Economic Transformations in Syria: From Patronage to War

Introduction:
A rentier state is a state that primarily relies on stable and unchanging revenues, often from natural resources like oil or gas, to provide services to its citizens and support the economy. In other words, it is a state that “nurtures” its people by distributing this wealth, rather than depending on a diversified economic output. One of the main characteristics of a rentier state is its reliance on a single resource, making the economy vulnerable to global price fluctuations. Additionally, the state is the primary source of employment, reducing the need for a private sector, and it offers a broad welfare system through extensive social services for citizens, such as healthcare, education, and social security. Another characteristic is a weak private sector, which is relatively underdeveloped and dependent on the state for contracts and privileges. There is also a high level of corruption, with state revenues being used to serve the interests of the ruling elites. Examples of rentier states include the Gulf Arab states, some oil-rich African countries, and Assad’s Syria.

Transition from a Rentier State:
Many rentier states face significant challenges, such as fluctuations in the prices of primary materials, where a drop in oil or gas prices can greatly impact their economies. Additionally, reliance on external factors makes their economies susceptible to external influences. The lack of competition may also lead to low productivity efficiency. For these reasons, many rentier states seek to diversify their economies and rely more on the private sector. It is important to note that the concept of a rentier state is not fixed and may vary from one country to another, as many factors influence the nature of the economy in any state, not just reliance on natural resources.

The Syrian Economy Before the Revolution:
The Syrian economy before the current revolution can be described as largely dependent on the rentier state model, but not entirely or absolutely.

It can be described as a rentier economy for the following reasons:

1. Dependence on Oil: Oil accounted for a significant portion of government revenues, making the Syrian economy vulnerable to global oil price fluctuations, with oil missing from the government budget.
2. The State as the Source of Employment: The state provided most of the job opportunities for citizens, especially in the public sector, reducing the importance of the private sector.
3. A Broad Social Welfare System: The state provided social services to citizens, such as healthcare, education, and social security, rather than leaving them to the market.
4. Government Price Support: The government fixed the prices of many basic goods, leading to market distortions.

However, the description of the Syrian economy as a rentier economy is criticized for not being a complete description, as there was a private sector. Although it was weak compared to the public sector, it existed and contributed to the economy. Additionally, the Syrian economy was not solely dependent on oil, as there was agricultural and industrial production, albeit limited. The state intervened significantly in the economy, but not to the extent that it completely controlled it. In summary, the Syrian economy before the revolution was a mix between the rentier state model and the planned economy model, where the state played a major role in directing the economy and distributing wealth, but did not fully control it.

Factors That Weakened This Model:
At the top of the list of reasons for the failure of the Syrian economic model before the revolution is corruption, which spread at all levels, leading to the waste of public resources and undermining trust in the government. Government institutions also suffered from inefficiency, leading to the squandering of resources. Additionally, the Syrian economy was heavily dependent on external factors, whether in terms of imports or aid. This situation weakened the Syrian economy and made it vulnerable to external shocks, such as falling oil prices and the civil war.

War Economy:
A war economy is a radical shift of the national economy from a state of peace to a state of war. In this situation, all of the state’s resources and capabilities are directed toward supporting the war effort and meeting its needs. Key features of a war economy include total mobilization, where all human, material, and economic resources are marshaled to serve the front lines. The state takes over the planning, production, and distribution processes centrally, sets priorities, and directs resources according to the needs of the war. Additionally, there is a restriction on economic freedoms through imposing controls on economic liberties, such as price controls, the distribution of goods, and directing production toward military industries. New taxes may be imposed, or existing taxes increased, to finance the war effort. A war economy also involves both domestic and foreign borrowing to fund the war, making the state beholden to creditor nations. Production is directed toward military industries and meeting the needs of the army, at the expense of civilian industries, as seen in Syria after 2012.

Goals of a War Economy:
The primary goals of a war economy include providing the necessary resources for the army by supplying weapons, ammunition, fuel, clothing, and other military needs, and maintaining economic stability as much as possible under difficult circumstances. Additionally, it aims to boost citizens’ morale through mobilization and sacrifice.

Effects of a War Economy:
One of the most significant and dangerous effects is the deterioration of living standards. The decline in civilian production and the rise in prices lead to a deterioration in citizens’ living standards, with a shortage of goods resulting from the focus on military production causing a scarcity of consumer goods. The state also accumulates debt due to increased military spending and borrowing.

War Economy in Syria:
It can be said that the Syrian economy transitioned into a war economy from the onset of the conflict, with resources being directed toward the frontlines, leading to a significant decline in civilian production and a sharp rise in prices. It is important to note that a war economy is an exceptional situation, aimed at achieving a specific goal—winning the war. The mechanisms and effects of a war economy can vary from one country to another and from one war to another. Additionally, a war economy has significant long-term negative impacts, and recovery from it can take many years.

However, it is clear that the Syrian economy has undergone radical changes since the outbreak of the revolution in 2011, shifting from a rentier state model, which relied on oil and gas revenues and state support for citizens, to a destructive war economy.

The key features of these transformations include:

1. Collapse of Production: The conflicts have destroyed industrial and agricultural infrastructure, and internal and external displacement has caused a labor shortage, leading to a sharp decline in national production.
2. Runaway Inflation: The devaluation of the Syrian pound and the scarcity of goods have led to a significant increase in the prices of basic commodities, exacerbating the suffering of the citizens.
3. Reliance on Aid: The Syrian economy has become heavily dependent on aid, which is insufficient to meet the basic needs of the citizens.
4. Expansion of the Informal Economy: Citizens have increasingly turned to informal and illegal trade to secure their basic needs.
5. Deterioration of Public Services: Essential services such as electricity, water, healthcare, and education have significantly declined, negatively impacting the lives of Syrians.
6. Changes in the Economic Structure: The focus has shifted from productive sectors to service sectors, particularly trade and communications.

