A few months after Hosni Mubarak lost the presidency to a full-fledged revolution, the Egyptian economy — whose inequities were always visible to the naked eye — brought the country to a virtual halt. It will be a while before this generation of fed-up young Egyptians enjoys the fruits of a recovery, for much needs to be accomplished to fix what is clearly broken. Samer Soliman, an assistant professor of Political Economy and Political Science at the American University in Cairo, and an activist editor of Al Bosla, a radical annual democratic publication, provides a first-rate analysis of what went wrong.
First published in 2006 by the Cairo printing house Al Dar under the title Al-Nizam al-Qawy wal Dawlah al-Da`ifah: Al-Azma al-Maliyyah wal-Taghyir al-Siyasih fi Misr fi `Ahd Mubarak (Strong Regime and the Weak State: Fiscal Crisis and Political Change in Egypt Under Mubarak), and using state budgetary data, Soliman predicted the collapse of the Mubarak regime due to a serious fiscal crisis.
In fact, the crammed-with-statistics book (26 figures and 13 tables) reveals that behind the putative strength of the Mubarak regime lay an increasingly weak state, as Cairo could no longer pay for many subsidies, ranging from cooking oil to wheat. Soliman documents how successive military regimes relied on the police or the mukhabarat (the so-called intelligence forces) to quash secular and religious opposition while ensuring that citizens were at least fed. Over the past three decades, however, and even with generous foreign stipends, the treasury ran deficits. The United States in particular allocated approximately $64 billion (about $2 billion, or Dh7.34 billion, annually) between 1979 and 2011, as fulfilment of the peace treaty with Israel after the Camp David Accords, though most of these sums were devoted to military equipment. To be sure, Washington officially gave Israel about $96 billion during the same period too, though somehow the Israelis spent the money in a wiser fashion, developing a sophisticated economy even if the two countries posted roughly similar GDPs standing at about $220 billion in 2010.
Naturally, while the Egyptian population was nearly 11 times larger (80 million versus 7 million), the authoritarian Egyptian regime boasted a corrupt system, one that redefined nepotism and wallowed in special interests. Consequently, far less was spent on basic necessities, with fewer social benefits, that further taxed an impoverished population. Although Cairo identified and invested heavily in the tourism sector, its lukewarm efforts necessitated additional revenues, with more taxes levied on those who could least afford it.
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Unable to create enough employment for a population growing by one million every nine months — clearly Egypt's most serious challenge for decades to come — and burdened with huge fiscal obligations, the government did the only thing it actually could do — cut public services. This translated into a weakened state — since deteriorating services were linked to poor opportunities for employment and challenging economic-development issues. Even if an entrepreneur wished to apply an idea to the marketplace, hurdles were erected in his path, which meant that one fell back on corruption to get things done.
Soliman has followed the money and found the truth by focusing on the regime's patterns of extractions and allocations. He laments that for all the available assistance, Cairo failed to foster economic growth, without which the government could not long survive.
Today, Western and Arab powers are scrambling to meet Egypt's economic needs through bilateral and multilateral aid packages, with pledges approaching $20 billion. Moreover, an effort is under way to cancel a portion of the country's external debts, estimated at $32 billion in 2010, which hang like an albatross around the country's neck. While such generosity cannot but assist Egypt's new rulers, only an extreme makeover of fiscal policies will pave the way for genuine political changes. Short of courageous democratising initiatives, including economic transparency and political freedoms, chances are good that the crisis will not strengthen the state.
Soliman was not surprised by the 2011 protests, though he recounts how past campaigns, especially those associated with labour and political activisms within the Kifayah (Enough) movement, set the pace. What the Mubarak government could not grasp, and what his military successors seem to ignore, were the levels of frustration and anger bottled up inside every Egyptian. Then, as now, demonstrators mobilised and put their lives on the line because they expected a better life. After the revolution, few ought to be surprised if people go back to the streets for another chapter of the unfolding revolution, this time to prevent starvation.
Ultimately, while Soliman analyses the failure of the state, it behooves Mubarak's successor(s) to encourage the creation of wealth if the country is to prosper.