Research in Political Economy

Research in Political Economy Emerald Book Chapter: Syria's Transition, 1970-2005: from Centralization of the State to Market Economy Angela Joya

Article information: To cite this document: Angela Joya, (2007),"Syria's Transition, 1970-2005: from Centralization of the State to Market Economy", Paul Zarembka, in (ed.) Transitions in Latin America and in Poland and Syria (Research in Political Economy, Volume 24), Emerald Group Publishing Limited, pp. 163 - 201 Permanent link to this document: http://dx.doi.org/10.1016/S0161-7230(07)24005-2 Downloaded on: 23-07-2012 References: This document contains references to 25 other documents To copy this document: [email protected] This document has been downloaded 582 times since 2008. *

Users who downloaded this Chapter also downloaded: * Steven R. Elliott, Jamie Brown Kruse, William Schulze, Shaul Ben-David, (2001),"Rationing supply capacity shocks: A laboratory comparison of second best mechanisms", in (ed.) 8 (Research in Experimental Economics, Volume 8), Emerald Group Publishing Limited, pp. 153 - 183 http://dx.doi.org/10.1016/S0193-2306(01)08008-5 (2001),"Preface", in (ed.) 8 (Research in Experimental Economics, Volume 8), Emerald Group Publishing Limited, pp. ix - x http://dx.doi.org/10.1016/S0193-2306(01)08001-2 E. Michael Schauerte, (2007),"Samezo Kuruma's Life as a Marxist Economist", Paul Zarembka, in (ed.) Transitions in Latin America and in Poland and Syria (Research in Political Economy, Volume 24), Emerald Group Publishing Limited, pp. 281 - 294 http://dx.doi.org/10.1016/S0161-7230(07)24008-8

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SYRIA’S TRANSITION, 1970–2005: FROM CENTRALIZATION OF THE STATE TO MARKET ECONOMY$ Angela Joya ABSTRACT This paper examines the transformation of Syrian political economy from 1970 until 2005. I argue that Syria has undergone two important phases of political and economic transformation, from building a centralized state and economy in the early 1970s to embarking on the path of market economy in the early 1990s. With the logic of competitiveness guiding the direction of economic development, the socio-economic changes of the mid-1980s and after have corresponded with an important process of class and state formation. After a brief discussion of the current transition in Syria, the following sections of the paper attempt to provide a critical study of the different strategies for economic development. Section two examines the process of state and economic centralization of the 1970s and 1980s and highlights the contradictions of this period. Section three assesses the impact of economic liberalization through a study of competitiveness in the economic policies of the 1990s and 2000. The final $

A different version of this paper was presented at the Historical Materialism conference, held in London, UK, December 8–10, 2006. I would like to thank Geoff Kennedy for his thoughtful comments on an earlier draft of this paper.

Transitions in Latin America and in Poland and Syria Research in Political Economy, Volume 24, 163–201 Copyright r 2007 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 0161-7230/doi:10.1016/S0161-7230(07)24005-2

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section examines the economic and political impasse that Syria has been faced with. In conclusion, I argue that the current path of market economy as the strategy for capital accumulation has not resolved the socioeconomic problems that Syria has faced in the last two decades. This strategy will continue to face contestation by marginalized groups such as factions of the Baath Party, landless peasants, workers and small producers as Syria becomes even more integrated into the regional and global economy.

After the collapse of the East Bloc in the early 1990s, Syria was faced with a new world order. This new world order has influenced Syrian development in such a way that the Syrian state and society have seen a decisive shift towards a capitalist market economy. More recently, however, Syria has been entangled in the United States’ global war on terror (US Congress Syria Accountability Act, 2003)1 and has been subjected to US and UN sanctions because of allegations of murder of former Lebanese Prime Minister, Rafik Harriri and its link to Syrian security forces.2 Thus, predominant views have portrayed Syria as a closed economy with heavy state involvement in the economy and restrictions on the private sector, factors, which make Syria appear to be an economic laggard in the eyes of economic liberals. International financial institutions (IFIs) have, nevertheless, maintained a close relationship with Syria, despite the political disconnect between the West and Syria. And, surprisingly, the Economist Intelligence Unit’s 2006 country report and the 2005 International Monetary Fund (IMF) report praised Syria for its slow but significant economic reforms that have set the country on the path to a market economy. With a prevalence of international relations in studies of the Middle East, including that of Syria, discussion of the domestic struggles over the state and the economy in the context of the current economic liberalization has often been left out. It is the goal of this paper to shed light on the domestic political economy of Syria to uncover these struggles and to discuss in detail the policies that have resulted in a radical transformation of state and society in Syria since 1970.3 I argue that Syria has been experiencing a rapid process of transformation towards capitalism over the last three decades. The early 1970s marked the decade when, for the first time a strong, centralized state-building project began under Hafiz al-Assad, whereas the 1990s marked a decisive transition towards a capitalist state and economy. In order to appreciate this dynamic

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history of socio-economic and political changes that have shaped Syria’s social relations since the 1970s, I have divided this paper into three sections. The first section of the paper offers some brief comments on conceptualizing the current transition in Syria. The second section examines the initial phase of state formation under Hafiz al-Assad. This section also discusses the socio-economic crisis of the second half of the 1970s and the popular social forces’ response to the crisis. I end the section with a discussion of policies of economic austerity that Hafiz al-Assad’s regime implemented in response to the economic crisis that unfolded in the early 1980s. The third section examines the origins of neoliberal economic development in Syria in the aftermath of the collapse of the Cold War. Prior to an examination of the contradictions of neoliberal policies and its limits, I discuss the emergence of a new class alliance as well as the consolidation of a neoliberal state and economy in Syria. I conclude the paper by recapping the process of state formation in Syria over the last three decades by focusing on the current process of political and economic transformations in Syria, which are, to a major extent, a response to global economic forces. Finally, questions are raised about the current policy directions and the possible negative impact of neoliberalism upon workers and peasants as well as upon factions of the ‘old guard’.

1. CONCEPTUALIZING THE TRANSITION What is significant about the last three decades of economic development in Syria is the changing nature of the state and the economy, reflecting the impact of the global capitalist market on individual national economies.4 Although Syria appears to be one of the most closed economies with very low levels of external debt to the IMF and the World Bank, as well as a very low volume of trade (Library of Congress, 2005), a closer study of the Syrian state and economy reveals a process of slow, but significant economic integration since the 1970s. The Syrian state and economy still represents some aspects of a planned economy in that the ruling party – which has become synonymous with the state – has been deeply involved in shaping and organizing the economy. According to IFIs, what Syria needs to do is to establish a separation between the ruling party and the state on the one hand, and between the state and the economy on the other. In short, it is argued that Syria needs a modern state, with liberal democratic elements, such as competing parties, free elections, a free media, as well as civil liberties, all of which would create a stable society that could facilitate capital

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accumulation in the capitalist world market. While efforts are being made to achieve Syria’s integration into the global economy, the outcome has been contradictory and uneven. This process of global economic integration is not free of conflict as external capitalist forces collide with domestic forces; i.e., factions of the elite whose interests do not require a larger market and who in fact rely on the protectionist measures of the state. The 1990s marked the beginning of a radical shift in the Syrian state and economy. In response to the failures of the public sector, the regimes of Hafiz al-Assad (1970–2000) and Bashar al-Assad (2000-present) implemented a gradual yet decisive shift towards the market economy. This shift has corresponded to a parallel transformation of the state, reflecting a changing balance of power in Syrian society. The transformation of the state carries serious implications for the various factions of the ruling class. The traditional industrial bourgeoisie who has been associated with the military and security wings of the Baath Party is doomed to lose since state restructuring has also meant a gradual purging of the latter two groups that dominated the state for over three decades. The other factions of the ruling class that have gained their power through different periods of liberalization (infitah) have managed to establish a political alliance with the bureaucratic factions of the ruling class comprised of the sons of the Baath Party officials (Perthes, 1993, p. 45). Many observers have argued that the Syrian ruling class, which has traditionally been very divided, is about to establish a broad class alliance with the various factions of the elite; namely the nouveaux riches, petite bourgeoisie and the state elite. The emerging ruling class factions do not accumulate their wealth through industrial investment or manufacturing; rather, they are interested in the quick turnover of their capital through speculative activities in the stock exchange, the real estate sector and the land market. In the meantime, economic decisions are being de-politicized, with the state transferring its responsibilities of policy making to the ministry of finance and the central bank. This would negatively impact the poor and the majority of Syrians who have come to depend on state subsidies for their daily commodities. The lack of legitimacy of the regime and the growing gap in wealth in Syrian society has made the regime and its recent economic development model quite unpopular. In the absence of any viable alternatives and political will, the regime of Bashar al-Assad has pursued the unpopular development project of market economy, albeit with a lot of caution. Any change in the nature of the state is not merely a technical change in response to global economic and political pressures; rather, changes in the state also have socio-economic dimensions. Each phase of change in the


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Syrian state has corresponded to a new balance of class forces and their influence in shaping the development project. The period of infitah, which was initially undertaken to bring Syria into the capitalist world market, has produced unpredictable negative effects for the Syrian economy and society. Whether the Syrian state and economy can survive yet another period of infitah will be determined by how the citizens of Syria respond to further austerity measures as the new ruling class attempts to form a more coherent alliance in order to successfully continue on a neoliberal path of economic development (Bahout, 1993, p. 77). The next section examines the rise of Hafiz al-Assad to power and the first phase of building a centralized state in Syria.

