Amal A. Kandeel
Professor Kandeel is an economist and development adviser and an adjunct assistant professor of science, technology and international affairs at the Edmund Walsh School of Foreign Service at Georgetown University.
At the dawn of 2011, crushing social grievances over the oppressive economic marginalization and political exclusion that deepened throughout the rule of former President Hosni Mubarak had stoked sufficient public fury to spark a revolt. Egypt was rattled by the eventual revolutionary earthquake of January 25-February 11. Aftershocks of much less intensity have continued since then, and the ground has not yet settled. Understanding the salient issues that culminated in this upheaval, and others that comprise undercurrents of perceptions and attitudes within the society, is essential to grasping some important changes that could occur down the road.
On the eve of the revolution, Egypt had been subject to the autocratic rule of Mubarak and the National Democratic Party (NDP) since he took office in 1981. The 1980s was a decade of recession and deepening financial and economic woes in the Arab region. This was due in large part to the dampening effect of the Iran-Iraq War on the regional economy and the reverse oil shock that sapped government coffers and national incomes of current-account and capital inflows from oil exports, expatriate transfers, and the petrodollar bonanza in general. Things were made worse in Egypt by the government's economic and financial mismanagement. By the end of the decade, the country had accumulated a staggering debt and was struggling with crises in major areas of the economy. In the early 1990s, the government reached out to the International Monetary Fund (IMF) and the World Bank for help. With far-reaching conditionality, they forgave or restructured some of Egypt's external debt. The United States, too, stepped in and did likewise. While this brought some financial relief and macroeconomic corrections, the economic, political and social price of "assistance" and "reform" was in other important ways severely detrimental to Egypt's national interests and would continue to haunt it. Although Egypt achieved considerable economic growth in 1990-2009, averaging a decent 4.5 percent annually,1 a small minority enjoyed most of the gains; balanced, all-inclusive development was not achieved. The extent of socioeconomic and political deterioration that occurred during the last 20 years gradually pushed the country towards an inevitable explosion. By 2007, the sense of imminent internal collapse that charged the air in Egypt was inescapable. I will never forget attempting to bring this reality to the attention of some influential officials in a prominent international organization the same year, only to find my meeting coldly shortened and uneasily ended. By 2010, Egypt seemed like a ship without a captain.
IN THE EYE OF THE STORM
On February 11 at mid-day, Egypt had reached the brink of an abyss. Anticipation peaked across the country, and thousands of demonstrators besieged Mubarak in his presidential palace, heavily guarded by army tanks. The potential for a small group of impatient protestors to sooner or later try to force its way through the gates and trigger a sudden downward spiral into bloodshed and chaos was all too real. Fortunately, the Egyptian Supreme Council of the Armed Forces stepped in to save the country at the climax of 18 very long and difficult days. It was the only group that had the capacity and legitimacy to take matters into its own hands and stabilize the situation.
The Supreme Council of the Armed Forces, which has been administering the country since that juncture, had initially announced its plan to undertake this role for a transition period of six months, at the end of which presidential elections would be held. This time frame has been changed recently, with parliamentary and consultative (shura) council elections now slated for September. Whether presidential elections will be held in December is uncertain. The current transition period could be extended (although there are indications that the army strongly prefers not to do so), and Egyptians would accept this, as internal and regional conditions warrant.
Despite the obvious advantages and necessity of the army's central role in this volatile time period, the job of the Supreme Council has not been easy from the outset. At times it has been complicated by reactionary attempts to undermine an already fragile stability. The Supreme Council has been under nearly unremitting pressure from the revolutionary movements and opposition groups to meet what has been for the most part a shifting and growing list of demands. Presidential hopefuls have also continued to stir public skepticism over decisions and actions taken by the Supreme Council, and members of opposition groups have called for demonstrations to continue until the council meets all their demands — however these may be defined. A protracted state of public protest, however, is neither welcomed nor considered justifiable by a broad majority of society. Some of the demands are not considered reasonable (for example, some raised by individual professional associations), and the fact that they are being sought during this period of uncertainty is considered by many to be poor judgment. The single common priority for most people now is a return of law, order and security to their daily lives. Although the conclusion of the constitutional referendum in favor of transitional amendments, as opposed to a complete overhaul, has largely settled an important issue that had caused much tension throughout late February and March, there are no clear indications that all protest will come to an end very soon. New demands, for which new protests are being organized, are still emerging on a weekly basis.
