Egypt’s January Revolution

No, not that one of 2011. The January revolution that comes to mind is that of 17-19 of January 1977. Thousands poured into the streets to protest the rise of subsidized bread prices. The police fled, and the panicked President asked the Army for help in quelling the chaos in Alexandria and parts of Cairo. If revolutions are to be measured by their results, then this was a profound and often forgotten event. Let us enumerate a few of its after effects.

Sadat in a panic over a lack of dividend for the impressive showing in the October 1973 war, and fearful of a US sponsored talk fest on peace in the Middle East, took matters into his own hand and eventually initiated direct talks with Israel. The result was an upending of the “Arab order” that still resonates to this day, in the hopelessness of building a Palestinian national state, the disintegration of the Levant and the rise of Saudi Arabia as the paranoid hegemon of the region.

The riots firmed Sadat’s desire to find allies among the Muslim Brotherhood. It was a fateful decision for him, and for the battered country he ruled. In the last days of his life he would realize the error of believing that the Brotherhood, and its allies, would seek anything less than the entire pie. That lesson seems to have been forgotten 34 years later, and with bloody consequences for the country.

The riots convinced the Egyptian political elites that subsidies for the poor were an evil necessity and can not be touched; the third rail of Egyptian politics, as it were. This conviction condemned the country to further three decades of authoritarian economic stagnation. Ironically, the attempt to reverse this in the decade before 2011 which was bearing some fruits in economic growth, came to an effective end in 2011.  

Shortly after the events of 1977 Tahseen Bashir remarked that “Egypt is the only country in the Arab world, the rest are tribes with flags”. The son of Egyptian aristocracy was paraphrasing a widespread feeling among those of his class during the early 20th century. They believed there were only two civilizations in the region, Egyptian and Persian. The irony of today is that both countries continue to struggle with the demons of their nationalism and religion sapping their potential greatness, while the “tribes” have fragmented even further.

It is not quaint historicism to recall the January 1977 revolution, for the next revolution in Egypt is likely to resemble the 1977 events rather than the 2011.     

— Maged Atiya


The Incompetent State

The crash of the Russian airliner in the Sinai is now causing widespread damage to the tourism industry in Egypt, estimated to bring in 6-8 Billion USD annually. There is even talk of a “collapsing state” due to this loss. To put things in perspective, there are over 100 US companies whose net profits exceed that of Egypt’s tourism industry. This is a frightening picture of the fragility of the Egyptian state. Lost in all the noise and opinionating, based mostly on pre-conceived biases, is a discussion of how Egypt got to this sorry state.

Tourism, or at the least the current Egyptian version of it, is not a happy industry. A few magnates, owners of resorts and associated businesses, do well. The majority of workers are “service industry” types; literally people who cook, clean, and serve the tourists sunning themselves on the beaches. For a country to base half its foreign earnings on this industry is a humiliating and profoundly damaging state. This humiliation, rarely acknowledged in the open due to the overly sensitive Egyptian psyche, is at the root of what seems to be national madness. A sense of injury and hurt aimed at the world in general, and at any particular critic that dares point out problems that Egyptians themselves have identified. This should be a moment of reflection for Egypt. The loss of tourism revenue threatens the state because Egypt imports twice as much as it exports, and relies on food imports to feed its burgeoning population. To correct this state, it is important to identify and correct its root causes.

The country as a whole suffers from poor education, low social entrepreneurship and rapidly increasing population. These problems reflect badly on the system that Egyptians have constructed to misgovern them since 1954, when the first “native” state took over. We do not need to dive into post-colonial mumbo jumbo to discuss this issue. Many countries around the world have threaded the development needle, evolving from a backward state to advancing and prosperous development. Often this is done under the watchful eye of enlightened authoritarian systems, which eventually give way to better and more liberal governance, once the population hits a magic level of GDP and Middle Class prosperity. The trouble with Egyptian authoritarianism is that it has been largely incompetent at economics, and often too weak to face a population fond of religious orthodoxy and bent on social conservatism. To escape the current vicious economic cycle, there will need to be major investment in Egypt, probably by many outside actors. The reason to do so is simple. No one wants a failed state on the Nile, astride Africa, Asia and Europe. But such investments must be pre-conditioned on major changes in public policies that favor investments and encourage small and medium entrepreneurs, and end the back-scratching cronyism of large businessmen getting preferential treatment from the state, or the Army. Such conditions will undoubtedly raise Egyptian hackles; as the hyper-nationalism seems rampant today. But many Egyptians are waking up to the outline of the disaster looming ahead. As the adage goes, an impending disaster can focus the mind.

