The decision regarding chemical weapons opens up a certain possibility of normalising the overall situation in Syria. Although, it is still too early to say that Syria has reached the point of no return in regulating the whole issue as the future of the country is still up in the air. On the contrary, her future severely depends on the condition of the Syrian economy, and one cannot hope to overcome the economic decline with a single signature from the president’s quill, as it happened in the case of the chemical weapon disarmament.

The war with the opposition quickly led the country towards wide-spread destruction of its production forces and this process is far from over. On the contrary, it is currently gaining momentum. There is no doubt that its inertia will be felt for a very long time to come and will severely affect the recovery of both the economy and the former relationships within society. It is clear that the goals and objectives of the bygone days will be put aside, while the planned transition from a “recovery movement” of Assad the elder to the “socially-oriented market” of Assad the younger will remain incomplete. Although, it is quite possible that it is specifically this evolution that could be effective if executed by Syria, as opposed to the market models of the IMF and World Bank which, strictly speaking, were the cause of the Arab Spring. However, caution and patience with reforms that are inherent for the entire Arab world turned out to be excessive in the case of Syria, and in the end this, along with other circumstances, led to the situation exploding.

Essentially, Syria has now directly confronted threatening trends such as deindustrialisation as well as a sharp decline in competitiveness and employment. These phenomena are further aggravated by the crisis in the financial and credit system, in the services sector and in other industries within the economy. A significant part of the agrarian sector, especially food production, is also facing exceptional difficulties.

Various regressive tendencies have been quite explicitly confirmed. They can be seen even from the fact that the contribution of agriculture within the country’s GDP has presently increased from 17% to 27% in comparison with 2010. These figures, naturally, do not indicate an increase in production within the agricultural sphere but instead point to the decline of the industrial sector.

The declines across all indicators are occurring as a result of the manifold reduction in areas of capital investment due to loss of stability, the destruction of production facilities and the drain of private savings which has reached its peak. Essentially, due to the direct destruction of physical assets and the looting of material assets, government losses exceed $41 billion and amount for half of all the economic losses. These are practically irrecoverable losses, incurred in the most important economic industries and enormous new investments will be necessary to recover them to at least their former state. Due to obvious reasons, the issue of searching for these funds is not being addressed yet. However, the evidence that they will be very difficult to attract can be seen in the fact that public investments have declined by 75% over the last two years, while private investments “plunged” by 80%. Furthermore, there have been significant changes in the distribution of investment flows. A growing part of them, valued at almost $5 billion, is being redirected towards military needs. Overall, the loss of capital over the last two years amounts to a bit under $38 billion and accounts for half of the damages incurred.

According to some estimations, at the present time the combined Syrian economic losses amount to over $85 billion, which is equal to roughly 150% of the GDP in 2010. However, in reality this figure could be a lot bigger. The overall losses of the “springtime” Arab nations are valued at around $700 billion. If this figure is to be taken as the mean, Syria’s portion could, evidently, end up being grossly underestimated. Yet Syria is the only country that has been subjected to mass destruction. This is why her contributions to the overall amount of losses incurred could end up being a lot more than those of her fellows in misfortune. At any rate, experts agree that no less than 30 years will be required to overcome such conditions, a timeline that was not predicted for any of the revolutionary Arab countries.

The overall decline of the economy has led to a formidable decrease of practically all important macroeconomic indicators. To top it all off, Syria’s exports have decreased by 75% while imports decreased by 60% while the constriction of the commodity exchange is the direct consequence of the depleted financial capabilities of the Syrian government.

The growing destructive phenomena have increasingly higher chances of turning the macro economy into a category of negative figures. Syria has almost always been able to keep its deficit at manageable levels. However, right now, the deficit has increased up to 65% of the GDP and has reached a lever never before seen in Syria. It is virtually certain that the debt will further increase because the most important sources of capital accumulation from oil and the industrial sector have been lost, suffering from sanctions and serious disruptions as a result of the armed opposition. Among everything else, the country’s tax revenue fell sharply as a result of the destruction of the tax base caused by the shortage in the number of jobs, the decreased private consumption and the overall collapse of economic activity.

Because the national replenishment mechanism is a complex system, it is thus affected, especially during times of extraordinary developments, from many sides at once. As such, Syria’s currency reserves have fallen from $23 billion to $2 billion. Further developments down this path threaten to completely devastate the treasury, which means a dead end for the country.

These and other problems are difficult to solve by one’s own strength, especially if one is to account for the fact that Syria’s prosperity has always been more than just moderate. There is no place for her to borrow funds from in order to rebuild the economy. At the same time, foreign loans can only be negotiated under choking conditions; it would be a good thing if they were only economic and not political. In seeing all of this, it is not difficult to imagine that the Syrian government will face new trials which is extremely painful for its citizens to accept, given that there is no end in sight for the present tribulations either. 

Alexander Filonik, Ph.D. in Economics, leading research associate at the Centre for Arabic and Islamic Research, Institute of Oriental Studies at the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.

On the eve of the Islamic offensive, Syria had already suffered a considerably severe blow. It fell on Syria in the form of the global financial crisis which caused Syrian rates of economic growth to plummet from 5% to 2% by 2011. Although the losses were not critical then, it is evident that a decrease of even a fraction of a percent in this very important indicator would lead to the absolute figures growing exponentially. Meanwhile Syria experienced a decrease of over 50% and by definition could not quickly return to her anti-crisis conditions even if her other circumstances were more or less favourable.

