Soldiers, Spies and Statesmen. Hazem Kandil
that could readily be used to recruit and energize a mass party … The people needed only to be offered an organizational framework … [Yet the ruler still assumed] that what applies within the military sphere also applies within the political realm … [he] visualized Egypt in managerial terms, as an organization instead of a polity.46
To the extent that the ASU and VO had a social power base at all, it was the aspiring rural middle class and its urban offshoot in the state bureaucracy. This distinctive social composition characterized Egypt’s ruling parties during the crucial decades of the 1960s and 1970s, and remained well in play until the final years of Mubarak’s rule; these middling landowners and their offspring in the bureaucracy wound up constituting the backbone of the ruling party.
Recall that one of the first things the new regime did in 1952 was initiate land reform. The coup took place in a semifeudal society where 2,500 large landowners (with 147 elite families) and 9,500 middling owners controlled a third of arable land and half of the parliament’s seats. There were also more than 2.5 million smallholders, and 11 million tenant farmers and landless peasants.* Aside from the rich absentee landlords, all the rest coexisted in the countryside, running their affairs with the aid of traditional social mores and hierarchy. The land reforms placed progressively lower limits on land ownership: 200 feddans in 1952, reduced to 100 in 1962, and finally 50 in 1965 (though the ceiling for family ownership was always higher). This was more than enough to run profitable agricultural projects. On the other hand, land redistribution granted each poor peasant five feddans or less—barely enough land to subsist on. While economically the peasants could not achieve independence, they were politically grateful to the revolution for providing them with a plot of land they could call their own. Therefore peasants could have offered a solid base for popular mobilization, but the insecure Nasser chose to blunt the revolutionary potential of the peasants lest they get out of control. Instead, he kept them tied down through reproducing traditional authority structures. He achieved this by allowing a prosperous rural middle class to occupy the apex of the patronage networks that were already set in place by large landlords, and thus perform the same political control function of their predecessors. So instead of redistributing all the surplus land among the peasants, or providing them with loans to buy it from the government, large owners were allowed to sell whatever exceeded their ownership limit on the open market where only financially solvent peasants could afford to buy. The relatively cheap divested land allowed small owners (controlling between 10 and 50 feddans) to become middling landowners (possessing between 50 and 200 feddans), and middling owners to become even wealthier. So the agricultural reform laws enabled the rural middle class, which had expanded modestly in number from 22,000 after the first installment of the land reform law in 1952 to 29,000 in 1965, to increase its land ownership by 29 percent, its annual income by 24 percent, and its share of state loans and subsidies by 80 percent during the same period.47 By enhancing the economic power of the middling landowners, land reform shifted the balance of political power from large landlords to these new kulaks, who now enjoyed undisputed hegemony in the countryside. Security and stability were thus prioritized over the potential for mobilization, a potential that might have served the regime today, but could have been used against it tomorrow. Conservative village notables were considered a safer bet.
The arbitrarily passed July 1961 Socialist Laws, which crowned Nasser’s drive to bring the economy under state control, further enhanced the position of the rural middle class by undermining the economic power of the wealthy urban stratum. Though one could scarcely argue that Nasser’s version of state socialism was detrimental to the interests of private enterprise, capitalists and former large landlords (with a lot of cash on their hands after forcibly selling their land) were reluctant to subject themselves to the whims of what they considered a totalitarian regime and so they held back on investment, preferring to make a profit in nonproductive fields, such as real estate speculation. Nasser tried his best to lure them back to productive investments through various tax exemptions, but this could not substitute for the lack of trust.* Following the Suez Crisis, it was estimated that out of £E45 million redirected away from agriculture, only £E6 million was invested in industry, while the rest went to real estate. In 1956 alone, real estate investment constituted 75.8 percent of all private investments. Nasser first responded in January 1957 by nationalizing foreign companies and forming the Economic Agency and the High Committee for National Planning to manage economic development. He then brought Egypt’s largest banks under state control in February 1960, and formulated the first Five-Year Plan, for 1960–1965.48
Although the upper bourgeoisie was forced to work for the state as executive managers after the nationalization laws, it remained obstinate. In 1961 Zakaria reported that a group of thirty high-ranking officers had been meeting regularly with Egyptian capitalists, and that together they were pushing Amer to help them end the dictatorship and restore private liberties. Zakaria’s report also highlighted that two-thirds of the economy was still in the hands of the private sector (that included 80 percent of commerce, and 70 percent of construction and industrial projects), and that half of Egypt’s workers were employed by private businesses. A swift move against capitalists was necessary. In October 1961, Zakaria detained 40 prominent investors, and in mid-November sequestrated the financial assets of another 767. The government then took over 80 banks and insurance companies, and 367 commercial companies.49 The Socialist Laws of 1961 were a logical next step. They eliminated the private sector in banking, insurance, international trade, heavy industry, transportation, large hotels, and the media. Even in light and medium industries and commercial companies—the last domain of private enterprise—the public sector became a partner with no less than 50 percent control. By 1967, the Supreme Council for Public Organizations supervised 48 public organizations, which in turn ran 382 affiliated companies.50
The bureaucracy and public sector were swelled further by state welfare laws passed during the same period. In 1962, Nasser’s cabinet decided to admit all secondary school graduates to university, and to secure a job for every college graduate. As a result, state employment in the civilian sectors alone jumped from 770,000 in 1962 to about 1.1 million by 1967. At the same time as state employment rates were as high as 70 percent between 1962 and 1969 (employing more than 60 percent of university graduates), state salaries increased by 102 percent.51 Needless to say, that expansion reflected neither population nor economic growth. It was part of Nasser’s attempt to expand and consolidate his civilian social base.
The expansion of the urban managerial class offered the middling landowners a golden opportunity to extend their influence to the city. They now pushed their offspring to find employment in the bureaucracy and public-sector companies. That is why the bureaucratic bourgeoisie, which doubled in size between 1962 and 1965, was overwhelmingly composed of the sons of rural notables. Soon these young bureaucrats transformed the public sector into a labyrinth of commercial and financial fiefdoms, which supplemented the agricultural fiefdoms their families had established in the countryside. Strategically placed in the city and the countryside, this new elite now represented the bulwark of the ruling party, the ASU. This leads us to conclude that the guiding rational for both the land reform and socialist laws was political, not economic.* In effect, this alliance between a class of wealthy landowners and the state bourgeoisie that sprang out of it pushed the economy toward commercial and real estate investment rather than industry. Even agriculture suffered as middling landowners passed a considerable part of their returns to their urban offshoots to double it through short-term economic ventures instead of reinvesting it in the land. Land was treated as a source of prestige, not a productive asset.
But the regime had only itself to blame. The poverty of its economic policy really stemmed from the poverty of its politics. Rather than focusing on development, the regime was motivated by the need to curtail capitalist interests, on the one hand, and the need to “bribe” society to excuse its dictatorial methods, on the other. The costly commitments imposed on the bureaucracy and public sector included employment of all university graduates, the provision of cheap housing and free health care and education, and so on. In the sixties, for instance, public-sector companies were forced to increase wages by 40 percent to absorb the quadrupling of university students without a corresponding increase in productivity or profit. In the bureaucracy alone, Egypt had one million civil servants on the payroll by 1967.52 The price was administrative chaos and