2. THE HISTORICAL PATH TO CAPITALIST DEVELOPMENT IN SYRIA 2.1. The Demise of Radical Baath and Hafiz Al-Assad’s Project of State Building: 1969–1977 Prior to 1958, Syria’s economy was dependent on cotton as the main cash crop, organized by independent urban notables who owned major tracts of land (Ahsan, 1984, p. 301). During Egypt’s union with Syria (which was known as the United Arab Republic (UAR)), radical reforms such as land redistribution and bank nationalizations were undertaken. These reforms aimed to break the monopoly of the landlords and industrial bourgeoisie over the economy. The state aimed to restructure the economy in the framework of Pan Arabism. These policies proved unpopular among the bourgeoisie who felt threatened and the UAR came to an end with a coup in 1961. The 1960s marked the beginning of various attempts at centralizing the state power and organizing the economy. The state building project in the late 1960s proceeded with a series of nationalizations of private firms and expropriation of large landholdings. Close to 106 private firms including oil distribution companies, cotton ginning companies and 70 per cent of export and import trade were brought under the control of the state. Fiscal policy and tax laws were modified in the interests of more egalitarian revenue generation and redistribution by the state. Rent reductions also served the interests of the working class and the poor (Ahsan, 1984, p. 306; Petran,1972, p. 183). Clearly, the regime sought to have the state as the guide for economic development of Syria. At the end of 1965, the regime

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was pressured by the landlords and the private sector and, as a result, a compromise was reached. The government halted its nationalization policies and allowed the private sector a free hand in real estate and construction. The most radical phase of Baath rule was from 1966–1969. The military wing of Baath Party, which ruled in this period, had their social base among the peasantry and the poor and their policies mostly served the interests of their constituency.5 The reforms of this period included a bigger role for the state in production, redistribution and consumption decisions. At the same time, popular representation was facilitated through independent workers and peasants’ unions. Substantial changes in the industrial and commercial sectors resembled that of state-led industrialization in the USSR, although with a large degree of autonomy for the workers and peasants (Ahsan, 1984, p. 307). The Baath Party in its most radical phase (called as the neo-Baath) in the 1960s introduced a series of reforms and policies that inadvertently tilted the balance of social forces in the interest of the poor, the workers and the small farmers. Attempts were made to organize the economy by limiting the reach of the urban landed notables and monopoly merchants and by integrating the peasantry and minority rural groups (Olson, 1982). However, the radical regimes’ attempts at creating an integrated domestic market and economy were faced with capital strikes of the worst kind. Left cash strapped and open to criticism from the moderate and liberal factions of the Baath Party, the radical regimes could not pursue their policies and finally fell victim to crisis of stagnating growth and increasing foreign debt. By 1969, the regime had succumbed to demands of liberal elements within the party. As a result, a series of reforms were implemented in the interest of the private sector. Having taken over important seats in the cabinet, conditions were provided for a shift to liberalized economy (Perthes, 1993, p. 45). Thus ended the first highly contested phase of state-building, which triggered thirteen coups d’etat in seventeen years (Petran, 1972). Hafez al-Assad’s rule, which began with a bloodless coup on November 14th, 1970, marked the beginning of a period of centralization of the state and economy with the institutional backing of the Baath Party. Al-Assad consolidated his power by appealing to the old bourgeoisie (the merchants and landlords) as a way of securing both the regime and consolidating the state. His economic policies which reflected the political shift in Syria came to be known as relaxation (Infiraj) or opening up to the people (al-infitah ala ash-shab). Thus, the ‘corrective movement’ that began under Hafiz al Assad signified a radical shift towards building a national economy. This shift entailed the uniting of all social forces to generate economic growth.6


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Al-Assad’s path of development, which began in 1969, was a response to the disorganized planning by the state, the rising influence of the merchant classes, with an eye to expanding the political base of the regime among the Sunni merchants (Ahsan, 1984, p. 317). With the stated goal of attracting Syrian capital back to Syria, a series of reforms such as the creation of tax free zones followed (Petran, 1972, p. 216). State building also entailed centralization of political authority, through cooptation of different forces in society (Olson, 1982). Labour unions were absorbed within the newly created institution of National Progressive Front (NPF). Al-Assad’s centralization of the economy and state initially aimed to embark on building capitalism in Syria, although it was not until 1990 that the conditions for private capital accumulation were secured by the state. Perthes has identified al-Assad’s economic development project as publicly financed, but privately managed development (ibid., 1993, p. 47). This project was superceded by the project of state building, which at times required political compromises between the state and the masses. Tabitha Petran has viewed al-Assad’s capitalist development project as the formation of an alliance with the landlords and merchants against the workers and peasants and their supporters within the Baath Party. As part of his expressed loyalty to the landlords and merchants, al-Assad reversed most of the previously sequestered lands, removed import quotas, set up tax free zones to attract capital. Other reforms included establishing economic courts to keep a check on economic activities within the state sector. State redistributive policies were funded through the high rent received from oil sales, remittances and geo-strategic rents of Cold War era (Petran, 1972, p. 210; Perthes, 1993, p. 45). Al-Assad’s economic and political reforms led to a balance of power between different factions in Syria. Through land reforms al-Assad reduced the power of the landlords, but at the same time he gave concessions to merchants and established the institutional power of the military and security forces through the state. Consequently, his policies resulted in giving birth to new classes whose power was directly linked to the state such as the military, the bureaucracy and the Baath Party members. Thus, he reorganized the social forces outside and inside the state either through cooptation or purges (Quilliam, 1999, p. 84; Olson, 1982). All of this was accomplished within a corporatist set of policies, which aimed to incorporate into the state, the left and the unions. The outcome of al-Assad’s policies resulted in the extension of his power base to the minorities, merchants, landlords and the private sector (real estate, construction) into the economic development project of the state. ‘‘Through its direct access to the state

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apparatus, the military y gained a crucial role in the state-building process’’ (ibid., 1999, p. 44). In short, economic liberalization in the 1970s was accompanied by a series of political reforms that facilitated the integration of conservative as well progressive forces into the structures of the state. However, political reforms aimed at isolating and controlling the progressive forces that posed threat to the regime of al-Assad. ‘‘By establishing a parliament and the NPF and by passing a new constitution, al-Assad tried both to broaden his base of support and to institutionalize and stabilize his regime y . For the most part [the independents in the parliament] represented the middle classes and in some cases Syria’s pre-Baathi urban and tribal aristocracy y . There was no legal basis for parties to act outside the front’’ (Perthes, 1993, p. 50; Olson, 1982). This was a very successful method of paralyzing the left in Syria and limiting its role in Syrian society, as they were not allowed to be active among students or become active in the military. All of this led to the centralization of the state power. The period of al-Assad’s rule can be divided into five periods: 1970–1977, 1977–1982, 1983–1985, 1985–1990, 1990–2000, each one corresponding to a new phase of economic liberalization or marking the unfolding of contradictions of market economy and the state’s response to them. Effective social control under al-Assad necessitated a series of compromises by the elite and the state which facilitated upward social mobility. Redistributive policies, which helped al-Assad maintain his power base, included ‘‘government housing projects, state-run health-care and public school systems, and vastly expanded employment opportunities in nationalized industrial, financial, commercial [sectors] and y expanded civil administration. y Both in rural and urban areas, the state emerged as a new class in coordinating socioeconomic activities of the different classes and status groups and replacing or at least reducing the influence of the old elite’’ (Ahsan, 1984, p. 320). Neil Quilliam has defined al-Assad’s strategy of state management as ‘populist corporatism’ which ‘‘includes the incorporation of political elite groups, popular organizations and organised business’’ (Quilliam, 1999, p. 78). As a sincere gesture to the private sector, al-Assad radically increased the role of the private sector in the commercial and industrial sectors of the economy while reducing the role of the public sector by reorganizing it. As a result of the economic reforms, in a short period of one year, more than 100 licenses were issued to individuals or private companies to set up industrial ventures (Lawson, 1989, pp. 22–23). Low-interest loans and subsidies were made available to small private workshops (Perthes, 1993, p. 46).


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Deregulation of the commercial and then industrial sector began as early as 1969. Free trading zones were set up in Aleppo and Tartus in the same year (Petran, 1972, p. 251). The public sector monopoly was removed through the break up of state-run import-export control agencies (Lawson, 1989, pp. 23–24). Finally, the country was opened to foreign direct investment in both trade and manufacturing, giving amnesty to Syrian capital flight (Quilliam, 1999, p. 86). Other reforms included removal of restrictions on import and expanding the range of manufactured goods. ‘‘As of 1972, imports without foreign exchange transfers were allowed in order to enable merchants and other persons who had part of their wealth abroad to repatriate some of it back to Syria’’ (Perthes, 1993, p. 46). In addition, as a concession to Arab regional interests, duties on 191 products imported from the region were lifted completely. In a sense, the 1970s were the testing ground for the ruling class in Syria to take on the role of organizing production. This had occurred after the defeat of the progressive forces within the Baath Party. However, the return of the state as the organizer of the economy in late 1970s clearly points to the failure of Syrian ruling classes and the private sector to independently take on the task of organizing the economy. This said, the private sector made a series of significant gains during different phases of economic liberalization. The autonomy and freedom that was awarded to private sector went hand in hand with its newly established role in overall economic development of Syria. Al-Assad mobilized private resources through the March 1974 decree, which allowed the private sector to sign off loans from private investors for developing private enterprise.7 From 1971–75, private sector accumulation strategies occurred within small industry and real estate sector, a risk free profitable sector. By 1973, the private sector controlled 32 per cent of foreign trade and in 1981, 40 per cent of all export and 35 per cent of all imports (Ahsan, 1984, p. 311). By 1979, private banking began with the establishment of a Syrian–Jordanian bank marking the end of bank nationalizations of the 1960s. Petran argues that liberalization policies of al-Assad regime only succeeded in evoking a ‘cautious response’ from the private sector. Investment levels remained low although three major sectors of the economy, construction, tourism and transport had been opened up to private investors (Petran,1972, p. 252). Liberalization policies also delivered heavy blows to workers in the public sector and in heavy industry. As stated by Lawson, ‘‘In 1971, almost 60 percent of workers were employed in agriculture, approximately 5 percent in construction, almost 10 percent in commerce, and 12 percent in services; eight years later, the proportion employed in agriculture had fallen to around 33 percent, while those for construction, commerce and services

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had risen to approximately 14, 10 and 20 percent respectively’’ (1989, p. 26). Another blow of the liberalization policies entailed the relaxation of labour laws as a way of enticing private investors to Syria(Perthes, 1993, p. 46; Quilliam, 1999, p. 69). While the private sector failed to undertake viable economic development, heavy state intervention produced a number of positive results that benefited the private sector and the Syrian society as a whole. As Quilliam writes as a result of the state’s role in economic planning: Per capita income was rising, albeit unequally, throughout all classes, ‘development’ in the form of electricity, roads and schools was noticeable in all parts of the country, and the expansion of education and of public sector employment allowed a high degree of upward social mobility. (1999, p. 54)

As we will see in the next section, the popular forces as well as factions of the traditional Sunni merchant groups did not quietly accept such experimentations of the private sector with the Syrian economy. We thus look into the crisis that engulfed Syria, so that, for the first time, Hafiz al-Assad’s state building project was seriously challenged by various groups within Syria.

