Although the Algerian state has shed its socialist identity since the February 1989 Constitution, the generosity of social policy continues to this day – albeit in different levels and varies from one era to another. From 1991 to 1999, the state endured a series of existential threats due to the war with Islamist groups. At the time, Algeria was battling a dire economic crisis that led to a dramatic decline in state revenues, bringing the country to the brink of bankruptcy, causing it to default on payments, and leading it to create a structural reform program.¹Since the economic crisis of the mid-1980s (during which Algeria's oil exports dropped to billion in 1987 and .5 billion in 1989), Algeria has implemented four phases of major economic reforms, but to no avail. The first phase lasted from 1986 to 1989, during which public institutions were initially restructured and later granted autonomy. The second phase entailed an agreement with the International Monetary Fund and the World Bank, granting Algeria loans based on conditions that can be summarized as follows: reducing state interference in economic activity and liberalizing foreign trade - liberalizing prices - controlling inflation by stabilizing wages and reducing public expenditure - privatization of defaulting public institutions - devaluation of the national currency...). The third phase was implemented between 1994 and 1995, during which the pace of price liberalization was accelerated, and subsidies were lifted on most commodities except for three: flour, semolina, and milk. Thousands of workers were laid off, and the volume of social subsidies directed to health, housing, and education was also reduced. The fourth phase lasted from 1995 to 1998, during which the International Monetary Fund forced Algeria to accelerate the transition towards a market economy, liberalize prices, and lift restrictions on foreign trade. The impact of these reforms was very harsh on the middle and lower classes, already suffering from the consequences of the security crisis and the war on terrorism. For a more in-depth study of these social impacts, see: Issa Ben Nasser: The Economic and Social Impacts of the Structural Adjustment Program in Algeria. Social and Human Sciences Magazine. Volume 3, issue 7, p. 119-14, via the following link: https://www.asjp.cerist.dz/en/article/40184. See also: Cherif Chakib, Programme d'ajustement structurel et résultats socio-économiques en Algérie (Structural Adjustment Program and Socio-Economic Outcomes in Algeria). Revue Sciences Humaines, Issue N°18, December 2002, p. 39-56. https://www.asjp.cerist.dz/en/downArticle/23/13/2/91015 Still, despite these challenges, social subsidies remained an essential part of the state budget and the structural reform program did not push for the total lifting of subsidies for basic goods and services.

As security was restored in the new millennium, oil prices began to surge again and with them a return to the state’s policy of generous spending. Social subsidies once again were allocated a significant portion of the budget.²This percentage changes yearly depending on the country's revenues, which are also linked to oil prices. For example, in 2022, it reached 19.7 % percent of the state budget (compared to 24% in 2021) and 4.8% of the country's GDP (9.5% in 2021), according to the Prime Minister’s statement before the Finance Committee in Parliament. A budget of DZD 597.7 billion (DZD 553.7 billion in 2021) is allocated to support families. This subsidy is divided into DZD 315.5 billion for basic goods (grains, milk, sugar, and table oil), DZD 105.3 billion for electricity, gas, and water, DZD 13.45 billion for family allowances, and DZD 131.7 billion for education. See: https://www.aps.dz/ar/economie/114618-2022. To view the volume of social subsidies between 2000 and 2018, check the in-depth analytical study by researchers Qadar Maryam and Eidoudi Fatima Zahra, entitled: Social Subsidies in Algeria during the 2000-2018period. Core compounds. ACP, Al-Bashaer Economic Journal, Volume 5, Issue no.2, p. 969-683. https://www.asjp.cerist.dz/en/downArticle/196/5/2/101136 During this period, the state built hundreds of thousands of social housing units, which it allocated to vulnerable and middle-income groups. Gasoline prices in Algeria remained the lowest in the world, and the state subsidized a wide range of basic consumer goods. Meanwhile, thousands of young graduates from universities and training institutes were employed in public administrative bodies and given salaries, although they did not contribute to production. The government also launched various programs and set up mechanisms to help young people build their businesses by granting them zero-interest or low-interest loans.³For example, the National Youth Employment Support Agency (ANSEJ).

