Business Networks in Syria: The Political Economy of Authoritarian Resilience / Edition 1 available in Paperback
Business Networks in Syria: The Political Economy of Authoritarian Resilience / Edition 1
- ISBN-10:
- 0804785066
- ISBN-13:
- 9780804785068
- Pub. Date:
- 08/15/2012
- Publisher:
- Stanford University Press
- ISBN-10:
- 0804785066
- ISBN-13:
- 9780804785068
- Pub. Date:
- 08/15/2012
- Publisher:
- Stanford University Press
Business Networks in Syria: The Political Economy of Authoritarian Resilience / Edition 1
Buy New
$30.00Buy Used
$14.92
-
$14.92
-
SHIP THIS ITEM
Temporarily Out of Stock Online
Please check back later for updated availability.
-
Overview
As state income from oil sales and aid declined, collusion was a bid for political security by an embattled regime. To achieve a modicum of economic growth, the Syrian regime would develop ties with select members of the business community, reserving the right to reverse their inclusion in the future. Haddad ultimately reveals that this practice paved the way for forms of economic agency that maintained the security of the regime but diminished the development potential of the state and the private sector.
Product Details
| ISBN-13: | 9780804785068 |
|---|---|
| Publisher: | Stanford University Press |
| Publication date: | 08/15/2012 |
| Series: | Stanford Studies in Middle Eastern and Islamic Societies and Cultures |
| Edition description: | New Edition |
| Pages: | 280 |
| Sales rank: | 745,776 |
| Product dimensions: | 5.90(w) x 8.90(h) x 0.60(d) |
About the Author
Read an Excerpt
Business Networks in Syria
THE POLITICAL ECONOMY OF AUTHORITARIAN RESILIENCEBy Bassam Haddad
Stanford University Press
Copyright © 2012 Board of Trustees of the Leland Stanford Junior UniversityAll right reserved.
ISBN: 978-0-8047-7332-4
Chapter One
STATE, BUSINESS, AND REFORM
METHODOLOGICALLY SPEAKING, state-business relations as an object of study can be approached as both a cause and an effect. Although it is difficult to separate the two in practice, they can and should be distinguished analytically if we are to operationalize state-business collaboration. As an effect, or an outcome, the study of state-business relations involves the examination of the inter actions of various macrolevel variables. This kind of examination can be carried out by drawing primarily on historical-institutional analysis and structural variables that shape the creation of networks. As a cause, the study of state-business relations aims to operationalize the nexus between state and business in order to determine its impact on economic change and developmental outcomes. Here the outcome to be explained is prolonged economic stagnation with costly developmental outcomes. The analysis proceeds by conceptualizing the category of "business" (for example, business as capital, network, sector, association) in respective contexts, in both time and space. In the Syrian case during the period under study, as in many developing countries with a similar level of development, "business" can be conceptualized as network, for it exhibits network-like structures rather than those of sectors, firms, or meaningful associations.
As a causal factor, the study of state-business collaboration draws on more microlevel strategic analysis and choice theories that are bound up with rational choice and historical institutionalism. A fruitful explanatory and interpretive analysis would be one that dynamically integrates the study of state-business collaboration as both a cause and an effect; that is, it would examine the origins or causes of the interaction between the state and the business community, and then examine the effects of those interactions. This causal chain represents both the argument and the analytical map of this book, and explains the transformation of the business community in general across time. The starting point is the state of the Syrian economy, followed by the factors that help shape it.
THE STATE OF THE SYRIAN POLITICAL ECONOMY: A BRIEF OVERVIEW
After a brief period of nominal economic growth in the early 1990s—financed largely by a consumption boom and erratic debt-for-commodities substitution schemes with the former Soviet Union and its immediate inheritors—signs of Syria's decrepit economy began to surface. After peaking in 1992 and 1993, economic growth continued to decline until 2005 (see Figure 1.1). The available data from virtually all sources also denote a considerable decrease in GDP per capita, signaling not just economic trouble but also increasing socioeconomic disparity. After its decline in 1994, "GDP per capita growth" through 2005 never again reached 1994 levels (see Figure 1.2). Notwithstanding variables such as rain seasons and oil production, the dominance of privileged rent-seeking networks has contributed immensely to the direction and type of economic and developmental outcomes that obtained in Syria between 1986 and 2005.
The cracks in the façade spread after 1993 as the result of an inhospitable investment climate and tailored policies that marginalized competitive and production-oriented businesses in favor of protection for well-connected and service-oriented private ones. Invariably, the primary beneficiaries of protection and tailored policies were the same individuals and groups—in both the private and public sectors—who were benefiting from prior state-centered economic arrangements. What changed was the formalization of previously informal partnerships and relations between state officials and private business actors. In some cases, this involved the entry of numerous businessmen into public life through parliament and "subsidized" election onto the boards of Chambers of Commerce and Industry. More conspicuous was the formal entry of the regime elite and their offspring into the private sector on a large scale. These new "entrepreneurs" began to crowd out traditional businesses and businessmen, especially in the commercial and transportation sectors, in the mid-and late 1990s.