2.2. Popular Protest and the Contestation of State Power: 1977–1982 The first crisis of the centralized economy became apparent in 1977 when the private sector left the mass of Syrian population disillusioned and living standards stagnated. Private sector activities in the unproductive sectors of the economy negatively impacted consumption levels of ordinary Syrians. Aziz al-Ahsan has noted that production of items such as matches, rubber boots – mostly worn by the poor – radically decreased. Instead, salons and luxury shops opened by 1978 appealing to the rising middle classes and the elite (Ahsan, 1984, pp. 309–310). As active opposition to the regime mounted, the state was forced to intervene in order to restore social order and protect the state. The state responded by active intervention, both by crushing dissent and limiting the private sector’s sphere of activity. This active intervention by the state was possible precisely because al-Assad had not abdicated his political powers in the course of limited economic liberalization (ibid., 1984, p. 318). At the same time, he did not want to alienate his newly established broad political base that included groups such as landlords, merchants, peasants and workers. The corporatist state re-emerged once again as the private sector had failed to carry on the task of economic development successfully.


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The crisis took the form of organized opposition to the regime signified in the Hamah rebellion of 1982.8 In the absence of any effective political outlet, opposition movements were forced to hit the streets. The discontent emerged from stagnant living standards, the dominance of the private sector over the public sector, a polarization of land ownership and the alienation of the Sunni-based middle class, muslim brotherhood from the state and inability for social mobility due to dominance of Baath Party in the state.9 In short, there was an overall discontent with al-Assad’s development strategy.10 The state responded to these oppositions by imposing regulations on merchants, and private manufacturing firms.11 Taxes were increased on private sector activities and raw materials were directed towards public sector enterprises. Furthermore, tax evasions were punished by the state, and state-run financial institutions became the central credit offering bodies (Lawson, 1989, p. 27). In the meantime, as Perthes argues, the measures taken by the state in no way represented a serious restriction on the private sector as the private sector was assured that no return to socialism and no expropriations would take place. The measures then were more ‘corrective’ aiming at further facilitating the development of the private sector with the help of the state. Through the establishment of the Committee for the Guidance of Imports, Exports and Consumption in 1981, the state clearly deferred to the private sector for economic development and planning (Perthes, 1993, p. 54). The state indeed played an important role at this point, forcing the private sector to learn to survive, through encouraging competition and overlooking the activities of the private sector.12

2.3. Crisis of the Planned Economy: 1983–1985 Until the early 1980s only limited liberalization had occurred. Liberalization measures of the 1970s had not corresponded to structural changes, as the state was still heavily involved in the economy delivering social policies with the help of oil revenues. The failure of the private sector to invest in the manufacturing or industrial sectors definitely made it necessary for the state to keep a central role in the economy (Ahsan, 1984, p. 312). Another reason for the strong role of the state in the economy and a check on the private sector was the high level of resistance from 1977–1982 to liberalization policies. During the first half of the 1980s, the crisis of centrally planned economy became unmanageable by the state. In response, the state actively encouraged the private sector to play a more central role in the economic

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development of Syria. Faced with a foreign exchange crisis and an unfriendly international climate for loans and economic aid, al-Assad saw private investment as the only way to deal with the crisis. To this end, he introduced a series of radical reforms in the interest of expanding the role of the private sector in the economy. Richards writes that the structural weakness of ISI became apparent in the late 1970s and early 1980s. Due to spiraling down oil prices, the state’s revenue shrank. As a result, the expenditure of the state led to inflation and a growing external debt, which grew ten fold between 1970 and 1983. The $2.3 billion debt plagued the economy (Richards, 2001, p. 47). Faced with the option of going to the IMF and World Bank and subjecting the state to the conditionalities of these institutions, on the one hand, or allowing a bigger role for the private sector, on the other, al-Assad’s regime opted for the latter option. Some form of export-oriented development strategy came to determine the goals of economic development in mid-1980s. However, this did not mean an overnight disappearance of state planning. Clearly, state planning had come to a crisis from which it could not escape without rearticulating the role of the state. This crisis reached its peak point after efforts of the 1980s did not lead to high growth and social problems persisted, while the international political landscape underwent radical change as the USSR faced its collapse. Perthes has argued that the second phase of liberalization in 1983 was qualitatively different from the earlier infitah of the 1970. This qualitative shift was seen in an overall shift in the government’s development strategy. Liberalization was not simply encouraging the private sector to participate in the economy; at this point, it meant the private sector was to be the main agent of economic development (ibid., 1993, p. 55). With the support of the emerging private sector, al-Assad attempted to adopt an independent development policy and reducing the reliance of Syrian development on the official development aid and geopolitical rents (Sukkar, 1993, p. 39). Raymond Hinnebusch (1993) and Nabil Sukkar (1993) have argued that the Syrian state posed a serious threat to successful liberalization. This threat no longer remained strong in the face of crisis of ISI with growth levels dropping to 1 per cent per annum. Building a national power base through state-supported consumption became unsustainable as the revenue sources of the state began spiraling downwards. As Hinnebusch (1993) writes, the Syrian state had overdeveloped with the help of rents and as soon as rents disappeared, it became impossible to support the large public sector. Austerity measures and cutbacks in public spending were pursued as a way of resolving the foreign exchange crisis. Economic reforms


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included a reversal of the role of the private and public sectors in accumulation and redistribution policies. As the government withdrew from planning and industrialization, state revenues and employment generation became dependent on the private sector. The government relaxed regulations and introduced incentives in order to encourage the private sector’s involvement in the economy (Hinnebusch, 1993, p. 101). Contradictory attempts by al-Assad with the goal of extending the life of the planned economy was a sign of the failure of the planned economy to generate growth and meet social needs without facing macroeconomic imbalances in the context of increasingly neoliberal global economy. Policies such as increasing wages and removing import restrictions unmasked the desperate struggle of al-Assad’s regime to revive a failing economy (Perthes, 1993, p. 55). The economic reforms of this period aimed at increasing the sphere of activity of the private sector while at the same time limiting the role of the public sector in the economy. The socio-economic impact of the reforms fell unevenly on the shoulders of that portion of the working class who worked in the public sector and those who depended on state subsidies for reproducing themselves (small farmers, peasants, workers and the unemployed). First, the shift towards an export-oriented economy led to the concentration of private property in land in the hands of few (Quilliam, 1999, pp. 48–49). In the manufacturing and industrial sectors, the private sector was allowed to keep 50 per cent of their hard currency export earnings for their own imports. Another main element of the second phase of infitah was the phased devaluation of Syrian currency in the interest of expanding Syrian exports (Perthes, 1993, pp. 56–58). This currency devaluation was coupled with high levels of inflation and price explosions during 1986–1987. ‘‘Consumer prices rose by 36 per cent in 1986 and 60 per cent in 1987, but true inflation rates were believed to have increased by more than 100 per cent in each of these two years’’ (Sukkar, 1993, p. 28). Next, in order to facilitate private sector activity, the reform of the regulatory framework was undertaken. At the same time, the monopoly of the public sector in basic consumer items such as rice, sugar, tea, coffee and cooking fat was broken with an eye to encouraging the private sector activity. Abandonment of state control over trade, investment and fiscal policies announced the end of state’s central role in determining production and consumption (Perthes, 1993, p. 59). More and more, the Central Bank of Syria had gained power in determining not only monetary and fiscal policies, but also making decisions about the overall economic development of Syria (Sukkar, 1993, p. 28).

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The economic reforms unevenly affected the different social groups and classes. If we look at who gained and who lost, we will notice that at a general level the private sector clearly gained. However, scratching below the surface, we will notice that not everyone within the private sector gained. Those aspects of the private sector, which relied on state protectionism for reproducing themselves lost to a newer private sector whose interests were more directly linked to external markets than to the domestic market. In a sense, the self-imposed Syrian reforms resembled the structural adjustment policies that were often imposed by the IMF on many other economies in the same period or earlier (Perthes, 1993, p. 56). The infitah of the 1980s impacted the public sector unfavorably, exposing the sector to intense competition with the private sector. This often took the form of mixed sector or joint ventures, which was the outcome of legislation passed in the late 1970s and 1980s. The state was ‘‘a silent partner holding a minimum of 25% share’’ (Polling, 1993, p. 15). As Perthes has pointed out in this period, ‘‘Public sector enterprises would not receive foreign exchange for their imports beyond what they obtained for their exports or, if foreign markets were inaccessible to them, from ‘exports to the local market’, that is, local sales of their products against hard currency’’ (Perthes, 1993, p. 57). Despite these reforms, the state avoided a complete erosion of its fragile legitimacy by maintaining a degree of social policy and redistributive mechanisms. This took the form of subsidies and public services, which was supported by the elite for fear of social disorder. The Syrian state at the time was actively engaged in convincing every interest group of its good intentions. On the one hand, it convinced the private sector of its commitment to reform, on the other it continued subsidizing basic commodities through heavy subsidies in order to maintain its base of support (Heydemann, Steve cited in Quilliam, 1999, p. 92). In sum, the burden of state expenditure in the absence of revenues led to a serious economic crisis, which took the form of lack of foreign exchange. State planned economy had reached its logical end and could not go on any longer without falling apart. The alternative path pursued by the state at this point was simultaneous encouragement of mixed sectors, on the one hand, and export led growth, on the other. In short, the state began heavy mobilization of private resources and capital for the purpose of economic development. This shift in economic development project was accompanied by a series of serious reforms, which many argue marked the first phase of non-reversible economic liberalization in Syria. This included measures for liberalizing trade and investment through expanding the reach of the private sector.


