Economics of Revolution

Feb 25, 2011 Editorial

While most analysts have focused on the political aspects of the ouster of Mubarak in Egypt, the importance of economic factors cannot be underestimated. Not surprisingly, it is the western press that is riveted by the political: their governments are most concerned that whatever regime emerges in Egypt, their interests will be secured. From this perspective the acceptance of the primacy of the army in the transition is salutary since they are confident the latter institution will not rock the boat.
Looking at the short and medium term, therefore, it is doubtful that apart from some minor reforms in the political sphere, anything fundamental will be altered in the economic realm. And this will certainly lead to new destabilizations in the country. Like Guyana, Egypt’s economy in the last few decades has been guided by the IMF/World Bank’s neo-liberal, one-shoe-fits-all basket of policies dubbed the “Washington Consensus”. This liberalisation or “intifah” was successful by the IMF/World Bank’s standards and they routinely gave the Egyptians kudos for raising GDP and keeping inflation under control. Just as in Guyana.
But all this just served to prove the old complaint that “growth” does not automatically translate into “development”. Apart from a tight circle of friends enjoying insider benefits, Egypt’s economy was not nurtured by private economic activities. It depended primarily on its own oil production, transfers from Egyptian workers in the oil-rich Arab countries, Suez Canal fees and external aid, mainly from the US. Too little of these revenues were invested in infrastructure, agriculture or the modernisation of the industry; too much went into services, were spent on armaments, or were dissipated on import-driven consumption. Egypt became a classic “rentier economy”: where the state undertakes all the resource mobilisation and infrastructure development functions, but captures the surplus of its own activities, a substantial portion of private sector profits and external rents (such as remittances of Egyptians living abroad) in order to finance its own expansion. The control and distribution of economic resources gave the regime the opportunity to control most of Egypt’s public and private economic activity. The regime could build up a veritable clientelistic network through the allocation of economic means. This tiny elite lived high off the hog. Sounds familiar?
However, behind the superficial glitter is a story of ever worsening poverty for ever greater numbers of people, coupled with huge rises in food costs. Initially, the Egyptian government did not apply the full, draconian IMF adjustment programmes; it chose a softer version; subsidies were covertly cut, and the state gradually retired more and more from public services. This policy avoided sudden deep cuts, but it worsened the quality of public services and affected mainly those social groups which were dependent on the state’s welfare services. One of the comprehensible consequences of the regime’s policies was the decreasing quality of the Egyptian education system.
Often insufficiently trained teachers have to deal with mounting numbers of pupils. The poor wages of the teachers and the situation in overcrowded school classes have led to a certain kind of privatisation of public education. Most of the pupils have been obliged to attend the private classes of their teachers, held in the early morning before school or late at night after the school day.
For most young Egyptians, attendance at one of these paid private courses has been indispensable for completing school education. As a consequence of the state’s slow and covert withdrawal from public services, private and mainly Islamic civil associations emerged to fill the vacuum. The youths that came out into the streets to topple Mubarak are the products of this dysfunctional educational system, which in the end could not deliver jobs.
Since 2006, Egypt has witnessed an increase in strikes and industrial action. The reasons given for these are mainly, if not exclusively, to do with higher pay to maintain basic living standards in the face of rising prices. Once the euphoria of the political achievement wears off, it will be apparent that the struggle for economic justice will have to continue.

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