4. War, Keynesianism, and Colonialism

Explaining State-Market Relations in the Postwar Middle East

Robert Vitalis and Steven Heydemann

For much of this century, but especially in the past two decades, sociologists, economists, historians, and political scientists have found productive and stimulating common ground in exploring the effects of war on processes of state formation and economy building in Europe. Their efforts have helped clarify the connections between war making and the processes through which large-scale political and economic institutions are constructed. Yet these findings have been largely ignored by scholars interested in explaining similar processes in the postcolonial states of the developing world.^[1] The reasons for this lack of interest are not hard to discern. As Charles Tilly rightly stresses, there is little reason to think that the processes underlying the emergence of modern states in Europe will “provide an adequate explanation of the formation, survival, or growth” of late-developing states in the Third World.^[2] The emergence of such states into a fully consolidated state system and a highly structured global economy presents daunting challenges to those who would draw on early modern Europe to explain postcolonial processes of state making or the construction of economic institutions.

Among the most powerful distinctions between early and late processes of state and market formation is the extent to which state forms and regulatory practices in much of the Third World have been shaped by the experience of colonialism. Indeed, for the first half of the twentieth century Middle Eastern peoples experienced full-scale war not as a national-state-defining enterprise of the sort Tilly so famously describes but as a manifestation of imperialism directed by outsiders. For local power holders in the Middle East, the experiences of World Wars I and II were heavily mediated by the dynamics of colonial domination and nationalist resistance. And theorists of late development have concluded that this reality weakens or even severs the causal link between war making and state formation in a decisive way. Because war making was not undertaken by local actors, shifts in state capacity, the emergence of new state institutional configurations, and the reorganization of state-society relations are seen as later processes—consequences of the transition from colonialism to “postcolonialism” rather than the experience of the World Wars.

As a result, the macrohistorical effects of war on processes of state and economy building in Europe seem to offer an unpromising starting point for theorizing about the relationship among war, states, and markets in the developing world.^[3] The profound gaps separating western Europe from the peripheral states of the mid-twentieth century would appear to require such conceptual stretching that the results would hardly justify the effort.^[4] Tilly’s caution against adopting a grand teleology of state building has been widely noted in subsequent research, as have Gershenkron’s efforts to delineate the distinctive trajectories of late developers. Reactions against the “conceptual hegemony” of Europe have led scholars of the developing world to focus, appropriately, on disentangling local processes from their embeddedness in Europe, whether as prototype or as archetype.

Yet in the absence of theoretical frameworks that illuminate the effects of World Wars I and II on processes of state and economy building in the developing world, our understanding of these processes cannot be considered complete. Theories of state and market formation in the developing world that overlook the effects of these conflicts, especially World War II, seriously underestimate the weight of external variables in explaining the global shift among late developers from market-based to statist developmental strategies in the postwar period. Such theories neglect the causal weight of wartime interventions in constructing the frameworks for postwar import substitution industrialization (ISI), even while ISI is often viewed as a consequence of postcolonial economic nationalism and, later, decolonization in Africa and Asia. They overlook the importance of wartime regulatory norms in facilitating the shift from non- or even antidemocratic forms of market liberalism to statist, often authoritarian forms of populism in much of the Third World.^[5]

This chapter examines the experience of World War II and its effects on state-market relations in one part of the developing world, the Middle East, with a focus on Egypt and Syria. Careful attention to the wartime political economy and the new forms of foreign intervention that were its hallmark move us toward an “adequate explanation” of how institutional arrangements for governing the economy first arose in places like Egypt and Syria. In the process, we are able to think critically about various forms of postdependency theorizing and interpretation in historical-comparative political economy. Our work challenges in particular a pronounced domestic bias in existing accounts of state institutional formation in the Middle East, evident in the tendency now to downplay the causal effects of external factors in the making of markets and states on the periphery and to assume that institutions emerge in relative isolation from the international system. But we also take issue with a second and more interesting sociological approach to the question of how to explain the global diffusion of particular models of state formation and repertoires of state intervention. By and large, scholars such as Meyer and McNeely, who emphasize the convergence of political units within the postwar international system around a limited number of state forms, have neglected two critical concerns. They have not provided adequate explanations of mechanisms and agency through which models of state management are installed, adapted, and consolidated.^[6] And in emphasizing states as isomorphic at a high level of organizational abstraction, they overlook the profound variation that exists within particular state forms—such as import-substituting models of development—and thus cannot account for the diversity of outcomes that even similar models generate. Our chapter addresses both of these issues.

Explaining State-Market Relations in the Middle East

European responses to the economic and administrative demands of World War II had profound implications for domestic processes of state formation and for the organization of state-market relations in the Middle East. Specifically, during World War II distinctive norms concerning appropriate strategies of state intervention were exported throughout much of the Middle East as a result of regulatory regimes established by Allied agencies. These norms were grounded in the Keynesian views of economic intervention and management held by leading British and to a lesser extent American officials of wartime regulatory agencies in the Middle East.^[7] They reflected, as well, the lessons learned by British officials through their roles in the design of economic regulatory agencies in England during World War I.^[8] With vast authority to organize economic activity, Allied regulators forcefully imposed their administrative and managerial norms throughout the region. The institutional consequences that followed the diffusion of these norms reached across the Middle East but were especially important in Egypt and the Levant (Syria, Palestine, Iraq, and Transjordan).^[9] They became elements in the regulatory repertoires of local governments and thus influenced in significant ways the postwar, postcolonial trajectories of state building, state intervention, and state-market relations that later came to define the political economies of these states.^[10]

We focus on the prewar, wartime, and immediate postwar experiences of economic regulation and economic institution building in two cases: Egypt and Syria.^[11] We first offer a general argument for wartime economic regulations as a critical juncture in the organization of state-market relations in the Middle East. We then review how Allied forces organized wartime regulatory regimes in the region. In the third section of the chapter we examine in detail the role of the single most important Allied regulatory institution, the Middle East Supply Centre (MESC), which we view as the central mechanism behind the diffusion of Keynesian notions of economic planning into the Middle East. We then turn to a more detailed account of the impact of MESC regulatory regimes in four key areas—agricultural production, trade regulation, taxation, and labor—emphasizing how certain kinds of MESC intervention became the object of bargaining between local and Allied officials, while others did not. Finally, we demonstrate the effects of wartime regulation on the emergence of postwar political economies in Egypt and Syria, tracking the legacies of wartime experiences in shaping postwar patterns of state-market relations in the two countries.

Why Syria and Egypt as cases? In part, this choice reflects the biases of our previous research.^[12] Yet the choice is not entirely path-dependent. Egypt and Syria represent broadly different instances of wartime regulatory experience. Egypt was the focal point of Britain’s Middle East interests during the war, the headquarters of Allied regulatory institutions, and a prominent site for both the emerging presence of the United States in the Middle East and the negotiation of Britain’s gradual, reluctant postwar disengagement from the region. Syria, governed by France under a League of Nations mandate, was much less central to the Allies’ strategic interests. British policy in Syria and Lebanon was driven principally by a concern to ensure that France honor its commitment to grant these states their independence, and to minimize economic disruptions that might encourage the spread of Axis influence among populations whose commitment to the Allies was, at best, contingent.^[13] In Egypt, wartime regulatory regimes were administered directly by the Middle East Supply Centre; in Syria and Lebanon, however, MESC operated under the auspices of the Spears Mission, an organization established by Britain to oversee the whole of its wartime relationship with Lebanon and Syria—military and political, as well as economic. The Mission was headquartered in Beirut rather than Damascus, and the force of its presence in Syria was thus circumscribed both by the role of French mandatory authorities and by its distance from the center of Syrian political life.^[14]

Despite these differences, however, the institutional and political-economic consequences of wartime economic regulations in these two cases were broadly similar. In both cases, Allied interventions exhibited a distinctive pattern in the extent to which they influenced domestic practices of economic management. These interventions largely succeeded in restructuring the organization of agricultural production and food supply; had more limited but still considerable success in shaping the management of foreign trade and promoting the development of import-substituting local industries; and attempted, with little success, to persuade the Syrian and Egyptian governments to shift from indirect to direct forms of taxation as a response to the dramatic increases in money supply (and inflation) that followed the war-driven influx of Allied resources.

Labor management, on the other hand, permits a different take on the role of MESC, shedding light on the indirect consequences of wartime economic regulation, and in this instance the experiences of Syria and Egypt were quite varied. In Egypt, the war created significant new demand for labor and promoted new forms of labor mobilization. Yet the regulation of labor was not a high priority for MESC, whose officials were more concerned with limiting unemployment caused by wartime fluctuations in demand. With the end of the war, the threat of large-scale unemployment in Egypt helped drive the postwar expansion of large public works projects and the formation of a substantial public sector. In Syria, on the other hand, wartime demand for labor was more limited and new forms of labor mobilization (the press gang) ended shortly thereafter, with few clearly discernible effects on state policy toward Syrian workers.^[15] In both Egypt and Syria, postwar governments would dramatically expand the scope of state intervention over the affairs of labor, imposing corporatist forms of interest representation on workers in both countries during the 1950s and 1960s. In this area, too, Middle East practices reflect the diffusion of global norms of interest organization, but outcomes cannot be explained by the styles of intervention introduced during World War II.

In both Egypt and Syria, therefore, World War II stands out as the crucial missing piece in the historical puzzle of the emerging statist alternative to the colonial-watchman economies that had been constructed over the previous half century. The uneven pattern of Allied intervention noted above represents a critical juncture in the postwar development of domestic political economies in both countries. Despite the broad differences in their starting points, the converging vectors of Syrian and Egyptian transitions from more liberal to more statist and populist developmental projects in the postwar period can be traced back to their wartime regulatory experiences.