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2.4. Market Economy and Competitive Austerity: 1985–1990 This 1985–1990 period marked the beginning of increased competition between the public and the private sectors, which was reflective of the shift in global development strategy whereby private investors gained a dominant role in guiding economic policies of nation states. Rather than privatizing state corporations, the Syrian state imposed the logic of competition on state firms forcing them to sink or swim. While the private sector was offered numerous incentives, including tax breaks and tax holidays, the public sector was constantly scrambling to meet the social needs of the domestic population and keep up with profitability levels (Perthes, 1992). The emerging weakness of the USSR and the East Bloc further strengthened the shift to market economy and the Syrian state preemptively sought a re-orientation in its economic policy through a self-imposed austerity measures and reforms. The state in Syria had been remade time and again, but it had not lost its relevance as a social force and its role as the means for capital accumulation. As we will see in the next section, while the economic role of the state is left for the private sector in many sectors, the state still exerts its power in implementing political changes that would guarantee accumulation as well as survival of the state. Hence, the state has been engaged in performing two tasks: increasing the influence of the private sector, and restructuring the political landscape to reflect the changed balance of social forces. This is a very sensitive task, which is reflected in the gradual and uneven nature of liberalization in Syria. This phase of reforms aimed at liberalizing investment, trade and prices, as a strong policy shift in favour of the private sector (Perthes, 1993, p. 59). As a result, the private sector made many significant gains during this period. For instance, while in 1983 private manufacturers were able to keep 50 per cent of their hard currency earnings from exports, by 1987 this percentage had increased to 75 per cent and the range of goods covered under this law had also broadened (Richards, 2001, p. 48). Richards referred to the new gains of the private sector as a blurring between ‘Mafya Kapitalism’ and ‘Arab Socialism’ as power became more and more concentrated in the private sector through its access to the state bureaucracy. In the agricultural sector, reforms benefited the bigger landlords and improving farmers. As early as 1980s, the private sector had gained entry into the agricultural sector, and, except for cotton, wheat and sugar beets, they had access to all other goods. ‘‘Private sector farming has remained a dominant force in agricultural production, and between 1987 and 1991 it accounted for two-thirds of the cultivable land’’ (Quilliam, 1999, pp. 48–49).

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In response to the profitable terms for exports, agricultural production became more and more specialized and geared towards the external markets. Richards argues that such changes strengthened the relationship between the merchants and the military leading to a ‘soldier-merchant’ alliance (Richards, 2001, p. 49). The second foreign exchange crisis in 1986 prompted the Syrian state to engage in generating foreign exchange resources through encouraging export led growth and a bigger role for the private sector. As Sukkar has noted, ‘‘The new strategy calls for exporting ‘whatever can be exported’, and the policy has been pursued even at the expense of fulfilling domestic needs’’ (Sukkar, 1993, p. 34). Pointing to the same phenomenon Perthes writes: Apart from foreign trade and currency regulations, this initial phase of the second infitah involved a substantial liberalization of Syria’s agricultural economyy . Beneficiaries of the new regulation were mainly ‘new class’ businessmen or crony-capitalists whose economic success depended heavily on their relationship with members of the regime elite. (Perthes, 1993, p. 57)

Liberalization measures of the late 1980s involved a move away from social pricing towards economic pricing, reduced subsidies on farm products, leaving farmers on a level ground with the private sector, reduced quantities of rationed food items, which removed the guaranteed market for the farmers, and an increased base for taxation (15 per cent sales tax imposed on luxury items. As a result, competitiveness has come to determine the survival of different sectors of the economy. The distributive effects of the reforms have often meant that the income gap has widened within Syrian society, with a minority accumulating most of the wealth. While the diminishing of the public sector has led to massive unemployment, the managers and controllers of the public sector will definitely lose, unless they succeed at competing with the private sector (Sukkar, 1993, p. 38). During the decade of the 1980s, the state implemented a number of political reforms to facilitate the involvement of the private sector in the economy. For instance, independent decision-making bodies – such as the Prime Minister’s Committee for the Guidance of Imports, Exports and Consumption with a heavy influence and presence from the private sector – were constituted to deliver policy decisions. In addition, the people’s council was altered to increase the number of independent candidates by bringing in members of the chambers of commerce of different cities. In 1990, one-third of the seats in the People’s Council were indeed reserved for the private sector, highlighting the radical transformation of the Syrian state over the course of the twenty years (1970–1990). ‘‘This was also a sign that the Baath


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Party, though still a patronage-generating entity, was beginning to lose its ideological leadership and its pivotal role in the policy process’’ (Quilliam, 1999, pp. 91–92).

3. THE TRIUMPH OF GLOBAL CAPITALISM AND THE END OF STATE PLANNING: 1990–2000 The new world order ushered in a new phase of substantive infitah in Syria. The Syrian state did not completely abandon its policies of central planning until 1990. It was in 1991 that with the introduction of its Investment Law No. 10, Syria attempted to make a radical break with import substitution through liberalizing investment and banking.13 This break in economic policy corresponded with significant political reforms at the state level. The decade of the 1990s posed serious challenges to the Syrian regime. With the collapse of the East bloc and the dominance of the capitalist economy, and the failing public sector performance, the Syrian regime attempted to reorient its policy direction (Polling, 1993, p. 19; Sukkar, 1993, p. 31; Kienle, 1993, p. 1). This reorientation entailed the introduction of important economic policies that reflected the dominance of the global economy. As Owen and Pamuk have noted, majority of the elite in Middle East have been convinced that except for economic liberalization, there is no other way forward (Owen & Pamuk, 1999, p. 242). In the process, the state underwent a process of restructuring, albeit slow and uneven. New forces, which had gained power during the previous phases of infitah had come to the forefront and they exerted a lot of power in determining economic policy. Thus, Syria began the pursuit of market economy in more pronounced ways than during the previous decade. This section will discuss the important policy shifts of the 1990s and the uneven impact of this policy on different social groups in Syria. It is noteworthy that the policy changes required a radical restructuring of the Syrian state, a project that has continued under Bashar al-Assad. Alan Richards (2001) discusses the period from 1985 crisis till 2000 and how policies have been formed in the period. The first measure of economic development shift was captured in Investment Law No. 10, which aimed to attract Syrian, Kuwaiti and other Arab investors who fled Kuwait during the Iraqi invasion to invest in Syria. The significance of this law lies in the fact that it marks a radical break from the hesitant investment reforms of the 1980s. By introducing this law, the state bestowed full freedom and

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guarntee to investors under very favourable conditions. It also meant that private investors could now engage in any sector of the economy as the public sector become more and more limited in its sphere of activity. As Fida Nasrallah writes, Investment Law No. 10 not only expanded the general sphere of activity and political power of the private sector, it also made ample room for foreign capital, which strategically aimed to encourage Lebanese capital in Syria (Nasrallah, 1993, p. 137). It should not be overlooked that laws that expanded the total share of private sector in the economy had been introduced as early as 1988 when the Ministry of Industry affected a reversal in the role of the public and private sectors in terms of freedom of production and investment. A list of 30 industries was to remain the exclusive domain of the public sector, and the rest was left free for mixed sector and the private sector. Previously the government had identified the industries that the private and mixed sectors were allowed to enter and everything else was the special domain of the public sector (Sukkar, 1993, p. 33). Richards has highlighted important aspects of Investment Law No. 10, which reflects on a new balance of power in favour of the private sector: ‘‘Under this law, which covered investments of over 10 million LS ($240,000), investors could propose projects in any economic sector. Approved projects are given a 7 years’ tax holiday, are largely exempt from customs duties and import restrictions and are granted generous profit and foreign exchange repatriation’’ (Richards, 2001, p. 49). In an attempt to boost export led development, companies that exported over 50 per cent of their production, received an extra two years of tax holiday (Sukkar, 1993, p. 35; Perthes, 1993, p. 60). Beside tax holidays, companies were offered exemptions from customs duties and import restrictions. This law also allowed the formation of joint stock companies and, for the first time, private banks in Syria (Sukkar, 1993, p. 33). Parallel to the Investment Law No. 10, a new tax law was introduced, which reduced corporate and business tax substantially. While the stated goal of government for this law was enticing investors, the law clearly points to the heightened importance of the private investors in Syrian economy, allowing the private sector to engage in sectors that were previously reserved only for the public sector. As Kienle has pointed out, the liberalization of 1990 marked a break from the discreet nature of transitions of the past decades (Kienle, 1993, p. 1). Taking advantage of the failing state of the public sector and of a state without a vision for economic development, the private sector successfully exploited these weaknesses and strengthened its structural position within the Syrian economy.


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By the 1990s, for the first time since 1963, the private sector had a bigger share of the Syrian economy in terms of investments in comparison to the public sector (Perthes, 1993, p. 60; Hinnebusch, 1993, p. 106). As Patrick Seale writes, this law served as a landmark on the path towards capitalist development in Syria (Seale, 1993, p. x). The dominance of the private sector was coined in the term ‘economic pluralism’ which came to characterize Syrian economy during the 1990s and onwards. Although misleading, the term was still significant in that it suggested the end of the public sector dominance in the economy. While during the 1970s and early 1980s, the public sector, the private sector and the mixed sector were said to compliment each other, by late 1980s and in 1990s it was argued that the three sectors must compete with each other (Sukkar, 1993, p. 33).14 In the agriculture for instance, the private sector gained control over production, pricing and marketing during the liberalization of the 1990s. Despite the dominance of the private sector, the public sector still remained in control of food, sugar, textiles, chemicals, engineering, cement and building materials (Quilliam, 1999, pp. 49–50). Commenting on the pace of reforms and obstacles to reform, Sukkar writes that due to the fragile balance of power in Syrian society and the negative social effects of economic liberalization, it is very possible that reforms will follow a slow and gradual pace. Sukkar argues that, in the course of the 1990s, two opposing views have emerged on the particular path of reform: The first deals with the transformation of public enterprises into joint stock companies, grouping them according to their functions under a number of holding companies as, for instance, in Egypt and Algeria, as a prelude to reforming and rehabilitating individual enterprises on a case-by-case basis. This approach leaves the door open for the introduction of necessary new laws and regulations that could convert these enterprises into market-oriented profit-making entities. The other view involves amending existing laws, rules and regulations governing public enterprise operations to make enterprises more autonomous. It suggests that enterprises should be given more say in purchasing inputs, marketing outputs and price fixing, and should retain all the surpluses they generate, only handing over taxes to the central government. This view still holds, however, that price fixing should remain centrally determined, and should be guided by economic and social considerations. (Sukkar, 1993, p. 41)

From the excerpt above, it is clear that the logic of capitalist development, competition and profit seeking have become the uncontested path of economic development. The only difference between these views tends to be on how fast reforms should be implemented and whether the poor and workers need to be protected against the side effects of such reforms or not.

