Social interactions and contract enforcement in the postcolonial Arab world. Evidence from the industrial elite of Morocco, 1956–1982

ABSTRACT

This paper examines the role of social interactions in contract enforcement within the postcolonial Arab world, with a specific focus on Morocco. Through extensive interviews with members of the industrial elite during the import-substituting industrialization (ISI) period, we uncover a significant risk of contractual breaches. Despite this risk, there was a reluctance to use social connections to penalize those who breached contracts. Legal recourse was also rarely pursued. Instead, business leaders leaned on their social networks to assess potential partners and resolve disputes through bilateral channels. This reliance on social ties was facilitated by the close-knit and compact nature of the business community. In the post-ISI era, characterized by a larger and more diverse industrial elite, there was a noticeable increase in contractual disputes, accompanied by a shift towards more aggressive resolution methods. We present a theoretical model that elucidates how these dynamics naturally emerge from an environment where economic and social interactions are intertwined.

KEYWORDS:

• Morocco
• social interactions
• elite, industry
• twentieth century

JEL:

• D8
• N15
• N65
• N85

Acknowledgements

We appreciate the extraordinary research assistance of Santiago Neira and Mariana Lopera. We are also grateful to Andres Alvarez, Rachid Laaja, Tomas Rodriguez, and seminar participants at Stellenbosch, Los Andes, CESA, and UC Berkeley for their valuable comments.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 It is worth noting that this tradition has faced intensive critique, primarily focused on the historical evidence supporting its assertions. Edwards and Ogilvie (2012a, 2012b) have raised questions about the significance of private actors in the Maghribi trade and the Champagne fairs. They argue that, in both cases, public institutions played a more crucial role than acknowledged by Greif (1993), Milgrom, North, and Weingast (1990), and their followers.

2 Despite this cohesiveness, there were certain dimensions of dispute among the elite – in particular, ethno-geographic disputes. Leveau (1985) highlights the political and economic rivalry between Fassis and Soussis, a subgroup of Berbers. Soussis were originally associated with petty trade, and wholesale and retail trade in foodstuffs. They progressively entered industry, often through bureaucracy. The Fassi–Soussi rivalry supposedly extended to manufacturing, where Fassi groups would compete against Soussi ones.

3 Goldberg (2012) illustrates the empirical challenges that studying the Magrhibi traders involves:

we must infer and deduce the nature of relationships and institutions from passing references, complaints and justifications when things went awry, snippets of legal testimony, rare surviving contracts, and letters of advice from senior merchants to apprentices. It does not help that letters were written in a Judaeo-Arabic that employs different registers of vernacular and classical Arabic, and is peppered with merchant jargon, rendering debatable the meaning of many sentences and phrases (Goldberg 2012, 9).

4 For instance, Bigsten et al. (2000) studied the manufacturing sector of Burundi, Cameroon, Cote d’Ivoire, Kenya, Zambia, and Zimbabwe in the late 1990s. Although their sample excludes microenterprises, it does not primarily consist of elite-type firms.

5 It is worth noting that the absence of an organizational infrastructure facilitating private coordination limited the use of private arbitration. The few individuals who did use it were members of the Confédération Générale Economique (CGEM), formerly known as Union Marocaine du Commerce et de l’Industrie, a major business association advocating for this mode of conflict resolution.

6 Summarizing a network by its size and density is a conventional practice in the literature (see Faust 2006).

7 Sociological literature, tracing back to Krackhardt (1998), consistently demonstrates that stronger ties naturally emerge in denser and smaller networks.

Additional information

Funding

The project leading to this publication has received funding from the French government under the ‘France 2030’ investment plan managed by the French National Research Agency (reference: ANR-17-EURE-0020) and from the Excellence Initiative of Aix-Marseille University – A*MIDEX.