Algeria and the major changes in the world economy

Algeria and the major changes in the world economy
Written by on100dayloans

BY : Pr Abdelouahab REZIG

In Algeria, notwithstanding the 1970s, characterized by a real desire for autonomous development and the implementation of major reforms between 1989 and 1991, the economy evolves between growth, driven by hydrocarbon export revenues, and recession, induced by their fall.

Ihe spread of the market throughout the world has enabled major innovations, a tremendous development of international trade and a significant increase in wealth. It has also been accompanied by great, sometimes ineffective, inequalities between and within countries. The health crisis has revealed other shortcomings of globalization in various fields.
Africa has been globally marginalized although good economic performance has been achieved recently in some parts of the continent.
In South Korea and China, the driving force behind economic development has been exports based primarily on foreign direct investment (FDI) and local labor, with support from the United States and thanks to reforms and to an outward opening led by a strong state. It has been able to regulate the market and invest massively in quality education and research. FDI and accompanying public policies have enabled the transfer and mastery of knowledge and know-how, the achievement of substantial progress in a short time and relatively autonomous economic and social development.
– In South Korea, whose economic development was undertaken in the 1960s and 1970s, experienced a process of internal political liberalization towards the end of the 1980s. It was then able to integrate the essentials of the universal while preserving their internal value system. I had observed it during a study trip in the 2000s. Economic time and political time were thus ordered: “the bowl of air” after “the bowl of rice”.
– In China, the “refocusing”, “rebalancing”, initiated without abandoning exports, constituted the main element of the new stage, qualitative this time, of the evolution of the economy: without renouncing its initial role of “workshop producing low-end goods”, the country pays more attention to that of “laboratory”, notably through the development of research/development; it thus deepens the process of modernization and the dissemination of its fruits to the whole of society. As for the new silk roads, even if they are driven fundamentally by economic motives, they do not however exclude, according to certain specialists, geopolitical aims. However, the country’s international approach continues to exclude “any interference in internal affairs”. China was thus able to devote itself to its economic and social development, even making its current political system prevail. While the drastic reduction of poverty has been a significant success, that of social and regional inequalities remains a major challenge to be met.
– In Algeria, notwithstanding the 1970s, characterized by a real desire for autonomous development and the implementation of major reforms between 1989 and 1991, the economy evolves between growth, driven by hydrocarbon export revenues, and recession , induced by their fall. The drying up of foreign exchange reserves made it necessary to resort to external debt, the repayment of which could only be made when there was a new substantial increase in the price of hydrocarbons. However, when this is slow in coming and/or when the rate of depletion of non-renewable resources accelerates, the prospect of autonomous development risks, “ceteris paribus”, to darken in favor of a singular dependence of our economy. Economic time and political time then became entangled because we did not undertake the reforms necessary for an orderly adaptation to the process of globalization and the formation of quality human capital (education and health). However, we were able to do it, independently, during the period of great financial ease. It is scarcity that imposes rationality; it would still be necessary to ensure an equitable distribution of the sacrifices while waiting for that of the fruits of sustainable growth, in a global context in full mutation.
Many authors recall the famous formula: “The world wears out as it grows older.” While it seemed to be moving forward, globalization has been a subject of debate since the 2008 crisis: it is, for specialists, “sick” and therefore needs care; for others, it has rather reached its limits because of its nature and the way it works. Long before the Covid-19 epidemic, multilateralism was called into question, under the effect of restrictive policies adopted and the proliferation of bilateral free trade agreements, particularly between developed and emerging countries. The Covid-19 outbreak has accelerated this trend and revealed the consequences of the fragmentation of production across global value chains. Fractures and fragilities at the global level are appearing. Both exports and imports are falling and supplies are no longer regular due to various bottlenecks. Having developed services to the detriment of industry, many advanced countries have found themselves dependent on a few Asian countries, in strategic areas, such as health; the example of masks is significant.
All of this is taking place in times of uncertainty, “turmoil”, notably altering stability and visibility, marked by bitter international competition, including the fundamental competition between the United States and China. Admittedly, the US economy is still the largest and most innovative in the world, while the dollar remains the dominant currency. However, the beginnings of a change in the balance of power between these powers are emerging, especially since the current relationship between Russia and China, so different from that which prevailed at the end of the 1970s, seems to confirm the trend towards new polarities and the recomposition of the world order. The interests, alliances and allegiances which then arise are made and unmade at high speed.
Such a process is, however, not only constraining; it also opens up new opportunities. Thus, the post-health crisis economic recovery will certainly be characterized by a tendency to relocate certain activities to places closer to European countries, in the Mediterranean for example; this trend will be driven by a double concern, that of breaking with dependence, on the one hand, and that of saving costs and procurement time, on the other. The economic recovery will also lead to an increase in world demand for hydrocarbons and other raw materials, while their supply will continue to be disrupted, at least temporarily, by numerous economic, technical and geopolitical factors: this will result in an increase in economic productivity gains (due to the increase in the prices of hydrocarbons and other raw materials). Judicious use of these opportunities will certainly facilitate the process of diversification of the economy of other countries.
The consequences of what is currently happening in Ukraine are particularly significant for the Algerian economy with regard to the export of hydrocarbons and the import of cereals:
1) The substantial increase in the price of hydrocarbons and, consequently, that of export earnings can constitute a “cyclical” advantage;
2) The strong dependence of the Algerian economy on food constitutes, on the other hand, a vulnerability.
Also, a judicious use of the “asset” would allow a strong reduction, if not an elimination of the vulnerability: “How many additional quintals of wheat would be produced by an investment of the fruits of hydrocarbons!” This import substitution would then be a virtuous step towards the diversification of the economy.

If Algeria has not been able or able to benefit from the transformations of the world order, initiated since the beginning of the 1980s, it could ensure that its interests are taken into consideration this time. Also, it should adopt a pragmatic approach, devoid of any ideology and simply driven by the concern to provide the country with a capacity to adapt to major global changes and to prepare it for participation as an effective actor. Considered in this way, this approach involves:
– A strong State, bearer of a vision, based on a lucid look at today’s Algeria and ambitious for that of tomorrow.
– A strategy that creates a favorable climate for activities that generate wealth and jobs, including alliances and cooperation allowing an effective transfer of knowledge and know-how, for example.
Quality human capital is needed to meet such challenges.

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