Since the early 1970s the working class and peasantry of the Middle East have been socially reorganized while their political salience has been reconfigured. These processes are associated with a transition from economic nationalism, industrially biased statist development and populist politics toward integration into the world economy, encouragement of private enterprise and upward redistribution of the national income. The timing, motivation, extent and economic and political consequences of this transition have been uneven, but the general trend across the region is apparent.
Turkey and Egypt were pioneers in adopting import-substitution industrialization strategies during the global capitalist depression of the 1930s. After World War II, more comprehensive versions of state-led development, often allied with populist nationalism and anti-imperialism, were adopted in Iran, Turkey, Egypt, Syria, Iraq, Tunisia and Algeria. Even countries that rejected this orientation, such as Jordan and Morocco, developed large public sectors. The emblematic expressions of post-World War II radical economic nationalism were Mohammad Mossadeq’s nationalization of the Anglo-Iranian Oil Company in 1951 and Egypt’s nationalization of the Suez Canal Company in 1956.
State-led development and import-substitution industrialization were key components of the social policies advanced by Gamal Abdel Nasser in Egypt, the Baath in Syria and Iraq and the Algerian National Liberation Front (FLN) from the 1950s to the 1970s. The political and economic programs of these authoritarian populist regimes were designated “Arab nationalism” and “Arab socialism” respectively. Even Habib Bourguiba, distinguished by his pragmatic pro-Western views, authorized a “socialist experiment” in Tunisia during the 1960s, albeit with a rather anti-labor and pro-business, pro-landowner orientation. In Lebanon and Jordan — regimes that were aligned with the United States in the Cold War and rejected populist, state-led development — Nasserism and Baathism became the primary forms of opposition politics in the 1950s and 1960s.
Political currents in Turkey are distinct from those in the Arab countries, but it has followed a comparable course of economic development, especially since 1960. The Democrat Party, in power from 1950 to 1960, was committed to its rural base, free markets and NATO. It promised to turn Turkey into a “little America.” These policies were successful in the early 1950s, when the Korean War boom and subsidized export of agricultural products buttressed the economy. In the second half of the decade, foreign exchange dried up and the economy suffered. A coup by junior officers in 1960 reinstated industrially oriented statist development and economic planning.
The 1961 constitution guaranteed workers the right to strike and engage in collective bargaining for the first time. The new regime encouraged labor and capital to coexist.
The authoritarian populist Arab regimes, as well as the post-1960 coup Turkish government, acknowledged workers and peasants as central components of the nation. Gamal Abdel Nasser often spoke of an alliance composed of the army, workers, peasants and “national” capitalists. Variations on this formula were common during this era.  These regimes proclaimed that the goal of national economic construction was improving the standard of living of the laboring masses, especially peasants and rural communities, who constituted some 75 percent of the population of Egypt and 80 percent of the population of Turkey in the 1960s. Thus, the Free Officers’ coup of July 23, 1952, in Egypt was popularly legitimated by land reforms enacted less than two months after the abolition of the monarchy, targeting “feudal” large landowners as an obstacle to economic development and political allies of imperialism. Similar land reforms were enacted in Syria, Iraq and Algeria.
Industrial, clerical and service workers in the greatly expanded public sector typically benefited from state-led development even more than peasants, because of the urban bias of import-substitution industrialization. Workers were encouraged to join trade unions and national labor federations linked to the ruling party and the state. In exchange for corporatist integration of the trade union confederations into the state apparatus, their members received job security, higher wages, shorter hours, health care, unemployment insurance, pensions and access to consumer cooperatives.
Official acknowledgment of the national importance of “the people,” “the toilers,” or the “popular classes” infused public political discourse with the vocabulary of class, exploitation and imperialism drawn from the Marxist lexicon. Communist parties intermittently allied with authoritarian populist regimes because of their anti-imperialist nationalism and their neutralist or pro-Soviet policies during the Cold War. Marxists and other left-leaning intellectuals were encouraged to investigate the history and sociology of workers and peasants.  Novels and films representing workers and peasants as the most worthy citizens of the nation won official approval and popular acclaim.  But Communists were also brutally suppressed at the whim of ruling regimes.