The situation is further exacerbated by the fact that these events transpired amid long-standing sanctions levied by the western powers against the ruling regime at the beginning of the 1980s. These anti-Syrian measures were not all-encompassing then, but they could significantly suppress development in a number of economic sectors.

In 2012, the sanctions reached their pinnacle and essentially expanded into a blockade. The internal situation caused by these sanctions led to a serious deterioration of the economy by impeding the work of financial mechanisms while at the same time negatively affecting the oil sector. At any rate, the already modest oil production was severely curtailed (by a third) which led to a corresponding drop in income. This resulted in numerous other economic difficulties related to being unable to access technology, equipment, parts and other critical elements. The installation of these barriers dealt a palpable blow to all life support systems within the Syrian state, irrespective of the events that have presently caused the heaviest suffering for the Syrian people.

The new wave of difficulties, this time in the shape of a colossal internal crisis, came in the form of a war with international bands of Islamists. The war led to a catastrophic collapse of the economy and the social sphere. Meanwhile, the scale of destruction grows as military clashes systematically roam from one location to another due to the absence of a continuous front line. This leads to the sweeping destruction of the infrastructure, engineering structures, housing and other property.

Syria was not forced to overcome such trials since the times of Tamerlane, which now plainly threaten her abilities to be reborn again. The country was essentially shattered even without the widespread use of aircraft or ground vehicles. Numerous city blocks and villages have been practically levelled by hand-held weapon fire, which was not hard to accomplish when one accounts for the specifics of the local lightweight construction. It is not meant to withstand the destructive force of natural disasters, much less the sieges and the war of annihilation that are being conducted, as per tradition, within tight city blocks and crowded villages.

It is difficult to imagine that all of this will be as easy to rebuild as it was to destroy. Moreover, it is not the rebuilding process itself that is intimidating, but the devastation that will follow after the war that is concerning, and it will require the long rehabilitation of the civilian population. Those forces that are interested in destabilizing the country will not be taken out of play immediately and will continue to traumatize the people and the Syrian society as a whole literally and figuratively.

It is not very difficult to assess the scope of the damages: one need only look at the ruins. However, determining the exact scope of the losses in the present circumstances is a much more demanding task, and it is currently possible to only make estimates. That being said, the Syrian Center for Political and Strategic Studies has attempted to at least make a rough estimate of the results of the Syrian war and its cost to ordinary Syrians.

The people were subjected to exceptional mass violence and persecutions on political and religious grounds. According to minimal estimates, a third of the country changed their place of residence one way or another. While there are no exact figures, it is still estimated that anywhere from 1.3 to 2 million people left everything behind to flee abroad from persecution in Syria, which is almost 10% of the total population. The same amount of people have also been said to have left the country “temporarily and voluntarily”. The intentions of the emergent masses of displaced people with Syrian citizenships with regards to their foreseeable future remains unclear. It also bears remembering that almost 2 million refugees did at one point move to Syria from Iraq. They settled into cities and villages, greatly increasing demand and inflating the prices for food and housing. Their fate presently remains uncertain while it is also unclear how many of them fled abroad within masses of Syrians.

These figures make apparent the kind of devastation that befell the civilian population. It is estimated that, in light of the changes that have taken place, the human development index has been rolled back 35 years. The indicators roughly match those of the 1980s, which were fairly difficult years both for the country and its people. However, from around the 1970s, Syria did not have any beggars or homeless people as the family and clan ties did not allow for such things. Furthermore, the situation within the country allowed for people to have side jobs, which were widely popular and provided families with an acceptable level of additional income if the income from their full-time jobs was not enough. At the same time, the government also spent considerable amounts of money to subsidize the price of food for the needy.

At present, the situation has drastically changed. The poverty threshold has increased considerably, now encompassing around seven million people while over three and a half million plunged into destitution. This is almost half of the population. This happened because 2.3 million jobs were destroyed and over 50% of the economically active population ended up unemployed, which reduced or completely cut off any means of livelihood for a great mass of people. Entire layers of the population must now survive by working at small-scale operations, bartering, resorting to odd jobs while not shunning any kind of work from anyone who can afford to pay for it. All of this is being widely used by the insurgents.

It goes without saying that the government is unable to help on the same scale that it was able to before – the blockade and the war did their part. Consumer demand has fallen by almost 85% while the exchange rate of the Syrian pound against the U.S. dollar “slimmed down” by three times.

Essentially, this degradation of the price index as well as the domestic currency exchange rate and the fragmentation of the supply and delivery systems are all linked with the weakening of regular monitoring by the government. However, exhausting the potential of manufacturing industries, curtailing the services sector and, of course, the destruction of the internal market as a whole, caused by the rupture of the intra-economic and inter-industry connections, have all contributed their fair share. The whole picture is further supplemented by factors such as the transition to autonomous life-support systems, more frequent power outages, malfunctions in water supply and the supply of fuel oil on the eve of the cold season. With all of these factors combined, it is even possible to talk about the country’s decentralization and the creation of very real preconditions for its disintegration into separate enclaves, as was observed in Lebanon during the years of their civil war.

