This chapter examines the effects of the June 1967 War on the balance of social and political forces in the Arab world and assesses the extent to which Israel's crushing defeat of the Arab armies transformed Arab politics. Did the third Arab-Israeli war mark a paradigm shift from secular pan-Arabism to religious nationalism or pan-Islamism? The question is not whether the 1967 defeat was a turning point in Arab politics. It clearly was. The real question is how, when, and in what ways did the shift from pan-Arab nationalism to pan-Islamism occur? The critical challenge is to contextualize the 1967 War within previous and subsequent developments and to assess its significance and impact on the course of modern Arab history.

To grasp fully the consequences of the June War, it is crucial to examine the internal and external challenges encountered by the Gamal Abdel Nasser pan-Arabist regime on the eve of the war. Domestically, the consequences of the 1967 defeat must be placed within preceding and subsequent developments. By 1965, the Nasser pan-Arabist regime reached a critical deadlock, particularly its much-touted economic program of “populist etatisme,” or populist state capitalism, was in crisis. According to John Waterbury, far from increasing productivity, the public sector caused a massive decline: “The crisis that overtook Egypt in 1956–66…was caused by the gross inefficiencies of a public sector called upon to do too many things: sell products at cost or at a loss, take on labour unrelated to production needs, earn foreign exchange, and satisfy local demand. It was also caused by the neglect of the traditional agricultural sector which, while taxed, was not reformed so as to become an engine of growth in its own right.”