Political-Economic Liberalization under Benjedid, 1979-88

Former President Chadli Benjedid (1979-92)
Courtesy Embassy of Algeria, Washington

Despite his overwhelming electoraÍÍÍÍl victory, Benjedid did not immediately enjoy the same respect that Boumediene had commanded. Accordingly, the new president was especially cautious in his first few years in office. His tentative and gradual reforms wandered little from the socialist course chosen by Boumediene.

Over time, however, Algeria moved slowly away from the strict socialism of the Boumediene years. After receiving a second popular mandate in 1985 with more than 95 percent of the vote in new presidential elections and after making some significant changes in government personnel, Benjedid seemed increasingly confident about instituting sweeping reforms that eventually altered radically the nature of the Algerian economy and polity.

Boumediene's socialist policy had focused almost exclusively on developing the industrial sector and relied on energy exports to finance its development at the expense of the domestic and especially the agricultural sector. Many of these industrialization projects were poorly designed and, instead of encouraging national development, eventually drained the economy. Relying on state initiative as the driving force behind economic development, large-scale industries quickly became consumed by nationalist imperatives rather than economically efficient ambitions. The fall of energy prices in the mid-1980s left Algeria, which was heavily dependent on the export of hydrocarbons, with a substantial national deficit. Agriculture, neglected in favor of heavy industry, was underdeveloped, poorly organized, and lacking in private initiative or investment. The reliance on food imports meant frequent food shortages and rapidly rising agricultural prices. Unfortunately, the crisis was not limited to the agricultural sector. The trade deficit was only one of Algeria's problems. High unemployment, one of the highest population growth rates in the world (3.1 percent per year in the early 1980s), an unbalanced industrial sector focused almost entirely on heavy industry, and rapidly declining revenues had eroded the state's welfare capacities and its ability to maintain political security and stability.

Benjedid's initial reforms concentrated on structural changes and economic liberalization. These measures included a shift in domestic investment away from heavy industry and toward agriculture, light industry, and consumer goods. State enterprises and ministries were broken up into smaller, more efficient, or at least more manageable, units, and a number of state-owned firms were divided and privatized. Benjedid opened the economy to limited foreign investment and encouraged private domestic investment. The new regime also undertook an anticorruption campaign. This campaign, aside from the obvious benefits of adding to the legitimacy of the regime, enabled Benjedid to eliminate much of th 100e old-gd-guard opposition loyal to Boumediene's legacy, ÍÍÍÍthus strengthening his political control.

With his regime consolidated, Benjedid could intensify economic and political reform without the threat of opposition. His early reforms had been limited to the economic sector and had ensured that Benjedid remained in control of the reform process. By 1987 and 1988, however, he added political liberalization to the agenda and espoused free-market principles. He legitimized independent associations, even extending the new freedom to organize to the Algerian League of Human Rights that had consistently criticized the regime for suppressing public political activity and demonstrations. In the economic sector, Benjedid gave state enterprises increased managerial autonomy. Central planning by the state ended, and firms became subject to the laws of supply and demand. In addition, the regime reduced subsidies, lifted price controls, and accelerated the privatization of state-owned lands and enterprises. Finally, Benjedid tackled the heavy fiscal deficit by increasing taxes and cutting spending at the central government level, as well as reducing state-purchased imports.

Despite all these measures, or perhaps because of them, Algeria found itself in a critical position politically and economically in 1988. Benjedid's reforms had exacerbated an already dismal economic situation. The dismantling and privatization of state enterprises had resulted in rising unemployment and a drop in industrial output. Trade liberalization, including import reduction and currency devaluation, and the removal of price controls and reduction in agricultural subsidies resulted in a drastic increase in prices and an unprecedented drop in purchasing power.

The negative effects of the economic reforms were felt primarily by the disadvantaged. In contrast, the bourgeoisie and upper classes benefited greatly from economic liberalization. Economic measures legalized the private accumulation of wealth, ensured privileged access to foreign exchange and goods, and provided many with relative security as heads of recently privatized state enterprises. The result was widespread economic frustration and a lack of public confidence in the political leadership.

In October 1988, this economic and political crisis erupted in the most violent and extensive public demonstrations since independence. Following weeks of strikes and work stoppages, the riots raged for six days--from October 5 to 11. Throughout the country, thousands of Algerians attacked city halls, police stations, post offices--anything that was seen to represent the regime or the FLN. The disorder and violence were a protest against a corrupt and inefficient government and a discredited party. The riots were a product of declining living standards, rapidly increasing unemployment, and frequent food shortages. Furthermore, the riots represented a revolt against persistent inequality and the privileged status of the elite.

The poor economic situation was not unique to the Benjedid regime. Even the austere socialism of Boumediene, at least as tainted by corruption as its successor regime, had not guaranteed the economic well-being of the masses. The high oil prices in the 1970s had allowed Boumediene to fund an extensive state-supported welfare system, however, freeing him somewhat from popular political accountability. The crash of energy prices in the mid-1980s undermined this political tradeoff for a minimum standard of living and eventually undid Boumediene's successor, who had never managed to achieve quite the same level of stability. On the contrary, the political and economic liberalization under Benjedid polarized society by helping to expose the corruption and excesses of the elites while simultaneously opening up the political realm to the masses.

The government initially responded to the "Black October" riots by declaring a state of emergency and calling in the military, but the demonstrations spread. Hundreds were killed, including numerous young people, who made up the bul 5dd k of rioters in Algiers. The brutal military suppression of the riots would have far-reaching consequences, consequences that would ultimately lead to a redefinition of the military's role in the political configuration of the state. On October 10, Benjedid addressed the nation, accepting blame for the suppression and offering promises of economic and political reform. His hand had been forced. In an effort to regain the political initiative and contain the damage to his regime, Benjedid lifted the state of emergency, recalled the tanks, and announced a national referendum on constitutional reform.

Data as of December 1993