During the post-war period, many leaders of the MENA region enacted an economic growth model based on import substitution industrialization, in which the state intervened heavily in the public and private sectors to enhance economic growth. The quality of the reforms was largely dependent on the quality of the political regimes in place. By the 1970s, corruption and rigidities in the public sector, as well as global economic developments, had halted economic growth. In the 1980s, MENA countries began to adopt neoliberal Structural Adjustment Packages (SAP), which advocated for open markets and the removal of trade barriers. Republished by Brill as Market deregulations, Public-Private Partnerships (PPPs), and opening the region up to the world market facilitated enormous economic and social transformations that defined MENA’s last four decades. While neoliberalist policies succeeded in generating significant economic growth, they left much of MENA’s population unemployed. This sparked repeated social unrest, which, in turn, was counteracted by the rise of authoritarian dictators that were supported by the IMF and World Bank. As such, neoliberalism’s effects on MENA continue to be a widely disputed and controversial subject that has undoubtedly left a large mark on the region.

Beginning in the late 1960s, several neoliberal reforms were implemented in the Middle East. For instance, Egypt is frequently linked to the implementation of neoliberal policies, particularly the 'open-door' policies of President Anwar Sadat throughout the 1970s and Hosni Mubarak's successive economic reforms between 1981 and 2011. These measures, known as al-Infitah, were later diffused across the region. In Tunisia, neoliberal economic policies are associated with the former president and de facto dictator Zine El Abidine Ben Ali; his reign made it clear that economic neoliberalism can coexist and even be encouraged by authoritarian states. Responses to globalization and economic reforms in the Gulf have also been approached via a neoliberal analytical framework.

Contradictions to state-led growth After gaining independence during the interbellum and after the Second World War, many leaders of Middle Eastern and North African (MENA) states saw themselves as engineers of new states to reverse the ‘backwardness’ of their economic development. While ideologies varied per country, almost all Middle Eastern states adopted an economic model of import substitution industrialization (ISI). In Egypt, where the strategy was implemented with vigor during the 1950 and 1960s, the prevailing thought was that only the state could mobilize and organize the necessary resources efficiently to prevent excessive waste of resources. Especially with regard to the areas within the Middle East, overall the education levels were inadequate, and their economies were based on an agricultural system with low productivity and inefficient use of scarce capital. These developments were exemplified by a large civil service and large labor force for public projects enacted by the state. This required a high quality of political leadership to enforce the state's effectiveness of these policies. Moreover, the state monopolized resources through the nationalization of many sectors. They controlled investment budgets, important parts of the banking system, mineral wealth and materials, and important infrastructure parts like roads, railways, power plants, and ports.

Another important element of the ISI economic model was the emphasis on equity. As a result of colonial dominance in the nineteenth and early twentieth centuries, gross inequalities were prevalent in the MENA countries by the time they became independent. The implementation of agrarian reform programs, as well as nationalizations of private and foreign assets and the prevalence of state-wide education, were examples of how to wipe out class differences. Sometimes, these policies were aggressively encouraged, for example during the Nasser regime in Egypt.

The economic growth model of rational planning required a strategy for developing such large-scale programs. Since there was little capital investment in the private sector, the state needed to deliver economic levers to implement the large structural economic reforms. Throughout the region, there was no trust in the fact that the private sector could undertake these large-scale mobilization and planning projects. Important reasons for the distrust were that the private sector was financially too weak to sustain these programs. Moreover, their focus on short-term profits over long-term structural transformation made them an unreliable partner.

The state dominated the private sector in many countries and implemented many infrastructural projects. The state would provide roads, railroads, ports, and energy stations to stimulate economic activity in the public and private sectors. Moreover, the state took over and provided the raw material industry, providing the necessary materials to create cheap manufactured goods. To stimulate the private sector financially, the governments intervened in the capital markets and provided cheap loans with small interest rates to acquire cheap credit. Its legislation was aimed at protecting the state companies and preventing capital from flowing out of the country. The state was also active in taking over enterprises that were failing to prevent high unemployment figures. Profits were used to further expand the activities with little regard to the private sector. The state interventions were connected to important entrepreneurs in these societies. In effect, social contracts became political instruments through which the citizens of MENA were restricted from political participation. They received many economic and social provisions. The success of the state-led growth model was reflected in their economic growth figures. Even while the oil crisis started to create economic problems in the 1970s, the economy of Syria grew by 7 percent, while the economy of Jordan grew by even 12 percent.