The significance of the war—as a shock that punctured the more liberal regulatory equilibrium of the prewar era—was not that it helped usher the region from lower to higher levels of state intervention. After all, the rise of statism characterizes the reorganization of political economies throughout the developing world between 1945 and 1960, and it is entirely reasonable to suppose that, even without the war, statist development strategies would have taken hold in the Middle East. The more important question, for which the experience of the war holds the answer, is why this transition took the form it did in our two cases. Why was it, for example, that in Egypt and Syria the public sector dominated the rise of import substitution industrialization (ISI), while in Latin American cases the private sector took the lead in the consolidation of ISI?^[16] Why did state elites in postwar Syria and Egypt perceive of state regulation and state management of the economy as appropriate solutions to some of the urgent problems associated with the construction of postcolonial economies but not others? Why did certain kinds of regulatory practices and institutional capacities become prominent in these states, such as a high propensity to regulate agricultural production and foreign trade, but a low propensity to impose direct taxes on citizens?

What shaped these patterns of intervention? The answer is quite straightforward: Allied preferences and the balance of Allied versus local command of critical resources. The two core interests of the Western powers were to ensure the supply of Western armies and to minimize the impact on import-dependent Middle Eastern populations of the disruptions in global trade that resulted from the requisitioning of global shipping capacity by the military. These two imperatives threw up nearly overwhelming administrative challenges but placed an urgent premium on resolving two problems: feeding local populations and making sure that local economies did not impose demands on global shipping capacity. Driven by these concerns, Allied administrators were prepared to permit the lowest levels of local discretion in the areas of food supply and trade management. And because the Allies controlled ships and thus held the fate of local populations in their hands, they had the power to impose their preferences in these areas.

At the same time, Allied regulators recognized the potential for social instability associated with war-driven shifts in local economies, notably the inflation caused by military spending in countries with limited access to goods. As a result, MESC officials concerned themselves with broader questions of macroeconomic management, but their efforts in this regard were less unilateral. Implementation of economic policies was contingent on local administrative capacities and local political circumstances. As a result, local governments exercised more discretion in the strategies they adopted to manage the money supply. Almost invariably, these took the form of indirect taxation rather than the politically more demanding forms of direct taxation urged by Allied officials.

In short, in these areas as in many others, wartime regulatory changes did not just promote the transition from market liberalism to statism. They shifted Middle East political economies onto a distinctive path, constructing a singular, if flexible, template for how statism would become organized. The Allied regulators, who directed the day-to-day work of wartime economic coordination, built new regulatory agencies, supervised the management of local economies, and negotiated economic policies with local officials, were acting as the microchannels through which a powerful set of Keynesian ideas about the efficacy of state economic management were filtered into the region. If state elites in Egypt and Syria were not themselves steeped in the techniques of demand management, they were nonetheless heavily influenced by the “Keynesian-esque” regulatory environment that Allied bureaucrats created, one in which state intervention easily acquired legitimacy as a solution to problems of economic development.^[17]

Allied regulators not only made intervention more accessible as a strategy, they also offered up specific institutional mechanisms (such as price control boards, state purchasing agencies, agricultural production committees, and import oversight commissions) that Syrian and Egyptian officials could appropriate, make use of in devising economic policies, and then absorb into the bureaucratic apparatus of their postwar states.^[18] In adopting Allied regulatory practices, local officials lowered the costs of constructing institutions for the management of postcolonial economies. But they also privileged the formation of state capacities in those areas most heavily subject to MESC regulatory intervention while neglecting others, notably the capacity to impose direct taxes on citizens. Just as important, local officials helped fix a pattern of state-market relations in which interventionist norms became deeply and pervasively embedded as the organizing principles of postcolonial economic policy in these two states.

As we suggest above, however, the processes through which interventionist norms were transmitted, received, adapted, and transformed belie any simplistic notion of passive local governments acquiescing to the dictates of colonial or postcolonial powers. Instead, Allied bureaucrats and local officials engaged in explicit processes of bargaining over the design of regulatory regimes. And despite the presumption of stringent Allied control, local officials often carried the day. The practices of economic management that resulted from this bargaining were just as firmly embedded in local political and economic dynamics—and in the politics of nationalism and anticolonialism—as they were in Allied strategic and administrative concerns. The result was a set of policies and institutional outcomes that bore the clear imprint of their origins in Allied regulatory agencies, and in the administrative norms that prevailed among British wartime economic planners, but that also reflected the contours of local political struggles and the organization of domestic social conflicts. During the war, but even more so in subsequent years, regulatory regimes were adapted, exploited, and transformed in the context of domestic struggles over the role of the state and the scope of legitimate state intervention in the economy.

In short, what World War II helps us explain is not the move from market-liberal to interventionist political economies in general, but the specific institutional and regulatory form this movement took.^[19] The outcome of wartime regulatory innovation was to articulate a pattern of state-market relations that was far removed from the economic liberalism of the prewar era. Moreover, this pattern reflected norms of economic management that helped legitimate and make possible the populist, redistributive, and aggressively state-managed economies of Syria and Egypt in subsequent decades after the war.^[20] There is little question that this pattern had certain features in common with the later developmental strategies of postcolonial states elsewhere. Yet the wide variation among late developers in terms of their postwar economic trajectories—including huge discrepancies in performance, inward versus outward orientation, and even in their responsiveness or resistance to the current wave of economic liberalization—suggests that differences within this broad pattern are critical to understanding how it is that what often appears to us as a coherent developmental model can produce such widely differing political and economic outcomes.

State and Market before the War

It is broadly true to say that before the Colonial Welfare and Development Act of 1940, Colonial Governments acknowledged little responsibility for economic affairs. Nor was there any great tradition of state interference in industry or commerce in the non-colonial countries, India, Egypt, Iraq, Syria, where much the same attitude persisted.

To understand and assess our claims about the effects of wartime regulatory regimes, it is important we resist the almost inevitable tendency to exaggerate the coherence of colonial governance or to impose contemporary intellectual images of “the state” on the past. For example, analysts generally credit the British occupation with a successful administrative revolution inside Egypt’s ministries. Elizabeth Thompson details in her chapter in this volume the extent to which popular mobilization prompted French colonial officials to expand state administration within Syria during the interwar period. Yet until the 1930s British colonial administrators in Egypt received no formal or specialized training, and the ideal of the generalist who improvised solutions to whatever problems arose in the field was well entrenched among those who ran the empire.^[21] Nor were the policies of French administrators in Syria driven by a vision of how to transform the Syrian state into a mirror image of the French bureaucracy. Although the colonial presence altered the regulatory environment in both countries, Egypt and Syria nonetheless arrived at the moment of World War II with economies subject to low levels of state intervention and to forms of intervention that were largely market enhancing.

In Egypt, the British colonial project was essentially Africa’s first experience with structural adjustment. The debts incurred by Muhammad ‘Ali and his descendants had led by the 1870s to the takeover of the Egyptian treasury, the imposition of an austerity regime, rebellion by those made to pay, and ultimately British armed intervention and occupation. As today, structural adjustment went hand in hand with a quite literal “privatization” campaign that turned over ownership and control of vast royal lands and industries to private investors.^[22]

In the realms of production and distribution, British imperialists oversaw the reconstruction and extension of the system of Nile control works under the authority of the public works ministry, one of the earliest organizations serving to create the (shaky) effect of a modern administrative state. But this effort was the limit of intervention for authorities who were charged with facilitating debt repatriation under prevailing Victorian norms. In the three decades preceding the occupation, Egypt’s hastening pace of incorporation on the then “frontier” of the world economy followed a kind of “Klondike-on-the-Nile” model. Unlike what occurred in other parts of Africa, investors had found power and transport ventures attractive, and British officials continued to support a model of privately dominated and privately initiated economic development. There was little government oversight or regulation of these domains, as we have come to understand such notions. Alexandria was a virtual enclave, and the cotton trade that fueled the city’s rapid (and of course unregulated) growth was run, like the city itself, by its leading families and firms. Building was also essentially unregulated, and the “old” city of Cairo was rapidly ringed by enclaves of its own: Zamalak, Bulaq al-Dakrur, Heliopolis, and Ma‘adi. Public services were contracted out to concessionaires, at a price, generally paid by consumers. Oligopoly emerged as the market-controlling institution of choice by the narrow stratum that occupied the commanding heights. And twenty-five years after the British occupation in 1882, there was still no ministry charged with governing agriculture, the country’s leading sector.

By World War I, both Egyptian nationalist factions and the leaders of the expatriate business community were demanding that government do more to support local enterprise. When Egyptian investors in particular in the 1920s successfully obtained subsidies and other guarantees for their investments, they were not cautiously laying the groundwork of etatism but instead desperately trying to catch up with the networks of British colonial officials, foreign financiers, and local interlocutors that had monopolized rent circuits over the previous three decades of industry- and economy-building. They shared with these competitors a broad understanding of the proper roles of government as an investment subsidizer and guarantor (distributor) of first resort but a regulator only of last resort. Any hint of a redistributive role, however, particularly one that challenged the existing balance of claims or rights with respect to property, was portrayed as foreign contamination of deep-rooted cultural norms.