Meanwhile, the Supreme Council and the transitional government have been trying to prevent a further hiatus in the operations of any economic sector or government function or department. Parallel to this, the Supreme Council has been working to ensure an orderly and effective transition and hand-over of government powers to a democratically elected civilian administration, while carefully steering internal and international affairs with as little disruption to daily life as possible. The Supreme Council from the outset has not made sweeping changes in the transitional cabinet and government. It announced in the first few days of the transition phase that it would make no administrative changes without a thorough investigation of possible candidates. The importance of administrative continuity and stability for the smooth functioning of the country and its economic sectors during this interim phase has clearly been much more appreciated by the Supreme Council than by the revolutionaries and political groups. Stability is also appreciated by the more experienced generation, those unaffiliated with political parties and youth groups, and those who have no personal political goals. The lingering threat to this fragile stability due to the continuation of public protests and civil disobedience, even on a relatively smaller scale, has become a cause of concern for many Egyptians.
Corruption trials of public officials got underway soon after the fall of Mubarak, with frequent reports of those named in pending charges being banned from travel and having their assets frozen. These measures have included a number of business tycoons and former ministers and prime ministers, as well as the former president and his family. Trials that confirm charges of corruption and the squandering or unlawful disposal of national and public resources will open the way for repatriating or expropriating these assets. Reclaiming these resources is important for the country's recovery from the economic and financial losses of the revolutionary phase and from some of the ramifications of the ill-conceived practices of the preceding period. Most probably, the Supreme Council wants to conclude these trials while it is still in charge of managing the country's affairs. There is a high risk that these trials would otherwise become politicized and deliver verdicts without the application of due process. Any eventual verdicts that do not entirely conform to the expectations of the revolutionaries will, therefore, be used to stage renewed unrest. Unfortunately, however, distrust of the current legal processes is felt not only by some of the proponents of revolutionary courts as an avenue for conducting these trials, but also by opponents of such courts.
The revolution has demanded change that falls within two main spheres: the economic and the political. There is no uniformity across the board, however, in terms of views and perceptions of the changes that are deemed essential or what the alternative model should be.
THE ECONOMIC SPHERE
Prior to the 1990s, Egypt, like other countries, was familiar with socioeconomic dichotomy and social inequity. Since 1990, however, a narrow concentration of political power and disreputable wealth that became interdependent and entrenched amidst widespread misery created a deeper and uglier polarity. A confluence of several inauspicious factors opened a schism between rich and poor, reaching down to the nerve.
At one pole stand the majority of Egypt's 83 million people. Their distinctive characteristics, aside from their sheer numbers, are poverty and excessive financial hardship. According to the standard narrow classification used by international development organizations, poverty has more than doubled in Egypt since 1982.2 By 2009, it afflicted over one-fifth, or 18 million, of the Egyptian population. At least as many more people are clustered just above this poverty line. At the other end of the societal pole are the former regime and its associates of ultra-affluent business tycoons, along with another minority of second-tier nouveaux-riches, who have been increasingly monopolizing economic opportunities, power and privileges. Between these two extremes, the middle class struggles on. Those who managed to move up did so, and those who could not eventually sank into the lower-income ranks. Anyone who had the opportunity to leave the country for study or work for a few years did. Europe, the United States, Canada and the Arab Gulf countries have been attracting some of the best and the brightest Egyptians in all professions. Countless numbers of low-skilled workers and less-educated Egyptians have also left whenever possible.