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Maintaining the public sector as the producer of basic commodities speaks more to the socio-economic realities of the Syrian society than to its lack of commitment to economic liberalization. Close to two million of the total eighteen million Syrians live below the poverty line according to UN report of 2005 on Syria. The official 14 per cent unemployment rate does not include those who have precarious and insecure jobs. As long as the public sector remains in control of production of basic commodities, there will be a certain guarantee for political stability and social order, something that the fractured, but newly emerging elite seeks (Perthes, 1993, p. 63). Richards has also offered similar explanations for the slow pace of reform. Beside the fear of social disorder, the vested interests of the old bourgeoisie and state elite are other factors that has put a break on the pace of reforms in Syria, which Richards has called Syrian reforms as ‘dilatory’ (Richards, 2001, p. 46). Another reason for the public sector’s involvement has been the inability of the private sector to take on the task of national economic development through reviving the productive sectors of the economy; this will continue to prevent Syrian economy from abandoning its public sector support (Hinnebusch, 1993, pp. 101–102; Hinnebusch, 1990). Given the interdependence of the global economy with its global division of labour, it is highly unlikely that the Syrian ruling class will ever achieve this goal, when it can find alternative ways for accumulating capital. The economic reforms have definitely led to a polarization of wealth and marginalization of the majority of the Syrian population. There has been a concentration of property in the hands of a minority while the petty bourgeoisie’s share of the national income has shrunk radically in the wake of the Investment Law No. 10. ‘‘In 1991, the average capital of newly established private industrial projects amounted to only US $25,000 whereas the average capital invested in new industrial and service companies established according to Investment Law No. 10 of 1991 exceeded $4 million’’ (Perthes, 1993, p. 62). As the state expands the role of the private sector, it has abandoned its active role in sustaining social policies and redistributive measures. Social policies and state expenditure are often supported, not by taxes, but through sales of oil, which according to the IMF, will be gone by 2020. At the same time, the performance of the private sector has been marginal in terms of the positive growth and redistributive measures. The rate of job creation has declined from 4.8 per cent in 1990 to 2.9 per cent in 2000. According to Arab Human Development Report 2005, unemployment has increased from 912 per cent in 2000 to 14 per cent in 2004. Other reports state unemployment at 20 per cent (United Nations Arab Human Development Report (AHDR), 2005).


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While liberalization will continue, it is not certain that it will pick up pace without requiring serious political reforms as well as political risks for the regime. Perthes has pointed to the establishment of a Syrian stock exchange along with private insurance companies and foreign private banks as part of the package of reform that was underway throughout the 1990s (Perthes, 1993, pp. 63–4). The political risks mentioned earlier indeed forced the regime to opt in favour of selective liberalization, something that the IMF (2005b) report has pointed out. The Syrian regime was faced with a number of social problems and economic imbalances by 2000. These included a 4 per cent labour force growth with a 1 per cent growth in the economy (Richards, 2001, p. 46). In order to deal with these problems, the Syrian regime has continued on the path of economic integration through signing bilateral free trade deals, such as GAFTA, WTO, EU-Mediterranean (Economist Intelligence Unit (EIU), 2005). Hence, liberalization of trade and investment has come to dominate the economic policy dimension of the Syrian regime over the course of 2000–2005. Ever since Bashar al-Assad took power in 2000, different views have emerged as to what his rule might mean for the Syrian state and economy. While the media in the region suspect any substantive change in the Syrian economy and state, evidence suggests otherwise. Bashar al-Assad’s rule indeed represents a crucial breaking point from his father’s era. This shift is reflective of a larger shift in the nature of ruling class interests. In order to successfully integrate into the global economy, the Syrian ruling elites have come to a crucial realization. The framework of Baath Party and its way of organizing the state no longer represents the interests of the newly emerged factions of the ruling class. Although the military and security forces have been resisting any radical change in the nature of the state and Baath Party, a gradual process of de-Baathification has been occurring since the beginning of 1970s as part and parcel of economic liberalization and development of capitalism in Syria.

3.1. Neoliberal Economic Development and Bashar Al-Assad’s Regime: 2000–2005 With the end of Hafiz al -Assad, his son Bashar al-Assad has had to deal with the legacy that his father left behind. Despite various expectations from the era of Bashar al-Assad, his regime continued the path of economic development that was put in place by his father. The developments that the

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Syrian state and economy have undergone under Bashar al-Assad’s regime are evidence of a qualitative transformation of the Syrian state. The rising influence of the pro-reform factions of the ruling class and their participation in the political decision-making process since 1990s, has come to determine the course of economic development and state reform under Bashar al-Assad. While the old guard, embodied in the Baath Party members, have resisted a fast pace of reform, it is a fact that a neoliberal logic of economic reform has been dominant in shaping a wide range of political, legal and institutional reforms. Despite this strong tendency towards market reform, there are serious obstacles to the neoliberal project. These obstacles can be summed up as the remnants of a traditional society such as the persistence of a moral economy and of customs. Other obstacles are structural weaknesses of the Syrian economy and legal framework that are not conducive to a competitive global economy where investors seek guarantee of private property. The results so far has been the formation of crony capitalism where old ties between the ruling classes have led to new opportunities for a transformed ruling class that is more attuned to the global economic logic. This said the concept of a national economy has been withering away in the face of the decline of the public sector. This section will discuss the coming to power of Bashar Al-Assad, the economic and political reforms under him, what these reforms mean in terms of balance of class forces and transformation of the state, and finally the impact of these reforms. In a newspaper article published in 2005 about the nature of Bashar al-Assad’s rule, Sami Moubayed pointed out that the Syrian parliament is adorned by portraits of conservative speakers from as far back as 1919 up to the present day. Ten years ago, these portraits did not exist as part of Syria’s history. While the conservative past has been restored, there still exist pictures of socialist leaders of the 1960s in the current parliament (Moubayed, 2005). This attests to the current conjuncture where conservative forces have come to hold the balance of power. As mentioned earlier, ‘economic pluralism’ is reflected in the various elements that are depicted in the parliament of Syria, although it is very clear and acknowledged by many that the influence of Baath Party has been on a decline for a long time now. Bringing together the emerging factions of the ruling class along with the pro-reform Baathists, Bashar al-Assad has been engaged in the remaking of the Syrian state and economy. Unlike his father, Bashar al-Assad did not hesitate to get help from the IMF and the World Bank.15 In fact, his minister of finance who was appointed in 2005 is an ex-World Bank economist. From this point of view, the period of his rule is quite significant, especially in terms of the impacts of the new path of economic


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development on the process of class formation and socio-economic problems that might accompany it. Adopting a neoliberal economic development agenda, Bashar al-Assad has pursued a series of economic and political reforms, which have further expanded the realm of activity and freedom of the private sector. The economic reforms include further liberalization of trade, investment and other capital flows, all of which transfer political decision making to the hands of a minority in the Central Bank of Syria and ministry of finance. An assessment of the liberalization period from 1990–2005 by IMF tends to praise the series of reforms undertaken by the Syrian regime. According to the report, under Bashar al-Assad’s rule, ‘‘Prices have been largely liberalized, trade and foreign exchange regimes have been simplified and liberalized, the tax system has been streamlined, and the private sector’s field of activity has been broadened to virtually all sectors of the economy, including banking and insurance’’ (IMF, 2005a, p. 25). Political reforms under Bashar al-Assad have been all geared towards facilitating the transition to a market economy. These reforms entail a qualitative shift in the nature of state that reflect structural gains of the emerging elite and are more in tune with the demands of a global capitalist world market (i.e., needs of private investors for regulatory framework and legal protections). Institutions of a modern state are being implemented as economic pressures are mounted against the regime. The failure of the public sector justified the regime’s accommodation with the private sector. The institutions of a modern state, as supported by the IMF and World Bank and making resonance among Syrian reformers, essentially entail a liberal democratic framework whereby rights of private property are guaranteed while market forces are unleashed. Bashar al-Assad’s reforms have led to a reorganization of social forces, although it is too early to determine the final outcome of his reforms as the process is still undergoing. Nonetheless, at this stage, it is still possible to sketch out the general impact of his reforms. An important reform under Bashar al-Assad, has been the grand project of building a modern state. This has entailed the removal of political barriers to such a project. In Syria, this obstacle is identified as the Baath Party’s relation to the Syrian state as well as the role of the executive. The shift in economic policies in the 1980s and onwards has slowly dismantled the power base of the Baath Party. The Baath Party traditionally represented class mobility; however, under Bashar al-Assad more independents and representatives of the private sector have penetrated the state and other positions of power within society. At the same time, Bashar al-Assad has imposed mandatory retirements of the

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security and military forces.16 While the political economy of Baathism is facing a serious threat by rapid liberalization of the economy, the relevance of the military and security forces might not come to an end as easily. As Quilliam has noted, ‘‘The armed forces and the security services have remained the most durable repositories of state power. y Their access to the state and the regime is underwritten by their indispensability to state and regime security. y Unlike the People’s Council, and the NPF, the military centres of power are not subordinate to the president’’ (Quilliam, 1999, p. 81). The destruction of the power of military and security forces within the Baath (either through purges or cooptation) represents a final blow to the structures of the old state that Baathists had built in the 1950s and 1960s. It was not until Bashar al-Assad’s rule that the power of the executive became subjected to change. Prior to Bashar al-Assad, the executive power represented almost the absolute power of the person of the president. The President appoints the prime minister, appoints the speaker of the People’s Council, makes laws when the Council is not in session, legislates without the Council’s consent, vetoes the parliamentary laws, and, finally, dismisses the People’s Council (ibid., 1999, p. 72). The transformation of the executive has been triggered by demands from both the domestic elite as well as IFIs. Despite economic liberalization policies of the last thirty-five years, Syrian and Arab investors do not feel protected enough by the state through rule of law, suggests Quilliam (ibid., 1999, p. 89). This has been one major reason behind the reform project of Bashar al-Assad since he took power in 2000. These demands find support within the IFIs, such as IMF and the World Bank. The IMF report of 2005 on Syria, for instance, has identified the declining oil prospects as a serious worry for the Syrian economy. The report argues that by 2020 Syria would have exhausted its oil resources. The only way that the Syrian economy could sustain the burden of reduced oil revenues is to pursue a rapid process of market economy. The report further argues that Syria has failed to solve the unemployment and poverty problems because of its failure to provide an investment friendly environment for investors. The suggested reforms to help the Syrian economy and society would entail a radical shift away from state planning to free market enterprise. This argument is premised on the lack of efficiency of the public sector enterprises. According to the report, the state-owned enterprises are irrationally organized, over-staffed under-paid employees and cumbersome.17 It is suggested that Syria needs to diversify its economy through expanding the export base of the economy before the oil runs out. Other reforms that are prescribed entail expanding the range of activities of the private sector, and fiscal reforms, which would lead to an overhaul of


