How Baathist economics championed by Assad and Saddam wrecked Syria and Iraq

The Syrian economy has suffered over the decades-long rule of the Assad dynasty. AFP

A primary cause of the Syrian government’s collapse last week was its political repressiveness. However, it is important to understand that the now-erstwhile Baathist establishments in Syria and Iraq were also overseers of one of the most unsuccessful economic paradigms in modern history, a lesson that must not be forgotten in an age when socialism is making a comeback.

One of the areas where Arab economists have contributed to the economic policy discourse is in the development of the Baathist economic paradigm, which became the dominant ideology in Syria and Iraq during the latter half of the 20th century.

Baathist economics has some overlap with the economic nationalism currently espoused by populist figures in some western economies now. Its key pillars include economic self-sufficiency, though notably, in the Baathist case, this was associated with a rejection of colonialism and the economic subservience it entailed, rather than the more indiscriminate form of xenophobia that is sometimes associated with modern economic nationalism.

To put this principle into practice, Baathist states nationalised key sectors such as heavy industry and banking to ensure that they are under the control of the state. This was motivated by a twin desire to prevent nefarious foreign interests from infiltrating these sectors, and to afford the state the tools it needed to manage the economy.

This latter point drew considerable inspiration from the Marxist rhetoric that was circulating during the 1960s, reflecting a firm belief in the importance of a paternalistic state, and a fear of the inequality and instability that a strong private sector sometimes breeds. The influence of leftist political and economic paradigms on Baathist economics was also apparent in its support for land reforms that ostensibly aimed to empower the poor at the expense of incumbent elites.

Unfortunately for millions of Syrians and Iraqis, Baathism – like socialism and communism – was an unsuccessful economic paradigm.

When both countries were taken over by their respective Baath parties in 1963, Syria’s per capita gross domestic product was 46 per cent of the world average, and Iraq’s was 45 per cent. In 2010, just months before the Syrian civil war broke out, the country’s per capita GDP as a percentage of the world average had shrunk to 29 per cent, while in 2002, as the US was preparing to invade, Iraq’s had contracted to 23 per cent.

Admittedly, both countries did exhibit superior performance during the 1970s, but this was primarily driven by increased oil income, rather than enlightened economic statecraft. Moreover, the long-term performance of both countries’ oil sectors has been hampered by the manner in which foreign energy companies were partially expropriated, under the banner of nationalism and anti-colonialism. There were exceptions: Shell operated in Syria under a joint venture until 2011. But their approach was in marked contrast to that of the Gulf countries, which nationalised their oil sectors properly, and as a result, maintain a much higher capacity to attract international oil companies that use the latest technologies.

There were undoubtedly mitigating circumstances that, to some extent, help to explain the economic underperformance in Syria and Iraq, notably the crippling sanctions that the West imposed upon them. However, there were two structural problems that cannot be ignored.

The first is the failure of the Baath economic policies. As socialist and communist economies demonstrated with clarity in the 20th century, the belief that a centralised team of technocrats can manage the economy is erroneous, as these functionaries lack the knowledge and incentives to make sound decisions. Innovation – the key driver of economic growth – requires a healthy dose of economic liberalism, and a private sector that can thrive without fear of expropriation. Both are incompatible with the fundamental tenets of the Baath economic paradigm, which instead favoured crony capitalism.

The second is that the corruption and repression that the Baath economic system inevitably spawned together increased the likelihood that the countries in which it existed turned into international pariahs that attracted sanctions. In the case of Iraq, for example, Saddam Hussein’s unchecked power and Baathism-induced cult of personality produced the ruinous decision to invade Iran in 1980. Moreover, the failure of his economic policies created the financial pressure that was a factor in the subsequent, disastrous invasion of Kuwait in 1990.

In fact, just as occurred in George Orwell’s Animal Farm, whatever the ideals of the first generations of Baathists in their pursuit of a strong state, it did not take long for the emergence of a class of repressive plutocrats masking their desire to consolidate power with vacuous nationalist and anti-colonial rhetoric. The total belief in the ability of technocrats to selflessly micromanage the economy, the selection of government officials based on ideological fealty to the Baathist cause, and the fear of the political threat posed by free enterprise, all combined to create an economic basket case that survived only when natural resource income was fortuitously high.

Today, many supporters of Palestine around the world have leftist economic leanings consistent with the Baath paradigm, reflecting a broader resurgence of socialist thinking. Arab individuals who are sympathetic with the Palestinian cause and keen to join an international coalition must learn from the failures of Baathism by decoupling their support for Palestinians from an affinity for centralised control of the economy. It ruined Syria and Iraq, and it will ruin any Arab state that falls for its allure.