Posted by Joshua on Friday, May 18th, 2007
On Sunday May 27th, Syria’s young leader will win a new 7-year term as President of his country. The words “will win” are seldom used ahead of Presidential elections. But Syria, like most countries of the Arab World, does not resemble western nations. Presidential elections in the Middle East do not contain even a slight element of surprise. The results are known in advance. The procedures leading to the actual elections have become part of each country’s folklore.
One cannot discuss modern Syrian politics without fully appreciating the events that took place between 1976 and the early 1980’s, when the Muslim Brotherhood uprising against the Assad rule was in full swing. While this is not the main topic of this post, one cannot escape the fact that the scars of those unfortunate events have left their marks to the present day. The Assad family will never forget how close they came to losing power to that militant insurgency. Only through brutal force was this insurgency crushed. While on face value, the Brotherhood is long gone; the leadership in Damascus has continued to believe that there remains a strong undercurrent of religious fundamentalism inside Syria waiting to be exploited again. Having succeeded at staying in power for so long, the current leadership has convinced itself that in order to maintain the status quo, only force and a clinically efficient security system can guarantee continuity. This leadership has come to view any signs of dissent with paranoia. Allowing any type of dissent has been seen as a slippery slope that must not be traveled on.
How has Mr. Assad done in his first term, and are the Syrian people better off today than they were in 2000?
Usually, newly elected Presidents can blame their predecessors on what is mostly wrong in their country. In the case of Syria, it is a little tricky to criticize your predecessor when he also happens to be your father who ruled the country for the 30 years prior to your coming to power. However, this challenge was addressed using a clever strategy:
The late Hafez Assad was to be positioned in the minds of the country’s citizens as a leader who was preoccupied with strategic international matters. He did not have the time to concern himself with domestic and economic issues. A group of never fully identified so-called “old guard” was to be assigned the responsibility and the blame for the country’s economic and domestic shortfalls over the past 30 years. For the record, those who knew the late leader are quick to note that he exercised full control over all matters. Delegating responsibilities was not his forte. It was repeatedly rumored that even the order to assign new university professors had to be signed by him personally. This meant that some of those documents sat on his desk for months waiting for his signature. Nonetheless, the above carefully crafted strategy has worked very well for the new President. The ever-tricky job of criticizing the past and pointing to improvements since 2000 was certainly made easier this way.
Supporters of the young President are rightfully quick to point to a list of “improvements” since he came to power. If one were to use the period of 1980-2000 as a measuring stick, then it is hard to argue with the country’ “relative” success over the past seven years. But is this the correct metric? Is it enough to claim that the country is doing better today than in the past?
Syria’s economic challenges:
As readers of this forum know, I have been consistently critical of the country’s economic policies. While it is hard to argue that the pace of reforms has picked up recently, it is important to stress that these reforms have been woefully inadequate. It is not enough to introduce new private banks and promise a wave of new investments in tourism followed with the promise to launch a new securities exchange. Many hard decisions have to be made before this country’s economic challenges can be addressed. Thus far, what has been done has not been adequate.
One of Syria’s main challenges is its chronic unemployment. Its vast public sector employs close to two million workers. Outside of telecommunication, almost all these industries experience red ink consistently. While having large state-owned enterprises may help subsidize the income of these employees, it results in the misalocation of resources and low productivity rates. In addition, it is a huge drain on the government’s books as the country’s finance minister reminded us recently.
Syria has a disproportionately young population. As a result, it has a rapidly growing labor force. According to the IMF, this labor force is currently growing at close to 4.0%. Why is this important? Each country has what economists call a “potential economic growth rate”. The way to calculate potential growth rate is to add the growth of the labor force to the change of the country’s productivity. In the case of the U.S., potential GDP growth is 3% as a 1% labor force is added to 2% productivity growth. The only way a country can create enough jobs for its labor force is to grow at or higher than potential.
In the case of Syria, a 4% labor force growth and an assumed 1% productivity rate means that its potential growth is at least 5%. However, growing at potential will not succeed at lowering the current pool of the unemployed. It will merely stop it from rising further. For the economy to absorb an increasing number of the unemployed, a growth rate in the order of 7-8% is needed.
How important is it for the economy to grow by 8% versus the current 3%?