In 2014, as oil prices began to drop, demands for the review of the universal social subsidy policy resurged, calling for a restructuring that would ensure that only low-income groups benefit from subsidies. This was aimed to prevent wasteful consumption of subsidized goods or the smuggling of oil commodities, which are the state’s main source of revenue in hard currency (more than 95%).

Indeed, over the past seven years (2014-2021), successive governments have gradually reduced subsidies on fuels and all other types of energy (electricity and gas). They also reduced employment in the public sector and halted the development and completion of housing projects targeting middle and vulnerable social groups.

When preparing the 2022 Budget Law amidst difficult financial conditions that eroded currency reserves to less than $40 billion, the government explicitly stated that it was determined to review social policy models to move towards targeted assistance programs to replace the costly universal subsidy system that was depleting the state treasury as oil prices dropped below $40 per barrel.⁴In 2012, reserves were about 0 billion. Consecutive governments adopted a financial policy focused on how to stop the depletion of these reserves. This goal even turned into an economic project in its own right, as it produced a strict austerity policy regarding exports that, in turn, led to a significant rise in the prices of imported goods, and in scarcity of others.

The conversation then became about reconciling the state's financial stability with the need to maintain social peace in light of the stifling economic crisis following the pandemic. There was a progressive decline in the purchasing power of Algerians since 2014 due to austerity policies and reduced public spending (especially in construction and public works), inflation, reduced exports, and the depreciated national currency.

In this context, the Budget Law of 2022 was strict and painful even for the middle class. The prices of basic fuels were not raised, but new taxes and fees were imposed on a wide range of goods and activities. The Prime Minister justified this approach by stressing “the need to reform the social subsidy system without undermining the social character of the Algerian state.”⁵In fact, the Prime Minister did not wait for the opportunity to present the draft Budget Law for 2022 to confirm this, but rather included the review of the state's social policy within the government's agenda that he presented to members of the National People's Assembly on Wednesday, September 22, 2021. To read the statement, see: https://www.aps.dz/ar/societe/112821-2021-09-22-19-00-40 However, following a severe backlash in the media and on social networks, the President of the Republic was quick to suspend all new taxes imposed in the Budget Law, while maintaining subsidies for mass-consumed goods based on the same traditional mechanisms.⁶The President of the Republic decided during a cabinet meeting on Sunday 13 February to suspend and freeze all taxes imposed in the Budget Law on consumer commodities and goods, as well as many electronic and household products and mobile phones until further notice (without specifying the duration of the suspension or if it was completely canceled). See: APS wire https://www.aps.dz/ar/economie/121228-2022-02-13-18-00-28. In fact, this practice was very common during Bouteflika's reign, as the government used to impose taxes and he would interfere via a presidential decision to cancel these taxes, followed by statements of blessing and appreciation for the decision by political parties, trade unions, and civil society organizations loyal to the state.

In light of the above, this paper examines the ideological background of the social subsidy policy of the Algerian state and raises two main questions:

• What are the historical and ideological origins of social policies in Algeria?
• Why has the social subsidypolicy remained the core of the Algerian political discourse, despite all the transformations that the country has undergone?

The Components of Social Policy in Algeria

Social policy in Algeria – also known as the social subsidy policy or the social transfers system – is based on direct and indirect state subsidies for a range of basic goods and services or specific sectors. Some of these subsidies are universal, covering all Algerians regardless of their income (basic commodity subsidies), while other types of subsidies – such as those for housing – are directed to specific groups or vary according to household and individual income. These subsidies can be summarized as follows:

