The Political Economy of Reforms in Egypt. Khalid Ikram
the ends, but was reluctant to supply the patience that would be required for the policy measures to attain the ends. This is unfortunate. After reviewing reforms in several Asian, African, and Latin American countries, Krueger (1992, 69) notes that a successful reform normally spans several years, and that “time is one of its ingredients.”
And therein lay the rub. Ministers were reluctant to support austerity measures unless they felt that they stood a good chance of being in office to see the benefits. But given the political mortality rate, the odds of this happening were distinctly unfavorable. The costs of policy reform were immediate and certain; the payoff was deferred in timing and unpredictable in amount. In their calculations, ministers heavily discounted the future. Consequently, the balance between risk and reward did little to encourage ministers (and even the president) to take the long view.
Dr. Abdel Aziz Higazi17 described a meeting in February 1975 at which President Sadat had been urged to slow down the consumption boom following the infitah. The argument was that policy measures taken up front to restrain excessive consumption would lead to increased investment and incomes, and thus permit high and more sustainable consumption a little later. The president had dismissed this view out of hand, responding sarcastically, “Ya‘ni bukra fi-l-mishmish?” (“In your dreams!”). The tendency of the government to concentrate almost exclusively on immediate benefits was much discussed among donors. At one of the monthly donor meetings in Cairo, the British representative remarked that the preoccupation with the short term made it appear that the government’s main strategic principle came from FitzGerald’s Rubaiyat of Omar Khayyam: “Ah, take the cash, and let the credit go,/Nor heed the rumble of a distant drum.” Or as Hamed al-Sayeh (minister of economy) confided more prosaically, “Ministers do not necessarily support reforms; they just want the results of reform.”
The focus on the short term was not limited to a particular cabinet. In early 1981 the deputy prime minister for economic affairs, Abdel Meguid, tabled at a cabinet meeting a range of proposals dealing with the exchange rate, consumer and fuel subsidies, the restructuring of loss-making public enterprises, and the injection of competition into the financial sector. Detailed papers, coordinated by the Ministry of Planning, had been circulated concerning the likely effect on the price level, the budget, and employment in the public enterprise sector. Abdel Meguid had discussed his ideas with the ministers concerned, and he was confident that they were all on board. At the meeting he asked for their formal assent to begin drafting appropriate legislation. The response took him by surprise.
He said that ministers had “hopped from one ‘however’ to another” and that the cabinet had not been able to reach any decisions. As Abdel Meguid put it, “Everyone was ready to go to heaven, but no one was prepared to die.” He added, “I suppose the most sobering thought for any politician is that he should politically die [because of authoring reform policies], while his successor should benefit from the outcome of those policies and go to political heaven.” The clear political-economy lesson is that if ministers perceive the benefits of reform to lie beyond the electoral horizon or (especially under an authoritarian regime) the president’s forbearance, reform policies will have few champions.
It is thus impossible to predict for how long a government is likely to persist with stabilization efforts or structural reform in the face of continuing austerity. Too many variables—such as the nature of the immediate economic crises, the economic trends of the previous decades, the political structure of the government (democratic, authoritarian, or dictatorship) and its strength, the state’s capacity for efficiently implementing the program, the role of external agencies, and many others—all are in play. After reviewing the experience of nineteen countries in Latin America, Africa, and East Asia, Nelson (1990, 339) tentatively concluded that “some relief from economic hardship within, perhaps, a year usually is necessary to sustain confidence” to carry on with the program even where economic crisis may have convinced much of the public that drastic measures were required. The only stabilization program in Egypt that may be said to have attained many of its goals covered 1991–93. Much of the government’s ability to stay the course resulted from the relief from economic hardship provided by the substantial write-offs and reschedulings of external debt, and the donor financing of support programs such as the Social Fund for Development (See chapter 6).
A further problem arose from Egyptian ministers’ insecurity about their tenures. Kassem (2004, 27–28) points out that the constitutional power to appoint the prime minister and the other ministers (and to relieve them of their posts) gave the president absolute power over the political future of cabinet members; moreover, the economic ministers were almost exclusively technicians who were not backed by a political constituency. This situation is very likely to inculcate in them a strong feeling of loyalty to the ruler; indeed, “the issue of loyalty accommodates subservience to the ruler’s policies. Consequently, [the president’s] personal decision-making is less likely to be questioned, let alone challenged.” Ministers could too often be unwilling to tell the president that some of his pet initiatives might not be workable.
McDermott (1988, 139–40) describes a meeting at which President Sadat was enthusiastically told by a minister of agriculture that he could carry out the president’s directive to “turn the entire Sinai green within one year.” This undertaking was given despite USAID’s providing the minister with evidence that (a) there was virtually no water to irrigate the Sinai; (b) if water were diverted from other uses and pumped across the Suez Canal into the Sinai, the per-gallon cost would be about five to eight times that of delivering it to existing sites in the Nile Delta; and (c) improving the quality of soil in the Sinai to support even simple grass cover could take five years or more. Such instances could occasion some irony by international observers. McDermott recounts that at that meeting the World Bank representative asked if the minister intended to fulfill his promise by plastering the Sinai with Astroturf, since growing natural vegetation appeared to be out of the question. Of course the Sinai has not become any greener in the forty or so years since that meeting. “Never commit to a date and a number,” would be sage advice to Egyptian policymakers, observed the USAID representative at the meeting.
These ministerial attitudes did nothing to encourage donors’ belief in the government’s seriousness. Moreover, such pronouncements debased public discussion by pretending that simple solutions existed for complex, and perhaps insoluble, problems, and corroded people’s trust in the government when it became apparent that there were in fact no easy answers.
Perhaps the ministers’ fears of their political ephemerality if they acted on sensitive subjects were not irrational. In a well-known paper, Cooper (1971, 28–29) analyzed the political effects of twenty-four devaluations between 1953 and 1966. He found that in about 30 percent of the cases the government lost office within one year, compared with only 14 percent in a random control group of similar countries that did not devalue. Ministers of finance suffered even worse fates: nearly 60 percent of them were dismissed in the year following devaluation, compared with 18 percent in the group that did not devalue.
2. Disjunction between private and social profitability. The cost–benefit ratios discussed above have all referred to social benefits or profitabilities, that is, the gains from policy reforms that accrue to society as a whole. However, the calculation that interest groups typically make does not refer to this wider concept of benefits, but rather focuses on private profitability—the gains or losses that would impact their own coalition. And there frequently is a wide disjunction between social and private profitability. Therefore, what happens to the structure of the country’s policy framework can depend crucially on whether the group seeking to advance social profitability can outwit, persuade, or overpower the group seeking to preserve private profitability that is created by inefficiencies in the economy. This is seldom easy. As long ago as 1513, in his classic study on the exercise of political power, Nikolai Machiavelli warned that “the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new” (The Prince, chapter 6).
Instances of the ascendancy of private over social profitability in the Egyptian experience and the effects