The past 43 years of Baath party rule has been associated with economic stagnation, red tape, socialism and endemic corruption. The cumulative impact of this has stifled economic growth and led to stagnant standard of living. When you grow below potential for as long as 43 years, the cumulative effects can be devastating on income and wealth.
Were a country like Syria to continue to grow at 3% instead of 8% for the next 43 years, the implications would be as follows:
From a base real GDP of $ 23 billion, 3% growth means that GDP will grow to $82 billion by 2050. An 8% economic growth rate, by contrast, would result in a 2050 GDP of $629 billion (thanks to the magic power of compounding). Assuming that Syria’s population grows at 3% over the same period, it is estimated that by 2050 there will be 71 million Syrians to share the GDP number above. The scenario of a 3% economic growth will leave the country with a per capita (per person) GDP of $ 1,150 per year. 8% growth would leave each person with $ 8,829. Assuming a family size of 5, the average Syrian family would either have an average monthly income of $479 or $3,679.
Using the above hypothetical example, one can start to appreciate the impact that economic mismanagement of a country can have if sustained for long periods.
A word on corruption:
One of Bashar’s biggest failures on the domestic front is his inability or unwillingness to reduce corruption and nepotism. Members of the President’s inner circle continue to dominate and monopolize every facet of the Syrian economy with impunity. This President has done nothing to stop this trend. Surely, the family’s financial security is not at risk any longer. Mr. Assad must demonstrate that he will stem this cancer from growing any further.
Bashar’s political record:
It is extremely hard to review Mr. Assad’s political decisions over the past seven years without eliciting passionate responses. Any discussion of this subject matter is seldom free of controversy. With that in mind, here are my own controversial thoughts:
Only months after Bashar’s rise to power, George W. Bush was elected to office in January 20, 2001. The timing for Bashar could not have been any worse. The Neoconservatives were soon throwing their weight around an extremely sympathetic White House. Eight months into the new US presidency, September 11th struck. The U.S. was shocked like never before. All previous protocols, arrangements, agreements, alliances, conventions were swept off the table. The U.S. changed. The neoconservatives in the administration had their chance to translate their long held dreams into action. The U.S. President was more than happy to follow them. Afghanistan was the first easy target. Iraq needed more time but not much. During 2002, it became clear that the White House was intent on the invasion of Iraq.
During this same period, Mr. Assad had to contemplate his move. The decision was made to resist the American invasion to his East fearing that Syria would itself become the next American target. Simultaneously, Syria's relations with Iraq kicked into high gear. The Americans were not amused. The Syrian leader was paid a number of visits to convince him to change course. Colin Powell led this effort in his infamous trip to Damascus. The Syrian President did not fall into line. It has been suggested that the list of demands by Powell and others was too long and hard for Mr. Assad to meet. The young President may have given the American official some assurances that he would consider meeting at least some of Powell's demands. In the end, he did not come through. Instead, his strategy seemed to revolve around waiting out the initial euphoria following the American invasion and then capitalizing the inevitable failure of US strategy.
While events in Iraq unfolded according to Bashar’s calculations, those in Lebanon did not. The White House was intent on punishing the young Syrian leader for his Iraq strategy. It decided that he should pay the price in Lebanon. Rafik Hariri pounced on the opportunities created by the change in America's power in the region. Using his personal relationship with Chirac and the Americans, he became the leading architect of resolution 1559, which was adopted at the Security Council in 2004. By then Damascus had seen enough. The order to eliminate Hariri was put into action. It was risky and audacious, but it was also necessary. If the Americans were already unhappy with Damascus, they were shocked once Bashar set out to scuttle their Lebanon strategy. The US Ambassador to Syria was called back to Washington in less than 24 hours. The U.N. resolution to try the killers of Hariri was put into full swing.
In the opinion of this writer, Mr. Assad could have followed a different strategy when he learnt of the American plan to invade Iraq. Did he need to be so vocally and publicly opposed to it? Today, we hear him offer his help to calm the chaos in Iraq. Could he have done this earlier? I am constantly reminded that there was no guarantee that America was going to accept Bashar’s help in the wake of the its invasion of Iraq should he have offered it then. One still wonders what would have happened had he tried harder. Something tells me that were Hafez to be alive during the past 7 years, he would have turned the American invasion of Iraq to his advantage and ended up establishing himself as the undisputed leader of the region stretching from Lebanon and the Mediterranean to the Euphrates river.