• Mass-consumed household subsidies are a basket of basic commodities that benefit from the state subsidy program. The state treasury pays the difference between the import price and the selling price in direct and indirect forms, which makes these commodities accessible for consumers at a price lower than the purchase price from the international market. These commodities may also be bought at a subsidized price from local producers, as is the case with fresh cow milk or wheat. This basket is not fixed but is adapted according to general budget conditions. However, there are five basic commodities that the state has remained committed to subsidizing in various ways:
• Bread: By subsidizing the raw materials for its production, the flour is sold to bakeries at a cost lower than its purchase price on the international market in exchange for a bread price ceiling.
• Flour: By subsidizing the sale price of wheat to mills and its purchase price for farmers.
• Milk, sugar and oil: By subsidizing producers in exchange for a price ceiling, or by canceling/reducing the VAT or customs duties on some consumer goods such as legumes, dry grains, or raw materials used in the manufacture of edible oils. The budget for supporting households in 2022 amounted to DZD 597,7 billion, which represents approximately 31% of the total social subsidy budget.
• Fuel and electricity subsidies: Algeria ranks third in the world in terms of low fuel prices, although the state has reduced fuel subsidies three times over the past 10 years.⁷Over a period of 10 years, fuel price  increased by 100%. In 2013, the price of gasoline was approximately DZD 23 per liter, but it rose to DZD 46 in 2020. As for diesel, which is heavily used in transport, agriculture and industry, its price rose from DZD 13 in 203 to DZD 29 in 2020. Large segments of the population in border regions make a living by smuggling fuel, due to the price difference between Algeria and neighboring countries. An entire parallel economy has emerged based on smuggling fuel and certain subsidized goods. It is estimated that Algeria loses nearly billion yearly due to smuggling. This has been used to justify subsidy reform or reductions. These materials are subsidized by selling them at a price below the cost of production and well below the international market price. The same applies to the electricity and natural gas prices, as the state directly subsidizes the National Electricity and Gas Company to compensate for losses in delivering electricity to consumers at a price lower than the actual cost.
• Health and education subsidies: Public health and education are free in Algeria. Large segments of low-income or impoverished citizens, and those with chronic diseases benefit from subsidized healthcare and health insurance. The state also allocates a scholarship for the children of middle and low-income families and free food at school – or for a symbolic amount – for students in various stages of their education. Higher education is also free and students benefit from a monthly scholarship, free food, accommodation and transportation.⁸In principle, there are certain conditions to be met to receive a university scholarship, in practice, however, nearly all students enrolled in university receive such scholarships. Students pay DZD 1.20 per meal (that is, ten meals cost less than 1 euro, while the true cost of each meal is more than DZD 250, or 1.5 euros). This is a very small amount that has remained the same since the 1980s. In addition, students pay a subscription fee for university transport (DZD 140, or 1 euro, per year and DZD 300, or 2 euros, per year) and live in student housing facilities.

• Employment subsidies are provided by paying part of young workers’ wages in the private and public sectors through the National Agency for Youth Employment.⁹Employment in the public and private sectors is carried out through the National Agency for Employment, which covers 40% of the wage of the employee or worker for a specific period (under pre-employment contracts), while the employer covers the rest. The purpose of this subsidy is to help industrial and service facilities to employ the largest possible number of educated young people.

• Housing subsidies are provided by building houses and selling them either at a low price to middle-income groups or giving them for free to vulnerable groups (as part of social housing). In 2022, the government allocated DZD 247 billion to subsidize housing.¹⁰There are many programs for supporting households and individuals in securing housing in Algeria. These differ based on the household income (spouses) or the region, and they can be summed up as follows: 1) Social housing (rent-based public housing), which is offered free of charge to households without income or whose income is less than DZD 24,000 (150 euros) in return for a symbolic rental; 2) Rural housing: a form of subsidy offered by the state to households living in rural areas to build individual homes. This subsidy covers 60% of the cost to build a house comprising three rooms, a kitchen and a bathroom; 3) Instalment-based housing: This program targets middle-income groups (between DZD 24,000 and DZD 120,000), whereby beneficiaries pay a down payment for the state-subsidized home and then cover the rest of the cast through instalments over a 25-year period; 4) Public promotional housing (LPA) targeting groups whose income exceeds DZD 120,000, but whose price is subsidized compared to house prices on the market offered by real estate developers. For more details on the housing policy in Algeria and the Arab region more generally, see volume 38/39 of Naqd Magazine (fall/winter 2020) addressing the topic: Naqd: les politiques de logement social au Maghreb/ Machrak et dans le sud global. Numéro piloté par Rachid Boumedine et Pierre Signole. To view accurate and detailed statistics on the number of housing units in all categories completed since 2010, visit Ministry of Housing and Urban Development website via the following link: https://bit.ly/3QiQqGE.

