Dilemmas of development in Syria

I recently attended a seminar in Damascus hosted by the United Nations Economic and Social Commission for Western Asia (ES-CWA). It was aimed at some stocktaking on the recent development strategies and experiences in the region. The theme of the seminar was “rights-based development,” that is, the problem of how to combine growth with equity in such a way that ordinary people are able to realize basic human rights to jobs, education, a minimum standard of living, etc. The seminar began with a presentation by the Deputy Prime Minister for the Economy, Abdullah al-Dardari, and speakers included ESCWA team leader Ali Kadari and the President of the Syrian Economic Society, Dr. Issam al-Zaim.

A major theme that came out of the seminar was the need to correct the neo-liberal agenda. If it can be argued that the neo-liberal revolution was a healthy correction, in some respects, of the previous statist develop-ment strategy with its bloated public sectors and enervation of private entrepreneurship, the subsequent attempt to uncritically apply neo-liberalism as an ideology in the region has not been wholly positive. There needs to be a correction of the neo-liberal tangent itself.

What has, unfortunately, become clear from empirical studies is that the Middle East has lost its earlier status as one of the regions with the most equitable income distributions and has become one of the more unequal areas of the developing world. Investment in the public sector has declined and the gap, notably in job creation, has not been filled by private investment. Moreover, such private investment is largely in the tertiary sector and much of it takes the form of crony-capitalism.

The problem of capital light has not been solved even though the bourgeoisie have achieved privileged access to decision-makers as compared to the earlier “populist” period. The lack of investment, hence job-creation, combined with conspicuous consumption by the minority of winners — the crony capitalists — fuels extremism which, in a kind of vicious circle, prevents improvements in the investment climate.

The consensus of the seminar was that these failings cannot be overcome without a simultaneous reform and renewed empowerment of the state as a vehicle of social reform, economic management and even selective investment in strategic sectors. The factors often said to be associated with the spectacular success of the East Asian NICs, the only Third World region to break out of under development, included state leadership of development, land reform, investment in education, merit recruitment to the bureaucracy (technocracy) and its autonomy from excessive politicization. At least some of these factors were a feature of the statistic era in the Middle East.

Another major challenge that requires re-thinking is how to “tame” crony capitalism. The risks of investment in the region are such that investors will often only be attracted if they can earn rent and their political connections give them security.

The problem is that possibly productive capitalism will be discriminated against, deterred from investment for lack of an even playing field or victimized by predatory practices.

There is, however, no point in wringing one’s hands about the evils of crony capitalism which appears to be an inevitable stage in the transition from state-centric to market capitalism, and is certainly so in the Middle East. What practically can be done is to try to nudge crony capitalists into becoming productive competitive capitalists by reducing the opportunities for excessive rent by encouraging a more competitive market and restraining predatory practices. This could be advanced by such measures as empowering the judiciary and incorporation into the Euro-Med partnership, which defines certain standards of transparency and non-discrimination (albeit having its own down-sides). One could look at the case of Vietnam which is a relatively small state that has faced a similar challenge of transition from statism to market capitalism. These general issues have relevance for the Syrian case. Syria has gone through two sharply different development experiences, the pre-Ba’th liberal and the Ba’thist one, both of which had positive and negative aspects. Syria should try to take lessons from and combine the positive aspects of both. In the pre-Ba’th period, the entrepreneurial culture produced a wave of industrial invest-ment and agricultural modernization. The challenge is to re-start this tradition and to get through the period of crony capitalism as quickly as possible. On the other hand, the temptation to uncritically adopt the neo-liberal formula must be resisted.

The danger is that, having lagged behind in adopting the neo-liberal model, Syria, in its haste to “catch up,” may make the mistakes of the Arab states that preceded it along this line. It would be a shame, for example, if Syria were to follow Egypt in rolling back land re-form, perhaps the most important achievement of the Ba’thist period and importantly, a feature of the most successful East Asian NICs. Land reform is widely understood to be an essential step to modernization and in Syria, when combined with co-operatization, it produced positive effects in terms of production and productivity as well as enabling greater security and equity for the peasant majority.

Some people now claim that the Baath Party is an obstacle to reform. In as much as it incorporates and represents a wide rural constituency, however, it may be a salutary check on the excesses of neo-liberalism. What is important is that the party be differentiated from the other branches of government and made to specialize in the proper role of a party, namely the mobilization of support and articulation of interests in the legislative process.

One cannot expect the party to wholly separate itself from the sources of patronage; this is the fuel of political parties anywhere; but limits can be put on it. Opposition parties must be allowed to represent interests excluded from the Ba’th and to compete with it sufficiently that the ruling party can be held accountable. The bureaucracy must be given enough autonomy to allow merit recruitment and economic decisions to be made on objective grounds. Similarly, the judiciary has to professionalized and de-politicized enough to enforce rule of law. Such reforms depend on a continued reformist drive from the presidency.

Unfortunately, both Syria’s ability to concentrate on reform and the improved investment climate needed to make them pay off, have been profoundly obstructed by the geo-political struggle in which the hegemon US has sought to enforce its grip on the Middle East. As long as the hegemon was a force for stability, Syrian and US interests could be accommodated. Washington recognized that Syria was pivotal to regional security and to an Arab-Israeli settlement and that the latter was, in turn, the key to sustained regional stability. However the capture of Washington by the extremist Bush-neocon clique which sees “creative instability” in the region to be in its and Israel’s interests means Washington has spurned the deals Syria has offered, insisting it can lay down the law to Damascus and punish it for its opposition to the invasion of Iraq.

This set off the struggle over Lebanon that is now the single most important obstacle to Syrian reforms. It distracts and jeopardizes the reforming presidency. It has isolated Syria from Europe, frozen the Euro-Med agreement and alienated former key al-lies and investors in the Arab Gulf. How far the Hariri affair will be used to destabilize Syria is a matter now inextricably embedded in wider regional struggles including an ominous Shiite-Sunni conflict that has been sparked by the increasingly interlinked conflicts over Lebanon, Iraq and Iran.

Prospects for Syrian reform depend on the recapture of power in Washington by main-stream moderate opinion as exemplified in the Baker-Hamilton report or, alternatively, a European recognition that Washington is the problem, not the solution, hence the need for the EU to recover an independent Middle East policy. Only if the hegemon returns to its role as stabilizer or is checked by other powers is there much hope that the Middle East investment climate can recover sufficiently to make Syrian reforms pay off in renewed growth.