Middle East Economic Models: State Intervention & Capitalism
Understanding State Intervention in Middle Eastern Economies
Goals were widely held by citizens at large, thus presenting no impediments to the interventionist state.
Case Studies: Characteristics of Interventionist States
Common Blueprint for Radical Transformation
Specific states—Egypt (1957-74), Algeria (1962-89), Syria (1963-present), Iraq (1963-present), Tunisia (1962-69), Sudan (1969-72), and Libya (1969-present)—shared a common blueprint for the radical transformation of their societies and economies.
Public Sector Performance Metrics
Profit and loss should not be the primary criteria for assessing public-sector performance. More appropriate tests of success include:
- Creation of jobs
- Provision of cheap basic necessities
- Introduction of new economic activity to remote or poor regions
- Achievement of self-sufficiency in goods of a strategic or military nature
Central Planning and Administered Prices
It was assumed that the operation of supply and demand was inferior to central planning and the application of administered prices. The state had to set prices so that basic necessities (food and clothing) were always within reach of low-income groups.
Skepticism Towards the Private Sector
The large-scale private sector was viewed as untrustworthy. Most regimes nationalized or sharply curtailed it.
Competition with Public Sector
The private sector often had to compete directly with the public sector.
Suspicion of Foreign Investment
Foreign investment was viewed with suspicion. Entire sectors of the economy were reserved exclusively for public-sector enterprises. Neither foreign nor domestic private capital was allowed.
Monopolies and Efficiency
There was an underlying idea that there is nothing inherently inefficient about monopolies.
Liberal Monarchies: Economic Credos and Public Sectors
Examples include pre-1979 Iran, Jordan, and Morocco.
Private Sector as Driving Force
These states were characterized by liberal economic credos, with the private sector as the driving force. The state acted as a facilitator for the private sector.
Paradox of Large Public Sectors
However, these countries actually possessed public sectors of a size and weight equal to those of socialist countries.
State Ownership vs. Socialism
It is important not to confuse state ownership with socialism.
Oil-Rich Monarchies: State-Dominated Economies
Conservative Regimes and State Sectors
The most conservative regimes also possess the largest state sectors. They share:
- Non-republican forms of government
- Concern for the protection of Islamic values
- Fierce anti-communism
- Dominant classes with roots in older maritime and trans-desert trading communities
Impact of Oil Revenues
Economies are often swamped by oil revenues, characterized by:
- Small populations
- Little to no agriculture
- No tradition of manufacturing
- A common resource of oil that generates tremendous rents
State-Controlled Investment
All new investment programs typically fall within the state sphere.
Growth of Civil Administration
Civil administration has grown prodigiously in all these countries. Saudi Arabia, for instance, has established a giant public-enterprise sector.
State Capitalism and the State Bourgeoisie
The interventionist state in the Middle East (and elsewhere) gave rise to a state bourgeoisie that controls but does not own the major means of production, leading to a process of accumulation known as state capitalism.
Types of State Intervention and Capitalist Accumulation
Type 1: State Nurturing of Private Sector
This process involves the state helping to nurture or strengthen a private sector by:
- Providing roads, railroads, ports, and electrical infrastructure
- Providing raw materials and semi-manufactured goods that feed into private production
- Providing cheap credit and protective legislation
- Potentially taking over failing private enterprises