In the late 1990s, economic downturns persisted and collided with the broader political logic of the regime, one that subordinates economic rationality to security concerns, although not to the point where economic decline serves neither. It is as though the Syrian regime, by virtue of its exclusionary relations and practices, had hit an institutional dead end: it had lost much of its already modest ability to mobilize collectivities or discipline social sectors for the purpose of producing collective gains. Instead, the regime could exercise control only by limiting and constraining certain economic activities or, alternatively, by providing rent opportunities for allies—opportunities that did not bode well for the health of the economy as a whole.
The limits of economic change in Syria coincided with the limits of state-business collusion (that is, cronyism) as manifested by networks of capitalists and "bureaucrats." After half a dozen years of stagnation, it took a succession crisis in June 2000 to shake the stalemate: immediately after the death of President Hafiz al-Asad, several prominent members of these networks were cast aside and many others were arrested or hassled under charges of corruption, such as the businessman and former parliamentarian Ma'moun al-Homsi. But such reshuffling had limited effects as it was also intended to consolidate the rule of the new leadership under Bashar al-Asad, a challenge that was accomplished in 2005 with the holding of the tenth Ba'th Regional Command Conference. By 2001, the Syrian economy began to witness some change in the cornerstones of central economic planning at the macroeconomic level, including the financial sector. Bashar's first ministerial shuffle brought new faces into key economic posts, and this new team undertook such tasks as overhauling the outdated state banking system, creating new, highly lucrative opportunities in the telecommunications sector, and expanding free trade zones around the country. The finance and banking sector in particular has seen a slew of ostensible liberalizations, beginning with the process of legalizing private banking in 2001—the first private banks opened in 2004, and the private banking sector has claimed 20 percent of the financial services market share in four short years. In 2005, the regime established the Syrian Stocks and Financial Markets Authority to oversee the Damascus Securities Exchange, which opened in March 2009. The first years of Bashar's rule also saw the legalization of private currency exchange, lowering the financial barriers to trade. Midway into the first decade of Bashar's rule, these developments mobilized the upper echelons of the private sector irrespective of their membership in privileged networks. In 2007, private sector interests banded together to form two holding companies—Cham Holding and Syria Holding—which have since invested in a new domestic airline and pursued development projects alongside Gulf investors. During the same year, some of the same investors formed the Syrian Business Council, a new and self-proclaimed "modern" business association that looks after their interests while addressing the needs of a new, information- and communication-driven economy. Though such developments are beyond the confines of this study, they indicate the decline of privileged networks as the dominant route to economic "success" after 2005, and for good reason.
Regime-Business Mistrust
I argue that public-private networks emerged as a result of the state elite's security concerns shortly after the 1970 coup, launched by the more pragmatic wing of the Ba'th party, and led by then defense minister Hafiz al-Asad. By 1970, the helm of the Ba'th regime was dominated by an increasingly rural-minoritarian leadership. This social stratum was embattled by the social and political struggles of the 1950s and 1960s, and was seeking both to moderate the politically unsustainable radicalism of the Ba'th and to establish détente with the weakened but potentially destabilizing traditional sectors (primarily urban-Sunni sectors). Not lacking social historical roots, this adversarial legacy between a radicalized rural-minoritarian regime and a conservative urban-Sunni business community bred mistrust and antagonism between those who held power and those who held capital. At the same time, however, the two parties needed each other: state intervention in the economy required the cooperation of the private sector, or parts of it; and the disempowered business community was looking to rejuvenate itself. From the perspective of a quasi-socialist regime that places a premium on statist development and decisional autonomy, a formal incorporation of the entire business community was politically risky and untenable. Alternative forms of incorporation had to be sought.
On the eve of the 1970 coup, state-business antagonism and mistrust were already a deep-seated legacy. Initially, this legacy prevented Hafiz al-Asad's regime from dealing formally with the business community as a whole, and from legitimizing the role of the private sector. Unable to discipline the private sector as a whole, the Syrian regime resorted to the creation of informal ties with particular members of the existing business community, some of whom acted as the unofficial partners of state elites (later called the "state bourgeoisie"). Thus, in contrast to the post-Nasir Egyptian regime, the Syrian regime opted for maintaining its principal cornerstone, a weakened Ba'th party, and replacing a politicized army with a massively refurbished security apparatus that constituted a strong backbone for public-private ties. Emerging state-business networks served as an alternative agency for capital accumulation and, in the late 1970s and early 1980s, as an alternative support base during times of political crisis—particularly when the Muslim Brotherhood sought to undermine the authority of the regime.
Over time, these informal webs of state-business ties formed and reformed rent-seeking networks that developed a life of their own, as demonstrated by their impact on economic change after 1986, as the regime attempted to handle a major economic crisis. This was even more evident after 1991, when these networks became the basis of the official institutional expression of the private sector. Nonetheless, most changes in economic policy after 1986, including the active resistance to change in some economic policy areas, can be traced back to the influence of these economic networks rather than to either the aspirations of the business community as a whole or the statist logic that guided economic policy until 1986.