The Historical Origins of the State's Social Policy

The logic behind the social policy of the Algerian state can only be understood within the historical context in which this policy emerged. This can avoid the oversimplified analysis that the sole purpose of the social subsidy policy is to buy social peace, rather than to guarantee the continuity of the existing political system and create rentier opportunities for the government’s clients, or for the relatives and cronies of public officials. True, these factors exist and social subsidies benefit the regime politically, but authoritarian goals and strategies are not the only drivers behind the “generosity” of the Algerian state. Rather, it would be more accurate to argue that the failure of the democratic transition is the result of the generous social policies, just as the economic failure and weak investment cannot be explained by stating that the social subsidy system has subverted market laws, price systems, and competitiveness.

The social assistance policy in Algeria existed well before the calls for democracy, that is, immediately after independence when the ruling elites enjoyed a strong revolutionary legitimacy. It also existed at the height of the socialist system, where the state was the sole producer, operator, and distributor of wealth. It is not possible to explain the failure of the socialist system (1962-1989) and the failure of the economy to transition towards a productive market economy because of the dominant social character of the state and its subversion of market laws and investment.

The main hypothesis of this paper is that the social character of the Algerian state has its origins in the historical circumstances in which the state was founded. Its continuity beyond pluralism and liberalism is too significant to be reduced to its use as a source of political support by the authorities. Social subsidy is one of the pillars of the political culture of the Algerian state, and it is difficult for any political system, be it democratic or totalitarian, liberal or leftist, to completely abandon it.

1. The Historical Context for the Emergence of the Algerian State

The Algerian state emerged as a revolutionary reaction to an imperialist and capitalist regime that had dominated Algeria for more than a century and in which a small group of European colonists and Algerian feudal families collaborated with colonial authorities and seized all the wealth of the country. A large number of peasants were exploited as slaves or sharecroppers in farms, construction projects or factories. At the time, the 1 November 1954 revolution was in the eyes of the Algerian elites the revolution of the hard-working groups of society against the feudal lords and capitalists. The state that resulted from this revolution committed itself in the Declaration of 1 November 1954 – the most important founding document of the Algerian state – to establish a social democratic state.

2. Algerians’ Views on the Nature and Functions of the State:

• The national state as opposed to a colonial state: Algerians’ first experience with the state was in the form of an occupying external force that imposed taxes, plundered resources and exploited goods. This was the case of the Ottoman beylik, and then the French administration. The collective memory of Algerians is still fraught with a negative image of the state. Therefore, the political elites strived after independence to build a state whose function would be breaking the stereotype that was enshrined in the imagination of Algerians and build a state that would not only collect taxes but also distribute wealth fairly among all Algerians. They also wanted to create a state that would eradicate the poverty and misery caused by colonialism, reduce social disparities, as well as fight the bourgeoisie and feudalism. This meant building a state that would nationalize natural resources, and provide services and social protection. Therefore, the state was not established as a force that settles and absorbs the differences within society, but rather as a welfare state working to provide goods and services to Algerians.
• The “anti-market state”:¹¹This term was coined by sociologist Addi Lahouari. This principle reflects the ideological roots of social policies in Algeria. Even among the activists of the national movement during the period between the two World Wars, colonialism was perceived as an imperial capitalist force working to exploit hard-working Algerians. The inequality between Algerians and the colonists was viewed from the perspective of production relations within society, especially since the People's Party was founded by activists from the Marxist left and supported by the French Communist Party. Amid an international context dominated by the Cold War between the socialist and the capitalist camps, the independent Algerian state was established as a bureaucracy that fights the market¹²Addi Lahouari, l'impasse du populisme (ENL. 1989). and prevents it from penetrating social relations. In the first 30 years of independence, the will of the state to fight the market was clear in the state founding documents, as embodied in the socialist approach to nationalize agricultural land and industrial establishments, the state’s monopoly of the economy, the fight against the private sector, and push to subsidize prices of goods at all levels – especially imported goods. The state used oil revenues to defy market laws and keep prices low and accessible to all social groups.

After the adoption of liberalism in the 1989 Constitution, not much has changed; the state has continued to defy the laws of the market even at the height of the security and economic crisis of the 1990s. Today, the social dimension still dominates the direction of the state, as indicated by the yearly budget allocated for social subsidies.¹³As mentioned above, the state began adoption an austerity policy since 2014. Between 2000 and 2013, the state adopted a social orientation and was the main investor in the country. See the study by Karima Hati and Belqasem Nouasir on the scale of these subsidies during that period: Hati, Karima & Belqasem, Nouaisir: The Reality of Social Policy in Algeria and How it Addresses Social Issues, Journal of Human and Social Sciences, Volume 10, Issue 2 (June 2017), pp. 347-366 (https://www.asjp.cerist.dz/en/downArticle/65/10/2/59249).