A steep accumulation of labor grievances was an integral dimension of the deteriorating socioeconomic and political environment during Mubarak's rule. It ultimately became one of the powerful propellants for the revolution. These grievances have been linked, partly in reality and partly in public perceptions, to the economic "reform" period that began in 1991, particularly to the privatization program that was part and parcel of it from the late 1990s. Some of the roots of the socioeconomic problems Egypt faced on the eve of 2011, however, reach deeper than just the last 20 years. Egypt emerged from the rule of Gamal Abdel Nasser and Anwar Al-Sadat with significant economic and financial problems, although these were not entirely due to the socialist policies of the 1960s and 1970s. This and many other fundamental facts about the nature, complexity and operation of the national as well as the global economy today are not known to the overwhelming majority of Egyptians. Many, therefore, continue to regard socialism with romanticism and nostalgia. A majority of Egyptian youth perceive that the government is responsible for securing employment for the people.3 This attests to the shallow extent to which real reform has actually occurred in Egypt during the market liberalization of the 1990s. Chronic, deepening and widening economic marginalization became an outcome of those "restructuring" policies that failed in the first place to restructure perceptions of the roles of the state and the private sector in the economy. A change in these perceptions was crucial for deep-rooted economic transformation to occur; they were indispensable to unlocking the vast potential of Egypt's human resources. They will continue to be extremely important in the present transition and the post-transition phases.
Unfortunately, in the absence of a bold and coherent strategy of real reform, standard unemployment (as officially reported) persisted at around 8-11 percent throughout 1990-2009.4 In reality, the extent of unemployment is much higher. The fall from its peak to 9 percent in 2007-08 was largely due to the discouragement of many who had ultimately exited the labor market. The numbers of those who participated had also decreased significantly from 1990 to 2009, as their percentage fell below 50 percent of the economically active age group. About 40 percent of Egyptians are 10-29 years old.5 Those under the age of 30 account for 90 percent of Egypt's total unemployment.6 Other conditions also made this unemployment situation quite destabilizing, such as a 3-million temporary-worker time bomb for which the privatization process was directly responsible.7
Some other policies adopted in the period 1990-2010, and for which the society had been least prepared, exacerbated the oppressive economic conditions. For example, in 1995, Egypt joined the World Trade Organization (WTO), which required it to have completed the implementation of its trade-liberalization commitments by 2005. During that time, the Egyptian pound depreciated rapidly. It lost more than half its value between 1990 and 2001, and dropped a further one-third when it was floated in 2003.8 By 2008, inflation had soared to 18 percent and stood at 12 percent in 2009.9 Unemployment and low incomes pushed the basic necessities out of the reach of millions of Egyptians and made large numbers of people vulnerable to the 2008 food crisis.
Since the 1970s, temporary and permanent migration to the oil-exporting Arab countries has constituted a safety valve for the high-pressure situation produced by an overflowing supply of labor in the absence of proportionate economic opportunity. This external employment has also provided much-needed household income and essential foreign exchange to finance imports. The reliability of this outlet, however, is vulnerable to regional and global shocks. In 2008-09, for example, the country saw a $1.5 billion drop in worker remittances10 as the global economic recession took its toll on labor demand in the Arab Gulf economies. Layoffs in the Gulf no doubt swelled unemployment in Egypt, contrary to what some high-profile sources suggested on the basis of government data, and contributed to the rise in poverty during that time period. The dependability of the regional economy as a safety valve is now being called into question again, due to the spread of revolutionary fever to other Arab countries.
