More than two decades after his death in 1978, Algeria's president Houari Boumedienne is still admired by millions of Algerians. Some admire him for his style and smile; many for his policies. But those who try to discredit him on shaky political grounds can be grouped into two main categories: (i) those who argue that he was no different from his successors, and (ii) those who think that he had plenty of oil. This article shows that the two groups are equally wrong.

The Cornerstone of Algeria's Prosperity

Many Algerians do not know why Algeria is not an economic super power. Yet the answer is simple: Phenomenal growth rates are missing. Asians in Singapore, Taiwan, Hong Kong and Malaysia, for example, are far richer than us (and than many people in other developing countries) primarily because they have managed to sustain high economic growth rates for so long. Similarly, Algerians were richer under the Boumedienne government in the 1970s than under Bendjedid in the 1980s because the latter could not sustain high GDP growth rates Boumedienne had initiated.

A bit of history is always useful. At the eve of his departure in December 1978, Boumedienne left Algeria with the highest output growth rate in the country's entire history. He achieved 9 percent. One year later, in 1979, his policies were still in play producing another phenomenal growth rate of 7 percent. However, as soon as Bendjedid detached himself from his predecessor's policies in 1980, the GDP growth rate plunged to 0.8 percent; a loss of more than 90 percent of its 1978 value.

The Numbers

The table below computes Algeria's real GDP growth rates for two periods: One for Boumedienne extending from 1974 to 1979; the other for Bendjedid stretching from 1980 to 1985. There are two important qualifications here. First, as a matter of fairness, I did not intend to blame Bendjedid for the post-1986 disaster (i.e. world oil price collapse), so I stopped at 1985 (although another reason is that the IMF runs Algeria). Second, although Boumedienne died in 1978, I included 1979 as part of his own heritage because at the time his policies were still in place. In other words, the 1979 prosperity should not be attributed to his successor.

What the story tells us is probably what everyone would expect: The average growth rate of Algeria's economy under Bendjedid did not match that of Boumedienne. In fact, it was almost 35 percent smaller. Furthermore, Bendjedid never matched Boumedienne's growth rate of 9 percent in any year from 1980 to 1985; his best record was only a little higher than 6 percent in 1982. Looking at it from a different angle, one would find that Boumedienne never recorded an output growth rate that was as low as 0.8 percent.

Does the difference in growth rates matter? In fact, a great deal. With a growth rate of 0.8 percent, GDP will double in 90 years; with 9 percent, this will take only 8 years to double (this is the rule of 72 where the number of years GDP will take to double is equal to 72 divided by the GDP growth rate). So, one can imagine the substantial increase in Algerians' living standards Bendjedid would have achieved had he been able to sustain Boumedienne's output growth rates.

Or was it because Bendjedid had lower world oil prices? The answer is no. From 1958 to 1973 crude oil prices were stable at about US$3 per barrel. In Bendjedid's era, they increased from US$3 in 1973 to more than US$35 in 1980 (to be fair to Boumedienne, the 1979 price increase should be added to Bendjedid's bill since the oil proceeds went to his government's budget). Under Boumedienne's presidency, from 1974 to 1978, crude oil prices increased at a moderate pace from US$11 per barrel to US$13 per barrel (in fact, when adjusted for inflation, the prices even tended to show a decline).

This leaves us with only one question: Why could Boumedienne register an average growth rate of 6.8 percent per year while Bendjedid only a rate of 4.5 percent, although they both had oil? The answer must be that the former worked harder.

Further Evidence

Houari Boumedienne, with more hard work and less corruption, managed to sustain not only high GDP growth rates, but also reasonably high growth rates of GDP per capita. This significantly improved Algerians' living standards under his presidency. For the period 1974-79, GDP per capita, a rough measure of average income, increased by 3.8 percent annually. On his departure in 1978, Boumedienne had already achieved a growth rate as high as 5.5 percent. This turned out to be the highest Algeria could generate in the entire period of 1974-85. Furthermore, Bendjedid is to blame for the dramatic fall in Algerians' living standards under his government. Thus, in 1980, Algerians witnessed a fall in their incomes by at least 2.5 percent; in 1981, these stagnated completely as the income per capita growth rate was nil.

As mentioned earlier, it matters a great deal as to whether GDP per capita increases by 3.8 percent per annum, as it did under Boumedienne, or by only 1.4 percent, as was the case under Bendjedid. According to the rule of 72 highlighted above, other things being equal, an increase of 3.8 percent would mean that our living standards, something we really care for, would double in less than two decades, while an increase of 1.4 percent would indicate that this would take more than half a century (and I will leave it to others to demonstrate the case of negative growth rates).

Finally, a little exercise may end the story. We estimate the levels of Algeria's real GDP in AD billions. Bendjedid would have gained had he managed to sustain Boumedienne's high growth rates (but, of course, he could not!). The data in Table 4 below indicates that the numbers are very large.

Table 4: Actual and Estimated levels of Output Under Bendjedid, AD billion

	Estimated	Actual	Estimated/Actual
1980	296	252	117
1981	319	260	123
1982	343	277	124
1983	368	292	126
1984	398	309	129
1985	430	328	131
Total	2,154	1,718	125

The data in Table 4 tells an interestingly sad story: Had Bendjedid followed Boumedienne's policies to the fullest, Algeria's GDP would have been AD 2,154 billion, instead of the actual AD 1,718 billion. This is a loss of more than AD 435 billion for the period 1980-85. In other words, Algeria's GDP would have been, on average, 25 percent higher than it actually was, which is a significant increase. This, in fact, matches a GDP per capita of about AD 20,000 at the 1985 population level.

The Bottom Line

This article proves two points. First, those who try to discredit Boukharouba* on shaky political grounds should realize the fact that it is time they became honest. Although Boumedienne did share common pitfalls with his successor, by depending on the oil sector so heavily and following a socialist path, the man worked smarter.

The issue of smart-working governments is particularly important to understand Algeria's current political turmoil. At the eve of the world oil price collapse in 1986, Algeria's GDP growth rate plunged to -0.6 percent, from 9 percent in 1978. In 1987, the population hoped for the best, as the rate of growth climbed to zero; but in 1988, it became convinced that the worst was far from over as the growth rate plunged to -1.5 percent. In response, thousands went to the street. In 1989, the IMF (International Monetary Fund) rushed to help with millions of dollars, increasing the GDP growth rate to 5.5 percent. This, unfortunately, as one might have expected, could not be sustained as the GDP growth rate declined to -1.2 percent in 1990. One year later, in 1991, Bendjedid tried hard to bring it up to 1.5 percent, but that was not good enough to save his existence as a president.

The second point, which is probably the most important, is that Boumedienne's experience is certainly instructive to Algeria's newly elected president. The message is clear: hard-work and political stability have become post-Boumedienne Algeria's dream. But there is one thing Bouteflika needs to unlearn from Boumedienne's heritage: dependency on oil proceeds and socialism. Had Boumedienne built his kingdom on large scale capitalistic manufacturing industries, there is little doubt that his miracle would have been a really BIG one.

*Mohamed Boukharouba was former president Boumedienne's real name.