These points are usefully summarized in John Waterbury’s reminder: “We should not forget that it was a very limited state. No Keynes or FDR [or, we might add, Stalin or Attaturk] burst upon the Egyptian scene in the 1930s to deal with the economic crisis.”^[23] World War II in fact appears to have arrested a new, mid-to-late-1930s “liberalizing” wave in the tariff regime. And if there even existed a significant cadre of officials, Egyptian or non-Egyptian, in the decade or two before 1939 intent on transforming the regulatory powers of the state, the task would have been formidable. Landlords and capitalists both had to be dragged from a Victorian past to an etatist future.^[24]

If the war thus propelled Egypt into the new Keynesian world order, foreigners engineered the shift. Egypt served as the central command post for the entire Middle Eastern theater, and the harbor at Alexandria became the main base for the British Mediterranean fleet. Allied authorities, backed by swelling ranks of foreign soldiers and civilians and the creation of a virtual shadow government in Cairo, seized control of the economy’s commanding heights for the duration of hostilities. Most local producers and consumers could exercise little direct influence over basic institutions of the wartime state’s economic apparatus. Martin W. Wilmington, the semiofficial historian of the Middle East Supply Centre—effectively the country’s, if not the region’s, first “superministry” of the economy—argues that its top officials purposely tried to design strategies for maintaining the facade of government sovereignty given “nationalist sensibilities.” They hoped to “preclude the impression that the British government was usurping governmental powers in the capital of a foreign country where its troops were quartered as allies, not occupiers.”^[25]

Syria’s trajectory marked a different path to a similar end. First, of course, when France was formalizing direct control over Damascus and environs in the 1920s, under the terms of the League of Nations mandate, the British were just beginning the transfer of power to an independent Egyptian government. More crucially for our argument, however, is that in the 1920s the French state was initiating a particular type of “development” (la mise en valeur) project throughout the empire in support of neomercantilism at home.^[26] French mandatory officials pursued policies that were thus typically “late” colonial in character. France assumed control of Syria’s monetary system; linked Syria’s currency to the French franc; exported to the metropole responsibility for macroeconomic policy; held local governments responsible for the costs of maintaining French forces in the country; controlled all major sources of public revenue; and, despite League of Nations prohibitions to the contrary, systematically privileged French investment and economic activity in the country.^[27]

Institutionally, French authorities greatly enlarged the bureaucratic and regulatory machinery of the post-Ottoman Syrian state, notably in those areas related to the collection of revenues and the maintenance of (French) security. Yet French-dominated institutions functioned, by and large, as a system of exclusion. They operated as a “dual structure” in which the French High Commission and its staff in the field “exercised an almost unlimited influence over the local administration and political life.”^[28] The growth of French intervention in the Syrian economy and the establishment or expansion of foreign-owned monopolies in such areas as communications and rail transport thus reflected the intent of mandate officials to maximize their capacity for extraction rather than any kind of statist development project on the part of a Syrian national or business elite. Writing in the 1950s, Syrian economist Edmund Asfour stressed that “the French mandatory government did not try . . . to hurry the pace or affect the pattern of economic development in the long-run interest of the country. There was no place in the central state budget for significant expenditure on development projects. . . . Trade and banking policy was designed to encourage trade with France and further strictly the ends of the French commercial empire, often to the detriment of valid Syrian interests. Industries were not given assistance or protection and in fact grew very little, while agriculture, the mainstay of the economy, was generally neglected.”^[29]

France’s policy of repeatedly reorganizing Syria’s borders and creating autonomous substates based on ethnic or religious identity further fragmented administration and the formation of a national economy. In March 1942, therefore, when Major General Sir Edward Spears arrived in Beirut as England’s Envoy Extraordinary and Minister Plenipotentiary for the Levant States the organization of Syria’s political economy had been profoundly influenced by two decades of French rule and the impact of economic policies intended to subordinate Syria’s economy to French economic priorities. Indeed, expressions of Syrian economic nationalism that various political factions deployed against the French clearly associated “statism” with the mandate—in the form of intrusive and unjust state regulation that harmed the economic interests of the elites who dominated the nationalist movements.^[30] Like their Egyptian counterparts, however, Syrian business elites were disturbed less by the emerging liberal (as opposed to democratic) economic order than they were by their exclusion from it.^[31] Resistance to French rule during the war often led Syrian political elites to embrace interventionist policies put forward by British officials from the Spears Mission, partly to ensure Syrian representation in questions of economic governance that French officials were less inclined to grant.^[32] In this way, nationalist politics led quite directly to the integration of Allied regulatory norms into Syrian administrative practices.

In both Egypt and Syria, therefore, colonial management of local economies in the prewar period had produced limited and highly selective state regulatory capacity. In both cases, colonial officials operated with a liberal economic framework but used state intervention to secure their own economic advantage. Neither colonial nor local elites viewed the state as an instrument of development, seeing it rather as an instrument for generating and directing the flow of resources within economies in which the private sector remained the dominant actors. Both sought the consolidation of liberal rather than democratic or redistributive patterns of state-market relations. Under these conditions, capitalists and landed elites in Syria and Egypt struggled not to overturn the existing regulatory order, but to expand its boundaries in ways that would permit them to enjoy its full benefits. In both cases, it was World War II that decisively altered the scope and intensity of state regulation of the economy, replacing the liberal prewar organization of state-market relations with more interventionist regimes. Initially, this shift greatly expanded the economic opportunities available to local elites, who dominated the institutions that managed access to rents in the postwar period. Later, however, these institutions were used to undermine economic liberalism, and became the tools through which a new generation of populist political leaders would accomplish the marginalization of the nationalist elites of the prewar and wartime period.

Debating Regulation: the Genesis of Wartime Intervention

For capitalists and landowners in Egypt and Syria, World War II marked a critical turning point. Wartime exigencies led to the creation of regulatory bureaucracies and normative frameworks that would become increasingly central to the dynamics of postcolonial state building. Interventionist practices defined a set of norms that legitimated state control of the private sector and linked the fortunes of capitalists and landlords, both political and economic, to the actions and policies of the state. In so doing, wartime regulatory regimes contributed in substantive ways to the creation of a distinctive sense of how states function and how they relate to business.^[33] They boosted local industry and gave rise to market-protecting import substitution policies that altered the relationship of local economies to global markets. Not least important, they also helped to develop the institutional and bureaucratic capacities that made it possible for new cadres of state officials to carry out their designated functions. In various domains—the creation of official statistical bureaus, the training of bureaucrats, the introduction of domestic price controls, the creation of credit facilities, the deepening of import-substituting patterns of industrialization, and the establishment of government monopsonies over agricultural produce—the contours of postwar, postcolonial state forms and practices were shaped by the regulatory regimes introduced during World War II.

One recent explanation for the shift from market-oriented to statist political economies focuses on the difficulties associated with the formation of market-supporting institutions.^[34] In this view, state elites adopt interventionist strategies of economic management only after they have been undermined in their efforts to build the institutional frameworks needed to support a national market. The rise of intervention is thus explained as a fallback strategy on the part of state elites frustrated by the demands of market building.

As the historical record makes clear, however, the new patterns of state intervention and the postcolonial development strategies that resulted from wartime economic transformations cannot be interpreted as an embrace of statist approaches on the part of local politicians and Allied bureaucrats frustrated by the unwillingness of local capitalists to play a developmental role, or by the difficulties of creating national markets. Rather, state intervention was organized around an explicit and durable division of labor between states and markets, with open debates surrounding each decision to permit the encroachment of the former on the latter. Neither the Allied officials directing the regulatory regimes introduced during the war, nor the local officials who were mostly responsible for implementing them, viewed state intervention as an uncontested good. Their principal concerns were not the difficulties of creating and sustaining national markets, which had become more consolidated in Egypt during the interwar period than in Syria. Rather, administrators struggled with the demands of managing a system of state controls, the problems of reengineering economies to meet social needs, and the political difficulties that seemed certain to follow the introduction of sweeping economic regulations.

Getting the prices right, ensuring adequate supplies of trained administrators, enhancing bureaucratic capacity, and negotiating the political implications of regulation and intervention: these were the issues that shaped the design of regulatory regimes in the Middle East during World War II. Allied officials were not driven by apprehensions about the capacity of states to create and sustain market mechanisms but by their determination to respond to the immediate social and military needs arising from the exigencies of war. And they tended to view intervention as a temporary response to emergency conditions. Indeed, they expressed their concerns about the possibly corrosive effects of expanded state intervention on the functioning of capitalism in the Middle East that echoed debates then under way in Europe and the United States.^[35]

Such concerns emerged quite clearly at, for example, a regional conference convened in August 1943 by the Middle East Supply Centre to discuss issues of food rationing and distribution. E. M. H. Lloyd, then-economic advisor to the British minister of state in Cairo and chair of the conference, opened the meeting with comments that evoked the mix of caution, regret, and hesitation that accompanied the expansion of state intervention throughout the Middle East as a result of the war:

There is no easy solution to the problem we are to discuss at the Conference. Government control is always unpopular. It requires a sufficient and reasonably competent staff; and above all it needs to win general acceptance and a fair measure of support from traders who have to be controlled. In no country is it wholly satisfactory. In Britain I can only claim that it is a good deal more satisfactory than in the last war. Indeed, conditions in the United Kingdom in 1916 and 1917 resembled in some ways those now prevailing in the Middle East—widespread profiteering and natural hesitation on the part of Government to launch out on the uncharted and perilous waters of State interference.

These considerations make it all the more remarkable that Middle East governments should have attempted to do as much as they have done. We all know that rationing and control of distribution can never be 100 percent perfect; but if the need is sufficiently great, there is some force in the view that even an imperfect attempt at rationing and control is better than doing nothing.^[36]

Reluctance to risk the perils of state interference captures quite accurately the initial response of local governments to the policy recommendations of Allied officials. Aware that their governments lacked the bureaucratic capacity or institutional strength to adopt a wide-ranging regulatory role, Middle Eastern leaders exhibited something of the hesitation identified by Weir and Skocpol on the part of politicians asked to consider policy options to which their state structures were incapable of responding.^[37]

Yet administrative concerns tell only a small part of the story. By and large, domestic political considerations were as powerful a predictor of local responses to wartime regulation as state institutional configurations and capacities. Such considerations heavily influenced the character of the negotiations among Allied and local officials over the scope and implementation of regulatory policies, and thus had a significant influence on the nature of regulatory regimes, the kinds of solutions that were adopted to resolve particular problems, and the kinds of administrative instruments created to implement them.^[38] As we indicated above, Allied officials were more heavy-handed in imposing controls in some areas (agricultural supply and pricing) than in others (taxation), but in every case shifts in regulation provided the impetus for domestic political conflicts.

In responding to price inflation resulting from wartime expenditures, for example, Allied officials worked to persuade regional governments to apply “remedial” policies “on orthodox lines,” that is, “higher taxation, loan issues, savings campaigns, control of prices and distribution, and rationing.”^[39] Yet in reviewing various ways to soak up excess purchasing power, local officials exhibited deep reluctance to introduce taxation schemes, for both administrative and political reasons. Allied pleas to do so “fell on deaf ears.” Instead, local governments exhibited a “greater readiness [to] control prices and distribution and to enforce rationing,” as well as to rely on indirect taxes.^[40] Doubting their capacity to tax and lacking the political will to ensure compliance, local governments negotiated a form of state intervention that was more consistent with their particular capacities and political circumstances—with lasting effects on the political economies of these states. Throughout the region, mechanisms to control prices and distribution were much more fully developed in the postwar period than those associated with taxation, and were consistently relied upon as a central feature of postwar economic development strategies.