3. The founding texts of the Algerian state: All the founding texts of the Algerian state refer to its social character. The following section reviews the most important texts and how they reinforce this character.

• The 1 November 1954 Declaration: The first objective of the Declaration was “the establishment of a sovereign, social democratic Algerian state within the framework of Islamic principles.”¹⁴Declaration of November 1, 1954: https://www.el-mouradia.dz/ar/algeria/texts/statement-of-november. This objective later turned into a principle for all the official charters of the Algerian state, and the official discourse uses it to confirm that it will not abandon the state’s social policy, regardless of the financial circumstances. However, it is also used to justify continuing the costly social spending, despite criticism and accusation of corruption.
• The 1962 Tripoli Conference Document:¹⁵Tripoli Program: https://www.el-mouradia.dz/ar/algeria/texts/tripoli-conference. The Algerian revolution was considered a revolution against internal feudalism, French imperialism, and the domination of the colonists over the country's resources. Another primary objective of the revolution was to build a state that ensures the well-being of the peasantry, the most affected group at the time.
• The 1963 Constitution:¹⁶Constitution of 1963: https://www.el-mouradia.dz/ar/algeria/texts/previous-constitutions. The preamble of the 1963 Constitution states that one of the most important functions of the state and for which the revolution took place is “to pursue a social policy that benefits the masses and raises the standard of living of workers.” It also states that the goal is “to accelerate the advancement of women so they are involved in the management of public affairs and the development of the country, to eradicate illiteracy, to develop the national culture, and to improve housing conditions and the health situation.”
• The 1976 Constitution:¹⁷Constitution of 1976: https://www.el-mouradia.dz/ar/algeria/texts/previous-constitutions. The 1976 Constitution, which emerged from the National Charter, enshrined the socialist approach through the state’s control of the economy, foreign trade and prices, with an emphasis on free education and health.

However, after the pluralism era, and despite the adoption of economic liberalism in the 1989 Constitution, the state did not abandon its social character. Post-1989 Algeria was built on a vision that accommodates the social character of the state and does not see it as an obstacle to the growth of the private sector or as a subversion of the laws of the market, especially the price system.

During the past 30 years, Algeria has had four major constitutions in 1989, 1996, 2016, and 2020 – all of which stressed the social character of the state, with the protection of vulnerable classes as one of its basic functions, and drew inspiration from the 1 November Declaration, drafted on the eve of the War of Independence (1954-1962).

Conclusion

The Algerian state was founded to put an end to the contradictions of the colonial system, which turned the colonial administration into a tool in the hands of the colonists to impoverish Algerians. The national elites who fought for independence adopted the principle of the social state and social justice among their objectives to promote the independence project. Indeed, this slogan contributed to the mobilization of Algerians around the National Liberation Front until the goal was achieved.

After the country’s independence, the political elites promised to put the state at the service of the Algerians who had been drained by the colonial regime. For this, they developed the political charters establishing the Algerian state and designed economic and social projects specifically to perform this function.

The massive oil revenues allowed the state to undertake this social function, enabling it to subsidize education, health, basic commodities, and transportation. This generous policy also allowed Algeria to rank ninth among 169 countries in the 2010 Human Development Index, not to mention that it was among the few countries that were able to achieve the UN Millennium Goals. ¹⁸See: Youcef Ben Abdellah: Etat développementaliste vs Etat rentier :Qu'en est -il en Algérie . In Naqd, N°36( Mars /Avril 2018), p. 82.

However, the universal subsidy system has not always been in favor of vulnerable classes; it rather benefited the rich class the most. For example, a 2012 study by the National Bureau of Statistics revealed that more than 50% of the social welfare budget was benefiting the richest segments of society.¹⁹Ibid, p. 82. The largest beneficiaries of milk subsidies, for instance, have been the producers of dairy products, and the beneficiaries of sugar subsidies have been the beverage and confectionery factories. The same applies to gasoline, oil, electricity, and water subsidies. Many social classes still decry their weak purchasing power and the inefficiency of the current social subsidy system. This is something the government acknowledges and uses to justify lifting subsidies or raising prices.