The armed opposition, represented by the militant elements, has been doing everything in its power to further aggravate the situation. The opposition is clearly abiding by the principle of “worse is better” and will stop at nothing to reach their goals. It is evident that the opposition is biding its time, waiting until the economic woes and social hardships, which are all presented solely as being the consequences of an uncompromising regime, force the masses to instigate armed rebellion against the regime in order to end their suffering, even if it means victory for the opposition. The radicals are happy with the collapse of the country and they are actively working towards this goal by shattering her unity, fueling religious antagonisms, destroying her culture and centuries-old moral environment.

It is obvious they have serious hopes that the sense of universal hopelessness, violence and fear will gradually penetrate all pores of society to such an extent, that these feelings will completely eradicate any concepts of peaceful life from memory and will force the people to disregard the abyss that religious obscurantism and adventurism will drag them into.

Syria has dangerously closely approached a frontier beyond which she may find a completely new life for herself. Although for now, the country is holding together. If we are to proceed from the realities of today, it can be assumed that Syria’s people are hardly ready to submissively accept the idea of turning the country into an Islamic enclave, even with the country’s current devastation and war. The Syrian statistics that register and confirm the realities of the present situation give the ordinary Syrians plenty food for thought with regards to the these possibilities.

Alexander Filonik, Ph.D. in economics, Senior Research Fellow at the Center for Arab and Islamic Studies in the Institute of Oriental Studies at the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”. 

Syria has been living the past three years completely engulfed in rampant terror and threats to the population, which are actively being used to demoralise the administration and force it to leave the political arena. The fact that the military campaigns have a localized nature does not lessen the severity of their consequences within the current dire situation. The overall feelings of confusion disorganise society, while the uncertainty about the present and a fear for the future create psychological pressure that robs people of their trust, leading to the creation of even more barriers between them.

The overall disorder only worsens the deterioration of the economy and is accompanied by as immense amount of negative consequences. Threats are coming in from practically all sides, yet the persistent domestic difficulties caused by a lack of water or energy are not the most overwhelming. The greatest threat is the uncertain future of the younger generation, which is what families are increasingly worried about. This is better understood especially if one is to remember that almost half of the population in the country is under the age of fifteen.

Numerous children have been dragged into the conflict. Presently, the religious aftertaste of the war not only rips the youth away from education but also fills their heads with religious dogma that was traditionally foreign to the secular Syrian society, which became radically politicised during the second half of the last century. It was not too long ago that most of the mosques would not be full to busting, even on a Friday.

Another problem is also quickly approaching due to the current military setting. The rates of disease and mortality are growing while the number of injured and wounded has exceeded any previously imaginable norms. The health system, as with the education system, is no longer able to handle its entrusted duties. The country has lost over sixty hospitals, medical centres and outpatient clinics, the pharmaceutical industry is on the verge of collapsing and the medical personnel, whose numbers have noticeably decreased, is working itself to death. The education system has fallen into a deep crisis due to the fact that three thousand schools have been destroyed, while the remaining two thousand are being used for refugees and the homeless. The number of students has decreased almost two-fold while the ranks of the teaching staff have also noticeably thinned out. Essentially, Syria is standing on the brink of a humanitarian catastrophe, while the meagre, as compared to the need, injections of aid are split between the refugees and those residents who remained, although the situation for the latter is not any better than for those who have been displaced.

The extension to all of these destructive processes came in the form of social differentiation and the creation of a large army of active out of control elements. The weakening of central power gives rise to the worst negative events, which are most clearly embodied in the higher criminal rate within Syria, but they can also develop into anarchy and even the degradation of social relations into archaism.

Syria has always had a very law-abiding society. However, the present has become an age of developing bandit groups and the creation of heretofore unheard of elements akin to the mafia. They are gradually laying their hands on authority in certain places and various abandoned assets, creating a foundation for their future. They will secure a place for themselves in the future at any cost. So far, their activities are not especially noticeable amidst the open military warfare and the overall turmoil. However, this does not mean that it will remain invisible when the situation changes for the better and that it will not provide another crack in the relationship between the government and society, altering the conflict-free – from a criminal standpoint – atmosphere of the previous decades. This is especially true since the overall poverty is starting to become a fairly fertile ground for the more steadfast criminal societies to expand their activities while also seeing the creation of criminal brotherhoods from the social drop-outs and incorrigible individuals.

The destabilisation of the situation and the growing threats to the population during the previous year have led to a revival of tribal connections and other links of this kind. This is caused by people yearning for safety and desiring to find some sort of defences against the terrible events befalling them. The easiest way to accomplish this is by connecting with your family or clan. According to popular beliefs that are once again gaining ground, more guarantees can be found in the formerly capable “power unit” such as the clan, a whole tribe or even an entire confession. One need only to reanimate them and to use the benefits of collective self-defence.

As early as a year ago there was already a clear tendency in Syria towards concentrating the representatives of the Alawite community within the coastal Syrian cities. This is difficult to accomplish because the families are spread all over the country and the members of this religious group have long since lived separately. However, the dire situation forces people to overcome their tribulations, difficulties with residence and other obstacles one way or another. Here, in their native lands, the members of a kindred group feel more sure of themselves and are counting on their united strength to oppose the Muslim radicals.

This is not the only case either. There are more examples, although not as pronounced, where members of other religious groups are moving about the country and gathering into larger groups to oppose the pressure of the enemy forces.

