Until October 1988, the most severe challenge to Algerian President Chadli Benjedid’s perestroika came not in industrial plants or in party forums. Instead, it came in the form of street protests by masses of disaffected, unemployed and marginalized young people refusing to be manipulated by the state. The most important was the November 1986 protests of students in Constantine which led to riots throughout the eastern region. 
In early October 1988, the capital of Algiers and other major cities, including Annaba in the east and Oran in the west, erupted into violence which spread to many provincial cities and towns. The authorities declared a state of emergency and imposed martial law in Algiers and its peripheral cities. The riots, according to official figures, left 159 dead, many more injured and 7,000 arrested, as well as material damage of more than $20 million.
Many in Algeria believe that, confronted with an impending systemic crisis, a faction of the political leadership stirred up these “October events” as an instrument to unleash a “democratic opening” and political reforms that would reinforce the “economic liberalization” that Benjedid has been pushing since he assumed power in 1979. Certainly the October events have given violent impetus to the political reforms which the Benjedid regime had timorously initiated.
The social conflict that erupted in the streets calls into question the legitimacy of the political establishment rooted in the national liberation struggle, namely, the “historic chiefs” who launched the war of national liberation in 1954. The National Liberation Front (FLN) in 1954 had itself emerged out of the contending political parties which comprised the Algerian liberation movement. Then at independence, after some internecine violence, Ahmad Ben Bella, with the military support of the ALN (National Liberation Army) general staff headed by Houari Boumedienne, was able to take over state power. Ben Bella’s dictatorial tendencies soon provoked factionalism on the one hand and alienated the working masses from political participation on the other. In 1963, political authorities consented to subordinate the spontaneous workers’ self-management movement to the control of the state technocrats.
Boumedienne’s coup in 1965 hardly caused a ripple in Algerian society, already inured to the authoritarianism of the political system. By 1968 Boumedienne had eliminated armed opposition to his regime — Tahar Zbiri’s coup in 1967 — and forced most of the political opposition abroad. Boumedienne’s regime was able to stabilize the political situation sufficiently to proceed with state building and industrialization.
A special FLN Congress in 1980, more than a year after Boumedienne’s death, evaluated the economic and social developments of his era, highlighting the shortcomings of the drive for heavy industrialization. The introduction to the report clearly intimates a shift towards a new political economy. By this time, the state bourgeoisie had clearly split into two wings: One group favored strengthening the state sector and opposed any “political liberalization” of Algerian socialism; the second, headed by Chadli Benjedid, favored “economic liberalization.”
At the FLN’s Fifth Congress in 1983, Chadli endeavored to eliminate the last vestiges of the Boumedienne period, ousting several key figures from the FLN Central Committee and other main organs. After his reelection in 1984 as president, though, the coalition of groups made up of the defenders of Boumedienne’s “revolutionary achievements” continued to confront Chadli. Strangely enough, Muhammad Cherif Messadia, whom Chadli made head of the FLN in 1983, led this coalition and became a serious contender to Chadli’s growing power. It was only after the events of October 1988 that Chadli could oust Messadia. But earlier the president did make changes in the upper echelons of state institutions, especially the military.  In retrospect, this seemed to signal that the People’s National Army was being prepared to intervene in the ongoing conflict within the state apparatus. Politically, Chadli pursued a cautious policy as president. He eliminated exit visa requirements for travel abroad. He released political prisoners like Ben Bella, who moved to France and organized the Algerian Democratic Movement (MDA). In 1984, Chadli allowed the return of certain political figures and amnestied others — Benyoucef Ben Khedda, for instance, former head of the pre-independence provisional government, who in 1989 organized the Umma (Nation) Party with the aim of implementing the shari‘a (Islamic law). Chadli’s perestroika aimed to reinforce his power base by fragmenting the opposition.
In April 1987, under Amnesty International pressure, the government approved the Algerian Human Rights League. In July 1987, parliament passed a bill allowing associations to operate outside the FLN’s control. These associations evolved in various domains — sports, social and cultural. Since October 1988, the number of associations has rapidly mushroomed throughout the country — to approximately 12,000 by January 1990. But “bureaucratic politics” — the heavy hand of the FLN — remain as important as ever, making them ineffective and unable to contribute to a social dynamic which will bring about social democracy in Algeria.
