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Economic Reform & Political Openings
Lessons from Algeria
MOHAMED RATOUL
Professor of Economics and Political Science, Shalaf University, Algeria
AFTER GAINING INDEPENDENCE in 1962, Algeria faced many economic, social
and political troubles. Like many developing and post-colonial countries at the time,
Algeria chose to address these hardships by adopting socialist principles, financed
by oil export revenues and foreign borrowing. However this socialist experiment col-
lapsed in the late 1980s with the decline in oil revenue due to falling oil prices, and
with the collapse of the Soviet Union and the strength of socialist ideology, leaving
Algeria to face both economic and social crises. The Algerian government was forced
to reexamine many principles that had not previously been open to discussion, and
Algeria began evolving into a market economy. At the same time, Algeria amended its
constitution in 1989 to reflect new political pluralism. Thus, beginning in the 1990s,
Algeria was simultaneously undergoing two crucial processes: economic and political
liberalization. This article will examine the sweeping economic reforms that Algeria
implemented under the structural adjustment program and again in the early 2000s,
in conjunction with an examination of the effects of political reform and the security
situation on Algeria’s economic development.
Reforms before 1999: harsh structural adjustment and democratic labor pains
By the late 1980s, it had become apparent that extensive economic and social reforms
were required to transform the prevailing model of planned economic development
that had been applied after independence and which relied heavily on oil export rev-
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78 Change in the Arab World
enue and foreign borrowing to support the Algerian economy. After huge, organized
demonstrations took place in Algeria’s major cities on Oct. 5, 1988 to protest the de-
clining economic and political situation, the government took steps toward converting
to a m