The strengthening of such collective bonds speaks volumes. Firstly, it states that in extreme situations of war, the tribe is starting to be seen as the only alternative to the government that can preserve social order and oppose the foreign threat to a certain territory. It then turns out that the tribal structure is preparing to take on the function of fighting the foreign – with respect to itself – forces. Essentially, a long lost and unnecessary in normal society phenomenon such as the physical defence of its members is now being reborn within the social practices of the community. This duty of the community is currently valued as being more important than mutual assistance in the home, in business, in career or in other such matters, which were essential during the former peace time.

Essentially, if such a tendency were to really take hold, it could be seen as evidence that the social relationships are moving back to an archaic structure. After all, the division of the population according to a religious and tribal basis during the weakening of the government is a step back in societal development and a turn back towards the times that are the cherished goal of the radical zealots of Islamic traditions. From their point of view, returning to any foundation is a blessing and is to be welcomed. However, the movement itself rather bodes ephemeral benefits and is rather an act of desperation than a really effective method against the armed extremists. In principle, this is a dead end road, which almost underlines the weakness of the government and brings hope to the enemy.

Syria’s experience shows that the destruction of modern government structures and economic institutions, regardless of the methods by which this is accomplished, is the quickest way to the deterioration not only of the economic foundations of the government, but also of an entire way of life. Retrograde tendencies quickly lead to a disintegration of society into separate enclaves with limited links outside their boundaries. This postpones the time when the population can be consolidated around any constructive idea that could lead to an exit out of this dead end civil strife.

Presently, Syria has made the correct move in agreeing to destroy its chemical weapons. If the future events will be developing in line with this initiative then the extremists’ positions could be seriously shaken. This will strengthen the authority of the government and will help it focus on maintaining a vibrant and healthy fabric of society, preventing the proliferation of fault lines that are threatening to evolve into a national catastrophe. 

Alexander Filonik, Ph.D. in Economics, leading research associate at the Centre for Arabic and Islamic Research, Institute of Oriental Studies at the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.

The Arab world is chronically falling behind the industrial leaders, and the hanging up in the stage of transition to more intensive forms of labour and types of production is going to continue in the foreseeable future. The idea of integration as a means to escape backwardness and encourage economic processes lacks the necessary impulse even now, and in the future, it will remain a third-priority goal for Arab interests in the economic field.

Meanwhile, the Arab world is approaching the borderline beyond which ignoring most important aspects of its existence may have most disastrous consequences. Integration does clearly belong to the category of inter-state acts, without which estrangement between countries and groups of countries in the Middle East and the Northern Africa will become stronger with time, especially with account of the actually manifested split between religious confessions and the loss of faith in the Arab unity.

Yet in the nearest future, the influence of various factors, while each of them does not seem to be destructive if taken separately, but can produce serious effects in combination with others, may aggravate the situation in economy, society and the ecosphere in a rough and unexpected way in large territories. The danger lies in the possible domino effect in development of further events, while Arab states may not have the instruments and means, which are effective only if applied on a large scale – and this is unattainable for isolated countries.

In the future, prevention of such course of events must be recognized as one of the top-priority goals of the Arab world, and one likely to be solved by joint efforts. The only condition for ensuring capacity of corresponding mechanisms for countering the threat must be joint mobilization of efforts, resources and knowledge to combat crises and deficits.

We should not exclude the chances that the Arab world, now caught up in an area of increased risks of various natures, will soon be forced to demonstrate its political will on a certain issue of vital importance. Most probably, such issues may concern water sources, currently subject to physical depletion by natural and anthropogenic factors. This problem is likely to be followed by other hard, but quite predictable, issues that can considerably affect survival opportunities of the Arab East people.

These will be extraordinary circumstances capable of forcing some Arab states to undertake joint action in order to maintain their sustainability when faced with dangerous challenges also caused by lack of food, extreme deterioration of environmental situation due to excessive accumulation of harmful waste, increasing desertification, soil salinization, dramatic deterioration of conditions for reproductivity of the population, etc. Emergence of such imperatives in the relatively near future is quite possible, but Arab public opinion is still inert to these eventual threats (as it sees them) and tends to treat them as an abstract matter.

Monarchies of the Persian Gulf are the most goal-focused states in this aspect, and they take care to develop their living spaces. At a hectic rate, they are creating economic and social infrastructure that is going to provide a basis for a large unification of transportation, power-generation, and communication systems into a multi-purpose network in the Persian Gulf, aimed for the future. Despite such hopeful backgrounds, even their progress towards common goals in the currency and finance fields has come to a standstill, far from reaching the goal.

The Arab world is not barred from global tendencies and will develop in their tideway in one way or another. Yet in terms of integration, this region is falling behind the rest of the world and kind of deaf to the needs of the age of globalization and internationalization of the economy, politics, security, etc. In this light, there seems to be almost no doubt that in the future, the states making up the Arab world, will clearly lack the impulse required to initiate an internal integration process. This process will be hindered, at least, by the following factors:

- strong individualization of the Arab world when ruling regimes do not see operant motives to limit their freedom, both within and outside its borders,

- unpreparedness of national capitalism to create a common economic space due to a number of circumstances,

- national egoism ignoring the negative effects of separate existence

- inter-Arabic differentiation, which is in steady opposition to common Arab harmony,

- accumulated large-scale antagonism within the traditional dichotomy “poverty – wealth”, which provokes disintegration as a means to defend against excessive claims of one party to receive aid from the other party,

- practical absence of an Arab country capable of leading others into an economic alliance or bringing together pioneers of the process, apart from Gulf Cooperative Council, which is exclusively a thing in itself and a thing for itself,

- similarity of their market specialization and homogeneity of their products, in spite of desperate efforts to diversify both.