In general, therefore, the scope of wartime regulations, their manner of implementation, and their effectiveness were influenced by a range of domestic factors, both political and economic. These included local institutional capacity; local economic conditions; whether a particular state or territory was independent, a colony or former colony, or ruled by a European power under the auspices of a U.N. mandate; whether Britain or France was the mandatory power in a given territory; and the pattern of nationalist politics in a particular state. Regulatory regimes also differed depending on whether the object of regulation was a commodity deemed critical for the sustenance of citizens, such as wheat, which was tightly controlled across the region and governed by a rather consistent set of policies, or a product regarded as less essential to the maintenance of daily life.

Just as important, regulatory policies emerged through a rather consistent pattern of trial and error in which reliance on markets was replaced by state intervention in specific and delimited instances when private traders and merchants sought to maximize their own profits (whether by hoarding or otherwise) rather than respond to local needs. Whether such instances constituted broad-based evidence of market failure or provided justification for more elaborate regulatory regimes was a hotly debated topic at the time. Yet these debates indicate that the control and regulation of markets were viewed as much more daunting tasks than their creation or maintenance. Thus, even as regulatory regimes expanded throughout the course of the war, and even as local governments overcame their earlier objections to such regimes and began to appropriate them to serve local political and economic aims, Syrian and Egyptian political and business elites continued to see the private sector as pivotal to the economic development of Middle Eastern states.

As this summary suggests, the making of wartime regulatory regimes in Syria and Egypt was a highly interactive and dynamic process, engaging local and Allied officials in ongoing negotiations about fundamental issues of state policy, state structure, and state-market relations. In turn, these negotiations were influenced by a broad range of factors, from the Keynesian preferences of Allied regulators and the political ambitions of nationalist governments in the region to the lobbying efforts of American exporters in Washington. They also had far-ranging consequences for the postwar structure of the political economies of the region.

As the war progressed, regulations became consolidated. Syrian and Egyptian leaders came to view regulatory policies as highly effective mechanisms for extracting resources from society. Similarly, they learned that the institutions created to implement these policies offered important bases of political power and patronage.^[41] As the end of the war approached and pressure began to grow for the removal of wartime regulatory agencies—pressures originating not only among private sectors within the region but also and importantly among exporters based in the United States and Europe who had long complained about wartime restrictions on their business activities in the Middle East—Allied regulators in the region began negotiations with governments within the region about how, or whether, to dismantle the regulatory institutions put in place just years or months earlier.^[42] In Syria and Egypt, the withdrawal of Allied involvement did not provide a justification for state shrinking; just the opposite. Local governments independently decided to sustain the regulatory regimes initiated at the urging of the Allies, and to incorporate regulatory institutions into their expanding state structures. As one observer of the time noted with regard to import-licensing regimes, to take just one case, “It was left to Middle Eastern Governments to retain what portions of their import-licensing system they desired—most in fact retained completely powers which they found most valuable as a means of financial control.”^[43]

The appropriation by Middle Eastern governments of wartime regulatory agencies and practices occurred on a fairly broad basis, underscoring the linkages between these regulatory regimes and the postwar economic structures of the region. It is important to emphasize, however, that the integration of wartime regimes into postwar state structures cannot be seen as a comprehensive, seamless process that explains fully the formation of contemporary economic structures across the Middle East. We have noted that business and political elites in postwar Lebanon colluded to roll back wartime regulations. And we have emphasized that the transmission of regulatory norms was highly selective. A number of policy outcomes considered crucial by Allied officials were essentially ignored by local governments, and little trace of them remains. Most important among these was the sense among Allied bureaucrats of the compelling value of regional economic integration, and the powerful benefits of building comparative advantage on a regional rather than a state level.^[44] The sense of disappointment on their part that integration was an early casualty of the postwar peace was tangible.^[45] Tracing this process of selective transmission, its wartime trajectory, and its legacy for the postwar political economies of the region requires a more focused review of policy making in specific cases. We take up this task in the following sections of the chapter, focusing on how wartime regulatory regimes altered the existing arrangement of state-market relations that had characterized the Egyptian and Syrian political economies during the interwar period.

The Rise of the Middle East Supply Centre

Many factors influenced the patterns and trajectories of wartime economic regulation, but the circumstances that led Allied authorities to intervene can be traced directly to a particular event: a shortage of shipping. With the onset of war and the extension of fighting into North Africa, Britain’s transport requirements confronted the need to enlarge and then supply its forces in the Middle East. This difficult task became even more complicated after 1940 with the fall of France, Italy’s entry into the war, and the resulting loss to British forces of Europe’s Mediterranean coastline. As Wilmington notes, “Overnight the link between the Desert Army and the arsenals of Britain and the United States had been lengthened from 5,000 miles to 12,000 miles and more.”^[46] German submarine attacks, competition for scarce shipping space between civilian and military cargoes, and disorganization at overburdened ports all compounded the difficulty of ensuring the provision of essential military supplies to Allied forces in the Middle East.

Stricter management of shipping and massive reductions of nonmilitary trade seemed the only solutions to the shipping crisis of 1940. Yet civilian shipping requirements could not easily be subordinated to military needs. Middle East states imported considerable quantities of essential foodstuffs and manufactured goods. These items represented an estimated 6 million tons of imports during peacetime, a level of trade requiring almost 100 percent of peacetime shipping capacity in the region.^[47] Dramatic reductions in civilian imports without corresponding efforts to increase local production and improve local systems of distribution would have threatened food supplies and endangered the health, if not the survival, of local populations. In Syria and Lebanon, memories of the widespread starvation resulting from the Allied blockades of World War I had provoked considerable hoarding, along with “one of the most spirited import sprees the region had known” as soon as war seemed imminent.^[48] The shipping crisis also threatened export-dependent sectors of Middle Eastern economies, as access to peacetime export markets was disrupted.^[49] Moreover, nationalist and colonial politics interacted with strategic and economic concerns. British leaders were determined to avoid political instability that might follow economic adversity and thereby create openings for Axis advances in the region and bolster the more radical of the nationalist forces they confronted.

These considerations reinforced a growing British recognition—developed through a protracted process of intrabureaucratic wrangling among numerous ministries and other government agencies in England—that a wartime shipping regime could succeed only if accompanied by a regionwide plan to reduce its potentially disruptive effects. Some agency would have to coordinate agricultural production and distribution, substitute local manufactured goods for imported products, and supervise civilian trade to ensure that only essential imports were permitted to occupy scarce shipping space. Long-term strategic factors worked alongside the shipping crisis to produce a distinctive strategy for wartime economic mobilization in the Middle East, a strategy designed to insulate the populations of the region from the economic consequences of the war by expanding and coordinating local production as well as local capacities for economic management. Though intended to resolve the immediate issue of the shipping crisis in ways that would not undermine the position of Allied powers in the region, this strategy had far-ranging consequences for the Middle Eastern states whose economies were to be reorganized to accommodate the loss of imports.

British authorities did not underestimate the magnitude of the task they faced. Wilmington emphasizes that neither Middle Eastern governments nor the colonial powers had prepared for the challenges of coordinating the economies of the region:

Nowhere was there a master plan of war economics, nowhere a central agency endowed with power and plenipotentiaries to set the pace for a regional alignment of consumption and production. There was no general scheme of rationing . . . [, no] remotely adequate scheme of commodity allocation to industry anywhere. Few price controls and no schemes for the allocation of labor were in effect. No drastic measures for the stretching of supplies . . . had been enacted. Few steps had been taken to convert land to food production. No important campaigns against inflation had been launched. Only feeble warnings and deterrents had been addressed to the hoarder and the profiteer, and no drastically effective regimes of import control had appeared.^[50]

As impressive as Wilmington’s record of Allied unpreparedness might be, it is nonetheless incomplete. It overlooks the fact that there was little coordination among colonial powers as to how to respond to the administrative gaps he identifies. It also neglects to point out that competition among France, Britain, and the United States over the terms of wartime economic management—an extension of their larger economic competition in the region— sured that inter-Allied bargaining and conflict would define how the Allies responded to the demands of managing the economies of a region larger than the United States.^[51]

As a major step toward creating the infrastructure needed to manage a wartime shipping regime, British authorities established the Middle East Supply Centre in April 1941. The Centre was created as a civilian office based in Cairo, operating under the auspices of the British Ministry of Shipping. Initially, the mandate of MESC was rather narrowly framed, focusing on collection of data needed to assign priorities to various civilian imports and thus determine the allocation of cargo space for civilian goods. MESC was created as an advisory body without executive power to enforce its recommendations.^[52] Yet even this apparently modest assignment implied an extraordinary range of tasks, and the executive power of MESC soon grew to match. As defined by W. W. Elliott, an administrator attached to the Spears Mission, the functions of MESC were:

To develop local production of essential food and materials in the Middle East through the co-operation of individual Middle Eastern governments. . . .

To ensure that the demand for imports of civilian goods and equipment to the Middle Eastern countries was restricted to essentials; and to ensure that these essential needs were, in fact met. . . .

To assist Middle Eastern governments in the administration of services and in the control of distribution so that the imports which did arrive were used to the best purpose. . . .

To provide a Centre for the exchange of information on problems of agriculture and industrial production, transport, distribution, and economics generally; and to make available technical experts to advise on these problems.^[53]

It would be hard to exaggerate the degree of intervention needed to achieve these goals. Simply to determine whether a particular food item was essential, for example, meant knowing how much of it was produced within the region and where; what local consumption levels were (implying a need for accurate demographic data in a region where rates of census avoidance were high); what kinds of replacements or substitutes could be found; how much it would cost to deliver them; what the effects would be of diverting crop production from one part of the region to another; and, not least, making sure that sufficient funds and credit were available to ensure that local alternatives could be purchased at one point for resale at another. For manufactured goods, allocation of shipping space required calculations of a similar complexity. As MESC expanded beyond its advisory role to become more active in the implementation of import-reduction schemes, its tasks became even more intricate; its reach extended into virtually every aspect of Middle Eastern economic life.