A factor that will determine Egypt's economic policy direction, and its economic future generally, is the capacity of the Egyptian people to stomach further economic and market liberalization. Public distaste for the private sector is significant, although monopolies, business-government corruption and the exploitation of labor — all of which had caused so much hardship and misery — are at the core of this aversion. National economic policies must acknowledge and eliminate these deficiencies and failures, and take concrete measures to address people's vulnerabilities. Achieving social justice and poverty alleviation must be a priority. No country in the world has entirely eliminated all forms of protectionism in its economy. This is true even in the EU and the United States, which have some of the highest per capita income levels in the world. However, care should be taken not to follow blindly in the footsteps of inefficient public policies implemented within two leading economic powers. Lessons should be drawn that are suitable for Egypt's specific conditions from what did and what did not work well in these countries and others. It is of vital importance, furthermore, to distinguish between fundamental societal essentials and unsustainable protectionist measures.
Successfully making this distinction in practice necessitates investment in upgrading education and vocational-training systems. In their current state, they constitute one of the most problematic sectors. Improvements are needed to align educational outputs and labor skills with local market requirements so that Egyptians can have a fair and equal chance to compete for employment. These changes are essential and long overdue. Labor-market issues present some major challenges that need to be resolved. This entails supporting and encouraging socially responsible investment and entrepreneurship, poor-inclusive business models, and an economic environment that is small-business friendly. Laws and regulations should be well balanced between the needs of a vibrant business environment — which, by definition, cannot be confined to or dominated by giant corporations — and those of a growing labor force. These two must converge to serve the purpose of broad-based development.
If there is an opportunity for people to choose their representatives in governance, groups or individuals that endorse socialist views (these include the Muslim Brotherhood and leftist parties) will most probably have greater appeal than secular and reformist parties by any name. Among the socialist-leaning groups, only the Muslim Brotherhood (and other Muslim charities) has left a mark in the socioeconomic sphere in Egypt. The popular support that this group has today derives from its active social work that has filled some gaps in the provision of basic goods and services to the poor. While these activities are commendable in their own right, they do not provide a sufficient basis for garnering political endorsement by a large majority of Egyptians.
Considering these factors and the social leanings of large segments of the Egyptian population, public pressure is quite strong to adopt, in what could be a reactionary way, economic policies that do not necessarily have sound fundamentals or promote efficiency, but deflate public anger. A challenge Egypt faces now as it tries to address broad-based socioeconomic grievances is not to fall back onto excessive protectionism. This would alleviate people's hardship and improve perceptions about living conditions temporarily but exacerbate economic problems and conditions further down the road. In this context, a major concern regarding the possibility of the Muslim Brotherhood's rise to power is that its representatives might renege on Egypt's international trade and economic agreements on the basis of the former regime's illegitimacy.
Egypt needs generous concessionary aid from the international community to help bridge this gap between reality and perceptions as it moves towards durable yet gradual policies for achieving sustainable economic growth and development. Concessionary aid is particularly crucial; during 2000-09, the percentage of long-term debt in Egypt's external debt stock doubled to 92 percent, and the variable-rate debt stock quadrupled to 12 percent.11 While this has lowered the risk of a financial crisis, it has also meant that the debt hangover will accompany Egypt's development struggles for decades to come and worsen as relevant interest rates increase. Ordinary people, who need employment and a reprieve from crushing economic pressures the most, will likely have to continue to pay down this debt for as many years as those during which Mubarak ruled.