The real political shift came with the February 23, 1989, referendum to amend the 1976 constitution. The new text, supposedly designed to produce what the intelligentsia calls a “state of law,” in fact reinforces the president’s power.  The president can indefinitely renew his terms of office; he appoints the prime minister and can dismiss him without a vote of no confidence from the parliament. In September 1989, Chadli terminated Prime Minister Kasdi Merbah on the grounds that Merbah did not push political liberalization hard enough. Those close to the pinnacle of power, however, say Merbah had risen as a serious contender to Chadli’s control.
The 1989 constitution severely restricts the parliament’s autonomy. It is automatically dissolved by two consecutive votes of no confidence. Needless to say, the parliament has no authority over military affairs, which remains under the president. To complete the edifice of the so-called Second Republic, Chadli’s third term has produced a series of bills on elections, mass media and political parties, to name a few, all these issued from the “president’s circle.” In a word, the president of the “state of law” is empowered with all the attributes of an enlightened sheikh.
The new constitution makes no reference to socialism or the ruling FLN. It recognizes the right to establish “associations of political character,” although taking into account the new precarious balance of power stemming from the October events, this clause aims essentially at reinvigorating the “ministry of mobilization” — the FLN — by “modernizing” the ruling party. Existing political opposition such as the Socialist Vanguard Party (PAGS, the former Communist Party), the Islamist and the social-democratic trends would remain incorporated inside the FLN, allowing the FLN with its 500,000 militants to remain the hegemonic party. By January 1990, there were 20 legal political parties, three of which call for implementing shari‘a as the fundamental law in Algeria. Two other parties have applied for legal approval. 
All the parties pontificate about Chadli’s slogans — “production and efficiency, free enterprise and social justice” — but none project concrete proposals to tackle seriously the potential collapse of the national economy. No wonder: All the leaders of these new parties have been members of the previous or current regimes. Thirty-five years after the FLN’s birth, they still refer to the “political heritage of liberation war.”  The PPA, the Popular Party of Algeria, is the only party the political establishment has refused to sanction. The growing Islamist movement, meanwhile, is seriously challenging the “soft state.” 
New Economic Policy?
Boumedienne gave priority to industrial development over agricultural development, spending oil revenues to import the most sophisticated technology at the expense of consumer goods, housing and employment. Some 48 percent of this industrial investment was spent in hydrocarbons and only 15 percent of total investment went to agriculture. Rapid economic growth took precedence over both social equality and political participation.
Algeria reached a critical juncture even before the fall of oil revenues in the mid-1980s. Algerian state capitalism no longer had the capacity to insure at the same time its developmental and its welfare functions. Yet any thorough reforms would severely threaten the very foundation of Algeria’s political rule, based on mismanagement and corruption, patronage and privilege, and coercion — in a word, the politics of authoritarianism.
Chadli’s strategy was a package of administrative and economic reforms designed to restructure and decentralize the “industrializing industries.” Breaking up the giant state corporations, some planners argued, would disperse political and economic decision-making. But did the deficits of the state firms owe to the technocrats’ autonomy from political control  — Sonatrach, the state-run oil and gas company employing 100,000 persons, now comprises 13 specialized units. Sixty-six giant firms were broken into 474 specialized firms known as Public Economic Enterprises (EPEs). Provincially controlled firms were also broken down from 500 into 1,865 units in 1985. The number of provinces (wilaya) increased from 31 to 48, and communes from 704 to 1,541.  Bureaucratic personnel, “conventional” rather than “developmental,” grew noticeably.
Related measures allow the EPEs to form their own capital base so as to plow back their profits, while depriving the EPEs of subsidized state bank financing. This means the EPEs have to pay commercial rates while divesting their welfare functions, e.g., job security, transportation and housing. The government, meanwhile, has implemented a system of shareholding to encourage privatization of the public sector.
