Economic liberalization and social transformations in pre-war Syria

Understanding the root causes of the Syrian conflict must include an analysis of socio-economic transformations that preceded the 2011 uprising. Fast tracked economic liberalization of the 2000’s deepened economic inequalities and eroded social safety nets, causing part of the disenfranchisement that prompted the protests.

Samer Abboud

The Syrian conflict presents one of the world’s worst humanitarian catastrophes. But beyond the humanitarian dimension, the conflict is precipitating large-scale social transformations in the country, and in the wider region. While the Syrian uprising of 2011 and the violence that followed cannot be attributed to a single cause, and the uprising took root in a context marked by a multitude of interconnected factors, a dimension that has received relatively little attention is the political economy of pre-2011 Syria. Such an analysis provides necessary insight into core questions around how people’s material conditions contribute to collective dissent, disenfranchisement, and the decisions to mobilize and demand change.

Many progressive observers of the Syrian conflict have conflated the Syrian regime’s ostensibly anti-imperial foreign policy positions with a parallel economic system generally viewed as socialist. Indeed, the Syrian economy was certainly oriented in some ways towards wealth redistribution and social protections from the 1970s onwards. But by the 2000s, the public sector and distributive state were abandoned in favor of an increasingly marketized economy that increased poverty, inequality, and hardship in the decade prior to the uprising.

For the sake of analytical clarity, we can separate the political economy of post-colonial Syrian state into three phases. The first phase roughly corresponds to the so-called radical Ba’athist regime from 1963-1970. The second phase was that of Hafiz al-Assad’s Presidency from 1970-2000. And, the final phase was that of his son, Bashar al-Assad’s Presidency from 2000-2011.

The second phase saw the dramatic expansion of state institutions and the public sector, under the rule of Hafiz al-Assad. Buoyed by oil rents and grants from regional states, the Syrian economy displayed impressive development gains while various social forces that had traditionally been peripheralized during the period of landlord-dominated rule prior to 1963, reaped substantial material gains. Access to key services, such as education and health care, was improved, and the expansion of the public sector provided secure, stable employment for almost a quarter of all working Syrians.

State expansion did not only occur in the economy: the military and security apparatus suppressed all expressions of political dissent and all forms of political organization.

The traditional mainstay of the Syrian economy, agriculture, benefitted from land nationalization schemes, the establishment of cooperatives, secure access to machinery and seeds, and a progressive pricing policy that incentivized domestic consumption. However, this economic system was underpinned by severe political suppression. State expansion did not only occur in the economy: the military and security apparatus, increasingly under the direct control of the President and his inner circle, suppressed all expressions of political dissent and all forms of political organization.

By the late 1980s the Syrian economy was displaying signs of stagnation and de-development, primarily caused by the fiscal crisis of the mid-decade. This initiated a gradual process of reform and liberalization to alleviate the fiscal pressures on state reserves. By the early 1990s, pressure for pro-market reforms increased from within the centers of power. A series of investment and de-nationalization laws emerged that sought to incentivize private sector activity. Yet, these reforms remained limited and largely inconsequential as the state sought to simultaneously suppress any political organizing from business interests. By the end of the century, and with the passing of Hafiz al-Assad, the momentum for reform was very strong.

The first decade of Bashar’s rule was the decade that directly preceded the uprising, and it was characterized by a series of economic liberalization measures.

When Bashar al-Assad inherited the Presidency in 2000 after his father’s death, he also inherited an economy that was stagnant and experiencing development regression. In many ways, Bashar al-Assad was presented to Syrians as an economic savior; a reformer who understood the demands of the 21st century much better than his father and his inner circle.

The first decade of Bashar’s rule was the decade that directly preceded the uprising, and it was characterized by a series of economic liberalization measures that radically changed Syria’s economic structures. Bashar oversaw the gradual dismantling of the public sector and the introduction of marketizing measures throughout the economy. These measures subjected Syrian citizens to the harmful effects of an economy that was increasingly marketized but simultaneously marked by the withdrawal of social protection, such as subsidies.

For political reasons, the Syrian public sector could not be completely abandoned. Nor could it be subjected to wholesale privatization, as occurred in other countries in the Global South under the auspices of the International Financial Institutions (IFIs). Nevertheless, a technocratic class of planners adopted their own version of neoliberalism that resembled the policies being imposed in other countries of the Global South. The language of deregulation, flexibility, choice, and reform saturated Syrian economic debates in the 2000s. Thus, unlike cases in which liberalizing measures were imposed from outside, Syrian neoliberalism was justified from within.

The unspoken element of the social market economy was the preservation of authoritarian rule and regime stability.

The tension between the need to preserve social protection while introducing a market economy was captured in the social market economy slogan officially adopted at the 10th Ba’ath Party Regional Conference in 2005. This new approach to economic development sought to marry social protections with a market economy. The unspoken element of the social market economy was the preservation of authoritarian rule and regime stability. Markets needed to be introduced, but they could not do so in a way that threatened social stability and thus Assad rule. The political inspiration for marrying markets and regime stability was derived from what Syrian intellectuals referred to as the ‘China Model’. Syrian planners adopted what were considered “gradual” reforms loosely modelled on an understanding of how Chinese reforms from the 1970s onwards introduced market relations into hitherto protected sectors of the economy.