To carry out the range of tasks expected of the Supply Centre would have proven daunting under virtually any circumstances, and MESC experienced any number of growing pains. Its operations were hampered at the outset not only by the enormity of its role but by interagency rivalries; a lack of cooperation from military services concerned with preserving their autonomy in the allocation of shipping space; and the absence of coordination with U.S. authorities, the other major supplier of shipping to the region and not yet a participant in MESC. From its inception, Free French officials, including Charles de Gaulle himself, strenuously lobbied the British for inclusion in MESC, arguing that France’s role in Syria and Lebanon demanded that it be given an equal voice in MESC. Already chafing at what they took to be de Gaulle’s presumptions about the scope of his authority, this was a prerogative the British were determined not to extend.^[54]

Despite this inauspicious beginning, by its second year of work and until it was dissolved in 1945 MESC exercised an extraordinary role in the management of regional economies. In summer 1942 MESC became a joint Anglo-American operation, and the United States was increasingly willing to rely on MESC recommendations to guide the civilian component of its lend-lease program in the region. The Supply Centre had established its reputation within Allied governments and agencies as an accurate provider of information needed to make decisions concerning the priority of shipments of goods throughout the Middle East. Within the span of a few years, MESC operations reduced the flow of imports shipped into the region from 6 million tons to about 1 1/2 million tons. Its staff had put in place regionwide import-control programs that largely determined what kinds and what amounts of foreign-made goods were available on local markets. It had become a leading direct importer of essential commodities such as pharmaceuticals, tires, grain, meat, and cooking oils. It regulated regional distribution networks, directed census-taking efforts, encouraged the development of local production in ways that influenced postwar industrialization patterns, and managed programs to eradicate locusts and other threats to agricultural production and public health.

As might be expected of an operation on this scale, MESC activities were highly controversial, generating strong reactions, both positive and negative, from a variety of directions. American and British exporters criticized the intervention of MESC in their trading relationships with Middle East customers. Local businesspeople lodged similar complaints. Both groups pursued vigorous lobbying efforts to undermine MESC’s authority and deregulate shipping. Governments and businesspeople in the region disparaged MESC’s authority to review and prioritize their import requests. They also resented MESC’s intervention into local markets as field officers worked to coordinate regional supplies with local demands. These were not by any means trivial concerns.

Perhaps more significant, MESC’s regulatory role cut deeply into prewar economic and political arrangements, redirecting the trajectory of local economies and thus reshaping relations among various political and economic groups at the domestic level. This process proceeded differently in Egypt and Syria, though it moved the political economies of these states in similar directions. Crucially, MESC activities were guided by a notion of the state as the agent of social equity, a clear and critical departure from the elitist market liberalism, if not laissez faire attitude, that shaped processes of state building before the war. Social justice as a responsibility of the state was a central principle underlying the work of the Supply Centre. Through its efforts this perspective became integrated into local perceptions concerning the appropriate purposes of the state in ways that profoundly altered the trajectories of postwar state formation. The Supply Centre took over agricultural production and distribution to ensure not only that food would be available in adequate measure but that it would be available at the same price and quality to every Syrian or Lebanese. It introduced rationing schemes to ensure that access to critical goods would be guided by some notion of equity in distribution.^[55] It undertook censuses of local populations in part to ensure fairness in the allocation of scarce resources. It bought grain directly from peasants at above fair market rates, producing substantial improvements in their standard of living.^[56] And officials of the Centre explicitly contrasted their efficient and rational approach to governance with what they characterized as the corruption and inefficiency of local politicians—sentiments that were typically phrased in the best traditions of colonial paternalism, if not outright racism.^[57] Through these explicit commitments to the state as the agent of social equity, the Centre highlighted and deepened tensions in the core of the state project in the Middle East, making explicit the contradictions between the antipopulist market liberalism that formed the elites’ vision of the state and an emerging vision of the state as the agent of redistribution and social equity that was articulated by reformist intellectuals and politicians as well as by labor unions. The Centre thus helped to frame deep social conflicts that would be resolved only with the demise of nationalist elites and their replacement by populist systems of rule in the decades after the war.

In the following sections of this chapter we review the dynamics through which the political economy of wartime regulation took shape in Egypt and Syria in three distinct arenas: agricultural production and supply, foreign trade, and taxation. We end with a brief assessment of labor regulation, a domain that was shaped to a far lesser extent by wartime intervention, even while new war-driven patterns of labor mobilization fed the larger move toward more statist developmental strategies, especially in Egypt.

Regulating Agricultural Production and Supply

From the outset of the war, Allied officials feared the consequences of wartime shipping disruptions on Middle East food supplies among local populations and struggled to balance the equally urgent need to provide for both civilian and military consumption. Allied assessments of regional food production identified inefficiencies in the distribution of food across the region: surpluses in one country were not available to redress shortages in a neighboring state, typically due to a simple lack of adequate transport. These studies found a reliance on imports in countries that showed the potential to be self-sufficient, and underscored the widespread use of practices deemed threatening to the stability of large urban areas: the hoarding of crops by villagers and of basic commodities by urban dwellers, price gouging by urban merchants, and smuggling of crops to areas outside the control of Allied forces (especially from Syria to Turkey). When combined with the volatility of harvests due to natural fluctuations in rainfall, and restrictions on the export of scarce goods from the United Kingdom to the Middle East, the conditions encountered by MESC officials when they set up shop in the region in mid-1941 were nothing short of dire.

In Syria and Lebanon, in particular, mass famine was a real possibility, and this threat led MESC officials operating within the Spears Mission to adopt a particularly heavy-handed approach to the management of agricultural production and supply. During its first season of operation, hoarding and speculating had led to severe grain shortages. The initial response of MESC staff was to flood the markets with low-priced wheat. More than one hundred thousand tons of wheat originally destined for Europe was diverted to the Levant “to induce speculators and hoarders to unload their stocks.”^[58] But as Spears admitted, “The absorptive capacity of the hoarders was underestimated.” Imported wheat was bought up as soon as it hit local markets, and prices immediately returned to their speculative levels.^[59]

In the face of this failure, MESC staff in the Levant abandoned market-based methods of price management and moved to impose a thorough control regime that governed the entire grain economy of Syria and Lebanon, bringing with it a raft of regulatory and interventionist practices that rapidly became consolidated within local state structures. To oversee this effort, the Spears Mission created an agency known as the Wheat and Cereals Office (also called the Office des céréales panifiables, or OCP), which included representatives from Syria, Lebanon, France, and England.^[60] The inclusion of local representatives had implications that reached well beyond a challenge to French authority. This step made Syrian and Lebanese bureaucrats responsible for the regulation of their own agricultural economies, socialized them into the administrative culture of the Spears Mission, and provided training in the management of large-scale regulatory enterprises—expertise that technocrats such as ‘Izzat Tarabulsi, one of several Syrians appointed to MESC agencies, later placed at the disposal of the postwar Syrian state.

Under OCP auspices, a centralized system of grain collection, transport, processing, and distribution was created, prefiguring the apparatus of food control that developed in independent Syria. Its tasks included everything from acquiring the foreign exchange needed to purchase grains, to equipping the OCP with trucks, sacks, and weighing equipment. The OCP became the monopsony purchaser of Syrian wheat, with prices fixed by MESC economists. To ensure compliance with directives that restricted the sale of wheat to the OCP, it created a dense network of village and district level committees to determine local grain requirements and develop estimates of grain production. Even the transport of wheat required a license in an effort to curtail smuggling.

As might be expected, the politics of managing Syria’s food supply were hugely contentious. Damascus was a site of particular unrest.^[61] Riots and protests were commonplace as MESC officials struggled to determine how much wheat Damascus really needed. Rumors abounded that MESC was skimming Syrian grain for British troops. Mobs collected outside bakeries whose owners sold bread made from adulterated flour. Absentee landowners and grain dealers, whose profits were threatened by OCP’s practice of direct cash purchases of wheat from peasants, encouraged noncompliance with OCP collection efforts.

To cope with these circumstances the OCP gradually expanded its reach, essentially nationalizing a number of bakeries and nine flour mills. Spears induced Syria’s prime minister Husni al-Barazi to become a local advocate of grain collection. Barazi traveled throughout Syria with an OCP delegation, urging landowners and peasants to sell their wheat. Implicit in his pleas was the threat of coercive collection by French forces if they did not comply. Soon, “knowledge of the risk involved in flouting the authority of the O.C.P. . . . percolated to the remotest corners of Syria,” and it was able to buy wheat at the rate of three thousand tons per day.^[62]

Alongside this enormous administrative apparatus, MESC constructed an entirely new bureaucracy for the collection of demographic and agricultural data. From the outset, MESC officials recognized that the work of the OCP would founder without adequate census information, of which only the most rudimentary was then available. They believed, accurately, that existing population counts dramatically overstated urban populations, to the detriment of the countryside. Local committees were unwilling or unable to direct new population counts. Early efforts to manage grain distribution in Lebanon through a system of ration cards had proven ineffective (Spears claimed that the prime minister of Lebanon held seventy-three ration cards). In response, OCP staff created a statistical agency (Bureau de statistiques et de liaison), with the mandate to undertake nationwide census counts and detailed crop estimates in Syria and Lebanon.

These were to be the first “modern” censuses in the history of the Levant, and they proved no less contentious than any other aspect of this enterprise. In spring 1942, separate censuses were conducted throughout Syria and Lebanon, with urban areas placed under curfew to ensure an accurate count. As Spears recalled, “The O.C.P. census of the Syrian towns produced some astonishing results. Damascus and Aleppo, taken together, revealed an overestimate of 96,000 souls, and Deir ez Zor proved to have a population of only 28,000 instead of 65,000. When it was learnt in Homs that a census was soon to be made by British and French officers under curfew conditions, panic-stricken householders immediately registered 5,000 new deaths at the municipal office; even excluding this sudden decrease, the new figures were 18 per cent. lower than those of the previous census.”^[63] Counting was accompanied by the formal registration of households to permit the implementation of a food-rationing scheme—information that was later used in Syria to revise lists of eligible voters.