Causes of These Transformations:
The armed conflict destroyed infrastructure and the economy, leading to widespread displacement. Western countries also imposed economic sanctions on the Syrian regime, contributing to the economic decline. The Assad government’s adoption of flawed economic policies further exacerbated the crisis, with widespread corruption being a major factor in the deterioration of public resources.

The consequences of these developments include:

1. Worsening poverty and unemployment.
2. Brain drain, as skilled Syrians emigrate abroad, leading to a shortage of qualified labor.
3. Deterioration of infrastructure, requiring massive investments for reconstruction.
4. Threats to social and security stability.

Mitigating the Negatives Faced by Syrians Amid the War Economy:
A range of measures can be taken, varying with the conditions and the stage the country is in. At the government level (the four current governments), there should be a focus on the fair distribution of humanitarian and food aid to all affected groups, with special attention to the most vulnerable. Local production should be supported by providing aid to farmers and industrialists to increase the supply of goods and reduce dependence on imports. Efforts should be made to combat corruption in all its forms to ensure that aid reaches those who need it and to improve the efficiency of government spending. Additionally, every possible effort should be made to provide basic services such as water, electricity, healthcare, and education to citizens, and genuine planning for the country’s reconstruction should begin, prioritizing the projects that need to be carried out.

At the International Level:
There is a need to increase humanitarian aid to war-affected countries to meet citizens’ basic needs, support the reconstruction of destroyed infrastructure, provide necessary funding for productive projects, and assist in resolving political conflicts peacefully to end wars and pave the way for development.

At the Civil Society Level:
Cooperation and solidarity among its members should be strengthened, with mutual assistance provided, offering essential services such as healthcare, education, and vocational training to citizens. Awareness should be raised about the dangers of war and its negative effects, and dialogue and understanding among different parties should be encouraged.

Thus, it is possible to significantly mitigate the negatives of a war economy even before achieving complete peace through measures that can alleviate the economic suffering of citizens in conflict areas, even while the conflict continues. These measures aim to:

1. Maintain a minimum level of basic services, such as water, electricity, healthcare, and education, as much as possible.
2. Support local production and encourage small-scale agriculture and industries to provide essential goods and reduce reliance on imports.
3. Distribute humanitarian aid and provide food, medicine, and clothing to those in need, with a focus on the most vulnerable groups, such as children, women, and the elderly.
4. Combat corruption and ensure that aid reaches the actual beneficiaries without waste or corruption.
5. Work on building trust among the conflicting parties through dialogue and negotiations, which may help ease the conflict and facilitate the delivery of aid.

The importance of mitigating the negatives of a war economy lies in maintaining social stability, preventing the worsening of humanitarian conditions, avoiding further violence and displacement, and creating suitable conditions for successful peace negotiations. It also helps preserve existing infrastructure and prevents its complete destruction.

Challenges Facing These Efforts:

1. The ongoing conflict makes it difficult to implement these measures in a sustainable manner.
2. A lack of financial and human resources needed to carry out these projects.
3. Access to affected areas may be challenging due to security issues.

Therefore, it can be said that mitigating the negatives of a war economy is possible even amidst ongoing conflict, but it requires the concerted efforts of all concerned parties, whether governmental, international, or civil society organizations.

Recommendations: Practical Solutions to Overcome the Negatives of the War Economy in Syria:

The Syrian crisis is one of the deepest humanitarian and economic crises in modern times, leaving behind massive destruction and significant challenges. To overcome the negatives of the war economy in Syria, there is a set of practical solutions that can be pursued simultaneously, and which we recommend at the Economic Office of the Syrian Future Movement (SFM):

A. Short-term Solutions:

1. Increase humanitarian aid and focus on providing citizens with basic needs such as food, medicine, and shelter, while expanding the scope of nutrition and healthcare programs.
2. Support local production by encouraging agriculture and small industries, providing loans and agricultural inputs to increase production and create job opportunities.
3. Stabilize the prices of basic goods to prevent inflation and help citizens secure their needs.
4. Combat corruption and enhance transparency and accountability in the distribution of aid and implementation of projects to prevent waste and corruption.

B. Medium-term Solutions:

1. Rebuild infrastructure with a focus on restoring essential facilities such as roads, bridges, hospitals, and schools to boost economic growth and provide basic services.
2. Develop the private sector by encouraging private investment and creating an attractive environment for investors, which will create jobs and increase production.
3. Diversify national income sources and move away from reliance on a single source.
4. Strengthen regional cooperation and build strong economic relationships with neighboring countries, facilitating the movement of trade and services.

C. Long-term Solutions:

1. A comprehensive political solution to the Syrian crisis that ensures a peaceful transition of power and the conduct of free and fair elections.
2. Build strong institutions governed by laws and regulations that ensure equality and justice.
3. Reform the public sector to make it more efficient and transparent, reducing bureaucracy.
4. Invest in education and training to develop human resources and prepare them for the job market.

It should be noted that these solutions are general proposals and may need to be adjusted to suit the changing circumstances on the ground. These solutions must be implemented comprehensively and integratively, with a focus on building partnerships between the public and private sectors and civil society. Moreover, these solutions should be periodically evaluated, and necessary adjustments should be made to achieve the best results.

Ammar Al-Omari
Economic Office
Research and Studies Department
Articles
Syrian Future Movement (SFM)