Twilight of ‘state capitalism’ in formerly ‘socialist’ Arab states

Abstract

During the 1950s and 1960s, Egypt and Syria were characterised as ‘state capitalist’. The main pillars of these socioeconomic structures were radical land reform, far-reaching nationalisation, and heavy-handed state intervention. During the ‘state capitalist’ period, the Egyptian and Syrian states took upon themselves the challenge of initiating an internally induced and independent path to economic development, mitigating foreign dominance, and alleviating the economic impediments that existed during the post-colonial period. By controlling the means of production through its tight control of the state apparatus, the state capitalist class in either country assumed the role of the agent of investment. It also promoted state-led and import-substituting investment that, on the one hand, built the economy's productive capacity and, on the other hand, promoted developmental and socially responsible outcomes. Nevertheless, since the working class did not assume political representation and participation in the new state apparatus, the whole process of egalitarian development was gradually reversed in the subsequent period. As of the early 1970s, the state capitalist class in both Egypt and Syria introduced market-friendly economic reforms that paved the way for the socioeconomic structure to transform from ‘state capitalism’ to private capitalism. This article seeks to explore the twilight of ‘state capitalism’ in the subsequent period of economic liberalisation and the accompanying reversal of socially responsible economic policies. By adopting a political economy approach, it considers economic, social, and political factors that explain the reasons behind this transformation, in general, and the change in the social alliance of the state capitalist class that shaped a new agent of investment, in particular. With the certitude of hindsight, this article argues that the market-friendly economic reforms generated anti-developmental outcomes that aggravated social hardships and inevitably ignited the political uprisings in 2011. This article concludes that there is much to gain, in both economic and social terms, from reverting to the previous macroeconomic strategies enacted during the ‘state capitalist’ period.