With new population figures in hand, wheat provisions to Damascus were cut. Rioting broke out to pressure the Syrian government to increase the city’s allocation. An OCP decision to reduce the “ration of the wealthier classes [in Damascus] . . . to the level prevailing elsewhere” also prompted riots in March 1942. As with other aspects of the food supply program, popular mobilization against intervention led MESC not to cut back, but to broaden its role. With the Syrian government unwilling to assume responsibility for an unpopular rationing system, the role of the Bureau de statistiques et de liaison “evolved first from liaison into supervision and [then became] one of direct control” of the entire wheat distribution scheme.^[64]

By the time Spears wrote his memorandum to the Foreign Office in June 1943, he was able to claim that the OCP’s efforts had been a resounding success. He took credit for averting famine and for giving Syria and Lebanon “a taste of honest and efficient administration which were conditions totally unknown there.” He expressed his hope that local governments would eventually develop an “attachment to the scheme.”^[65] In Syria, the government certainly did.

“Wars pass,” wrote Guy Hunter, a historian of MESC, “but economic problems do not.”^[66] Syrian politicians were no less concerned than officials of the Spears Mission about the imperative necessity to ensure food security, especially for highly mobilized urban populations. Following the war, the OCP was absorbed into the Syrian bureaucracy, as were several other agencies created by MESC to manage food production and supply. For a short period, a small number of British technical experts stayed on, but over time the functions of OCP agencies were absorbed into a range of ministries, from the Ministry of Economy to the Ministries of Agriculture and Supply, and managed entirely by Syrians. Throughout the 1940s and 1950s, and quite apart from their flawed and halfhearted attempts at agrarian reform, the Syrian governments of this period steadily broadened the role of the state in the agricultural economy, retaining many of the regulatory regimes first introduced by the OCP. These included price controls, marketing controls, and oversight of food distribution.^[67] The statistical and data collection capacities created by the Bureau de statistiques et de liaison supported the production of Syria’s Al-majmu‘a al-ih‘saiya (annual statistical abstract), published first by the Ministry of Economy and later by the Ministry of Planning. In general, and without exaggerating the extent to which later practices grew directly out of Syria’s wartime experience, it is clear that Syria’s postwar capacity to manage the agrarian sector has critical links to the role of MESC in the construction of a pervasive program of agrarian regulation during the war.

In Egypt, entrenched patterns of agricultural production posed two distinct and related problems for economic administrators: how to meet the increased need for food production and how to minimize the adverse effects of a drastic decline in fertilizer imports. The Egyptian economy was built around estate production of cotton for export on the world market. Unlike during World War I, however, when producers and merchants reaped the windfalls from rising wartime demand for their goods, world cotton market prices began a precipitous decline early in 1940 that indeed rocked the foundations of the political economy.^[68] Following protracted negotiations through the late spring and summer, which were bound up with the British Embassy’s intervention to remove one government presumed insufficiently loyal and secure the cooperation of a successor, British authorities agreed in August 1940 to purchase the entire domestic cotton crop.^[69] Producers planted their fields in anticipation of even greater windfalls, but in 1941 British authorities drove a harder bargain, linking its support to a system of invasive regulation of cotton production and marketing.^[70]

In this case, the wartime administration invented many of the arrangements that have since come to stand for etatism in Egyptian agriculture, including a strict currency exchange control regime, the closing of the first cotton futures market in the world, and the conversion of the state to monopsonist.^[71] According to Richards, these unprecedented policy changes contributed to undermining the one-hundred-year-old ‘izba system of estate production. From the time of the war, large landowners turned increasingly to renting out their estates for cash.^[72] The cornerstone of this new and transforming regulatory regime was a series of laws controlling cotton production by forcing growers to alter their regular pattern of crop rotation and fixing upper limits on the percentage of lands that could be planted with the traditional cash crop. Wartime officials combined these restrictions with cash incentives to farmers who shifted additional acreage to food production.

These regulations succeeded in shrinking the cultivated acreage to 50 percent of the prewar level, and, for the duration of the war, cotton trickled to rather than flooded the market.^[73] Officials continued this regime after the war, relaxing controls very briefly in 1950 before reinstating them one year later. The result was a shift in agricultural output over time, including increases in rice, sugarcane, fruits and vegetables, and the introduction of wholly new crops such as flax, jute, and sugar beet cultivation under the guidance of MESC.^[74] But, as is widely noted about the intervention, the massive shift out of cotton and into staple grains—wheat, barley, millet, and maize—was able only to offset the steep fall in yields caused by the virtual cutoff of fertilizer shipments.^[75] And the increased rate of exploitation to make up for food imports exhausted soil resources.^[76] In Egypt as in Syria, therefore, agricultural inputs and outputs were subjected to an increasing degree of control, until governments had taken over purchase and distribution of most key commodities, including fertilizers, wheat and other grains, sugar, tea, coffee, and cooking oil.^[77] And as in Syria, the spillover effects of these regulatory innovations into postwar Egyptian food policies are clearly visible.

The Regulation of Foreign Trade: Centralization, Coordination, and State-Led Isi

The scale of MESC’s role in the regulation of trade was similar to the extent of its role in the management of agriculture. Controlling the flow of goods into and out of the Middle East was the raison d’être of the Middle East Supply Centre, making the regulation of domestic trade its principal task. Moreover, its control over access to shipping was complete, giving MESC officials extraordinary leverage in their negotiations over trade with Syrian and Egyptian representatives, whose economies were heavily import-dependent. As in the case of agriculture, the implications of regulating trade encompassed an enormous range of economic activities, leading MESC officials to become deeply engaged in the restructuring of a wide array of domestic economic arrangements and in the development of significant new forms of state capacity.

Three specific factors helped determine how economic arrangements were restructured and what specific forms of state capacity were produced through the intervention of the Supply Centre. First, MESC was above all an agency of economic coordination, evaluating and prioritizing the import requirements of some fifteen states and territories, reconciling these needs against available shipping space, communicating with government agencies in Washington and London and with private vendors to supply essential goods—but only essential goods. To make these determinations in any reasonable fashion required the construction of a centralized, regionwide trade management apparatus, including local agencies that mediated between MESC and domestic business interests. The specific mechanism MESC adopted to regulate trade flows was a system of import licensing. To allocate licenses, governments provided MESC with data detailing import requirements for a six-month period (later annually), for everything from “heavy machinery to razor blades.”^[78] This represented a level of data collection that vastly exceeded the prewar capacity of local governments and demanded considerable expansion in their collection of basic economic information. And because MESC worked with local representatives and governments to attach priorities to specific requests, the import licensing scheme made private enterprise highly dependent on government mediation, shifting the balance of public-private power in matters of economic decision making. In Syria, these issues were especially acute because by 1941, “the volume of imports [had sunk] to a lower proportion of the pre-war level than it [had] in any other Middle East country.”^[79]

Second, MESC’s role in regulating foreign trade became a channel for imposing direct state control over domestic economies on the part of local governments, but here too this happened in ways that favored the development of quite distinctive state capacities. Once again, the participation of local bureaucrats in trade regulation—though poorly trained and in short supply—helped transfer administrative norms from MESC to local bureaucracies. And once again, MESC policies were heavily influenced by a view of the state as the mechanism for ensuring that economic outcomes would be socially just (and therefore politically justifiable in the West). As Hunter writes:

Undoubtedly the most effective controls were in the rationing and price control of essentials, and here the partly effective control of M.E.S.C. over the distribution of imported goods and the governmental control of grain through the Wheat Collection Schemes were of outstanding importance. M.E.S.C. was able to make it a condition of supply that scarce essentials should be fairly distributed at controlled prices. In taking this attitude it was fair to insist that the British and American publics were not prepared to go short of supplies and to risk their sailors and ships in order to put enormous profits into the hands of Middle East black-marketeers. In the distribution of tires, cotton textiles, and some medical supplies, M.E.S.C. rigidly insisted that the receiving Government should establish a satisfactory scheme for distribution according to need and essential use before supplies were released.^[80]

In Syria and Lebanon, the regulation of essential goods gave rise to no less than eight separate advisory boards. These included a Joint Supply Council, on which Syrians and Lebanese were the only representatives and which was responsible for approving import and export forwarded by the other boards.^[81] The authority of these boards was considerable, and their work quickly expanded beyond mediating between MESC and local business to encompass the control of domestic production in critical areas. The extent to which this new role cast the state as supervisor rather than ally of the private sector, and the resistance of private capitalists to this shift, was amply demonstrated by the intense opposition of mill owners and textile merchants in Aleppo and Damascus to a proposal by the Textile Advisory Board to impose government control over the entire textile sector.^[82] Nor was this economic oversight role, once taken on, quick to disappear at the end of the war—even though Spears and his American counterparts were anxious to see the resumption of free trade in the region and determined to secure the competitive position of their countries’ commercial interests. Despite state controls, local prices for many imported goods were considerably higher than global prices, and governments reaped windfall profits from their monopoly over trade in various commodities. Given politicians’ reluctance to tax, they were not inclined to give up this source of revenue. Nor were local manufacturers inclined to see protectionism disappear. Syrian industrialists lobbied for the continuation of protectionist legislation after the war, hoping to expand their operations before more competitive Western producers could reenter local markets.^[83]

In the Egyptian case, the system of import licenses, quotas, and excluded goods that was installed beginning in the fall of 1941 was based on a division of labor. For a combination of political and administrative reasons, once the schedule had been formulated the Egyptian government was responsible for distributing of licenses. The result was a political entrepreneur’s dream come true. We know this conceptually from the recent accounts of rent-seeking and governance in Egypt and elsewhere in postcolonial Africa, as well as anecdotally from the lurid tales of the Wafd party in office between 1942 and 1944 and Durrell’s unforgettable portrait of those in Cairo and Alexandria “in a money daydream . . . who have skimmed the grease off the war effort in contracts and profiteering.”^[84] Nonetheless, as elsewhere in the region, all decisions on licenses were forwarded for review by MESC, which held effective veto power through its influence on shipping and supply commissions in London and Washington.^[85]

Though few details are available as yet, this particular regulatory regime emerged as the result of “long drawn-out and difficult negotiations” with the Allied authorities.^[86] For instance, MESC exploited Egypt’s dependence on fertilizers at different points to obtain wheat, barley, rice, and millet for export. A British organization—the United Kingdom Commercial Corporation—received all fertilizers shipped to Egypt and released them to the Egyptian government only with the authorization of the regulators. And the government organization that determined fertilizer allocation for different crops included British authorities as members.^[87] While such authorities saw no need to gracelessly trample the myth of Egyptian sovereignty—Lampson never called for armor to surround the finance ministry—Allied control over the supply of strategic goods gave them significant leverage over arenas deemed of vital importance.

