The Political Economy of Reforms in Egypt. Khalid Ikram
Cooperation Agency
Introduction
When a country has a continuous history of more than five thousand years, dating the genesis of an issue requiring reform can become a little arbitrary. It seems that in Egypt’s case, no matter which date is chosen, it is almost always possible to look back to find pre-echoes of political-economy issues that are being discussed today. “This country is a palimpsest,” wrote Lady Duff Gordon in 1863 “in which the Bible is written over Herodotus, and the Koran over that” (Gordon 1969).
Even the time of the pharaohs offers important instances of matters with which present-day administrations continue to grapple. A modern policymaker would be no stranger, for example, to wrestling with problems of controlling and distributing the Nile’s waters; to managing an extremely centralized administration; to examining issues raised by the level of government intrusion in the economy; to assessing the consequences for the country’s cropping patterns of farmers’ not having to pay for irrigation water; to estimating the taxes to be levied in the coming year; to concerning himself with the role of religion in the polity; and many more questions that can trace their roots to pharaonic times.1
Or one could start with Napoleon’s expedition to Egypt (1798–1801) because it marked the beginning of the most recent serious interaction between Egypt and the West and has political, economic, social, and cultural consequences that continue to unfold to our day. Moreover, the reign of Muhammad Ali (1805–49), who assumed power after the departure of the French, and his successors saw the introduction of many policies—such as those relating to the ownership of land; the expansion of the canal network; the steady replacement of basin by perennial irrigation in order to meet the requirement of increasing the country’s limited cultivated and cropped area; the government’s sponsorship of industrialization; protection against imports and the consequences of removing it; the enlargement and modernization of the armed forces; the raising of revenues to pay for the policies of economic expansion; the construction of the Suez Canal and the resulting deeper integration of Egypt into the international economy; the rise of external indebtedness and the political vulnerability that it created; and several others that have molded much of Egypt’s contemporary economy and society. These policies delivered many of the strengths that buttress the country but also initiated problems that continue to engage the attention of today’s regimes.
This book has a more limited compass. The discussion focuses on the era since the Free Officers staged a coup on July 23, 1952, but refers back to earlier periods to show how an issue arose and how deeply, with time or reiteration, it has become embedded in the political and economic structures of the country. It discusses the principal economic challenges that Egypt faced and looks at the interaction of politics and economics that went into determining the policies devised to deal with the challenges. In discussing these policies, one must almost inevitably raise the question of whether other approaches would have been more effective.
Four points concerning the approach and the scope of the book should be stated at the outset. First, this is not a book about the politics of Egypt per se; rather, it deals with how political and economic variables interacted to produce the crucial economic outcomes for the country since 1952.
Second, its underlying assumption is that the most important responsibilities of a government are to create a better life for its citizens and to keep the country free from external domination. While many different elements go into the creation of a better and more secure life, the economic element is critical; this includes policies that would bring about a sustainable development of the economy and a better distribution of its fruits. These criteria are taken as the touchstone against which to appraise the effectiveness of economic strategies.
Third, much of Egypt’s economic development since 1952 has involved the use of foreign resources, contracted bilaterally, multilaterally, or commercially. One could even say that a good deal of Egypt’s political maneuvering since 1952 has been in the quest to obtain such resources. How providers of external resources reacted to Egypt’s economic policymaking, and what the impact of their policy advice was, therefore requires scrutiny.
Fourth, there is no attempt to provide a recipe for dealing with an immediate situation, such as, for example, that resulting from the overthrow of the Mubarak regime in January 2011. The discussion of the way forward is on the enduring structural issues in the economic field that will have to be tackled by whatever regime is in power over at least the next two or three decades.
The Importance of Economic Health
Egypt’s economic future matters. With a population that accounts for about 40 percent of the Arab world; with a preeminence in Arab culture, education, and media; with a large and well-qualified diaspora that underpins the economic and social development of many other Arab countries; with a strategic location where the Suez Canal provides the shortest passage between Europe and Asia; and with the largest armed forces among the Arab countries, Egypt should rank as one of the most important countries in the world. And yet there is a perception that the country’s performance has fallen short of its potential.
While many reasons—historical, political, and other—have contributed to this state of affairs, economic weaknesses have been responsible for many of the country’s most serious political ills. To take but one example: even 150 years ago, the failure to generate sufficient foreign-exchange earnings created both the need for Egypt to borrow externally for the construction of the Suez Canal and also its inability