Like similar ideologies in Africa and Latin America, Nasserism, Baathism and other varieties of Middle Eastern populist authoritarianism rejected the notion of class struggle. When collective actions of workers and peasants exceeded authorized boundaries and challenged the regime, they were quashed. In Egypt, the first act of the Free Officers in the realm of economic and social policy was to suppress the textile workers’ strike at Kafr al-Dawwar in August 1952 and hang two of its leaders. In Algeria, the Union Générale des Travailleurs Algériens encouraged workers to seize the farms and businesses of departed colons and manage them as cooperatives. The FLN originally embraced this initiative but soon disbanded the experiment in self-management (autogestion) in favor of centralized state-owned enterprises.
Despite regimes’ rhetoric, poor peasants and unorganized workers in small-scale enterprises were not the primary beneficiaries of Arab socialist policies. Middle class peasants were often the main beneficiaries of the land reforms enacted in Egypt, Syria, Iraq and Algeria in the 1960s and early 1970s, and land reform bureaucracies deepened state intervention in rural life rather than empowering poor peasants. Although significant redistribution occurred and the political dominance of the landed elite was decisively broken, many large landholding families managed to preserve at least some of their wealth and influence. 
Urban middle strata and an elite segment of the working class benefited disproportionately from the expansion of the public and governmental sectors and increased social spending on education and other social services.  Subaltern segments of the population did benefit from social spending, and nationalist regimes’ legitimacy depended on improving their standard of living. In exchange, they tolerated substantial violations of human rights and undemocratic rule. Even when the limits of import-substitution industrialization were manifested in stagnation or decline in the standard of living of workers and peasants, the prevailing political discourse required that their existence and interests be acknowledged.
Tunisia was the first country to turn away from statist development, symbolized by the ouster of Ahmad Ben Salah, a socialist and former secretary-general of the Union Générale Tunisienne de Travail, as minister of national economy in 1969. Egypt began to retreat from Arab socialism in 1968, even before Gamal Abdel Nasser’s death. But the ideological elaboration of the new orientation did not occur until 1974. 
The 1980 military coup in Turkey brought to power a regime committed to neoliberal economic policies. Oil wealth enabled Algeria to avoid facing the contradictions of statist development in the 1970s and to attempt to address them on its own terms at the end of the decade.
The specificities of these cases suggest that monocausal or globalist explanations for the demise of statist development policies in the Middle East, such as Guillermo O’Donnell’s theory of the economic changes associated with a transition from populist to bureaucratic authoritarianism,  or interpretations stressing pressures from the United States and Great Britain during the ascendancy of Reagan-Thatcher efforts to roll back economic nationalism,  or the all-pervasive power of the International Monetary Fund (IMF) and the World Bank,  must be modified according to the particularities of each case. Although these general explanations have some validity, rivalries within ruling parties, the social balance of forces, and collective actions of workers and others have influenced the timing and character of these transitions.
Moreover, the impact of global economic changes and shifts in local social and political power was mediated by Middle East regional developments. The political appeal of state-led development and import-substitution industrialization was dramatically undermined by the massive Arab defeat of June 1967. That debacle demonstrated that Arab nationalism and Arab socialism had failed to effect a revolutionary transformation of Arab societies; they were even weaker relative to Israel than they had been in 1948. The 1967 defeat affected Egypt most immediately and strengthened the hand of those advocating a reconsideration of economic and social policy.
The defeat of Nasserism and Baathism, the suppression of the Communists and the new left, official encouragement of political Islam, frequently supported by private mercantile and financial interests linked to Saudi Arabia or other Gulf oil states (for example, the Faysal Islamic Bank) remolded the political, cultural and economic contours of the Middle East.