All of the above-mentioned are long-term circumstances that prevent Arab countries from solving the problems they have suffered from for decades – which would be a success given a teamwork approach.

Additionally, the future will see no demand for such – by no means unimportant – motivation for joint efforts that all Arab countries are members of a community united by geographical location, language and religion, and possessing an advantage so rarely found in most regions – their national and socio-cultural identity. These circumstances will not have a promoting effect onto the process of unification. Due to general inertness on issues of integration, it will not receive any impulse and, all the more so, will not gain a new quality just as the Arab ummah will not turn into a full-featured nation, the system-building element of which includes well-developed productive forces based on modern technologies, science and knowledge.

Even the fact that the Arab world may put a claim to be recognized as a kind of unity in terms of geo-political and geo-economic concerns, and is actually an organic civilization with an inherent stability of features, structuredness, and a powerful tendency to protect its system of values, it will not be able to check the centrifugal forces breaking the historically formed community, which is not protected by any corset of integration.

In this connection, a group of Arab countries changed the direction of their efforts and focused on rapprochement with their neighbours in the outside world, thus attempting to fall in the tideway of modern trends for global development, while combining these with their own ideas of their place and role in this process. For Arabian monarchies, this last way will become a natural continuation and development of the already consolidated tendency they are following. For them, the integration project has more to do with reality already, because it will develop in two ways – the internal and the external – that complement each other. In this, the external aspect seems more promising in case of favourable circumstances, and has improved chances to develop into a tangible shape.

Future of the sub-region is connected with the phenomenon noticed by a number of observers, which can lead to big changes in the integration component of Arab development. This is the entry of monarchies into strategic plane of action, in the course of emerging evolution in global foundations of international economic activities – dominated for a long time by the North Atlantic Region, which then lost a part of its influence area to the Pacific Region. In the nearest future, the main players may feel the influence of the new candidate for the leading role represented by countries from the Indian Ocean Region.

Arab states of the Mediterranean have also been actively looking for partners, and they also focused more on partners from outside rather than from inside the Arab world. Before the Arab Spring, they tried to improve their relations with the European Union within the framework of the Partnership for Progress and a Common Future, and with the Middle East and Northern Africa, anchoring more hopes on these than on the Arab project itself. Now this program has lost much of its capacity, and the future of destroyed economies in this part of the Arab world remains vague, in terms of their cooperation with Western capital.

Maladjusted and demobilized Arab mechanisms of economic unification will only deteriorate in the future under the influence of current events in the Arab East. The mechanisms themselves are running a risk of becoming a factor of long-term destabilization that can dilute the idea of integration and cooperation between Arab countries. In the face of the world becoming economically consolidated, such a turn threatens with even deeper disorder and staggering among Arab countries, further exacerbation of crisis manifestations and growing deficits that cannot be compensated for at the expense of internal sources of accumulation.

Recent events brushed the still developing process of integration on the economic basis aside to the far periphery of Arab life, and it may come back into this life only after a very long time, which no one dares to predict. The entire situation is a dangerous and the real feature of today’s Arab reality, and it will affect the dynamics of its development.

It is real because Arab countries failed to accumulate integration experience, though they have had sufficient time and potential opportunities for such practices. Now, it handicaps them extremely in a situation when economic and political interests of the region are protected rather individually than by a unified league of states. In this case, each state may lack the general picture of the situation and its role in the common cause of involvement into the global economic order.

It is also dangerous, because the Arab region has actually entered a stage of reunification of the regional system, and in the future prospect, it will be losing and wasting its internal potential for integration even more intensively. Attempts to escape isolation through unification, not within their inner circle, but in partnership with foreign countries beyond this circle, will hardly be able to guarantee, even in the distant future, that the middle-level Arab states could develop equal relations and solve their problems quickly.

It is absolutely clear that the Arab world has been deep in doubt for decades, as to how beneficial and necessary integration efforts can be, and had little confidence as to results of such efforts. The years-long experience of declarations about short-term practical action suggests that Arabs (with little exception, though) will partake in the results of anaemic behaviour or full-value complex of their countries, while the former cannot, and the latter do not hurry to mobilize their capitals and assets for the sake of common benefit. That is why the chances are high the Arab nations will stick to this marginal position, in terms of integration between themselves, for quite a long time.

Alexander Filonik, PhD in Economics, leading research associate at the Centre for Arabic and Islamic Research, Institute of Oriental Studies at the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.

A certain share of those people shaping modern Arab thought speak openly about their doubts as to recognition of capitalism as an incontestable system for optimizing economic and interpersonal relations. Arab ideologists are in search of a special development option for their nations, which do not belong to the “golden billion” club. They believe that a combination of state regulation and distribution, while preventing local capital from transforming into monopolistic groups and loading it with social obligations, may appear as the correct path to follow, and create a real social-economic discourse of Arab development. It is this version of national capitalism that must become an antipode for the Western understanding of the market economy, and a guarantee of not repeating the blunders of the West – which has developed its economy to a degree of corporatism never seen before, thus making its economic subjects superior to society, its political institutions, and economic preferences.