THE POLITICAL SPHERE
The political space in Egypt, which the NDP has dominated for decades, contains only a handful of parties that are known to the general populace, out of a total of about two dozen. Only religious groups, however, which have not been — and legally could not be — organized into political parties, have had extensive tangible presence in the lives of Egyptians. Therefore, they have a record of methodologies and actions for tackling public problems. According to the preliminary schedule that the Supreme Council announced for holding parliamentary, consultative council and presidential elections, time will be too short to form new parties, to design programs and to cultivate public support. A new party needs a few years, not a few additional months, to nurture broad and effective public support. This leaves much to be desired; the most politically pervasive groups have been the Muslim Brotherhood and, until its recent court-ordered dissolution, the NDP (whose former members can reconstitute it under a different name). Due to conflicting statements from the Brotherhood, it is unclear whether it will name a presidential candidate. Yet there is no reason to expect that it will not. Unless its views infiltrate the military, however, it would not have the chance to rise to power. There is much social conservatism within the military's ranks, which reflects the traditional conservatism of society; but conservatism and agreeing with all the Brotherhood's views are two different things. Mohamed ElBaradei, former director-general of the International Atomic Energy Agency, and Amr Moussa, recent secretary-general of the Arab League, on the other hand, have been straightforward about their intensions to run in the presidential elections. ElBaradei's principal, and significant, obstacle is that his support base is very narrow, due to his having been an outsider to Egypt throughout his professional life. Moussa's principal obstacle is his previous, brief association with the Mubarak regime, though he fell out of favor and was removed from his post as foreign minister. On the positive side, both have substantial international experience. A mainstream alternative, however, still does not exist. The head of Al-Karama group, Hamdeen Sabahi, who announced his self-nomination in late March, does not enjoy significant popularity, and his group has not yet officially acquired the status of a political party.
TWO REGIONAL ISSUES
The winds of change that swept through Tunisia and Egypt have continued to blow elsewhere in the region. A repercussion of this wave of popular uprisings could be the return of tens, if not hundreds, of thousands of Egyptian expatriates working in Arab countries that have recently been thrown into chaos or in others that could sooner or later experience similar upheavals. What occurred in Libya is an important example. In late 2010, the official figure for Egypt's unemployed was 2.3 million. There were 1.5 million Egyptians working in Libya before the revolution broke out there. At least a quarter to half a million of them, including the numbers of returnees who had not been officially counted, would likely have re-entered Egypt by the time this article is published. The rest urgently need to be brought home. This is a huge shock for the economy. Most returnees who are able and willing to work cannot be absorbed at once in economic activity. Many may not find employment in the mid-term or even longer. Pressures on available supplies of public services and basic goods will increase considerably. Inflation rates, which have risen since January 2011 due to reduced economic activity and escalating international prices of food and fuel, will inch up further as savings are drawn down.None of this will make things immediately easier or better, as poor and uneducated Egyptians expect after the revolution. Tensions could escalate if timely support is not extended to Egypt to mitigate these and other interconnected effects. An emergency fund should be set up for increased public spending in response to a swelling population and unemployment. Plans must be drawn up by the international community for a timely response to influxes of Egyptian returnees and Arab refugees from destabilized areas that would complicate the efforts of the Supreme Council to stabilize internal conditions and ensure the necessary transition to civilian rule.
No country has watched the Egyptian revolution as warily as Israel. Mubarak was an important partner in its official state of peace with Egypt. The Israeli leadership's fear early in the revolution was that Egypt would fall into internal chaos and a security breakdown that extremist groups could take advantage of. Israel is also deeply concerned about which political forces would take power after this transition period is over. The Egyptian political arena will be fluid in the next few months, its features possibly changing. One constant, however, is conservatism, not only among political groups but within the society as a whole. Furthermore, Egypt's society, like others, is sympathetic to the plight of the Palestinians under occupation. Israel has infuriated the Arab and Muslim peoples worldwide with its policies in the West Bank and Gaza. This does not mean that Egyptians would want to annul the Camp David Accords and raise the flags of war. The revolution was about freedom from repression and exploitation and aspirations for better economic, social and political conditions. What Egyptians want is to live better, not to die more. Nevertheless, Israel's optimal choice was to see no political dice tossed in Egypt at all. The Egyptian people's probable pick for leadership will be someone with conservative views about Israel, especially with respect to economic cooperation considered non-essential or damaging to Egypt.