Third, and perhaps most important, trade restrictions gave MESC a stake in the development of local production capacity for items that could no longer be imported. In other words, MESC became an agent in the construction of import substitution industrialization in the Middle East, and its intervention gave a particular cast to the form of ISI. For MESC officials, the move toward ISI raised much deeper issues than those posed by rationing or price controls, interventions that were perceived as flexible and potentially short-term. Tinkering with the organization of industry was a different matter. MESC economists had an intuitive sense that the path on which they set local industrialization would determine future prospects for economic development. To mention again Hunter’s account, he emphasizes the importance MESC officials attached to the long-term effects of their actions:

The struggle for imported supplies was a war problem, and one likely to cease after the war when normal trade could be resumed. But its corollary, the effort to increase local production, at once entered the field of possibly permanent economic improvement; and it was in this field that the work of M.E.S.C. had its chief interest in the future.

Although there was an urgent need for some products which could have been made in the Middle East, a good deal of care had to be taken not to create uneconomic industries which would wither away altogether when lower priced and better quality goods from the industrial West were again freely available. The war and consequent shortages acted almost as a high tariff wall behind which it would have been possible to create a number of enterprises; but the temptation was resisted.^[88]

Despite the reticence Hunter attributes to MESC, it helped launch a number of industrial enterprises in both Syria and Egypt, especially in the fields of mining, chemicals production, and construction supplies. In addition, Syrian manufacturers seized on the sudden absence of foreign competition to ramp up their own production and capture the profits held out to them by closed wartime markets. Their efforts led to a tremendous industrial boom. Indeed, increases in local output made it possible to meet military requirements for many items without imposing hardship on civilians.^[89] Private investment in industry soared. According to Wilmington, “For years afterwards the business community of the region mused about the war years as something akin to a golden age of bustle and confidence.”^[90]

The golden age was not to last. Crucially, and somewhat ironically given industrialists’ enthusiasm for protection, MESC officials helped construct a version of ISI that transformed industrialization into a state project. If private capital drove the wartime expansion of import-substituting sectors—with public investment largely limited to heavy industry and food processing—wartime controls represented the first critical moves toward state appropriation of industrialization in both Egypt and Syria. With MESC support, states established a range of heavy industries and thus helped construct industrial public sectors. Control regimes institutionalized the role of government as the direct manager of industry and created significant financial incentives for them to expand their role in the years after the war. MESC also provided local governments with a discourse that linked economic management to norms of fairness and social justice and gave intervention a powerful element of legitimacy. It is not surprising therefore that the end of the war did not bring about the removal of tariff barriers as Hunter expected. In fact, the sheltering of local economies gave rise to protectionist coalitions of state managers and industrialists who worked together to embed state-managed ISI within the political economies of postwar Egypt and Syria. The lower-priced and better-quality goods (presumably British goods) that Hunter expected to flow into the region after the war did not materialize. Instead, the pattern of industrialization that MESC officials feared was precisely the one they helped to construct: state-dominated forms of import substitution embedded first within nationalist-liberal, and later within populist, strategies of economic development.

Tax Policy and the Limits of Mesc Authority

Among the many changes associated with wartime shifts in the economy of the Middle East was rampant inflation. Spending by Allied armies and expenditures by MESC itself combined with restrictions on trade to produce vast increases in money supply and corresponding increases in local prices. Despite extensive use of price controls and more limited reliance on rationing of scarce goods, the money supply in Syria (in pounds sterling) grew by more than 1,000 percent between August 1939 and June 1945, while local commodity prices jumped by 860 percent in the same period.^[91] For allied authorities, the concern that inflation might generate social instability led them to explore a range of strategies for absorbing excess purchasing power, including tax reform. In this area as in others, MESC officials expressed confidence that reforms would bring lasting benefits to the region, but managing fiscal policies was a lower priority and their efforts lacked the urgency and intensity of their intervention in trade and agriculture. As a result, Middle East authorities exerted less pressures to overcome entrenched local interests in the area of taxation, providing considerably more latitude for local politicians to shape policy outcomes. MESC economists encouraged local politicians to impose considerably higher direct taxes on their populations, but in the face of local resistance they abandoned this tack and shifted to other ways of absorbing purchasing power, such as the sale of gold, a policy that was developed by a MESC economist, R. F. Kahn, who was a colleague of Keynes at Cambridge, and reviewed by Keynes himself in his capacity as a director of the Bank of England.^[92]

For Syrian politicians, the idea of shifting from indirect to direct forms of taxation posed a considerable political dilemma. State revenues were derived almost entirely from indirect taxes, principally customs duties. Syria had no income tax at all until 1942 and then assessed taxes of only 3–4 percent on fixed-wage earners. Agricultural income was largely exempt from taxation. The move to direct taxation would thus alienate virtually every electoral constituency, as well as cut into the prerogatives of the land owners and capitalists who sat in Syria’s cabinet and national assembly. This is not to say that Syrian politicians made no effort to respond to the urgings of MESC economists. In 1944, avoiding policies that targeted the commercial elite, the government attempted to impose direct withholding on the wages of textile workers. Yet even singling out workers proved ineffective. News of the change prompted a strike among mill workers in Aleppo, and the government relented.^[93] By the end of the war, and in the absence of strong Allied pressure, little remained of MESC’s efforts to shift the organization of tax policy in Syria.

In Egypt, the situation was similar. Taxes in Egypt increased more during the war than in neighboring Arab states, but in an oft-cited 1945 address the president of the National Bank of Egypt admitted that “Egypt still remains one of the least taxed countries in the world.”^[94] And the increase in indirect taxes such as customs duties more likely exacerbated rather than checked rising prices. Egyptian officials apparently preferred price-fixing and rationing schemes. As a result, former prime minister Isma‘il Sidqi’s projection, on the eve of the war, of the state’s need for new sources of development revenues went unheeded.^[95] Colonial arrangements (the debt administration and the system of commercial treaties known as the Capitulations) tightly constrained the state’s fiscal powers. Egypt had no income tax until these controls were dismantled in 1937–38. The government imposed four new taxes in January 1939—on movable property, on commercial and industrial profits, on professional earnings, and on salaries and wages. During the war these schedules were adjusted mildly upward and were supplemented by an excess profits tax passed in 1941. Significantly, this emergency levy was never applied to agricultural land rents, though these had soared together with property values.^[96] Nonetheless, the government made up for the loss in revenue from the import decline, and by 1944 direct taxes netted £E 14 million or approximately 30 percent of all taxes and customs duties.^[97]

As in Syria, these wartime arrangements did not outlast the fighting. Firms proved more resourceful than the overtaxed employees of the finance ministry, where reforms designed to close up loopholes in the tax regime and raise rates were enacted after protracted negotiations, in 1949.^[98] In the intervening years, the state reverted to its pattern of relying on import duties, which increased both absolutely and relative to other taxes in the postwar period. Thus, by 1948, direct taxes totaled £E 11.8 million, down from 1944, while customs and excise duties climbed to £E 51 million or 71 percent of all revenues. The share was identical to that of 1939.

Labor and the Indirect Consequences of Mesc Intervention

Despite the close association between Keynesian economics and problems of employment, MESC regulators were virtually silent on the issue of labor policy in the Middle East. In part, this reflected an appreciation of the difference between agrarian and industrialized economies, and in part the perception of Allied regulators that wartime demand would itself provide sufficient employment to avoid serious labor shortages in the region. What stands out about the war period, however, especially for Egypt, were the indirect effects of MESC’s intervention in other areas on how the state managed the regulation of labor. Even without direct forms of intervention, the war caused significant shifts in the relationship between the state and local labor markets.

Labor power represented Egypt’s primary contribution to the war effort. In contrast to the small numbers of citizens absorbed by the Egyptian army, the number of workers employed by the Allied armies in the Cairo, Alexandria, and Canal Zone bases peaked at 210,000 in 1943, and these massive new flows into military construction and service sectors represented the overwhelming share of the growth in the ranks of the wartime urban labor force.^[99] Syrians were similarly recruited for defense works, though the 30,000 mostly unskilled workers employed in the peak year of 1943 did not represent the same order of magnitude as in Egypt, where shortages of skilled and semiskilled labor of all classes were acute.^[100]

For the duration of the war, officials did little more than let the market, that is, wages, govern the allocation of labor resources. At most, and under pressure from newly legalized labor unions and their core constituencies, the state directed firms to pay (nominal) cost-of-living allowances and began to subsidize some basic commodities as hedges against the inflationary spiral of prices and rents.^[101] The real problem for politicians would come once the war ended. With the steep decline in demand for labor, the recent flood of migrants to Cairo and other urban centers would be transformed into a reservoir of unemployed and impoverished city dwellers.^[102] In 1943 the Egyptian government unveiled the country’s first five-year plan, outlining future public outlays for infrastructure and social and industrial construction. A new hydropower station and fertilizer-manufacturing complex anchored the plan, which needed and received the endorsement of the allied economic authorities, not least because both the Roosevelt and Churchill governments recognized the centrality of these industrial schemes to postwar Middle East policy.^[103] The Egyptian government, no less clearly, viewed these and related policies as designs for coping with the postwar unemployment problem.^[104]