With much certainty, we may suggest that creation of the promised development pattern – as it is seen by its supporters in the Arab world – must be preceded by a long preparatory stage, moving through which can surely be accelerated by closer interaction with market economies of the West. Yet this is countered by the opportunity to compensate for contacts with the West by traditionalism and conservatism of still large segments of the population and business communities, which have somehow adjusted to capitalism or survived the twists and turns of non-capitalist orientation. In any case, they are sceptical about activities of large speculative capital, as well as of other similar forms of private capital, the chosen representatives of which can create a kind of an informal circle of super-rich economic and business elites from among citizens and subjects of various Arab countries. These elites can potentially unite their efforts to solve specific issues at the national, regional and maybe even at higher levels.

In other words, a set of powerful factors exist, which hinder development along some specific path. Even now, they only allow slow transformation of Arabic communities into a modern social and economic system, and they are linked with gravitation to peripheral forms of social and economic organization; they determine the unwilling involvement of society and the entrepreneurship into processes of economic liberalization and privatization. Overall, any powerful breach of the already established state of affairs is perceived as a threat to deep-rooted welfare mentality and the locally recognized ideas of social justice. The long history of this phenomenon does not provide any grounds for us to believe that such a mindset could be extinguished in the nearest future, or that it will not influence development processes even in the long-term prospect.

The way to the future should be through appeasement of wide public discontent and overcoming instability in domestic policies that have developed from the most powerful economic dysfunctions. In other words, such explosive forces are at work now that there are no minimal conditions required to neutralize them at the moment, while the direct effects and aftereffects of these factors on the future events cannot be doubted.

Loss of peace in the society as a result of the Arab Spring and destruction of its productive forces contains a direct threat to economic security, which has lacked any serious guarantees for decades in the Arab world, because of social experiments, wars, local crises and natural disasters. In conditions of a new round of falling behind the industrial leaders of the world, hanging up in the stage of transition to more intensive forms of labour and types of production, with presence of other factors limiting these opportunities, Arab leaders of the new wave will most probably act by the patterns of the preceding period. They will hardly be able to normalize the deep processes, restore the full-fledged reproduction cycle in the economy, optimize their relations with the people, and lay the basis for civilian dialogue – and not even because of historical reasons, but more due to a fierce struggle for power that breaks links within the society, antagonizes it, and hinders economic activity. Intellectual ferment and uncertainty of the future in the opposing sides of the struggle are threatening to become a permanent factor of political life, accompanied by the inevitable weakening of foreign policy positions and melting opportunities for attracting not only foreign investments but also international aid.

This tendency is noticeable even at the current stage, and there is clear evidence to the effect that the process is becoming a long-lasting one, and can develop at a faster rate in the nearest future. This is indicated by the mere extrapolation of events, let alone mentioning the fact that stimuli for exacerbation are increasing because of the permanently aggravating internal situation, depleting resources, broken market links and widening boundaries of what is permitted in the society. Taken all together, these are destructive factors, which will only accumulate the energy of destruction when treated with connivance.

Internal economic and political discord in the Arab world, given the low capacity of the ruling regimes, only encourages external powers to interfere into their domestic affairs in an effort to adjust the existing situation to suit their own interests. It may be expected that in the future, external pressure in different ways will be a dominant method applied by industrial nations of the West in their interaction with Arab regimes of any orientation. Particularly vulnerable to such treatment are the countries which, due to lack of resources and independent course in politics, will have more chances to be “democratized” and “modernized” by industrial nations. It is easy to predict how such methods of accelerated development may impact on the destiny of Middle Eastern and North African states.

Even without crippling methods, the Arab social and economic practices in their progressive advance will be prone to evolve mostly in accordance with their laws, i.e., slowly, cautiously and selectively. At the same time, one should bear in mind the fact of general acceleration of the development processes, and unification of methods of economic activity in the world, along with these being supplied with brand new mechanisms, instruments and models. Such technological discourse will shake up the Arab world and probably even make it act in anticipation in some cases. Even then, though, we would not be able to say this world can leave its usual trajectory, and that both its parts – the oil-exporting and the oil-producing, the capital-excessive and the capital-lacking – will come to level out their growth potentials. The latter has not achieved even a stable growth yet, and the notion of the meaning of pursuing development without a long-run objective will hardly gain a positive meaning in Arab territories in the foreseeable future, as the task by itself is impossible because of conditions of such a contest. In this connection, in the next decades the Arab countries can hardly hope to increase and improve their potential so much as to be completely ready to enter into a new stage of growth, where technological novelties will play an incommensurably more important role than they do now. Most probably, the point will be just to keep the current figures and, in a proportion, maintain the current reproductive performance. This being the case, searching for their development options might turn out to be not so productive.

Alexander Filonik, PhD in Economics, leading research associate at the Centre for Arabic and Islamic Research, Institute of Oriental Studies at the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.

