current affairs development economics equality growth

Is Egypt a victim of its economic policy?

As you will know if you’ve been watching the news recently, Egypt has hit a crisis point. Protestors are in the streets, calling for the government to step down. Hosni Mubarak has been president of the country for 30 years, and refusing to see himself as the problem, he has sacked his government and promised to appoint a new one this week. But Egypt’s problems run far deeper than a single politician with a stranglehold on democracy.

In the last 20 years, Egypt has been hailed as a something of an economic marvel. It has liberalized and opened its markets, privatized, reduced subsidies, and cut the rate of business tax, to generous applause from the IMF. Its faith in the neoliberal agenda appeared to be rewarded, with huge amounts of foreign investment and economic growth running at 7% a year.

As is often the case with GDP however, those growth figures disguised the real issues.  The economy may have been growing, but it was making no difference to the lives of ordinary Egyptians. The minimum wage remained unchanged at £4 a month, and millionaires paid the same rate of tax as those at the bottom.  The number of Egyptians living in poverty actually grew, 20% of the population were living on less than $2 a day when the reforms began, and it is In 2009 a government report admitted that 9 out of 10 Egyptians had gained nothing from all that growth.

Even last year, Middle East magazine ran a feature on ‘y’, but it proves how irrelevant GDP can be if inequality rises at the same time as economic growth. Is it really any wonder that the country is currently in uproar?

8 comments

  1. If I read you correctly between the lines, you are saying that neoliberalism would be the problem (or, at least, not the solution others claim it to be). In this case, that would be a misleading statement because there are other problematic factors, most notably corruption and the extreme age-demographics of Egypt that together almost guarantee the failure of any system when it comes to the well-fare of the masses.

    (Which is not to rule out that some moderate transfers would be beneficial—just to straighten the picture with regard to the real problems.)

    1. I’m suggesting that bad economic policy is one of the factors that has led to the crisis. A booming population and an underemployed ‘youth bulge’ is another, along with the democratic concerns and rampant corruption. My broader point is that our view of progress is so narrowly defined that Egypt’s economy has been considered a great success when in fact it’s been a catastrophic failure.

  2. Economic growth should not, and in the end, can not be used as the only indicator for success. Economic growth is used by the World Bank as one of the key indicators of its democratic governance index. However, repression, of any kind will eventually come to the surface. Just as Costanza et al. argued that the value of the environmental services needed to be added to the economic bottom lines so that the reflected the true cost of doing business, so does the cost on ordinary Egyptians need to be reflected – not just growth in GDP. Ironically, as long as gaps between rich and poor continue to widen in the wake of democratization and opening of markets, the need for addressing that gap with more holistic, perhaps even socialist ideals will become evident. Repression will only lead to violent revolution.

  3. Have you noticed Joe Romm’s joining of the dots concerning (and )? The cost of food is likely to be a triggering cause, whereas the economic inequalities you’re pointing out here are important underlying causes.

    1. I hadn’t noticed that, but it could well be part of the trigger as you say. We certainly saw plenty of riots last time the food price index was this high. Maybe this time it’s a bit more serious, and will provoke lasting change rather than the temporary unrest of food riots.

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