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the subsidy system and reduced public expenditure. The report also offers the following recommendations and policy suggestions: make the Central Bank act as the fiscal agent and move the bulk of assets from the commercial bank of Syria to the Central Bank of Syria, unify the exchange rate, liberalize trade, reduce tariffs and the number of banned products radically, maintain efficiency of the public sector by creating competition between public and private sector (impose market imperatives and let the public sector sink or swim). The target industries and firms are pharmaceuticals, textiles, engineering and assembling of durables. In order to implement these economic reforms, however, it is necessary that the Syrian regime implement a series of institutional reforms. The stated goals of institutional reforms according to IMF report are the following: ‘‘Institutional reforms aim at strengthening competition, good governance, property rights and the rule of law. Judiciary reform would aim at strengthening the independence of the judiciary branch and at updating legislation and improving the process and effectiveness of business related penal cases’’ (IMF, 2005a, 2005b). These reforms will increase investment flows to Syria, argues the report. Although most of these reforms have been implemented by Bashar al-Assad’s regime, IMF argues that the reforms have not been fast enough to meet the challenges of Syrian society. There is a further need for comprehensive restructuring of the public enterprises, which could be achieved if the public enterprises are exposed to market logic of competition. According to the IMF, for successful integration into the global economy, Syria needs to modernize its state and economy. Modernization of state has meant the need to separate the ruling or governing party from the state, whereas modernization of the economy has entailed a break away from centralized planning by the Baath Party as well as a separation of the economy from political interests, something that is hoped to render the economy more rational and efficient. In short, it is argued that Syria needs a modern state, with liberal democratic elements, such as competing parties, free elections, free media as well as a set of civil liberties, all of which would create a stable society that could function within the capitalist world market. The obstacles to reform mainly come from the military and security forces along with remnants of the old industrial bourgeoisie who demand slower pace of reform. The old bourgeoisie still requires a certain measure of protectionism due to a lack of competitive edge. All of this suggests that all factions of the elite agree on one point and that is the need for political stability alongside economic freedom. So far, it seems that the need for the first has led to a slower and uneven pace of economic reforms, exposing the

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compromises that the elite are willing to make. Quilliam attests that since 1990, the Baath Party has been losing to the private sector and new classes of infitah elite (1999, p. 87). The public sector has deteriorated over the last twenty years, while the private sector has come to dominate the economy. By the 1990s, the ills of the private sector covered: ‘‘the multiplicity of supervisory organizations, centralized regulations for the purchasing of inputs and the marketing of outputs, poor management, old equipment, excessive employment and undercapitalization. In proposing solutions, comments focused on the need for decentralization and true autonomy, separation of ownership from management, application of economic criteria in assessing performance, differentiating between economic and social objectives and giving the public sector the same incentives as those given to the private and mixed sectors’’ (Sukkar, 1993, pp. 31–32). It is important to note that both Assads’ regimes maintained the public sector, not through active investment and industrial policies, but rather through exposing it to competition with the private sector. The United Nations report on Syria sounded the alarm about the socioeconomic effects of market reforms in that society. The report based its conclusions on the dismal record of the private sector over the past twenty years. As it stands, Syria is gripped with massive unemployment and poverty, an expanding labour force and an incapable private sector that has failed to invest in sectors that could absorb this level of growth of the labour force.18 In the face of this reality, the report strongly advocates the Syrian state to take an active and interventionist role in the economy. In order to expand its revenues, the state must reform the current taxation structures so that taxation becomes more equitable in terms of distributing the costs. The report also warns against liberalization due to the negative effect of the global economy on the smaller industries and on the tariff-protected industries such as consumer durables industries, pharmaceuticals, textiles and clothing industries. In spite of these warnings, the Syrian state under Bashar al-Assad has been transferring economic decision-making powers to a greater degree to the private sector. Later on, economic prices replaced social prices, which could no longer be sustained by a state that had abdicated its sources of revenue as it gave major tax breaks and tax holidays for private sector. Further reforms were paralleled by a process of separation of economic from political over-sight, relegating economic decisions to the forces of the market (represented in the state by the Central Bank and ministry of Finance). The role of technocrats has increased in economic decision making and determining production and consumption options. Experts from the IMF and the World Bank have filled


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in different ministries, filling in the gap that the bankrupt regime of al-Assad has left in place. Institution building also falls within the broader project of introducing a market economy in Syria. The main goal of these institutions is to achieve efficiency while ‘rationalizing’ bureaucracy. In other words, the state has to shed its heavy bureaucracy and reduce the costs of running a state. At the same time, a series of legal and institutional reforms are aimed at securing the rights of private property and contract. As the private sector’s reach has expanded, the state has begun a process of heavy taxation of the population. While, at the moment, this process has many flaws, it is expected that in the near future taxation would be made more rational and effective. The three phases of infitah first aimed at fostering a capitalist class under state direction and guidance; then, in the 1980s, the private sector’s sphere of activity was expanded and its role in the economy became more dominant as opposed to the public sector; and, in the late 1980s and early 1990s, the private sector gained freedom to make decisions on finance and investment, as a way of entering the global economy. By 2000, the role of the private sector further expanded in foreign trade and investment as well as finance. This attests to the dominant role of the private sector in the economy and its power in determining not only fiscal and monetary policy, but shaping the overall development agenda in its own interest. It might be appropriate to end this discussion with the quote by Bashar al-Assad’s deputy Prime Minister for economic affairs, as this statement clearly highlights the dominant trend for economic policy under Bashar al-Assad: ‘‘In an October interview with Arabian Business, a Dubai-based magazine, Mr. Dardari [deputy prime minister for economic affairs] claimed: ‘We are adopting fully free trade, free investment, an open investment climate, we are liberalizing our monetary and fiscal policies, and we are liberalizing and deregulating our banking sector and financial system’’’ (EIU, 2005, p. 22).

3.2. Obstacles to a Neoliberal Market Economy There are different obstacles in the path of developing a market economy, the most important ones are the structural constraints imposed by the global division of labour and the increased integration of the global economy. At the same time, Syrian economy lacks both institutions and a skilled labour force in order to compete in the global economy. In the absence of protection for property rights and the persistence of large state bureaucracy, foreign investment would be discouraged from entering the Syrian economy, a reality that cannot be overlooked (Richards, 2001, p. 51; Karshenas, 2001, pp. 59–79).

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The fear of the elite for political instability also prevents a fast pace of economic reform. This would prevent a full-scale implementation of neoliberal economic development agenda. As Quilliam notes: The state cannot afford to alienate its public sector support for the latter credits the state with legitimacy. Extensive economic liberalization would create widespread dissatisfaction among the Syrian population. The state’s ability to insulate itself form unpopular sentiment would be severely restricted as unemployment, the removal of basic food subsidies, and a diminution of welfare services would erode legitimacy. On the other hand, comprehensive economic liberalization would not benefit the bourgeoisie as it would expose it to intense competition. (1999, pp. 94–95)

Polling points out that the slow pace of liberalization is due to Baath’s fear of regime collapse and the end of its power (1993, p. 15). Thus, with sufficient support against liberalization, the regime would follow a gradual pace of reforms rather than a fast paced one that is recommended by the IMF and World Bank. Furthermore, the experience of the last two decades of reforms suggests that the process of integration into the world market by attrition of the public sector is a messy process with undetermined outcomes. For a start, there is no guarantee that the private sector is capable of taking on the responsibilities for generating growth that would contribute to a better standard of living for Syrian population. The nature of economic activities that the Syrian elites pursue fall within speculative activities that only benefits a few at the expense of many. The productive sector of the economy would stagnate and the brunt of this economic crisis would easily fall on the workers and the poor. This would carry negative implications for the elite as the legitimacy of the regimes erodes with increasing social inequalities. This explains the caution that is displayed in implementing liberalization reforms by the regime and the complicity of the Syrian ruling classes. The polarization of wealth in Syria has led to social inequalities. The main source of state revenue has been oil rents, which according to IMF predictions will completely disappear by 2020. This prevents the state from continuing on its ISI path and, in the absence of an industrial policy; it has turned to the private sector for policy formation. While it is true that the effects of declining oil has not yet been felt and the state still experiences a degree of autonomy in social policy due to oil exports and new gas findings, Syrian Scholar, Bassam Haddad highlights a set of socio-economic problems in Syria. He writes that: An all-time high unemployment rate (between 20 and 25 percent depending on the source) only reinforces these expectations. The entire middle class, shrunken as it may


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be, and the disenfranchised Syrian working classes outside the public sector, including peasants, are feeling the strain of the current economic and political circumstances. (Haddad, 2001)

Government investments in the public sector represent a precautionary measure to provide social safety nets that could cushion the negative effects of liberalization. These investments cannot be seen as an ideological commitment of the state towards the public sector as it is suggested by Bessam Haddad and other scholars of Syria. While in terms of power of the regime, many argue that the oppressive arm of the regime has not tired out and this is therefore taken as a sign for the durability and unchanging nature of the Syrian state, yet there are other signs that the Syrian state is undergoing serious and qualitative change. These changes have destabilized the party-state relations, removing the traditional Baath Party from its dominant role in the state. Indeed, no one should be surprised at this change as the path of economic development since the 1980s had already set this process in motion. In effect, political decisions are taken out of the hand of the Baath Party and are left to the private sector as it has come to dominate the policy-making process. This transformation has become known as de-Baathification of the state, but carries significant implications for the transformation of the state as well. Over the years a division within the Baath Party has appeared where some Baathists have opted to modernize themselves, i.e., reproduce themselves through adjusting in a market economy. This group aims to lead the path of liberal democratic transition by making space for multiple competing political parties. At the same time, the elite and the regime clearly want to make a break from the past. As Sami Moubayed notes, ‘‘There are moves to drop the word ‘socialism’ from the objectives of the Baath Party and replace the longstanding trinity of ‘unity, freedom and socialism’ with ‘unity, democracy, and social equality’’’ (Moubayed, 2005). The Syrian state and economy seem to have reached a critical impasse. There have been disparate attempts at finding a way out of the current impasse through opening up the political space. In the absence of any clear force to lead the economy, the regime is hesitant to give into the demands of any particular group fearing a total collapse of the political order. Although most of the regime’s faith is put in the private sector, the repeated failure of the private sector to effectively organize the economy pose signs of worry among the resisters to reform. The situation has become grimmer in light of

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larger socio-economic problems that exist in Syria. As Omayma Abdel-Latif writes: The economic situation in the country has alarmingly declined. Complaints about price hikes and low salaries are voiced everywhere. Syria, according to the Arab Human Development Report, has the lowest level salaries in the Arab world. With an economic growth rate set at 3.7 per cent and a poverty-line population estimated, according to official figures, at 1.5 million out of Syria’s 18 million total population, many Syrians are struggling to make ends meet. (Abdel Latif, 2006)