The strength of these states was different on a case-by-case basis, and many of these ISI-development-led states stumbled upon obstacles. The potential for creating a strong and nationalized state was dependent on large investments in the military. However, such investments resulted from rampant corruption and patronage between the government and the military classes.

On top of that, huge state bureaucracies started to paralyze in the 1970s as a result of slow and inefficient organization. The structural transformation of the MENA economies in the post-war period was tied to human capital formation. However, the rapidity of population growth, the expansion of the military budgets, the limited resources other than oil, and the low literacy levels meant that the economic downturn had grave consequences. Moreover, infant industries were seldom internationally competitive. Products in the country remained expensive and of low quality. The focus on heavy industry also failed to create new jobs in the private sector. With a young population, the state had to create new jobs to prevent unemployment from soaring.

Externally, the oil crisis of 1973 had a different impact on MENA countries, depending on the type of economy these countries possessed. Oil-abundant countries in the Gulf benefited a lot from the oil booms of the 1970s. Iran in the 1960s and Saudi Arabia in the 1970s grew about 8 percent per capita. Countries that did not have oil reserves but had a labor abundance, such as Turkey, Egypt, and Morocco, were confronted by mounting fiscal problems and huge sums of debt. Their debt crisis ultimately led to a transition in the economic growth model of the Middle East. From the 1970s onwards, the crisis of these models led to a transition to a neoliberal paradigm. In some states, such as Egypt, early forms and policies of neoliberalism were enacted in 1974 with the Infitah program. The state-led development that characterized the region was replaced, both through internal and external factors, by a neoliberal model in which the state retreated.

Transition to neoliberalism

By the 1980s, the process of state-led intervention had resulted in a deep crisis in both the public and private sectors in the MENA countries. Privatization was the centerpiece of the changes needed to open their economies. While global economic processes transformed under the influence of the neoliberal tide, the 1980s in MENA countries were marked by a slow transition. This was mainly the result of many societal forces resisting neoliberal reforms. As a result, the history of the Structural Adjustment Programs (SAPs) in the MENA countries can be divided into two phases. The 1980s were a period of small and modest reforms to the existing state-led growth systems. Only during the 1990s and 2000s did people see an acceleration of privatization, deregulation, and liberalization, in which many public-owned companies were privatized.

Since the early 1980s, all major international financial institutions have advocated for the need for neoliberal reforms. The advent of Margaret Thatcher in Britain and Ronald Reagan in the United States kicked off their countries' privatization, deregulation, and liberalization measures. Institutions such as the International Monetary Fund (IMF) and the World Bank also advocated the neoliberal paradigm. Countries would get loans on the basis that certain conditionalities were used and implemented. The reports of these financial institutions in the Middle East were typically constructed in a discourse of crisis. The region would be hit by an economic crisis, such as a high unemployment rate and low economic growth, if it did not change its economic policy. This discourse of an imminent crisis was important to create an opportunity for a new economic outlook based on market mechanisms and with the retreatment of the state from the economy.

In the MENA countries, the advent of the neoliberal turn led to a further divergence between resource-rich, labor-abundant countries (RRLA) and resource-poor, labor-abundant countries (RPLA). Countries that had large oil reserves did not undertake large structural adjustments, as their regimes would not tolerate international actors outside their direct control. Increasingly, their regimes were dependent on repression and patronage in their alliances with powerful actors to remain in power. In countries without natural resources such as oil or gas, political regimes had to find new ways to enhance economic growth while their debt levels accelerated. From their perspectives, the Structural Adjustment Programs (SAP) of the World Bank and the IMF were meant to create a new alliance with business elites. It could cut the dominance of organized labor and the bureaucratic elite.

Initial resistance to neoliberal reforms One of the problems with reforming the MENA economies was that the states had provided privileges to certain market entrepreneurs. When confidence in state-led development strategies declined, reforms were not always initiated. Economic reforms would challenge the ruling elites controlling large parts of the economy.

Another component that hindered reforms was the strength of organized labor, which opposed any form of reform. Their relatively high wages, work benefits, and job stability meant that they hindered any reform that diminished their privileges. Cammett has called the public sector in many MENA countries a form of 'labor aristocracy', who defended their privileges in the name of socialism and with the fear of large unemployment figures. Yet, while organized labor opposed any reform, they did not want to pay the price of developing a more efficient public sector.