War economy or the "Miracle of the Southern Provinces"

War economy is about adjusting a country's economic policy to a war context. During the COVID-19 pandemic, this term has gained a lot of traction. Countries that have implemented wartime economic policies have emerged stronger than before the conflict, as was the case with the US, Japan and South Korea. This hypothesis seems to be confirmed for Morocco in the 1975-1991 war, instigated by Algeria through the Polisario, in the Moroccan region of the Sahara.

The analysis of economic data from the contenders explains how the Kingdom of Morocco, under Hassan II and later Mohammed VI, would apply a war economy by adjusting economic policy to the war context, and why Algeria has neglected this process.

In the aftermath of the war, Morocco faced several challenges. On the one hand, it had to create infrastructure for an additional territory of 266,000 square kilometres and generate wealth for its respective populations, and on the other, it had to multiply its military spending in defence of its sovereignty. All of this would force the Kingdom to put in place various economic policies to deal with the hostilities unleashed in 1975.

The activation of the war economy meant serious macroeconomic adjustments for Morocco, with major budget cuts, the suspension of subsidies for basic products such as oil, flour, sugar and butane and, above all, the freezing of public wages. The Moroccan population fell victim to a debt of 111.90% of GNP in 1984, in the middle of the war. It was also the year of social protests throughout the Kingdom, with serious consequences.

While the adjustments were taking place, inflation, which is badly linked to indebtedness, was worsened by the transfer of agricultural production in order to supply the Southern Provinces, as an initial attempt was made to rationalise domestic demand without undermining agricultural exports and to avoid falling into autarky. Exports, tourism and transfers from Moroccans living abroad were vital assets. To this end, Hassan II, through the five-year plans, would multiply agricultural capacity and derived industries by increasing arable land, building dams and irrigation channels, as well as establishing advantageous measures to attract foreign investment.

The cost of the war was considerable for Morocco. According to World Bank figures, Morocco's foreign debt rose from 29.78% of GDP in 1975 to 71.90% in 1991, the year of the ceasefire. On the other hand, Algeria, a party to the conflict, although it pretended to deceive international public opinion that the conflict was between Morocco and the Polisario, deceived itself and was unable to activate the "war mode", as it depended on hydrocarbons, the fluctuations of which would end up sinking its economy.

Algeria's foreign debt rose from 30.12% in 1975 to 66% in 1991. This level of debt contradicts its growth, which was -1.2% compared to Morocco's 7.2% in 1991. This would explain the increase in Algerian military spending and its total involvement in the war. In fact, in 2019, Algeria led the African ranking in arms purchases with 6% of GDP compared to only 3% for Morocco.

During the reign of Mohamed VI, the war economy would gain revolutionary momentum. External debt would fall to 22.75 per cent in 2008, rising steadily without passing tolerance levels, accompanied by continued growth of 4 per cent on average between 2005-2019, and 2.78 per cent for Algeria, while the Eurozone average was 1.17 per cent over the same time series.

Moroccan debt would support both defence spending and growth in the country. The traditional sectors of the Moroccan economy would triple their productive and export capacities. The country's industrialisation with automotive, aerospace, military and renewable energy companies is noteworthy. The country would be equipped with modern infrastructures from Tangier to El Güera, with highways, dams, fishing and commercial ports, high-speed train, housing, telecommunications, tourist infrastructures, etc.

In the 2020 Doing Business ranking, Morocco would rank 53rd behind Belgium (46th) and ahead of Italy (58th), while Algeria would rank 157th out of 190 countries. The Kingdom is one of the most stable countries in Africa, with a highly secure political, economic and legal environment. This explains the influx of foreign investment into the country, which has allowed both the transfer of technology and the creation of new jobs.

Morocco, which has not yet emerged from the war, is still in the midst of economic expansion, having survived the COVID-19 pandemic hiatus. With the war economy, the country has achieved a spectacular, unprecedented economic take-off, with important advances in its democratisation. We could speak of the "Miracle of the Southern Provinces". This was the case of the US and Japan after World War II, and more specifically the case of South Korea, one of the poorest countries in Southeast Asia which, after the Korean War, experienced an economic boom known as the "Miracle of the Han River".

As a corollary, Algeria hoped that the war would lead to the political, economic and social erosion of the Kingdom of Morocco. However, it has had the opposite effect. Worst of all, Algeria is in dire straits and on the verge of collapse. Evidence of the lack of liquidity is that civil servants' salaries for April 2021 were paid late, in the middle of the month after several protests.

This is what happens when the military, in addition to waging dirty war, also engage in politics.