Privatization through the sale of public sector enterprises to the private sector was avoided. Instead, the economy was to be marketized by deregulating economic activity, subjecting prices to market fluctuation, and incentivizing new forms of private sector investment into the economy.
The economy was not to be privatized through a fire sale of public sector enterprises, but rather marketized through the stimulation of private sector activity in the economy. For example, one of the first sectors of the economy targeted for reform was banking. The Syrian government passed laws allowing for the operation of private sector banks in Syria’s free trade zones in 2003. These zones were physically located in coastal areas and were not subject to national laws. They were “free” zones insofar as economic activity was less regulated, such that private banks could operate in these zones and provide services to enterprises there but not in the rest of the economy. After successfully piloting these banks, they were allowed to operate in the national economy. Similar measures were introduced in the insurance sector. Health care and education services were also marketized leading to the mushrooming of private clinics and schools in Syria. As the state introduced measures to shift social and economic responsibilities to the market, fiscal measures gradually rolled backed the Syrian subsidy system.

Pricing policy was de-controlled gradually over a series of phases in the 2000s, eventually eliminating price ceilings and fiscal interventions altogether. Prior to these deregulations, the price of most food consumed by Syrians was protected through state interventions, either through subsidies or the enforcement of price ceilings. By the end of the decade, many of these interventions had been rolled back and the price of food, along with other goods and services, was increasingly determined by the market. More generally, the relationship between citizens and the state was increasingly mediated by the market. The marketization of the Syrian economy – from banking to price de-regulations –introduced domestic and regional capital interests into Syria. By liberalizing markets, the Syrian regime had opened the economy to private capital interests. These investors were positioned to reap the economic benefits of an increasingly pro-market ethos in Damascus.

Contrary to the sloganeering of the social market economy, the social protections that were to soften the impact of marketization of the economy were largely absent from policy in the 2000s. The imagined employment that was to result from marketization simply never materialized as the private sector was unable to absorb the hundreds of thousands of unemployed and underemployed workers. Public sector employment was dramatically reduced, providing even fewer outlets for Syrian labour. This largely meant a decade of declining wages, while prices and cost of living increased exponentially. Official statistics placed unemployment in the decade at consistently around 10% while unofficial estimates ranged between 20-30%. In the middle part of the decade, one economist estimated that salaries would have to triple just to meet basic living standards. A new, essentially managerial class that was connected with market expansion in the financial services emerged, as well as an entrepreneurial stratum that benefited from trade liberalization. But these gains were concentrated, not distributed, leaving most Syrians at the mercy of rapid economic change.

New patterns of social stratification developed as a result, with a nouveau riche emerging alongside new managerial and entrepreneurial forces. As in many other neoliberal contexts, gains were generated but they were concentrated. There were two institutional effects of this concentration of wealth in Syria in the 2000s. The first was overtly political. Increasingly, business interests were represented in the Syrian parliament as either independents or members of the Ba’ath Party. The presence of business interests in parliament – no matter how cosmetic parliamentary deliberations are in Syria – was an acknowledgement of the importance of these interests to state power. The increasingly public visibility of Syrian business interests paralleled an increasingly technocratic government that oversaw the implementation of capital-friendly policies.

Social protections meant to soften the ill-effects of wealth concentration never materialized.

The second effect was the emergence of new forms of business power in the form of holding companies that brought together Syrian capital interests. Prior to the marketization reforms, Syrian business interests were largely represented in the Damascus and Aleppo Chambers of Commerce, although these institutions primarily represented individual board members’ interests rather than a collective interest. In the mid-2000s, the two holding companies Cham and Souria were created as institutional expressions of business power. These holding companies merged and networked Syrian capital interests. By the end of the decade, public assets and economic responsibilities were increasingly transferred to the two holding companies and Gulf-based capital conglomerates. This was made possible by legal reforms, which introduced a public-private partnership law, enabling the privatization of the economy.

Within a few years, power plant projects, major national highways covering the entirety of Syrian territory, an urban metro network in Damascus, and new airports, were all projects that were to be realized through public-private partnerships. At the same time, decrees promulgated throughout Syria’s various ministries eliminating public sector monopolies on major projects, including electricity and transportation, thus displacing the central role of the public sector in major national works. Within this framework, the government committed to transfer land, capital, assets, and provide tax exemptions to the private sector. The role of the public was not merely as a partner to private capital but also as a facilitator of land transfer and tax exemptions.

During the decade prior to the uprisings, the Syrian state had undergone dramatic transformation that sought to expand opportunities for domestic and regional private capital to reap the benefits of an increasingly marketized economy. Simultaneously, social protections meant to soften the ill-effects of wealth concentration never materialized. Wages stagnated, living costs increased, jobs were unavailable, and public services were increasingly underfunded and inaccessible. All of this is not to suggest that the hardships of the 2000s directly led to the uprising. Rather, the worsening material conditions of most Syrians, and increasing economic inequalities within Syrian society, formed a contributing factor that fed political discontent. Combined with severe and violent repression by the state security apparatus and other domestic and international factors, these conditions led Syrians to massively take the streets in the spring of 2011.

Samer Abboud is associate professor of global interdisciplinary studies at Villanova University. His research focuses on political economy and addresses the manifestations of neoliberalism in the Arab World. His publications include Syria (Polity Press, 2018) and The Struggle for the New Arab State: Postcolonialism, Privatisation and Political Change. He tweets at @samer_abboud