STABILIZING THE GROUND
While Egyptian society has made some progress toward political transition, there seems to be a degree of paralysis regarding post-revolution reconstruction and development. This standstill has been represented by the persistence of weekly group demonstrations, albeit on a relatively much more limited scale. Many of the demands of these post-revolution protests concern small, disparate professional or labor groups. These protests have revealed a perception among certain population groups that the revolution had unearthed Ali Baba's treasure and that they should now get a piece of it. Student demonstrations have also been staged. The most recent of these have tried to unseat all academic faculty in leadership and administrative positions in a number of prominent universities in order to replace them by candidates whom the students would elect. Other recent student demonstrations have called for canceling mid-term examination results. During the last week of March, there was news about a planned demonstration to secure the right to continue to demonstrate.
It may be that the end of the glorified phase of ousting Mubarak has left some people disoriented — it would definitely not be appropriate to use the term "disillusioned." The time that has elapsed since the Supreme Council of the Armed Forces took control of the country's administration has not been sufficient to allow for the return of economic activity and security at least to pre-revolution levels, and for broad results to be produced and then judged. One of the most tragic legacies of the Mubarak era, however, is the corrosive effect it has had on the value of work and its meaning on an individual level. A lot of people received privileges without justification or effort; many more who had worked extremely hard did not get what they deserved. Prolonged unemployment and underemployment in the government sector have reinforced a disconnection in the minds of many Egyptians between productive work and the quality of one's life.
It is for these reasons that certain groups of people have been caught up in a protest cycle. Now that the revolution has accomplished its highest objective, many do not know what to do next in order to make their lives better. The eager anticipation of immediate change and the kinds of changes that have been expected are understandable, given the economic difficulties. They are much less surprising, however, when we consider that about 20 million Egyptians over the age of 15 are illiterate.12 An uneducated person who struggles daily just to feed a family does not realize that international linkages mean that government control over inflation is only partial, barring a full return to socialism. Nor are the implications of government intervention to cushion the domestic impact of international prices — never mind the limits to such ability — adequately understood. These are additional reasons proper education is absolutely critical to Egypt's future. People must be able to understand and assess facts within meaningful and relevant contexts to gain a realistic perspective on them. And their abundant energy must be channeled constructively to move this society forward.
This makes an emergency fund to meet the unusual needs of this time period all the more necessary. To lessen the inflationary effects of this spending, it would best be made in conjunction with the use of some of the robust reserves of unemployed youth in short- and medium-term public-works construction projects. There is ample need for improved infrastructure in many areas of Egypt. This approach would assist individuals and families in weathering the current inflationary storms of food and energy prices, while ensuring a value-added return to the economy from this monetary injection. At the same time, measures of this kind would aid in blunting the charge of restlessness that some population segments are still carrying around. It is essential to disable the potentially harmful bottled-up energy that could militate against society's well-being — and turn it instead to the service of the country.
1 Calculated using data from World Bank, World Data Bank, http://databank.worldbank.org/ddp/home.do?Step=12&id=4&CNO=2.
2 UN Development Programme (UNDP), Egypt's Progress towards Achieving the Millennium Development Goals (2010), http://www.undp.org.eg/Portals/0/MDG/2010%20MDGR_English_R5.pdfPoverty, p. 20.
3 UNDP, Egypt Human Development Report 2010 (New York: UNDP; and Cairo: Institute of National Planning, 2010), p. 136.
4 All employment data in this paragraph are from the World Bank, World Data Bank, op. cit.
5 UNDP, Egypt Human Development Report, op. cit., pp. ix, 28.
6 Ibid, p. 6.
7 Mohamed Abdel Salem, Egypt: Three Million Workers Are at Risk Due to Temporary Employment, Bikyamasr, October 28, 2010, http://bikyamasr.com/wordpress/?p=19516.
8 IMF, International Financial Statistics, http://elibrary-data.imf.org/FindDataReports.aspx?d=33061&e=169393.
9 World Bank, World Data Bank, op. cit.
10 IMF, International Financial Statistics.
11 World Bank, World Data Bank, op. cit.