Whenever the fluctuating oil prices drop on global markets, the state finds itself in a critical situation, unable to fulfill its obligations. This is often followed by a discourse that stresses the need to reform the social subsidy system or even to put an end to squandering and focusing social assistance directly on those who deserve it the most. Other economic pretexts are used, such as the need to stimulate investment. However, as soon as prices rise again, the voices calling for reform fade, giving the place to a full return to wasteful practices.

The practices of the state itself over its sixty years of existence – and the historical circumstances under which it emerged – make abandoning the social character fraught with risks, not only for the vulnerable groups that have been the victims of successive economic crises and the dependence of the Algerian economy on the oil market but also for the social image of the state from which the ruling elites derive their political legitimacy. What would the Algerian state be if it abandons its social function? What political legitimacy will remain for the ruling elites if they renounce this orientation?

There is only one way forward under this scenario, and it involves substituting social subsidy for power-sharing. The problem is that this option is not yet viable for two reasons. In times of financial prosperity, there is no reason for the ruling class to welcome newcomers because it can buy social peace, satisfy social demand, and keep individuals disinterested in politics. This was the case throughout Bouteflika's reign.²⁰Shortly before each round of elections, Bouteflika toured the main provinces and offered them large sums of money outside the annual budget to fund social projects. Social housing subsidies were distributed along with photos of Bouteflika, and large posters of him were displayed on the facades of buildings or projects being inaugurated. In fact, many projects were named after Bouteflika (Bouteflika housing projects, Bouteflika stores, Bouteflika grants…). National TV channels promoted such events and made it seem as if the state’s subsidies for vulnerable groups were personal achievements of Bouteflika. However, during economic crises, which occur periodically due to oil price fluctuations, the social forces that benefit from any leniency by the ruling class are the radical and populist forces. This option was tested in the 1990s and it came at a heavy price: a civil war that left tens of thousands of people dead and massive economic devastation. Despite this, the state has not equipped society to safely navigate such difficult times. It does not have to wait for times of economic crisis to open the political space for different parties and political participation, because during such times the most radical and populist parties always gain superiority. The state should no longer view social policies as a political resource, nor as a substitute for political participation and the distribution of power within society.

As for those calling for price liberalization to stimulate economic growth and create a competitive market, they ought to reconsider whether the social subsidy scheme is what weakened and marginalized economic growth in non-hydrocarbon sectors.

The current social subsidy policy indeed challenges the international price system, but it is not the only barrier to the emergence of a competitive market in Algeria because subsidies do not affect all commodities. The emergence of a competitive market depends on the establishment of an independent economy that functions according to market laws. The problem today is that the economy has been dominated by the state’s political tools, and the subsidy policy is only one of them. Its contribution of social subsidy as a political tool remains marginal compared to other tools, such as a weak judiciary, the instability of investment laws, the abuse of power by officials to impede independent investors, and the exploitation of influence within the state to neutralize competitors.

No competitive market can be established without an independent judiciary that protects competitors and ensures respect for the laws, as a safeguard for those affected by monopolistic practices or the arbitrariness of state agents and bureaucrats. One could argue that the subsidy system in some sectors is a stimulating factor for investment, because of the subsidies on the prices of energy, fuel, water, and free road networks. These are motivating factors, but they cannot stimulate investments because of the lack of free economic initiative, which – like other fundamental freedoms – can only be achieved through an independent judiciary, a free media, and a parliament that exercises control over the government and enacts laws that protect these freedoms.

Therefore, it is difficult to presume that the justification for lifting subsidies is the need to encourage investment because other sectors that do not have subsidies are also suffering from stagnation. If the state wants to reduce the cost of social subsidies, it should ensure free economic initiatives, stop interfering in the economy through political tools, and allow the accumulation of national capital through labor, rather than influence. Only then would it be possible to increase individual income and raise the standard of living, rather than keeping citizens dependent on what the state bestows upon them in the form of subsidies or handouts. Only then can the discourse on raising or reviewing subsidies gain political credibility and economic viability.