis that is incapable of enforcing any system.

Libya, with its vast resources—oil, gas, and water—along with its strategic geographical location, has a relatively small population compared to these resources. Yet, it continues to endure severe living crises, a crumbling infrastructure, and a disorganized economy.

This raises the question: how can a country so rich appear so poor?

The painful answer is simple: the problem lies not in the scarcity of resources but in the way the state itself is managed.

We could import the best economic theories and flood the screens with reform and development plans, but none of this will provide a solution. When the very institutions meant to oversee these matters are mired in corruption, and the law becomes a tool to justify malfeasance, with networks of interests proving stronger than the law and the state, any economic model will automatically devolve into a new version of corruption and chaos.

The problem is not the economy itself, but rather the environment in which that economy operates.

Over the past decades, Libya has gradually transitioned into what economists refer to as a:

Rentier State

This is a state that relies on income from natural resources rather than genuine production.

Oil has not built a diversified economy; instead, it has created a distorted model characterized by:

– Overstaffed government jobs,
– Random subsidies,
– High consumption,
– And a near-total dependence on the state as a source of income.

This has fostered a dangerous mentality over the years:

– The state pays salaries,
– The state supports everything,
– And the state is the primary source of life.

Over time, the economy has transformed into a “money distribution machine” rather than a true economy that produces and innovates.

The struggle in Libya is no longer about who will build the country, but rather who will control the money flowing from oil.

Here lies the catastrophe: corruption in Libya today is no longer just a misconduct of an institution or a public official; it has become an unspoken ruling system. Corruption is no longer an individual behavior but has evolved into a comprehensive system characterized by:

– Networks of interests,
– Tools of influence,
– Mechanisms for buying loyalty,
– And an unannounced system for managing authority.

Thus, we see institutions that are supposed to combat corruption, while corruption comfortably infiltrates them, making the fight against corruption feel like battling one’s shadow in a mirror.

You cannot defeat corruption while the economy itself is built on ambiguity, untraceable spending, political appointments, a parallel economy, and a lack of accurate data.

Countries that have succeeded in reducing corruption did not rely solely on “good intentions,” but on very practical measures such as:

– Digitalizing services,
– Tracking spending electronically,
– Reducing cash transactions,
– Linking institutions with unified databases,
– And closing loopholes that allow the state to become a spoils.

Is a free market the solution?

Here, many fall into a significant trap.

Some believe the answer lies in fully liberating the economy and letting the market operate freely.

But a free market within a weak state can turn into a disaster.

Why?

Because the absence of a strong state does not create fair competition; instead, it leads to:

– Monopolies,
– Economic mafias,
– Smuggling,
– And collusion between money and arms.

In stable countries, the free market operates under the authority of a strong law. However, in fragile states, it often devolves into a jungle economy. Thus, Libya does not today need absolute capitalism or bureaucratic socialism, but rather a more realistic model: a regulated market economy backed by a strong state and rigorous institutions.

A state that allows the private sector to grow while imposing real regulations on:

– Banks,
– Currency,
– Oil,
– Monopolies,
– And the flow of money.

A state that protects competition, prevents monopolies, supervises banks, maintains currency value, and prevents the economy from turning into a jungle.

The question now is: how do we begin?

First: the starting point must be addressing subsidies. In Libya, subsidies have transformed from protecting people into a profitable trade.

The original goal of subsidies was to help citizens, but what happened?

One of the biggest illusions in the Libyan economy is the belief that subsidies, in their current form, protect the poor.

The reality tells a different story. The truth that everyone now knows is that a massive portion of subsidies ends up going to:

– Smuggling,
– The black market,
– And exploitation networks.

For example, subsidized fuel is not only consumed by the average citizen but is also significantly exploited by smuggling networks.

However, suddenly lifting subsidies would be a grave shock to the people.

Therefore, the solution is not to “cut subsidies” all at once, but to gradually reform them:

– Direct cash assistance,
– Accurate digital systems,
– And step-by-step reductions in leaks.

Second: reduce government spending by cutting salaries and benefits for officials, decreasing diplomatic missions, regulating missions and delegations, and limiting the number of employees in service ministries while supporting and regulating the private sector.

A state that employs everyone suffocates the economy.

No economy can grow while the government becomes the largest employer in the country.

One of Libya’s gravest issues is that the government has become the largest hiring entity in the nation.

And the result?

– Concealed unemployment,
– Low productivity,
– And complete dependency on government salaries.

Public employment has transformed into a “social right” rather than a productive necessity, and the state has turned into a colossal entity that consumes money without generating real value.

The real economy is not built through distributing salaries but through:

– Industry,
– Services,
– Technology,
– Logistics,
– And energy.

Libya has an exceptional geographical location, immense energy wealth, and a market close to Europe and Africa, yet it still sells crude oil and imports nearly everything.

Here lies the painful paradox: a resource-rich country that is poor in production.

Are there models to draw inspiration from?

Some dream of transforming Libya into a new Norway, but the comparison is misleading.

Norway built its robust institutions before the oil boom, while Libya entered the oil era before establishing genuine institutional structures.

Perhaps what is closer to Libya is a blend of:

– Singapore’s experience in management and digitization,
– The United Arab Emirates’ experience in infrastructure and investment,
– Along with strict sovereign management of resources, as practiced by Saudi Arabia, and the reforms implemented by Crown Prince Mohammed bin Salman.

However, even these models cannot be simply replicated, as their success was based on having authority capable of enforcing the law and implementing decisions before considering economics.

Before discussing capitalism or socialism or a market economy, Libya needs:

– An independent and impartial judiciary,
– Unified institutions,
– Digitization of public spending,
– A complete overhaul of mid-level management in banks and financial institutions,
– Real oversight,
– Transparent spending,
– And a law that applies equally to all.

Without this, any economic reform will remain nothing more than a recycling of corruption, and any economic plan will turn into a new version of chaos.

In conclusion,

Libya does not need today an economic genius as much as it needs a state that can close the door on corruption.