Democracy or dependence? The future of Algeria in a rentier economy

Democracy or dependence? The future of Algeria in a rentier economy

Comment: Democracy in Algeria will require reduced dependence on the domestic hydrocarbons industry and the networks of cronyism that run it, writes Gabriel Davis.
6 min read
22 Apr, 2020
Algerians protest a new oil and gas bill in front of the parliament, Algiers [Anadolu]
On 23 March, responding to the coronavirus outbreak, Algerian President Abdelmadjid Tebboune ordered state institutions to "increase their level of vigilance to the maximum level." 

As the crisis grows, Tebboune has also allocated $100 million for pharmaceutical imports - capping off a remarkably rocky start to his presidency. Since his election on 12 December, Tebboune's tenure has been overshadowed by social malaise: protests have swept through Algeria since February 2019, casting doubt on the ability of the National Liberation Front (FLN), Algeria's ruling political party, to act in the interests of Algerian voters.

Unsurprisingly, then, Tebboune's election was by turns boycotted and criticised by many Algerians of all walks of life. The resulting voter turnout was a dismal 39.9 percent

These disappointing numbers reflect the popular disenchantment with regime politics and widespread demands for either broad systemic reform or the complete elimination of the existing political class, if not both. Since Algeria's independence in 1962, the FLN has relentlessly concentrated political power within the country's ruling military and administrative bodies, sculpting a state with near-total institutional controls linked to party machinery or FLN politicians.

Salim Abdullah El-Haj describes this phenomenon as borderline cronyism, noting that "although the ongoing protest movement in Algeria has succeeded in achieving some political gains, the old political regime still stands and continues to enjoy both total power and the support of the military establishment." In this context, many Algerians understand Tebboune to be yet another remnant of tired FLN politics. 

But protests and low voter turnout are indicative of a larger, potentially more concerning, trend in Algerian society: the regime's inadvertent suppression of political enthusiasm. Even as citizens march in the streets, the government's monolithic embrace of establishment actors and policies suggests a marketplace of actually viable ideas that excludes new voices from the conversation.

The FLN has engineered a near-inextricable bond between party politics, state machinery, and oil rents

Just as the FLN consolidates decision-making authority among its military and party elites, so does it continue to champion several key economic, social, or strategic narratives that discourage participation from younger Algerians - all but ensuring a growing frustration with the state's seeming rigidity.

As such, the FLN is simultaneously losing support from the young generation, and stymying national development. In other words, it has enshrined social attitudes that jeopardise not only the country's growth, but also the party's survival writ large. 

It's clear then, the FLN does not have Algeria's long-term interests at heart. But another factor helps explain the party's hesitance to encourage political participation: the impact of oil rents. Recent declines in global oil prices have upset Algeria's enormous hydrocarbons industry, threatening financial shortages that could rupture national supply lines and prevent basic resources from reaching everyday Algerians.

As Dalia Ghanem noted in September, "[i]n a country that imports 70 percent of what it consumes, the current reserves only cover 13 months of imports. If the state can no longer deliver goods and services, socioeconomic discontent will rise." Fluctuating oil prices have left the regime with insufficient funds and a volatile political-economic power nexus that responds to the often-chaotic whims of the global rentier market. 

Read more: Algerians will keep rejecting elections until they are fair and free

This unfortunate reality is, to a large extent, a crisis of the state's own making. Since the 1960s, the government has almost single-mindedly yoked Algerian economic prosperity to the domestic hydrocarbons industry, sidelining massive agricultural and service sectors in the process. 

In 1969, the government introduced a four-year plan that deliberately strengthened hydrocarbons as a gateway industry, theoretically providing the funds to create more industrial diversification later on. In this spirit, then-President Houari Boumediene nationalised French gas and oil companies in 1971, and Algeria benefitted generously from the 1973 OPEC embargo as barrel prices quadrupled.

Despite this, the planned diversification never occurred. 
According to Gregory White and Scott Taylor, state elites pocketed the money, "preferring instead to ensure their own economic gain and political preservation." The windfall profits of the early 1970s dried up. 

In the absence of strong state funding, a panicked FLN enacted a programme of economic liberalisation through the 1980s, intending to create stronger commercial links with international markets.

However, this did not translate to increased foreign direct investment (FDI). Projects undertaken on the assumption of increased FDI, such as economic diversification, struggled to achieve their goals and ultimately foundered upon the exhaustion of state funding.

In response, state leadership spent the 1990s managing both a civil war and an economic course correction that only deepened its dependence on hydrocarbons. By the early 2000s, the regime had strengthened its economic control and grown wary of international markets, "[a]pprehensive that foreign involvement could result in a loss of state control over oil rents, and a loss of crucial patronage." Consequently, the FLN has engineered a near-inextricable bond between party politics, state machinery, and oil rents.

The more it aids the hydrocarbons sector, the further Algeria drifts from becoming economically diversified or democratic

The upshot of this is a contemporary Algerian regime characterised by two notable features. First, oil rents have joined hands with the state to create de facto technocracy.

As the FLN has wedded itself and Algeria's national interests to hydrocarbons, not to mention its overzealous shielding of rentier policy from outside influence, its top politicians have slowly but surely become the only social class with expert knowledge of the economy - preemptively crippling many potential challenges to the FLN's authority. In other words, party practices have insulated a crucial knowledge base from public access, and excluded all outsiders.

Second, following on from technocracy, the government finds itself in a vicious feedback loop. On one hand, the more it aids the hydrocarbons sector, the greater its power becomes. But the more it aids the hydrocarbons sector, the further Algeria drifts from becoming economically diversified or democratic - precisely the pressures that have led Algerians to challenge the regime's rule.

As a result, the FLN now finds itself at a crossroads. It continues to assert technocratic and political dominance over Algeria, not only to preserve its internal power, but to quash any chances of insurgent political challengers.

In so doing, the party has scuttled numerous opportunities for increasing political participation and economic diversification. In today's political context, this has never mattered more. As oil rents 
grow increasingly unstable, presaging a looming economic crisis, and coronavirus cases continue to rise, the FLN will paradoxically need more stability just when Tebboune's election has produced less. 

The FLN will paradoxically need more stability just when Tebboune's election has produced less

What is to be done? Algerians will no longer be placated with empty promises of future oil profits. The FLN seems fated for a stark confrontation with the ways it has systematically shut out its people, and recent protests have laid bare the need to do more than hold new elections.

The only answer, then, appears to lie in finally opening Algeria to political diversity. With diverse opposition parties in government, dialogue over hydrocarbons can be enriched, while generating broad-based, grassroots political enthusiasm. Further, it could prompt greater participation in politics 
just as the US attempts to pivot to Africa, potentially leading to public relations benefits in the offing.

Either way, the only certainty is that the FLN has a difficult choice ahead, with an array of political and economic considerations to mediate. How the Algerian people stand to benefit, remains to be seen. 

Gabriel Davis is a recent graduate of the University of Chicago with a degree in Near Eastern Languages and Civilizations. He is interested in the interaction between globalisation, development, security, and democratic institutions in North Africa.

Opinions expressed in this article remain those of the author and do not necessarily represent those of The New Arab, its editorial board or staff.