The Algerian economy has undergone significant restructuring and reform since the 1980s. Yet after more than two decades of reform measures, the performance of the Algerian economy has barely changed. Indeed, although the country has a degree of fiscal stability – due in large part to oil revenues – the Algerian economy remains sluggish. Obviously, neither domestic pressures nor IMF conditions and recommendations have compelled policymakers to move the economy in a different direction. This contradiction between wealth accumulation (which the country has been able to do with its robust oil revenues and foreign currency reserves) and poor economic performance are symptomatic of bad policy choices.
The Algerian economy to a large degree follows in its operation the directives of the state, not free market forces. The country’s political administrative system established after Algerian independence in 1962 sought to build a utopian ideal withdrawn from a market economy. The government hoped to avoid inequalities caused by the market, and for this purpose it was necessary to closely control and heavily regulate the production and distribution of goods and services. But the model, which prevails to this day, has not prevented inequality and has even furthered it. This rentier economy has fueled poverty, waste and corruption, and has discouraged organic economic growth that does not depend on oil revenues.
Moreover, this rentier model has above all ensured the longevity of Algeria’s authoritarian system. As long as politics and the economy are so inextricably linked in Algeria, obstacles to change will remain. The Algerian government is obsessed with the domination of all levers of power including the economy, which inevitably precludes them from making the right choices in terms of economic development, liberalization and growth.
On a political level, the Algerian regime has shielded itself from the emergence of competing political forces and from autonomous civil society through the outright ban on all political activity occurring outside state apparatuses. The proliferation of scandals – mainly in the financial sector and in the public markets – the denial of free political and union representation, the ban on public demonstrations, and the massive violations of human rights, are all telltale signs of the country’s broken politics.
Yet, several factors may offer a glimmer of hope. First is the possible emergence of an autonomous private sector; the room opened by partial liberalization can give rise to an emergent economic elite in the private sector and possibly the informal sphere, which would in turn realize that its future depends on economic policy change. Second is pressure for change that would come from foreign partners. Western countries – including those that form the European Union– might indeed decide to pressure Algeria to play a bigger role than what it has done so far and might push for a more aggressive development plan for the country. Third is the emergence of autonomous trade unions, currently part of Algerian civil society, which could eventually grow over time and become impactful.
Finally, contrary to what some analysts suggest, Algerian society is not immune from the unrest plaguing North Africa and the Middle East. The Jasmine Revolution in Tunisia, the fall of Mubarak and then Morsi in Egypt, the violent overthrow of the Libyan regime, and the Syrian conflict all plainly show that the aspirations for a better life are an essential sociological reality for the peoples of this region. Algerian society cannot afford to remain on the sidelines of these historical developments indefinitely.
Mourad Ouchichi is a professor of economics at the University of Béjaia in Algeria and author of “The Political Foundations of the Rentier Economy in Algeria” (2014). This commentary, translated from Arabic, first appeared at Sada, an online journal published by the Carnegie Endowment for International Peace (www.carnegieendowment.org/sada).
A version of this article appeared in the print edition of The Daily Star on November 07, 2014, on page 7.