The demise of state-led development in the Middle East was consolidated by the effects of the brief and very permeable Arab oil boycott following the 1973 war and the end of the long wave of post-World War II capitalist expansion regulated by the institutions established at the 1944 Bretton Woods conference: the IMF, the International Bank for Reconstruction and Development (now the World Bank), and the General Agreement on Tariffs and Trade. The Bretton Woods system was an international expression of Fordism-Keynesianism: a regime of mass production, mass consumption and parliamentary democracy in the metropolitan capitalist countries.  Its success was based on the preeminence of the US economy, the US dollar and US military power.
In the late 1960s and early 1970s, the Bretton Woods system began to break down. Japan and Europe reemerged as economic powers. The US attempt to fund “Great Society” social programs while fighting the war in Vietnam diminished the relative strength of the US economy, symbolized by the delinking of the dollar from gold in 1971. The recessions in 1974-1975 and 1980-1982 were caused primarily by domestic factors in the OECD countries: insufficient capital investment exacerbated by Reagan-Thatcher monetarist policies designed to eliminate inflation and break the bargaining power of organized labor. A decade of stagflation (stagnation and inflation) — the longest and deepest recessionary period since the end of World War II — ended the era of Fordism-Keynesianism.
The rise of OPEC in the 1960s also helped to undermine the position of US capital by shifting the balance of power and revenue flows from multinational oil corporations to oil-exporting states. The 1973 Arab oil boycott and the Iranian revolution of 1979 were associated with, though not the direct cause of the severe recessions that marked the collapse of Fordism-Keynesianism. But the twenty-fold increase in the international market price of oil, from $2.00 per barrel in 1973 to $40.50 per barrel in 1981, contributed to the inflationary element of the stagflation syndrome.
During the oil boom of the 1970s, a deluge of petro-dollars washed over the Middle East, lubricating the transition to a new economic order. Governments of oil-exporting states (especially Saudi Arabia, Kuwait and the United Arab Emirates, who had large oil reserves and relatively small populations to absorb them) came to control enormous concentrations of petroleum revenues. International lending to Middle Eastern countries increased dramatically in the 1970s, partly motivated by the desire to recirculate petro-dollars. Massive numbers of workers from countries with little or no oil (Egypt, Jordan, Palestine, Syria, Lebanon, Yemen) migrated to oil-exporting states that undertook major programs of construction and development (Saudi Arabia, Kuwait, Libya). Remittances of migrant workers effected a limited redistribution of petroleum revenues, as did Arab development aid to Egypt (until the peace treaty with Israel in 1979) and the occupied Palestinian territories (much of it funneled through the PLO until the 1991 Gulf war), and the export of goods and services to Iraq by Turkey and Jordan.
Multinational oil companies enhanced their profits dramatically during the oil boom and regained much of the power they had lost to OPEC and the exporting states when prices collapsed in 1985-86. Declining oil prices curtailed the development plans of oil-exporting countries and diminished their demand for labor, although Iraq’s need to replace soldiers occupied by the 1980-1988 Iran-Iraq war partially compensated for the declining demand for labor in Saudi Arabia, Kuwait and Libya. The Gulf oil countries, and even more so Algeria, were under pressure to repay international debts contracted with the expectation of high oil revenues.
The herald of the end of state-led development in the Middle East and the policy shift most closely connected to the outcome of the 1973 war was Egypt’s open door (infitah) economic policy announced in Anwar al-Sadat’s April 1974 “October Working Paper.” Despite this and similar grand pronouncements, the Egyptian economy witnessed little structural change in the 1970s and early 1980s.  Nonetheless, a new class of munfatihun — importers, financiers, middlemen and profiteers — began to form. US aid linked to peace with Israel, oil exports, tolls from the reopened Suez Canal, renewed international tourism and remittances from migrant workers masked the depth of the crisis of import-substitution industrialization. These service and rent activities generated sufficient hard currency to avert a foreign currency crisis. Therefore, the government could avoid policy choices that would endanger its support from the legions of managers, clerical and blue-collar workers employed in public enterprises and the state apparatus.