It is pointless to recommend “democratic reforms” on Egypt today. They will not come, and any democracy that might conceivably emerge today will be fragile, prone to demagoguery, and in the grotesque language favored by many think tankers “illiberal”. To have a democratic state one must start with an actual state. Sadly, the best that can be recommended to Egypt today is capable and competent authoritarianism, which the current version is not. Many are asking that relations and aid to Egypt be predicated on ending its “repressive” policies. This observer argues that aid and relations be predicated on the quality of managers and the policies in place. In the end, native prosperity is more likely to bring social and political freedom than the well-intentioned urgings of outsiders.

— Maged Atiya

Jay Walking Morsi

There is plenty of criticism of President Morsi, and almost all of it deserved. Yet it all has the air of charging a lethal drunk driver with jay walking. The massive economic ills are blamed on the “revolution” and almost never on his inept leadership. This ignores the fundamental fact that growth in 2010 was 3-4 times the current growth, and in a worse global environment. Egypt’s economic problems are not ordained to be insoluble.

The collapse of the currency is not due solely to the large Current Account imbalance, but also, perhaps mostly, to the large capital outflow. That can be partly blamed on the revolution and the consequent instability. But all evidence points to an increase in the outflow since last year. More importantly, Morsi built his campaign on improving the economy by moving away from the “ills of the felool”. He even rammed through a sorry constitution by dubious means for the purely tactical goal of improving the foreign reserves. Those who had the stomach to listen to his loudly barked campaign speeches will recall that he promised a net capital inflow of $200 Billion dollars over his first term, or $50 Billion annually. Of course nothing of the sort happened. He did manage a few crumbs from his ally Qatar.

In fact, almost all of Morsi’s lurches and gyrations have had the opposite effect of increasing economic instability and hence capital outflow. Almost no attention is given to his promise; how economically illiterate it was to make it, and how inevitable that it was not kept. This, more than his gyrations into light-weight autocracy and general Ikhwan-coddling, represents the serious and present danger to Egypt and the breaking of his oath of office, reluctantly taken as it was. His appointments did little to increase confidence and hence willingness to invest in Egypt. His Prime Minister is a decent man who can only be described as “Ragel Ghalban”, with hardly any steel to make tough decisions. The recently appointed Finance Minister, Dr. Morsy Hegazy, surely “knows God”, but shows little familiarity with economic principles. With such a lot at the wheelhouse, any sensible man would reach for the life preservers.

The Egyptian opposition awaits for its version of James Carville. A country boy from Upper Egypt who can coin the native and catchy version of the “It’s the economy stupid”.

Future Thirst

Climate change will affect Africa disproportionately. The Nile basin is 10% of the African landmass but contains 40% of its population, including some of the oldest African civilizations and states. Egypt, “The Gift of the Nile”, could experience serious water shortage by 2025, due to population growth, economic growth and climate change. This risk is aggravated by four distinct ongoing factors

1- The decline of the Sudan into a failed state. The Sudan has been Egypt’s “buffer” for use of the Nile.

2- The large scale purchases of land in the Nile basin by external powers. China, Gulf countries and Multi-nationals are all buying land in the African heartland south of the Sudan. No doubt the water use will increase.

3- The mismanagement of agricultural and water policy by inept governments. Ethiopia, with the encouragement of China, has been particularly inept in a combination of neglect, land sale and attempts to dam up the Nile.

4- The failure of the Nile basin governments to agree on common policies. Egypt, the largest country, has ignored this problem for decades.

The focus of Egyptian foreign policy since the 1940’s, when the Muslim Brothers stockpiled arms for expeditions into Palestine, has been the Arab world and Israel. This is a perversion of Egyptian interests. Israel is an emotional issue, but not an existential threat to Egypt. Egypt has little leverage over any of the Arab countries, nor Israel. The Arab-Israeli wars have drained Egypt, while most Arab countries sat on the sidelines and cheered.

While everyone is arguing about the exact nature of the Islamist society, no one is paying attention to the fact that Egypt’s future, indeed survival, is linked closely with Africa. Egyptians have always attempted to suppress their African links. Perhaps it is a desire to be accepted by the West, or the effect of Islamist thinking which emphasizes Arabian links. Whatever the reason, it is an unhealthy state.

Almost any attempt to engage with Africa will mean that Egypt needs to reassure African countries about the Islamist trends. The disasters of the Sudan(and now Nigeria) have made most African countries wary of Islamists. Egypt will need to both stabilize the Sudan (most likely by ditching its current pseudo-Islamists rulers) and create a sensible policy with Ethiopia, Uganda and Kenya to manage the Nile. Egypt also needs to displace some of the external actors, such as China, and can do so only with trust and a fair share of economic strength. This is a major administrative and executive shift, and will require innovative economic thinking and use of global capital and technology.  Are the Islamists the best candidates for this shift?