4. CONCLUSION The history of class struggle in Syria in the post-war period has entailed a gradual liberation of economic forces from political constraints and social regulations. In Syria, it is clear that pre-capitalist social relations determined the nature of state and economic development until the late 1960s when Hafez al-Assad used the state to fundamentally reorganize production and social relations in Syria. The state in Syria under Hafiz al-Assad became a class in itself that directly organized the Syrian economy. This was achieved precisely because the old landed ruling class had failed to organize the economy and respond to the socio-economic crisis that had engulfed Syria. Such fusion of economic and political powers within the state continued until the early 1990s when the crisis of state planned economy unfolded. State planning had empowered a new class of private interests who begin seeking partial autonomy in organizing production.19 Thus, it was in the 1990s that a crucial phase of state formation led to the beginning of a formal separation of the economic from the political, a process that is still on going and has not been completed. This uneven pace of market reform (infitah or liberalization) can be understood as the complex process of transition to capitalism and integration into the capitalist world market. The difficulty of achieving this task lies in the specific balance of power, the nature of ruling class interests and the degree of their connectedness to the world market. It also depends on the ability of the ruling classes to reproduce themselves within the existing social relations whereby traditional ties (kinship, tribal identities and relations of clientelism) persist within a pre-capitalist system. The process of transition in Syria, as in a number of other developing countries, is important in the larger historical development of global capitalism.20 In order to reproduce the system, all parts need to be integrated and the responsibility for reproducing the system as a whole is divided


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among all member states. While efforts are made to achieve this goal, the outcome has been contradictory and uneven.21 The project of building capitalism in the Middle East has been complicated by the resilience and persistence of non-capitalist social relations. Thus, among other factors such as colonialism that have led to the uneven process of transition and integration into the global economy, in Syria the persistence of non-capitalist social relations has been quite significant. Indeed, the persistence of non-capitalist social relations is a characteristic shared by many Arab states and societies, which has definitely complicated the process of transition to a market economy. In Syria, it can be argued that the transition to capitalism has not occurred as a clean break from a previous mode of production. Transitions can be better understood as processes that are slow, but more importantly dialectical, depending on the particular balance of social forces at the particular historical period. Thus, there is no guarantee that the old ruling class would not return to power, especially in the context of a radical change in the balance of social forces.22 The institutions of the Syrian state are also reflective of the complex interaction between a pre-capitalist set of social relations and a modern, yet centralized state with hierarchically organized institutions. With the takeover of power under Hafiz al-Assad in 1970, a conscious process of capitalist development was launched under the auspices of the state. This project entailed the balancing of different social forces in Syrian society and at the same time gave rise to new classes who benefited from stateled industrialization in agriculture and industry. The contradictions of stateled planning, however, forced the state to encourage the private sector to take a more central role in mobilizing economic resources and managing growth. The inability of the private sector to perform the task of economic growth and management ensured a continuation of the role of the state in the economy throughout the 1980s. It was not until the 1990s that the private sector began to demand more autonomy in organizing the economy (Wood, 1995, p. 25). Emerging private-sector forces demanded a transformation of state institutions with the goal of de-politicizing economic decisions. While these demands did not face serious opposition, the Baath Party and the regime emphasized caution and a gradual transformation in the interest of maintaining and defending the state itself. The Baathists fear that a rapid transition to a market economy and a dramatic transformation of state institutions would destabilize the state altogether (Richards, 2001, pp. 50–51). In 2005, Syria’s state and economy retained some aspects of a planned economy in that the ruling Party has been deeply involved in shaping and

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organizing the economy. IFIs argue that a close relationship between the state and the ruling party does not provide a proper framework for the development and success of a market economy. It is also argued that this deep involvement of the ruling party in the economy and within the state represents a weak state, which could crumble once the ruling party loses power. In order to remove these uncertainties, Syria needs to modernize its state and economy. The prospect of reduced oil production in the coming decade has been used as a pretext to warn Syria to diversify its export base. The process of global economic integration and capitalist restructuring in Syria has corresponded with the dismantling of the socialist and progressive aspects of the Baathist Party. Although these suggestions have only been issued in 2005, Syria has already embarked on a series of reforms of both its economy and state since the 1970s. The difference between Syria and other Middle Eastern states is that liberalization has resulted from pressures by the domestic forces in response to Syria’s socio-economic crisis since the 1970s. By 1991, a serious shift in the Syrian economy had occurred. This shift towards a market economy reflected a larger shift in the nature of ruling class interests and their reorientation towards the global economy in the 1990s. At this point the ruling classes in Syria consisted of four different groups. The divided interests within the ruling class factions, as well as the need for regime and state stability, are the main factors that have stalled the liberalization process of Syria’s economy. Liberalization has been resisted by both the public sector employees and the military wing of Baath, whose power would crumble if the Syrian economy were fully liberalized (Sayyigh, 2005). This process is further complicated by the close relationship between the Baath Party and the military. The path of modernization and the shift towards a market economy has entailed a process of self-destruction of the Baath Party. State restructuring has not reduced the role of the state, but has rather shifted the role of the state in serving the interests of the private sector (e.g., implementation of new laws, removing Baathists and replacing them by technocrats and representatives of the private sector). The political economy of state building under Hafez al-Assad depended upon maintaining a delicate balance between all social forces, at least during the first phase of infitah. Faced with the crisis of the ISI and a hostile international environment in terms of financial aid and support in the 1980s, Assad chose the side of the merchants and the landlords, while crushing any dissent against his policies. Despite small steps to join the global economy, Assad continued to keep a balance between the different social forces and especially among the different faction of the elite and nouveaux riches.


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This style of political leadership became the legacy of al-Assad and was abandoned or was no longer sustainable under his son Bashar. Over the past thirty-five years, the balance of forces has come to favour the liberal reformers who have established their dominance over economic policy. At the same time, the remnants of the statist regime, i.e., the traditional industrial bourgeoisie, the military and security forces have been isolated from the state through the withering away of the Baath Party and the restructuring of the state. Under Hafiz al Assad’s regime, the military and the security forces had gained power through their association to the state and their economic links to the merchant classes, to whom they extended their services and provided protection. This relationship was viable as long as Syria maintained a protectionist economic policy while also keeping a central role for the Baath Party within the state. With the liberalization of the economy and the transformation of the state, this traditional role of the military can no longer exist, as the material base for its existence would disappear. The old bourgeoisie has two options: reorient itself and reform to adjust to world market demands and shed its old ties with the military or go under. It is still too early to determine which path it will opt for. As for the military, the lack of legitimacy of the regime is the last remaining reason for its existence. This explains the clamp down on civil society by the military at end of the Spring of 2001; it represented a struggle for power and survival on the part of the Baathist regime and its military apparatuses. The drive to become competitive has led the Syrian state to remove all sorts of barriers to capital flows and investments. At the same time, the state has reduced or eliminated social policies, exposing insecure workers and peasants to market forces. The maintenance of a certain degree of public sector involvement will rescue the state from full collapse by cushioning society from the activities of the private sector. Nonetheless, even the Baathists have all come to an agreement about the need to reform; the disagreement tends to be more on the pace and nature of reform and not necessarily about the shift to a market economy.

NOTES 1. The US has embarked on an unprecedented project of remaking the Middle East. Prior to the invasion of Iraq and even after, regime change was identified as the tool of achieving this goal, at least in 2003, this was very clear. The US Congress’s Syria Accountability Act (April 2003) was prepared as a preamble to justify regime change in Syria, with the hope that the invasion of Iraq (March 2003) would go

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smoothly and then the next stage of remaking the Middle East would be Syria. There is clearly a link between the US war on terror and the expansion of capitalism especially in the case of the Middle East. As stated by the current US president, ‘The advance of freedom is the calling of our time; it is the calling of our country.’ George W. Bush, November 6th, 2003. See bibliographical entry below. As this citation conveys it well, the United States has assumed an important historical role as the facilitator of capitalist system through distributing risks and integrating different societies into the system. Individual states are being disciplined by the American police state along with international financial institutions, so that these states would accept the capitalist hierarchical and uneven global division of labour and contribute actively in reproducing the system. For a discussion of the significance of The US Congress’s Syria Accountability Act (2003), see Stephen Zunes, 2004 (US policy towards Syria and the triumph of neo-conservatism (2004). Middle East Policy, 11(1), Spring). 2. Although the conflicts between Syria and Lebanon could be traced back to their historical division in the aftermath of the fall of the Ottoman Empire, it was in mid1970s when Syria and Lebanon’s relations became entangled. Syrian aid was requested by the Christian Lebanese president in 1976 to deal with the civil war and the in flow of Palestinians into Lebanon. Syrian forces remained in Lebanon until 2005 when the US and Israel forced their withdrawal. Currently there are over one million Syrian workers in Lebanon, whose remittances are important to the Syrian economy. As well, there is a strong link between Syrian ruling classes and Lebanese bankers. The conflict between Syria and Lebanon could not understood without a study of the role of Israel in the occupation of Palestine and its aggressive interventions and attacks in Lebanon. Scholars have argued that Syria and Israel could be considered as two competitors who struggle for regional influence. In the current situation when the US is in Iraq, Syria is seen as a source of instability in Iraq and therefore the US has been pressuring Bashar al-Assad to control the borders between Syria and Iraq. There are a number of excellent accounts of Syria’s regional foreign relations (see Volker Perthes, 2004). Another excellent scholar of Syria is Bassam Haddad. His articles often appear on Middle East Report online. Haddad (2005) has produced critical and insightful commentary on Syria’s current situation especially in the context of America’s war on terror in the Middle East, available at: (http://www. merip.org/mer/mer236/haddad.html). For voices from an American think-tank that regularly study Middle East policies, see Claude Salhani (2003) (Syria At The Cross Roads. Middle East Policy. 10(3), Fall, 2003). 3. For a useful source that provides a rich study of different angles of Syrian domestic and foreign policies under Hafiz al-Assad until the mid-1980s (see Ma’oz and Yaniv (1986)). 4. In the absence of a better term that could describe the Syrian state in the 1970s and 1980s, I have used the commonly used term ‘planned economy’. Owing to the confusion this might cause, it is important to qualify the use of this term in the case Syria where it does not imply the same thing as scholars attributed to the economies of the East Bloc. Given the predominance of pre-capitalist social relations, the Syrian state played an important role in the economy, albeit this was not a conscious and coordinated role, but one that was constantly contested by various interests in Syrian society. In fact, in the history of modern Syria (since WWI), this was the first instant


