Division Regarding the Direction of Economic Reform in the Future

The Syrian economy was built over four decades on the idea of the government’s ownership of entire sectors of the economy, while keeping the other sectors under the direct supervision of the government or agencies that the government controls. This mechanism managed to lead an important phase of accelerating economic growth in the seventies, based on rent that comes from petroleum products and aide from the Gulf states after the 1973 war against Israel. Despite the fact that constraints against inflation, which usually accompanies accelerated growth, remained under control by the government that provided a primary social security network in the sectors of health, education, social services and governmental employment, but the requirements of public deficit and debt exploded in the second half of the eighties. The state was no longer able to fulfil its primary obligations, with regards to providing the care and protection network and the minimum level of social welfare. Nonetheless, the approach that lasted for many years and consolidated a perception within the Syrian society with regards to the economic role of the government remained in control of both public policies and society expectations, even after it was evident that these policies have failed and were not able anymore to pursue the requirements of development. There is a general view among Syrians that they deserve all free services of the state, that they would only pay the minimum taxes, that their salaries should rise, and that all this should take place with the least amount of inflation.

The economic reforms came as a pressing need to try and involve the private sector and local and foreign investments  in financing economic growth and opening new horizons for the Syrian economy that are capable of absorbing the increasing demographic growth and the entry of hundreds of thousands of young people into the labour market every year. However, while the economic reforms succeeded in liberalising wide sections of the economy and bringing in foreign investments, they remained confined to a general political and ethical mechanism that view the government’s role as being primary and the private sector’s role as secondary, no matter how large it becomes. Therefore, the economic growth movement was not paralleled by a movement of judicial, administrative and political reforms. The result was that the continuous growth rates that Syria witnessed throughout the six years preceding the crisis was not reflected into real economic opportunities, with regards to the vast majority of Syrians.

Despite all the primary indicators of the macro economy, the micro indicators remained almost static. The growth of the domestic product took place in sectors of high productive nature but do not provide large employment opportunities. Therefore, job opportunities grew in services jobs at the expense of productive jobs. The major growth in the business and banks sector, for example, took place in parallel to the loss of huge employment opportunities in the agriculture sector. Moreover, the growth of a middle class of a wide spectrum (one million small 1,600 cc cars throughout the past ten years), came at the expense of poverty that consolidated among the segment of citizens who live under the absolute poverty line. All this created a general feeling that the gap between the poor and the rich became so huge that the Syrian culture, which is organically linked to the previous socialist experience, did not accept it.

Economic reform came in segments and was not accompanied by political and administrative reforms that allow accountability and questioning, which promoted the spread of types of corruption that surpassed everything that Syria had witnessed in the past. The economic growth remained tied in the hands of a network of patronages that did not allow benefiting from the revenues of economic growth and distributing it fairly so that they would affect the poorer groups of the society. The policies that the government put in place were incapable of creating a society protection network to deal with the expected results of the economic liberalisation process. The government kept using ineffective and insufficient tools for basic support to the poor, instead of developing those tools and linking them with society enabling tools that would help the poor from exiting the circle of poverty. Moreover the consolidation of the idea of leaving everything to the government continued, despite the role of the government dramatically changing.

This general feeling of economic unfairness was accompanied by a stagnation in the human development tools, in comparison to other neighbouring countries. For despite Syria being a pioneer in providing a number of primary services, like health and education, the general feeling was that the government did not sufficiently develop its tools and that the neighbouring countries have surpassed us. This feeling was reinforced when Syria signed economic agreements with Turkey, through which the weak competitiveness of the Syrian economy as well as indicators of human development became evident, in comparison with the neighbouring countries. This also reinforced a general feeling that the government did not adequately protect the local economy.

To summarise, the general policies of economic liberalisation kept being highly controversial between those who benefited from them and those who were harmed by them. The crisis came to increase the state of flounder with regards to the economic policies. For instance, there are those who demand more liberalisation and openness and on the other hand there are those who followed the populist tendencies and threw all the blame for the crisis against the economic openness. The objective economic discussion does not change the general perception of many that the economic openness resulted in humble, insufficient, late, and unfairly distributed results. What increased the intensity of this debate is that the government tried to hold the persons who were responsible for the economic openness responsible for the crisis, whereas the bitter truth is that the reasons for the crisis are secondary economical, but primary they are linked to the administrative reform, corruption problems and lack of accountability.

The economic role of the government in the future will affect the shape of the solution that Syria seeks to end the crisis. Would Syria draw loans to cover the reconstruction expenses, who would lend them and under what circumstances? How would Syria be able to pay back the loans that she would draw for reconstruction? Would the state adopt supply side policies, like before, defend the role of public institutions and support production through public sector institutions, or would she support the role of the private sector and create demand side policies? Would she implement reconstruction processes through public bids that could be swift but ineffective and non-employment generating, or would they come through society incentives that could be slow but less expensive and employment generating, within small and medium enterprises?

All these questions would determine the shape of the economy for Syrians, through which they would work, and would force them to make tough  decisions with regards to their future. Therefore, many Syrians call on the conflict factions to clearly determine which economic approach they would take the country towards, in the future. Moreover, as everything in the Syrian crisis took an extreme tendency, the economic dialogue has also become a field for dispute between the varying and opposition interests. Many today seek mounting pressure in order to determine the shape of the Syrian economy once more, within frameworks that would protect their interests, and in order to guarantee these interests, they demand deciding the shape of the Syrian economy in the constitution.

In fact, there is no clear and delicate mechanism to know the majority opinion in this regard. Even if such a mechanism exists, it would be subject to change according to developments. All projections that some make in order to portray their vision as the most appropriate model, remain more of a utopian intellect. Characterising the most suitable economic system for Syrians is one of the primary issues upon which political parties would compete in the future. Such characterisation would continuously change according to the change in the perception of the voters. The problem lies in the non-existence of a political system that allows for change in political policies when they prove to be a failure (or outdated). The Syrian electorate would have to decide the correct formula in the future and this would only be through a number free and transparent election cycles, in which the experience of auditing economy through democratic process would be crystallised.  The decision with regards to Syria’s economic future should be for the Syrian electorate and not for the Syrian elite, in a way through which the democratic institutions would guarantee correcting the path every time politicians fail in adopting real economic solutions to the country problems.

It may be premature today to engage in theoretical debates with regards to the economic form of the coming phase, in light of the more persistent questions regarding the provision of primary human needs. This is especially the case as these questions are being presented today by many in terms of blame shifting and not in terms of finding solutions. The most important economical questions in this phase would focus on the priorities of humanitarian aid and relief, and on the type of available incentives for reconstruction and the stability and return of the displaced. They would circle around reparations for the aggrieved, the healing of the wounded, and other primary necessities. Moreover, feasible incentives should be searched for gathering weapons from the hands of all armed parties, and to tempt them to come out from the parasite war economy to the productive peace economy. As for the hard questions with regards to the nature of the economic system and, therefore, the nature of the tax system, the subsequent laws that are linked to work, the protection that the law provides to workers and the balance between these rights and incentives, which would be made in order to attract investments into Syria once more, these questions could only be answered with a political democratic system that determines the nature of the political economy of the country through democratic institutions and not through allowing the winner in the crisis to impose their opinion by force.

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