The obvious example is the steep rise in tariff levels imposed on top of the protection already provided to the cottonseed oil producers, the distilleries, the giant spinning mills, the canning industry, the sugar monopoly, and other privileged economic actors by the wartime diversion of shipping space and the import control regime put in place by MESC. Despite these war-driven forms of protectionism, the tariff on manufactures rose 50 percent in 1941 and ratcheted up twice more in 1942 and 1943. True, firms and their agents may well have been motivated to shore up their (un)competitive positions in the postwar market, but for politicians these rents were the price for maintaining uncompetitively high employment levels. In archival data from the late 1940s, firms are explicit about the existence of this bargain.^[105] And, by the time of the 1952 revolution, at least some large investors were looking for alternatives.^[106]

Legacies of Allied Regulation

By the end of the 1940s, citizens of Egypt and Syria were subject to political economies that had been profoundly restructured as a result of MESC intervention. Allied regulators had shifted the prewar, liberal trajectory of state-market relations in these countries, and in the Middle East more broadly, onto a new trajectory. Their impact certainly varied, leaving only faint traces in some areas while having tremendous weight and longevity in others. Where the Allies perceived regulation to be critical for success of the war effort, and where local political and economic actors perceived regulation to be in their immediate (but not always long-term) interests, interventionist norms became deeply embedded within domestic political economies. Where the Allies attached a lower priority to economic outcomes, and where local politicians associated regulation with high political costs, wartime innovations were more fleeting in their effects. Yet the overall shift in state-market relations was unmistakable and reached even into areas, such as labor, that were not part of its formal mandate. Above all, in both Egypt and Syria the regulation of markets would come to be seen as a normal and appropriate response to questions of development. For a decade after the war, certain groups of capitalists would struggle to overcome the accelerating move toward statist development strategies. But the normative and institutional legacies of the war had become too deeply consolidated in these states to be forced aside. Within only fifteen years, little was left in either Egypt or Syria of the economic liberalism of the prewar period that capitalists would recall with increasing nostalgia.

Though mediated by the vastly different colonial contexts of Egypt and Syria in the 1940s, wartime economic policies created new institutional arenas within which capitalists, landowners, colonial representatives, and local politicians struggled to secure their interests. These transformations were not in any sense necessarily antagonistic toward capitalists—the merchants, entrepreneurs, industrialists, traders, and others whose activities dominated the economies of both countries before and during the war. Indeed, the rise of wartime regulatory regimes designed to substitute local production for foreign imports and administer the purchase and distribution of essential commodities had widely differing effects on capitalists, strengthening and enriching them in some instances, eroding their power and well-being in others. Capitalists and state institutions alike often benefited considerably, however, from wartime rents: the windfall profits resulting from the supply and maintenance of foreign troops, foreign aid, wartime contracts, and, notably in Syria and Lebanon, levels of inflation that greatly enriched those who controlled the supply of necessary goods.

Capitalists thus fared reasonably well during the years of the war, and in both Syria and Egypt the immediate postwar period was a time of rapid private sector growth. Yet in both countries wartime economic practices helped consolidate notions of the economy as a legitimate object of regulation, and of the state as the necessary agent of economic coordination and management. They valorized the belief that a “national” economy could be directed to achieve distributive justice. They extended “rational” administrative practices into the management of agricultural production and supply—at least in Syria—in ways that disrupted long-standing patterns of agrarian production based on sharecropping relations between landlords and peasants. Moreover, and perhaps most important, these notions and practices, and the institutions through which they were effected did not disappear with the end of the war or the departure of colonial powers. In both Egypt and Syria, wartime regulatory institutions and practices were appropriated by nationalist movements. They were carried over and incorporated into postwar, postindependence processes of state formation and economy building.

Conclusion: Critical Perspectives on the Middle East Supply Centre

This chapter brings together ideas, institutions, and actors to trace the specific routes through which a particular set of developmental norms were transmitted into and institutionalized within a specific set of political economies. This argument, which locates one important force behind Middle East state and market formation at the intersection of externally imposed wartime economic regulations and the domestic political contexts of the region, has implications for a range of contemporary debates concerning the relationship between state and market in late-developing states, and the relationship between domestic and international influences shaping patterns of state and market formation. In particular, the chapter challenges revisionist explanations of the political economy of state formation in the Middle East, arguing that postcolonial conflicts between statist and market-oriented visions of economic development—conflicts that resulted in the marginalization of private sectors in our two cases, Egypt and Syria—cannot adequately be understood without reference to war-related transformations that reshaped the institutional arena within which struggles between private capitalists and state actors were played out. The state-led and import-substituting economic development strategies that became dominant in Syria and Egypt after World War II, as in much of the developing world, did not reflect simply the inability or unwillingness of local capitalists to shoulder the burdens of development.^[107] Nor do they indicate a lack of state capacity to create and manage markets.^[108] Rather, they can be seen as a product, at least in part, of three interrelated aspects of the experience of World War II in the Middle East: (1) wartime efforts of Allied powers to manage and organize the local economies of Egypt and Syria in keeping with their sense of military priorities—and in keeping with a set of administrative preferences influenced by the increasing acceptance of Keynesian interventionist strategies; (2) the negotiations between Allied officials and local leaders over how to implement these efforts; and (3) the transformation in the balance of power between state actors and local capitalists produced by the policies that resulted from this process of bargaining.

Inevitably, however, there are gaps in detailing the causal links that illuminate the relationships at the core of this study. Despite access to diplomatic archives and to the small secondary literature about the work of MESC, we are aware that much remains hidden from view. A more fine-tuned judgment about MESC and its role is difficult, given how little we actually know about the history of specific economic institutions in the Middle East and of specific policy making arenas, episodes, and outcomes. British officials at the time understandably celebrated rather than looked critically at their wartime statist experiment, and found it convenient to explain most economic problems as the result of local administrative deficiencies, tradition-bound peasants, and local political corruption. Nonetheless, Vitalis has previously documented incidents of collusion between British officials and Egyptian capitalists in subverting export controls and rationing rules.^[109] Clearly, paeans to the efficiency of Anglo-Egyptian planning need systematic review, as do the earnest testimonies in the British Parliament that the massive allied operation imposed no particular burden on the Egyptian populace. As Milward proposes, the massive influx of soldiers and civilians strained the resources of Middle Eastern countries “to the utmost,” and if Egypt was “relatively well off” in the war, it was despite the Allied administration, which he says contributed to famine in India in 1943.^[110]

We know that London viewed MESC as vital to the refashioning of neocolonial arrangements in Egypt and the Levant, which led the U.S. government in turn to oppose plans to reconfigure MESC as a joint Anglo-American regional development agency.^[111] Assistant Secretary of State Acheson and other top officials, such as Roosevelt’s confidant Patrick Hurley and the senior U.S. representative to MESC James M. Landis, prevailed in the policy debate, backed by the findings of the business leaders and government officials who comprised the special Culbertson economic mission to the Middle East.^[112] This opposition was framed in terms of continuing statist economic structures at the behest of Great Powers. The irony is, of course, that the statist currents grew stronger in the first postwar decade, aided by the U.S. Embassy, which was pressing in the late 1940s for more comprehensive forms of planning; U.S. technicians, who were designing land reform schemes in Egypt in 1951–52; U.S. funding ($40 million by 1954); and the U.S. consulting firms who were paid to design the Nagib-Nasser regime’s import substitution industrialization program.^[113]

In reality, U.S. officials were among the most fervent early disciples of import substitution industrialization, and were the conduits to Egypt and the rest of the Middle East region for ideas, routines, and rationales that were widely adapted in the decade following the war’s end. As we have seen, specific policies constructed in an ad hoc fashion to cope with the exigencies of conflict came to serve as organizational templates. Postwar administrators, suddenly more easily able to see why and how it was possible, for instance, to substitute for the Alexandria Cotton Futures Market or to distribute agricultural inputs, “reinstalled” these wartime programs. In related fashion, to the extent that there were cadres who were already inspired by Turkish, Soviet, or U.S. alternatives to the “liberal” state that had become naturalized over the previous half century, the war opened up a significant political space for these new statist currents.

In part, our arguments challenging the purely domestic and “nationalist” origins of statism in the Middle East derive from a problematic historiography in which statism is seen to emerge “first” in places such as Latin America and Turkey, and only much later, in the 1960s and beyond, in Egypt, Africa, and Asia. This narrative, a product of post-1968 intellectual trends, is intent on constructing ISI as an act of resistance within the global order and, significantly, in defiance of alleged U.S. preferences for unregulated markets. But this reading is called into question by, for instance, archival accounts of postwar U.S. initiatives in the Philippines and elsewhere, as well as a new wave of economic histories of the Southern Cone that trace the multifaceted and contingent origins of the statist programs and currents of the 1940s to the 1960s.^[114] Far from emerging against U.S. interests, scores of countries adapted ISI projects under the guidance of the U.S. state. In India, where “socialist” currents allegedly had envisioned and pressed for such reforms before the war, nonetheless, following the allied intervention, these policies took on a distinctly new cast. In Turkey, where the Soviet project was particularly influential, and which in turn influenced particular Indian intellectuals, Americans had a remarkable influence in reconfiguring these policies, as is now widely recognized.

The allied experiment in the Middle East during World War II may thus be a critical link in a much broader account of global shifts in economic arrangements. As Wilmington reminds us, MESC influenced the European experiment in World War II while other of its cadres went on to administer UN development projects and the regional commissions such as Economic Commission for Latin America (1949) that proved so critical to ISI in Latin America. The unfortunate irony is that this legacy has somehow been lost, and the countries of the Middle East are now more likely to be portrayed as places where the vestiges of colonialism first had to be obliterated before authorities there could experiment with public planning, industrial development, and economic regulation.

Notes

This essay is in every sense a joint venture, and the order of the names is the result of a coin toss. Heydemann thanks Joel Migdal, Michael Barnett, and David Waldner for critical readings of earlier drafts of this article, as well as Columbia University for a grant that funded travel to archives in the United Kingdom. Vitalis thanks Philip Khoury for originally supporting the research he presents in this essay and Ellis Goldberg for countless conversations that shaped these ideas. Both of us are grateful to our coparticipants at the November 1994 SSRC workshop, “War as a Source of State and Social Transformation in the Near and Middle East,” and to the Ford Foundation for funding it.