The end of the oil boom in 1985-1986 and the explosion of Third World debt, signaled regionally by the 1978 Turkish foreign exchange crisis and globally by the 1982 Mexican default, made the Egyptian state more vulnerable to pressure from the munfatihun, their allies and the Bretton Woods institutions, resulting in more intense social conflict and a more decisive transition to the new economic order following the Gulf war. The pressures of international debt contributed to similar processes, with differences in timing due to local circumstances in Turkey, Jordan, Algeria, Tunisia, Morocco and, to a limited extent, in Syria and Iraq.
The Washington Consensus
The IMF and the World Bank have advocated a transition from public enterprises and import-substitution industrialization to export-led development, private enterprise and integration into the world capitalist market since the “successful” experiment following the 1973 military coup in Chile. The debt crisis of the 1980s allowed the IMF, the World Bank and the US Agency for International Development to promote this program — the neoliberal Washington consensus — even more forcefully by attaching conditions to the loans it offered to ease the debt crisis (stabilization) and restructuring the economies of debt-stricken countries so as to enable them to continue repaying their debts in the future (structural adjustment). The typical IMF/World Bank stabilization and structural adjustment program raised the cost of food and other basic consumer goods, cut government spending on social services and reduced investments in the public sector. Workers, government bureaucrats and others on fixed incomes bore a disproportionate share of the pain of these austerity measures. Peasant incomes were supposed to rise because of the dismantling of consumer subsidies, the establishment of market-based prices for agricultural goods and the opportunity to market crops freely. But capitalist farmers, not peasant families, have been the main rural beneficiaries of the new economic orientation.
Despite pro forma rhetoric about promoting economic growth and raising the incomes of the poor, neoliberal policies were promoted by the Bretton Woods institutions and the US government in the 1980s as an end in themselves. As Joan M. Nelson, a moderate critic of the Washington consensus, notes, “it is roughly accurate to argue that in the early 1980s the international financial and development agencies pressed debtor governments to subordinate virtually all other goals to stabilization and adjustment.”  Such single-mindedness is not simply a consequence of professional narrowness or policy errors. It is rooted in a reconceptualization of what an economy is and how and for whose benefit it functions.
This discursive shift has been an integral part of the social reformation of the working class and the peasantry of the Middle East and the fitful integration of the region into the new international capitalist order of post-Fordist flexible accumulation. The neoliberal conception of an economy eliminates questions about whose interests it serves. As part of their critique of colonialism, authoritarian populists advocating state-led import-substitution industrialization popularized the idea that an economy should serve the nation, its workers, its peasants and other sectors of “the people.” They were neither entirely successful nor entirely sincere in implementing this vision, but it was fundamental to their political legitimacy.
Advocates of the Washington consensus believe that, “all things being equal,” economies operate according to regular laws and that markets distribute goods most efficiently. Designating it a “science” enhances the power of this belief. Few advocates of the Washington consensus argue that an economy should privilege the interests of local and multinational capital and international financial institutions. It just happens to work out that way when neoliberal policies are dogmatically applied. The beneficiaries of these policies provide lucrative employment, social prestige and power to economists who advocate them, subject to no democratic accountability regardless of the accuracy of their predictions.
The neoliberal belief system can never be conclusively confirmed, as all things are never equal and unpredictable political events often intervene to affect how economies operate. For example, the 1980 military coup in Turkey cleared the way for aggressive implementation of the IMF structural adjustment plan; and the cancellation of half of Egypt’s $55 billion foreign debt as a political reward for participating in the US-led coalition against Iraq in the Gulf war opened the way to concluding a successful agreement with the IMF and gave the regime sufficient political capital to begin the long-delayed privatization of public sector enterprises. The claim that neoliberal economic theory is a science, or the conviction that it can predict events, is analogous to the cultural function of the medieval practice of alchemy.