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that the centralization of state and economy were taken up in such a decisive manner. Thus, we could conclude that while the Syrian economy was planned by the state, the scope of planning and the incoherence of it along with an undeveloped state, made the Syrian ‘planned economy’ qualitatively different from the traditionally planned economies of the East Bloc. 5. It is argued that these policies were the effect of Nasser’s influence in the same period in Egypt, when very radical social policies were implemented under Nasser, with an eye to achieving Arab socialism. Petran (1972) has argued that despite their commitment to socialism, the radicals were inadvertently promoting agrarian capitalism in Syria. The policies of this regime although aimed at building socialism led to the development of capitalism. 6. As Olson has noted, al-Assad’s institutional innovations and political appointments were all aimed at striking a balance in the power among various factions of the ruling class. Although he reduced the power of the urban landed classes, nonetheless he integrated them into the state alongside other minorities and groups from rural Syria (Olson, 1982, pp. 132–133). 7. Similar to Sadat in Egypt, winning the 1973 war with Israel gave currency and legitimacy to Assad’s unpopular economic policies and rallied Syrians behind his state building project – See Perthes, 1993, p. 54; Quilliam, 1999, p. 54; Petran, 1972. 8. The conflict between the state and the contending Sunni groups lasted for two weeks in the course of which the state coercive apparatus destroyed large portions of the City of Hamah and killed at least 10,000 civilians (Cleveland, 2000, p. 394). 9. Early 1976 marked a high point in the development of overt, organized opposition to the Baath regime in Syria’s north central provinces. During February, rioting occurred in several north central cities following the death of a widely respected leader of the Islamic movement in a government prison. The most serious of these disorders took place in Hamah, where local merchants and students clashed with police and army units. This marked the beginning of the Islamic struggle against the Syrian regime (Lawson, 1989, pp. 24-5). 10. ‘‘In the autumn of 1978, a number of leftists and Nasserists opposed to the regime were elected to [local union committees] from unofficial lists, competing with those prepared by the party hierarchy. These candidates ran on platforms sharply critical of the emphasis being accorded to private enterprise in the country’s development program’’ (Lawson, 1989, p. 27). 11. The Islamic opposition to the regime in this period was the combined protest of the Sunni merchant class and its ideological wing, the muslim brotherhood as well as a popular protest against the rising prices of daily food items. In a sense, the main opposition to the regime came from the traditional ruling class constituting the merchants, urban notables and old landlords as well as the Islamic ‘ulama’ or religious leaders (Olson, 1982, pp. 63–164). The failure of the Islamic opposition to seriously challenge the regime was due to a crucial absence of a broad base of support for the Sunni majority in the rural areas. In other words, Sunni merchants and landlords, who have traditionally been based in the cities, cannot claim support among the peasants. The Baath Party, however, finds mass support among the rural peasantry as well as the minorities whom it effectively integrated into the institutions of the state. Although this was the nature of the struggles in the late 1970s, the current struggles are radically different. These struggles are taking place between a

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reformist, newly constituted ruling class and the classes that gained their power through running state corporations and cooperatives. 12. The unintended outcome was a fragmented bourgeoisie who could not act as a collective negotiator on behalf of capital. This is a unique feature of Syrian bourgeoisie and merchant classes, who are still struggling to form a coherent class alliance (Perthes, 1993, p. 49). 13. Syria’s Investment Law No. 10 can be compared to Egypt’s Investment Law No. 43 of 1974. It has been argued that while Egypt implemented investment and trade liberalizations, Syria lagged behind in these two areas and it was not until 1991, when the Syrian state embarked on such high scale of liberalizing the economy by extending freedom of investment, exchange and trade to the private sector. 14. Sukkar further adds, ‘‘The public sector is dominant in oil, banking, construction and, until recently, foreign trade, while the private sector has been dominant in agriculture, tourism and domestic trade’’ (Sukkar, 1993, p. 26). 15. Under Hafiz al Assad, the revenues from oil exports, workers’ remittances and other strategic rents helped Syria avoid dealing with the IMF and the World Bank (Richards, 2001, p. 49). 16. The Baath Party has penetrated the Syrian society in every way and their influence within the public sector has mass support among Syrians who depend on subsidies. The destruction of Baathists is not an easy fight for the reformers to win. 17. In 2005, the state-owned enterprises ranged from oil sector, telecommunications, ports, power generation and distribution, water, air transfer, prices of key commodities. 18. Child labour constitutes 18 per cent of the total labour force in Syria. Close to 70 per cent of Syrians earn less than $100 a month. Slum dwellers constitute two millions out of the total 18 million population of Syria (UNDP, 2005). 19. It is noteworthy that the global environment also served such private interests very well as the US pursued its project of democratization in the Middle East. The fall of the East Bloc had delivered a blow to state planned economies that now had to learn to adapt to a global capitalist environment by learning the tools of capitalist accumulation. 20. Capitalist expansion has entailed the integration of non-integrated spaces and social relations under the dominant capitalist social relations. According to the IMF and the World Bank, Syria represents a closed economy given its low level of international trade links. Its lack of integration into the capitalist world market is also reflected in the low level of debt that it carries, according to the World Bank and IMF. Syria’s debt has remained at very manageable levels and its foreign reserves can support it for up to 212 years. Although the argument for economic reform uses the declining oil prospects as its main reason, oil constitutes only 15 per cent of the Syria’s GDP and Syrian economy represents one of the most diversified economies in the whole Arab world. Syrian economy is divided into agriculture, industry (food, olive oil), textile, pharmaceuticals, engineering, consumer durables and over time, with the closer integration into the global world market, the share of work force in the agriculture has declined dramatically, while the ratio of labour force in services and construction has increased. (IMF, 2005a, 2005b; UN report on Syria, 2005). United States Library of Congress Report on Syria.


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21. Here I am referring to the ‘democratization’ project of the United States in the global south since the end of the Cold War as a process of transplanting liberal democratic institutions. 22. While here I am thinking of the return of the old conservative ruling class in Syria under Hafiz al Assad, a similar situation occurred in France in the nineteenth century when the old ruling class power was restored under the Second Empire of Louis Napoleon Bonaparte right when the progressive forces had their high hopes and expected a radical social transformation (see Karl Marx, 1963).

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Olson, R. W. (1982). The Ba’th and Syria, 1947 to 1982: The evolution of ideology, party, and state. Princeton: The Kingston Press. Owen, R., & Pamuk, S- . (1999). A history of Middle East economies in the twentieth century. Cambridge, Mass: Harvard University. Perthes, V. (1992). The Syrian private industrial and commercial sectors and the state. International Journal of Middle East Studies, 24(2), 207–230. Perthes, V. (1993). Stages of economic and political liberalization. In: E. Kienle (Ed.), Contemporary Syria: Liberalization between Cold War and Cold Peace. London: British Academic Press in association with Center of Near and Middle Eastern Studies, School of Oriental and African Studies, University of London. Perthes, V. (2004). Syria under Bashar al-Assad: Modernization and the limits of change. New York: Oxford University Press. Petran, T. (1972). Syria. New York: Praeger. Polling, S. (1993). Investment Law No. 10: Which future for the private sector? In: E. Kienle (Ed.), Contemporary Syria: Liberalization between Cold War and Cold Peace. London: British Academic Press in association with Center of Near and Middle Eastern Studies, School of Oriental and African Studies, University of London. Quilliam, N. (1999). Syria and the new world order. UK: Ithaca. Richards, A. (2001). The political economy of economic reform in the Middle East: The challenge to governance. RAND project. Salhani, C. (2003). Syria at the cross roads. Middle East Policy, 10(3), 136–143. Sayyigh, Y. (2005). US and European support to democratic reform: The intentions and practices as seen from the Middle East. In: B. Rahbek (Ed.), Democratization in the Middle East. London: Aarhus University. Seale, P. (1993). Preface. In: E. Kienle (Ed.), Contemporary Syria: Liberalization between Cold War and Cold Peace. London: British Academic Press in association with Center of Near and Middle Eastern Studies, School of Oriental and African Studies, University of London. Sukkar, N. (1993). The crisis of 1986 and Syria’s plan for reform. In: E. Kienle (Ed.), Contemporary Syria: Liberalization between Cold War and Cold Peace. London: British Academic Press in association with Center of Near and Middle Eastern Studies, School of Oriental and African Studies, University of London. Wood, E. M. (1995). Democracy against capitalism. London: Verso. Zunes, S. (2004). U. S. policy towards Syria and the triumph of neo-conservatism. Middle East Policy, 11(1), 52–69.

Reports and News Articles: Abdel Latif, O. (2006). What now for Syria? Available: http://weekly.ahram.org.eg/2006/783/ re202.htm Haddad, B. (2001). Business as usual in Syria? MERIP. Fall. Available: http://www.merip.org/ mero/mero090701.html Haddad, B. (2005). Syria’s curious dilemma. MERIP (236). Fall. Available: www.merip.org/ mer/mer236/haddad.html


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International Monetary Fund (IMF). (2005a). Syrian Arab republic: 2005 article IV consultation-staff report; and public information notice on the executive board discussion. IMF Country Report No. 05/356, October. International Monetary Fund (IMF). (2005b). Syrian Arab republic: Statistical appendix. IMF Country Report No. 05/355, October. Library of Congress – Federal Research Division, Country Profile: Syria (2005). Available: http://lcweb2.loc.gov/frd/cs/profiles/Syria.pdf Moubayed, S. (2005). Soft De-Baathification in Syria. Al-Ahram Weekly. Available: http:// weekly.ahram.org.eg/2006/788/re6.htm The Economist Intelligence Unit (EIU). (2005). Syria at a glance: 2006–2007. Country report. The economist intelligence unit, 15 Regent St, London SW1Y 4LR, United Kingdom. United Nations Arab Human Development Report (AHDR). (2005). Arab human development report 2004: Towards freedom in the Arab world. Syria. United Nations. United Nations Development Programme (UNDP). (2005). Macroeconomic Policies for Poverty Reduction: The case of Syria. United Nations. United States Congress. (2003). Syria Accountability Act. Available at http://www.whitehouse. gov/news/releases/2004/05/20040511-7.html