Since 1982, the state has also worked to establish more joint-venture firms with foreign capital, especially in tourist industries, housing and raw materials prospecting. Until the October events, foreign capital had been reluctant to invest in Algeria. Since October 1988, Algeria has revised legislation to make joint-ventures more attractive, but foreign capital remains skeptical.
Private Sector, State Bourgeoisie
The private industrial sector is important in Algeria. The 1963 and 1966 investment codes regulated its legal existence during the Boumedienne era, when the regime considered it “parasitic.” The 1982 investment law, though, accords it a “positive role,” complementing the activities of the public sector and providing consumer goods oriented to short-term profits. The state sector traditionally produced inputs for the private sector at low cost, often with no national or international competition.
In 1982, the private industrial sector employed more than a quarter of the industrial work force, and accounted for more than 40 percent of the national value-added outside agriculture in 1989. As a result of the recent measures favoring private investment, the Chambre Nationale de Commerce (CNC) counted 2,364 private new projects in the current year. The real figures are much higher, because many entrepreneurs avoid the complications of recording their projects with the CNC. According to the state sector, though, Algerian entrepreneurs have not played by the “rules of the game.” They have not invested in the areas designated to create jobs in the interior. They also took advantage of the backward fiscal system and paid few taxes.
The paucity of reliable data on this sector leads one to speculate as to the relations between the Algerian entrepreneurs and the bureaucratic bourgeoisie. People believe that many private firms are owned by members of the ruling class; on the record they belong to their relatives and friends. A survey in 1982-1983 found that out of 1,331 entrepreneurs, 40 percent had been state managers or military officers.  By 1981 the state bourgeoisie had acquired a great many of the 200,000 residential and business properties which had been abandoned by French settlers in 1962 at ridiculous prices. This measure, as well as the 1987 law on land reform, permitted certain people to become extremely wealthy overnight.
Algeria’s decade of perestroika has fostered a culture of corruption. Today private wealth is amassed conspicuously and flagrantly. Private fortunes smuggled abroad are enough, according to some estimates, for Algeria to pay back its $25 billion foreign debt. As in Egypt, Chadli’s infitah (economic opening) has produced a “new class” within the bourgeoisie while living and working conditions of the overwhelming majority of people have declined precipitously. The most recent official figures show five percent of the population earning 45 percent of the national income, while 50 percent of Algerians earn less then 22 percent.  Wage disparity now exceeds 20 to 1. The declining quality of life can also be seen in unemployment and underemployment, inadequate food supplies and derelict social services. Between 1985 and 1987, male unemployment increased dramatically. A job is no longer a sure thing for a college graduate. The tourists now attracted to Algeria see large numbers of these young men standing around on every street corner. If one adds women to these figures — they are not, by and large, tabulated in the official data — one can plainly infer that the “Egyptianization” has virtually marginalized two thirds of the Algerian labor force. No wonder the disaffected youth turn to the mosques and the soccer stadiums and to street protests to vent their frustrations.
Above all, Algeria faces an explosive housing shortage. In 1990, the country has a deficit of 2 million dwelling units. Since the October events, the housing crisis has stirred up further disturbances and riots throughout the country. I would estimate that more than half of the towns and cities in the country have seen at least one serious incident of social unrest. Labor strikes have also increased dramatically. In the 1980s, there were no more than 70 strikes per month in the public sector. Since the “October events,” this sector has been disrupted by a wave of labor protest unprecedented in Algerian history. Last year, the Ministry of Labor recorded a loss of 2 million labor days — an average of 250 strikes per month. 
Chadli’s perestroika has been less the outcome of Algerian class dynamics than the country’s mode of integration into the world economy. This adjustment could have only succeeded if the state had, for instance, put into practice in the 1980s a radical reform of the system of taxation. Instead, emphasis has been laid on reducing industrialization and cutting consumer subsidies while deregulating prices in the national market. 