Lest they appear to be “unscientific,” even moderate critics like Nelson adopt the rhetoric of the Washington consensus. Who can be opposed to economic “stabilization” or “structural adjustment?” These benign terms, and others like “reform,” “liberalization,” “efficiency” and “rationalization,” are nearly universally employed to describe the economic transformations envisioned by neoliberals. “Cutting public investments in housing, health and education,” “upward redistribution of income,” “increasing inequality,” “diminishing the influence of trade unions,” “increasing the power of private capital” and “upward redistribution of access to agricultural land” are more difficult to defend. Yet these are the common effects of the neoliberal program, at least in the short and medium run.
Proponents of the Washington consensus often argue that despite the immediate pain, these policies will promote economic growth and thereby increase the incomes of the poor in the long run. Bent Hansen carefully examined the Turkish case, widely considered a successful example of reform based primarily on the rapid growth in exports of manufactured goods in the 1980s, when Washington consensus policies prevailed. Hansen demonstrates that economic growth from 1962 to 1977 under a regime of state planning and import-substitution was as good as that of the 1980s. He concludes, “The verdict would seem to be that expected benefits of reform and liberalization programs have at best materialized unevenly and rather slowly,” although he speculates that the long-term effects of the new policy may not yet be evident and it may not have been possible to sustain high levels of growth with an import-substitution strategy past the mid-1970s.  More generally, after a decade of structural adjustment programs, the World Bank admitted that there was no “straightforward” way to assess their success and “no conclusive evidence on growth.”  Surely, if a stronger case could be made for the general efficacy of these policies, the World Bank would be making it loudly and forcefully.
Along with a new conception of the economy, the Washington consensus tends to eliminate workers and peasants as social categories altogether, since their very presence recalls the social compact of the era of populist authoritarianism, which the current regimes cannot fulfill. A salient expression of this inclination is the widely used textbook by Alan Richards and John Waterbury, A Political Economy of the Middle East.  The first edition includes the subtitle, State, Class, and Economic Development. This was removed from the second edition, and the conceptual framework of the study was redesigned, replacing “class” with “social actors.” This might be understood as eliminating a residue of Marxist dogmatism, although the first edition of the text was hardly sympathetic to the interests of workers and peasants and focused primarily on the role of the state in economic development. “Social actors” is an amorphous term not necessarily incompatible with the concept of class. Its main task in this context is to avoid asking: Are there structural contradictions in capitalist economies, and in whose interests are such economies most likely to operate?
 John Waterbury; “The Political Management of Economic Adjustment and Reform,” in Joan M. Nelson, ed., Fragile Coalitions: The Politics of Economic Adjustment (Washington, DC: Overseas Development Corporation, 1989).
 ‘Abd al-Ghazzali, Ta’rikh al-haraka al-niqabiyya al-misriyya, 1899-1952 (Cairo: Dar al-Thaqafa al-Jadida, 1968); Amin ‘Izz al-Din, Ta’rikh al-tabaqa al-‘amila al-misriyya mundhu nash’atiha hatta thawrat 1919 (Cairo: Dar al-Kitab al-‘Arabi, 1967); Amin ‘Izz al-Din, Ta’rikh al-tabaqa al-‘amila al-misriyya, 1919-1929 (Cairo: Dar al-Sha‘b, 1970); Amin ‘Izz al-Din, Ta‘rikh al-tabaqa al-‘amila al-misriyya, 1929-1939 (Cairo: Dar al-Sha‘b, 1972); Sulayman al-Nukhayli, Al-Haraka al-‘ummaliyya fi misr wa-mawqif al-sahafa wal-sultat minha min sanat 1882 ila sanat 1952 (Cairo: al-Ittihad al-Amm lil-‘Ummal, 1967); Abdallah Hanna, Al-Haraka al-‘ummaliyya fi Suriyya wa-Lubnan, 1900-1945 (Damascus: Dar Dimashq, 1973); Abdallah Hanna, Al-Qadiya al-zira‘iyya wal-harakat al-fallahiyya fi Suriyya wa-Lubnan (Beirut: Dar al-Farabi, 1975); Kamal Mazhar Ahmad, Al-Tabaqa al-‘amila al-‘iraqiyya: al-takawwun wa bidayat al-taharruk (Baghdad: Dar al-Rashid, 1981).
