As explained in his manifesto The Green Book, published in the 1970s, Colonel Qadhafi's ideology has shaped the Libyan political system and economy since 1969. As an "alternative" to capitalism and Marxism , this ideology draws on Arab nationalism and Islam, but its economic program is primarily socialist . Accordingly, the state controls the economy, and the private sector assumes a negligible role. The situation has remained the same despite the relaxation of some restrictions on the private sector.
Libya has a peculiar political system known as the Jamahiriya or the "republic of the masses." In theory, this means that the Libyans rule their country directly through a series of popular entities that function as local governments, which are called Basic People's Congresses (BPCs). Each BPC chooses a secretary to represent it in Libya's highest legislative organ, the General People's Congress (GPC). The GPC chooses "the secretaries of the secretariat," (cabinet ministers) who form the cabinet called the General People's Committee, and also the head of the Committee, who presides over the cabinet as the prime minister.
The system has undergone changes in form, but the theoretical concept of running the country through popular entities has been kept. In 1992, Colonel Qadhafi divided Libya into 1,500 mahallat (communes or neighborhoods) and granted each of them its own budget as well as executive and legislative powers. As part of his decentralization policy, in 2000 he transferred most central government executive functions excluding its defense, trade, social security, health, education, and infrastructure to 26 municipal councils represented in the GPC.
Having the title of "Brother Leader and Guide of the Revolution," Colonel Qadhafi does not hold any official government position. Theoretically, he has no power and defers to the GPC. However, in practice, the GPC is a rubber stamp for the colonel, who appoints all influential figures and ensures the docility of all security and political organs through the revolutionary committees (associations of pro-Qadhafi young men led by the colonel's appointees). They function as a political police force with the power of arrest and summary execution, although their power has been curtailed to some extent since the late 1980s to appease the growing popular dissatisfaction with their abuses. Since mid-1996, the newly formed "purification committees" have also operated on Colonel Qadhafi's behalf to combat corruption and black-market activities. In short, Libya is run by Qadhafi and a small circle of his close allies.
There is no legal opposition group inside the country with an alternative economic view or with any impact on the economy whatsoever. The government has suppressed various secular and religious political groups and turned them into ineffective political forces based mainly in exile. They include the National Front for the Salvation of Libya, the Militant Islamic Group, and the Libyan Martyrs' Movement.
Fossil-energy exports have been the major contributor to government revenues since the 1960s, accounting for more than 70 percent of these revenues. The Libyan government has failed to reduce its heavy reliance on such exports by increasing its revenue from taxes due to the limited tax base and insignificant private sector activities. In absence of such activities, salaried government employees are the main tax payers, although they make little income that can be taxed. Heavy dependency on energy exports affects government revenues, since world oil prices tend to fluctuate. Due to this vulnerability on energy prices, the Libyan government makes every effort to balance its budgets and avoid deficit spending. While accurate budget figures are difficult to obtain from a relatively closed society, it is estimated that in 1999, government revenues roughly equaled expenditures of US$10.88 billion, of which the share of exports was over US$7 billion.