Whilst the trends are similar, there is no doubt about their unevenness. The speed and magnitude of the economic and social processes in the non-petroleum part of the Arab world will be also determined by the nature and pace of the mobilisation of internal and external sources of accumulation, and by the amount of material, technical and financial provision of development. But these resources, in each particular case, do not conform a priori to their needs. Hence, stability of efforts cannot be achieved even due to very individualised ways of evolution. The convergence of indicators of growth is very unlikely also because there is already a big gap between the coordinates of the starting points due to the destruction of the material base of production, collapse of the internal market, the destruction of the economic and social infrastructure in some countries, and the substantial deterioration of quality indicators on these points in others, and this process is still far from reaching its end.

The technical and social progress, under such conditions, can be achieved mainly by a natural, that is slow, accumulation of relevant features without significant jumps but with a weighty trend for a malfunction in the significant areas. In this connection, Arab states of the average and below-average level of development will continue to move along nonconvergent routes but with the use of previous techniques.

And still, the Arab world, in this part of it, is moving, one way or another, in line with the global processes, repeating at its level some peculiarities of the global dynamics, which determines the vector of the evolution of the global community. This is one of the few circumstances which can somehow confirm that, in the future, Arab “average” countries will stay in line with the global trends and will, with lesser or greater consistency, adhere to political, social and cultural standards in an effort to overcome their transitive status and enter decent places.

However, practice shows that, on the whole, the attitude of the group of countries in question to many issues of the contemporary world looks reactive, they do not work in a proactive manner, and their propensity to palliative solutions even of complex problems will continue for a long period of time. In the light of this, the overcoming of several decades of development in a natural, that is evolutionary, way, which is not one of the most economical ones, probably seem quite acceptable to the rigid part of the Arab world. It is this approach to the socio-economic processes that protects best the integrity of traditional heritage, the Arab nationalism and patriotism which constitute the carcass of public conscience and protect the population from the effects of pro-Western modernisation. Each of the Arab regimes (secular or theocratic) strongly emphasises its special way – from the support for dying handicrafts to the cultivation, within their boundaries, of the idea of Islamic banking revived by Arabian monarchies. The successful example of progressing Islamic finance will continue to personify the capacity of Arab money and enhance, for the sake of Arabian vanity, the illusion of independent functioning of the non-existent “Islamic economy” in the framework of the world economic system. But low-income Arabs also use these as some sort of anchor points which guarantee them the preservation of their identity and familiar socio-cultural orientation against the constantly haunting threat of the advent of the Western market ideology and unacceptable spiritual values.

The protective function of traditions will not die in the Arab world as such any time soon, and the whole process will be sore in the forthcoming period of time. Their political and economic substance now manifests itself (and it should remain so in the foreseeable future) in the amorphism of the economic organism, the distortions of macroeconomic stabilisation and structural reforms, the propensity to etatism, the quite intensive and proven by time corporate connections within groups of economic entities, the informal relations in business, and the shadow structures of the tribal origin which are actively participating in the under-cover distribution not only of the economic but also political resource.

These points make it possible to talk about the extent of the preparedness of Arab countries to perceive the modern multifaceted economic and political order. This extent cannot be described as high. Even the supporters of a more open course evaluate the prospects with caution: active actions in this direction are hindered by the visible obsolete and archaic touch of the approaches to this delicate subject. At the same time, the diversification of institutions and management functions raises concerns in terms of the quality of executive mechanisms and the scale of new tasks. Even if this attitude is considered as a consequence of simple bias, the latter is clearly difficult to erase, too, by isolated manipulations on a narrow front, not to mention the deeper causes for its existence. This will require persistent and systematic measures, for which neither the power of any genesis nor the educated Arab intelligentsia, the state bureaucracy with its numerous failings and even the people, by and large, not ready. And it is more so now, when, in the previously key Arab countries of moderate income, there has been an enormous malfunction in the reproduction systems and the development processes have become unmanageable, so, before going any further, it is necessary to at least bring what has been lost back to the original condition. This alone will require substantial efforts and time and will affect the overall duration of the recovery period, which well may take decades.

These and other points in the course of the sluggish growth (which has not been very high previously either) and the insufficiently expressed political will are expected to maintain, for a long time, the additional negative qualities in the flawed Middle Eastern economy. They are virtually impossible to eliminate using the measures of usual bureaucratic therapy, and its methods, previously applied in various niches, even in better times gave the economy looseness and reduced its efficiency factor.

However, the more or less long-term forecast period makes it possible to predict that, one way or another, the new will be still penetrating the fabric of the Arab existence. But the new will be fiercely confronted by the old, generating an ongoing antagonism, which is particularly likely under the conditions of the deficit of anything and everything. Old rivalries will not be forgotten quickly, and there will be further acute problems and challenges, the solution of which will require of the Arab community to intensify their remaining strength, thus hindering their consolidation and mobilisation on a positive basis.

Alexander Filonik, PhD in economics, Senior Research Fellow at the Centre for Arab and Islamic Studies at the Institute of Oriental Studies RAS, exclusively for the online magazine “New Eastern Outlook”.

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In other aspects, their ways can differ substantially, particularly when it comes to internal evolution under the conditions of an increasingly complex geopolitical and geoeconomic situation, active globalisation processes, turbulence in the Middle East and North Africa against the backdrop of growing contradictions between the developed and developing worlds and between the world players themselves. There is an obvious possibility of the emergence of accidents, unexpected circumstances and factors which can adjust the vector of development of oil exporters and even change the paradigm of their development. In such circumstances, their internal stability should be considered as a provisional value.