Politics and Islam
In Algeria, Islam is a source of cultural identity. During colonial rule, it served as a factor of national cohesion and a creative force against foreign rule. The recent rise of an Islamist movement signifies that official Islam and state reformism have together failed to incorporate popular Islam or to modernize society. The minister of religious affairs has virtually total authority over religious matters. He administers all religious schools and hires imams — the bureaucrats in cloaks who preached the state’s Friday sermons in the 1970s. The ministry also sponsored seminars and monitored a wide range of religiously related activities. Attendance at official mosques in Algiers by the mid-1970s resembled church attendance in Moscow.
Boumedienne subsequently made bold moves that have favored a resurgence of Islamist politics. One was a sudden and rowdy campaign to “Arabize” street and shop signs, in spite of the fact that more than 60 percent of the population could not read Arabic. Boumedienne used Islamism to counterbalance communist penetration into the state apparatus. Now the Islamist trend capitalizes on the grievances of university graduates who find themselves destined for “dead-end jobs,” as nearly all positions in the private as well as the public sector require French and to some extent English as working languages. 
Since the October events, the Islamists have been exceedingly active. They obstreperously demand “purification” measures — for example, the elimination of coeducational schooling, the Arabization of the medical schools and colleges of technology, and the substitution of English for French as Algeria’s second language.
It seems the Islamist movement has intensified its strategy of penetrating state institutions, especially the educational system. During the October 1988 events, the Islamist militants did not violently intervene against the regime, in spite of provocation by unknown people who fired random shots at mosques. The Islamic Salvation Front (FIS), the main Islamist organization, was formally sanctioned a few months later even though it contravened the proscription against religious political parties in the July 1989 political parties bill.
The most visible manifestation of the challenge to secularism is the growth of street mosques and prayer rooms in factories, schools and government offices. Using electronic amplification in these places, imams loudly preach against “infidels” and women who do not follow “Islamic norms.” Cassettes of sermons and speeches by eastern theologians allow Algerian fundamentalists to follow trends from the other side of the Arab world. This heavy drive forced debate over coeducation for the first time in Algeria’s political history at the November 1989 FLN meeting.
It seems clear that transforming authoritarianism into a democratic political system is not on Chadli’s agenda. The November 1989 reintegration of Boumedienne’s close associates into the FLN Central Committee means that Algeria’s “legitimation crisis” will surely erupt again in the near future. Unemployment continues to grow and urban conditions worsen, creating conditions for a “law and order” crisis and intervention by the military.
 The first challenge goes back to 1980, when public discontent erupted in Tizi Ouzou in three days of riots against all symbols of state authority.
 John Entelis, “Algeria Under Chadli: Liberalization without Democratization or, Perestroika, Yes; Glasnost, No!,” Middle East Insight 6/3 (Fall 1988), p. 59.
 El-Hadi Chalabi, “Metamorphose d’une Constitution-loi,” Sou’al 9-10 (July 1989), p. 22.
 El Moudjahid, January 21, 1990.
 R. Radjala, L’opposition Algerienne (Paris: L’Harmattan, 1988), p. 13.
 Nazih Ayubi, “Bureaucracy and Development in Egypt Today,” Journal of Asian and African Studies 24/1-2 (January-April 1989), p. 66.
 Rachid Tlemcani and W. Hansen, “Development and the State in Post-Colonial Algeria,” Journal of Asian and African Studies 24/1-2 (January-April 1989).
 Mahfoud Bennoune, The Making of Contemporary Algeria, 1830-1987 (Cambridge: Cambridge University Press, 1988), pp. 265-266.
 D. Liabes, “Entreprises, Entrepreneurs et Bourgeoisie Industrielle en Algerie — Elements d’une Sociologie de l’entreprendre,” unpublished Ph.D. dissertation, University de Paris VII, 1988, p. 606.
 K. Aomar, “Les annees de l’anesthesie,” Algerie-Actualites, November 16-22, 1989.
 El Moudjahid, January 29, 1990.
 Giacomo Luciani, “Economic Foundations of Democracy and Authoritarianism: The Arab World in Comparative Perspective,” Arab Studies Quarterly 10/4 (Autumn 1988).
 Rachid Tlemcani, State and Revolution in Algeria (Boulder, CO: Westview Press, 1987), p. 197.