 ‘Abd al-Rahman al-Sharqawi, al-Ard (Cairo: Dar al-Katib al-Arabi, 1968); Yusuf Idris, al-Haram (Cairo: al-Kitab al-Fiddi, 1959); Yusuf Shahin, Bab al-Hadid (1958); Yusuf Shahin, al-Ard (1970).
 Mahmoud Abdel-Fadil, Development, Income Distribution and Social Change in Rural Egypt (1952-1970): A Study in the Political Economy of Agrarian Transition (Cambridge: Cambridge University Press, 1975); Alan Richards, “Egypt’s Agriculture in Trouble,” MERIP Reports 84 (January 1980); Raymond Hinnebusch, Peasant and Bureaucracy in Ba‘thist Syria: The Political Economy of Rural Development (Boulder, CO: Westview Press, 1989); Karen Pfeifer, Agrarian Reform Under State Capitalism in Algeria (Boulder, CO: Westview Press, 1985); Hamied Ansari, Egypt: The Stalled Society (Albany: State University of New York Press, 1986).
 Mahmoud Abdel-Fadil, The Political Economy of Nasserism: A Study in Employment and Income Distribution Policies in Urban Egypt, 1952-1972 (Cambridge: Cambridge University Press, 1980).
 Mark N. Cooper, The Transformation of Egypt (Baltimore: Johns Hopkins University Press, 1982).
 Guillermo O’Donnell, “Reflections on the Patterns of Change in the Bureaucratic-Authoritarian State,” Latin American Research Review 12/1 (1978).
 Walden Bello with Shea Cunningham and Bill Rau, Dark Victory: The United States, Structural Adjustment and Global Poverty (London: Pluto Press, 1994).
 Gouda Abdel-Khalek, “Looking Outside or Turning NW? On the Meaning and External Dimension of Egypt’s Infitah, 1971-1980,” Social Problems 28/4 (April 1981), pp. 394-409; Galal A. Amin, Egypt’s Economic Predicament: A Study in the Interaction of External Pressure, Political Folly and Social Tension in Egypt, 1960-1990 (Leiden: E.J. Brill, 1995); Tim Niblock, “International and Domestic Factors in the Economic Liberalization Process in Arab Countries,” in Tim Niblock and Emma Murphy, eds., Economic and Political Liberalization in the Middle East (London: British Academic Press, 1993), pp. 55-87.
 David Harvey, The Condition of Postmodernity: An Enquiry Into the Origins of Cultural Change (Oxford: Blackwell, 1989).
 Alan Richards, The Political Economy of Dilatory Reform: Egypt in the 1980s, Middle East Research Associates Occasional Paper 7 (Amsterdam, 1990).
 Joan M. Nelson, “Overview: The Politics of Long-Haul Reform,” in Joan M. Nelson, ed., Fragile Coalitions: The Politics of Economic Adjustment (Washington, DC: Overseas Development Corporation, 1989), p. 14.
 Bent Hansen, The Political Economy of Poverty, Equity and Growth: Egypt and Turkey (Oxford: Oxford University Press, 1991), pp. 391-95.
 World Bank, World Development Report 1991: The Challenge of Development (Washington, DC, 1991), p. 114.
 Alan Richards, and John Waterbury, A Political Economy of the Middle East: State, Class and Economic Development (Boulder, CO: Westview Press, 1990); Alan Richards and John Waterbury, A Political Economy of the Middle East, second ed. (Boulder, CO: Westview Press, 1996).