On the whole, the entire Arab oil producing areal is faced with quite tangible challenges and threats, with the only difference being that in some places they have already emerged in a hard way or are in the process of maturing to emerge with large intensity later on. And in other places, they are masked by the enormous and cleverly managed and distributed profits from oil, by the developed infrastructure and comfortable living conditions for indigenous people and partly for outsiders as well as by the extensive connections in the framework of global economic activity under the patronage of the West. This is a serious “airbag”, but it should not be considered as a permanent component of national security and livelihood.

It is a different matter when it comes to weighing the most common possibilities and versions of development, which makes it possible to establish a certain general trend, according to which oil exporters will be accumulating the growth potential and realising the advantages of their place in the system of international distribution of labour.

In the framework of the vision of the common tendency, it can be assumed that, if the current course in the Arab energy exporters is retained (even with some deviations from the established resultant in the development and dynamics), its preservation, in the near term, can be considered as very likely. It can be expected that the state will not be able to get far away, even with time, from managing significant segments of economic and social processes. This can be expected due to, for example, the conventional and stable perception of the idea of autocratic economic activity, on the one hand, and the intuitively reluctant attitude of Arab capital to the privatisation of large and more so very large production facilities, on the other hand. It is also supported by the fact that, with the persisting global crisis, it was the state in the Gulf countries that mobilised forces at the end of the 2000s to order to decisively tackle financial difficulties from the outset. This circumstance will be taken into consideration in the mind of the general public and in the long term as an effective means to tackle macroeconomic problems, to solve social issues and as a tool for optimising the national systems of regulation, distribution and investment planning. In such circumstances, private capital is unlikely to go beyond expectations.

It is not by chance that in monarchies it is the forces of the state that are used to consistently create interconnected intraregional infrastructure. It is turning, matter-of-factly and increasingly, into a backbone element of modern productive forces and expanding the development horizons unattainable with the concentration of private efforts alone.

Previously, only material production had exclusive priority in shaping basic clusters in the economy. Nowadays, this function is increasingly shifting to the economic and social infrastructure. In the Gulf conditions, it is and will remain that bridge which brings together the internal markets of the region and increases the interest in it. At the same time, the region itself will get established not only as a financial and industrial enclave but also as a transit hub for foreign investors, manufacturers and international suppliers of goods and services. It is visible that Arabian monarchies are striving to completely monopolise their region and to play the indisputably main role in it in terms of the economy (in addition to financial substantiality). This is necessary so that they could send impulses to the outside world themselves and minimise strong pressure on the part of their influential foreign partners through the diversification of their foreign economic and foreign political relations, the expansion of contacts with other counterparties and the maximum economic and political ascent of their areal.

The scope of work convinces that the state will hardly give up the intrinsic role that it currently has and is very likely to extend it in the future, as managing the growing assets requires the mobilisation of power where there is insufficient entrepreneural initiative of national capital.

The expansion of this tendency only strengthens the conviction of Eastern society in the state’s might. In its eyes, only the state will be capable, at the turn of epochs, to mobilise the resources, move up the reserves and, based on the methods of state regulation and state support, to develop an alternative to the structural reforms and measures of macroeconomic stabilisation which, having been implemented in some countries of the Arab East based on the templates of supranational structures and global corporations, turned out to be destructive in the end. And this graphically demonstrated the essence of imitative modernisation to their potential followers since transnational economic entities are ultimately interested only in resources, including and particularly Arabian energy resources, and only in connection with that, secondarily, in the preservation of the political status quo in this region.

It is not impossible that in this context the current patrimonialism and sultanism (especially in the spread of unmanageable processes in social and political life) is made legitimate in some changed or new authoritarian form. It is very likely that it will emerge with the rights of stringent control and distribution of the social product in the conditions of exacerbated environmental problems, shrinking living space due to reduced food and water resources, the escalated demographic factor, threats of various etiology on the part of competing centres of power. Or it may emerge in the form of “enlightened” or “appropriate” or some other authoritarianism which will be inclined, to a greater or lesser extent, to conform to the needs of society.

But in that case, it will have to move towards the goal by looking for more adaptive models and management tools designed for at least limited national dialogue, compromise and consent for the sake of maintaining social peace and coherent movement along the path of the modernisation of economic structures, the essence of which is more in line with national interests. The combination of so many tasks makes it a winding path, it requires to take into account a multitude of incoming factors and appropriate tactical tricks, to create a developed system of various checks and balances, which can endlessly postpone the set goals.

But for the distant future, the direct extrapolation of current dynamics and realities would be a mistake. There are at least three reasons for that. Very high dependence on the external factor (Libya, Iraq, Syria as an example), which, in combination with the out-of-proportion accusations by the West of the power in authoritarianism, have led to frightening consequences for the population. And the lack of guarantees against such actions in the future in relation to unwanted regimes. Hence, the formational shifts in the world in the form of the advent of a new technological pattern, which is capable to change the usual beliefs about modern capitalism and demonstrate different facets of global livelihood, can refocus geopolitics and geoeconomics in such a way that they will drastically transform the space and all interactions on a global scale and lead to unpredictable shifts in the entire system of world order itself, in which all states will have to look for new places, including the trouble-free Arab countries.

Alexander Filonik, PhD in economics, Senior Research Fellow at the Centre for Arab and Islamic Studies at the Institute of Oriental Studies RAS, exclusively for the online magazine “New Eastern Outlook”.