Oil and Strategic Rents
At the macroeconomic level, the policies promoted by state-business networks involved massive misallocation of resources and a lack of comprehensive vision for reform and constituted a drain on the state budget. Nevertheless, the networks' sustenance was secured by substantial oil and strategic rents that the Syrian regime has been able to extract since 1973, notwithstanding a temporary downturn in rents in the mid-1980s. This source of "external" or "rent" income (income that derives from ownership of natural resources or directly unproductive profit-seeking) is the principal reason the Syrian regime was able to maintain (and not forced to substantially downsize) the public sector and public spending. Oil proceeds are handled directly by the political elite within the Syrian regime. How much of this revenue is incorporated into the yearly budget and where it is incorporated are still obscure matters. It is safe to assume, however, that the regime disposes of this revenue in a manner that sustains its ability to make high-policy decisions independent of any other social forces. The key to its decisional autonomy is its financing of the patronage around the public sector, particularly that which relates to public-private networks.
The public sector serves crucial political purposes for the regime: employment generation, benefits for the urban working classes and the families it employs, and the dominance of the largest sectors of the economy. Without the kind of dependency, albeit decreasing, that the public sector fosters in Syrian society, the regime would become far more vulnerable vis-à-vis social unrest. The regime has hitherto unwaveringly refused any form of official privatization of state-owned enterprises and has repeatedly rejected proposals to downsize the public sector in any significant way, insisting on preserving it as the "leading economic sector," to be complemented by the private and mixed sectors.
Thus, economic liberalization occurred alongside a bolstering of the public sector, notwithstanding the decreasing output of the latter. This two-pronged strategy of economic "reform" (expanding both the public and the private sectors) has been costly and irrational from an economic point of view. However, political logic alone was not sufficient to sustain the economy: thus far, it is external rent income that has allowed the regime to subordinate economic rationality to its own security concerns, at least until 2005.
Strategic rents in the form of "aid" or "assistance" from rich Arab states in the Gulf reached their peak in the late 1970s at approximately $1.6 billion per year. This external assistance reached some 10 percent of gross national product (GNP) in the late 1970s and early 1980s and was resumed in the 1990s to reach some 5 percent of GNP. Meanwhile, oil rents—also crucial to the regime's rentier survival strategy—grew steadily from 1975 onwards, peaking in the mid-1990s and slowly declining thereafter (see Table 1.1). On average, since 1975 oil rents alone constituted at least 60 percent of Syria's foreign exchange earnings and a similar proportion of its total exports, allowing the regime to finance its patronage relations, cover more than 50 percent of total imports, and substitute for the necessity of industrial deepening or diversification. In 1995, at Syria's peak oil production, oil constituted 65 percent of exports, 35 percent of fiscal revenue, and 34 percent of GDP. However, even after oil production began to decline in 2000, oil rents on average continued to constitute 60 percent of export earnings, between 40 and 50 percent of total revenue, and between 15 and 20 percent of GDP (see Figure 1.3).
Nonetheless, rent income is not without its perils. It can fluctuate and even disappear. In recent years, foreign aid and oil have become less dependable sources of rent income for the regime. A variety of data sources indicate that oil production in Syria has been slowly scaled back since reaching its production peak in the mid-1990s at nearly 600,000 barrels per day. Between 2000 and 2005, production averages decreased to 525,000 barrels per day, and by 2008 production had dropped to just under 400,000 barrels per day—a 30 percent decrease in just over a decade. In 2007 Syria became a net importer of oil for the first time in thirty years. It is indisputable that Syrian oil is a finite resource, although estimates vary on when exactly Syrian oil will run out, and the Syrian government did not publicly acknowledge the reality of finite oil resources until 2002. In 2003 an optimistic (or politically shrewd) minister of petroleum and mineral resources predicted a 50 percent increase in oil production in successive years, and to that end, the government has attempted to entice oil companies into renewed exploration. There have been some new discoveries and increased output at smaller oilfields; however, no new large discoveries are expected to be on the horizon, and nongovernment estimates place the end of oil somewhere near 2030. All such studies, and facts, influenced how the regime relied on nonstate economic actors, which until 2005 were dominated by privileged networks.
(Continues...)
Excerpted from Business Networks in Syria by Bassam Haddad Copyright © 2012 by Board of Trustees of the Leland Stanford Junior University. Excerpted by permission of Stanford University Press. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
List of Illustrations ix
Preamble: An Arab Spring for Syria? xi
Preface xiii
Acknowledgments xvii
Introduction: Economic Reform and Network Analysis 1
1 State, Business, and Reform 23
2 The Legacy of State-Business Antagonism 36
3 The Politics of Private Sector Development 61
4 The Formation and Development of Economic Networks 84
5 The Political Dynamics of Economic Liberalization 119
6 The Impact of Economic Networks on Fiscal Change 154
Conclusion: State, Business, and Networks 169
Notes 183
Bibliography 229
Index 249