SINCE SYRIA BECAME independent in 1946, the economy has undergone widespread structural change. Although the presence of the Allied Forces during World War II stimulated commerce by providing markets for agriculture, textiles, and other locally manufactured goods, Syria lacked both the infrastructure and resources to promote economic prosperity. Agriculture controlled the country's economy and determined the pace of industrial expansion as large landowners channeled profits from agricultural exports into agroindustrial and related urban enterprises. Syria's predominantly rural population, working under land tenure and sharecropping arrangements, derived few benefits from the agriculturally induced economic growth of the 1950s. However, Syria's union with Egypt (1958-61) and the rise of the Baath Party as the major political force in the country in the 1960s, transformed Syria's economic orientation and development strategy.
By the mid-1960s, government-sponsored land reform and nationalization of major industries and foreign investments had confirmed the new socialist direction of Syria's economic policy. As the state assumed greater control over economic decisionmaking by adopting centralized planning and strictly regulating commercial transactions, Syria experienced a substantial loss of skilled workers, administrators, and their capital. Despite the political upheavals, which undermined the confidence of landowners, merchants, and industrialists, the state successfully implemented large-scale development projects to expand industry, agriculture, and infrastructure.
During the 1970s, Syria achieved high rates of economic growth. The dramatic rise of world oil prices from 1973 to 1974 led to increased production from domestic refineries. Moreover, higher prices for agricultural and oil exports, as well as the state's limited economic liberalization policy, encouraged growth. Also, Syria's economic boom was furthered by increased remittances from Syrians working in the oil-rich Arab states and higher levels of Arab and other foreign aid. By the end of the decade, the Syrian economy had shifted from its traditional agrarian base to an economy dominated by the service, industrial, and commercial sectors. Massive expenditures for development of irrigation, electricity, water, road building projects, and the expansion of health services and education to rural areas contributed to prosperity. However, the economy remained dependent on foreign aid and grants to finance the growing deficits both in the budget and in trade. Syria, as a front-line state in the Arab-Israeli conflict, was also vulnerable to the vagaries of Middle East politics, relying on Arab aid transfers and Soviet assistance to support mounting defense expenditures.
By the mid-1980s, the country's economic climate had shifted from prosperity to austerity. Syria's economic boom collapsed as a result of the rapid fall of world oil prices, lower export revenues, drought affecting agricultural production, and falling worker remittances. Also, Arab aid levels decreased because of economic retrenchment in the oil-producing states and Syrian support for Iran in the Iran-Iraq War. To restore the economy, the government sharply reduced spending, cut back imports, encouraged more private sector and foreign investment, and launched an anticorruption campaign against smugglers and blackmarket money changers. However, massive defense outlays continued to divert resources from productive investments.
By the late 1980s, spot shortages of basic commodities occurred frequently and industry operated far below capacity because of routine power outages. Foreign exchange reserves plummeted, the trade deficit widened, and real gross domestic product ( GDP) growth fell as economic difficulties compounded. Although the government instituted limited reforms to respond to the burgeoning crisis, Syria's pressing economic problems required a radically restructured economic policy to improve future economic performance.
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