Tuesday, February 1, 2011

The economics of the Egyptian uprising

It would be difficult indeed to watch the over one million Egyptians protesting their government from Tahrir Square in Cairo this morning and not be profoundly moved.  Egypt may be one of the original civilizations on earth, but recent history has not been kind--colonial exploitation, chronic underdevelopment, overpopulation, and for the last 30 years, misrule by a brutal and corrupt police state.  People of good will from around the world are cheering on the long-suffering Egyptians.  I am certainly one of them.

But I have a bad feeling about this.  While the Tunisians actually succeeded in getting rid of their kleptocracy, the economics catastrophes that have brought people into the streets from Iceland and Ireland to Greece and the UK are as real as the one in Egypt and those protests have not succeeded in changing much of importance.  Worse, the Egyptian situation is complicated by geopolitical concerns that means there are many outside forces that want as little change as possible.

Former Managing Director of Goldman Sachs: Egyptians, Greeks, Tunisians and British Are All Protesting Against Pillaging of Their Economies
Nomi Prins - former managing director of Goldman Sachs and head of the international analytics group at Bear Stearns in London - notes that the Egyptian people are rebelling against being pillaged by giant, international banks and their own government as much as anything else.
She also points out that the Greek, British, Tunisian and other protesters are all in the same boat:
The ongoing demonstrations in Egypt are as much, if not more, about the mass deterioration of economic conditions and the harsh result of years of financial deregulation, than the political ideology that some of the media seems more focused on.
According to the CIA's World Fact-book depiction of Egypt's economy, "Cairo from 2004 to 2008 aggressively pursued economic reforms to attract foreign investment and facilitate GDP growth." And, while that was happening, "Despite the relatively high levels of economic growth over the past few years, living conditions for the average Egyptian remain poor."
Unemployment in Egypt is hovering just below the 10% mark, like in the US, though similarly, this figure grossly underestimates underemployment, quality of employment, prospects for employment, and the growing youth population with a dismal job future. Nearly 20% of the country live below the poverty line (compared to 14% and growing in the US) and 10% of the population controls 28% of household income (compared to 30% in the US). [By the most commonly used measure of inequality - the Gini Coefficient - the U.S. has much higher inequality than Egypt]. But, these figures, as in the US, have been accelerating in ways that undermine financial security of the majority of the population, and have been doing so for more than have a decade.
Around 2005, Egypt decided to transform its financial system in order to increase its appeal as a magnet for foreign investment, notably banks and real estate speculators. Egypt reduced cumbersome bureaucracy and regulations around foreign property investment through decree (number 583.) International luxury property firms depicted the country as a mecca (of the tax-haven variety) for property speculation, a country offering no capital gains taxes on real estate transactions, no stamp duty, and no inheritance tax. more

Why Now?
Tunisia, Then Egypt
By LAWRENCE DAVIDSON  January 31, 2011
If the recent events in Tunisia and Egypt tell us anything it is that predicting the beginning of mass unrest is very difficult. Indeed, it is probably easier to predict the stock market. What one can do, however, is describe conditions that are likely to create a context conducive to such unrest. What might those be?
First and foremost are poor economic conditions that are believed unnecessary by a suffering population. In our day and age this condition is easy to meet. There are many areas of the world where economies are stagnant, held hostage by international organizations like the World Bank and the International Monetary Fund, unable to feed usually growing populations, and most importantly, unable to employ a growing percentage of their adult population, including highly educated middle class individuals. And, in age of worldwide instant communication, no one really believes that such conditions are the way things have to be. Muhammad Bouazizi, the young man who, through an act of self-immolation, sparked the revolt that brought down Tunisia's dictator, was responding to years of economic frustration. 
Police and/or military repression is the second condition that increases the probability, at least in the long run, of resistance and revolt. In a country where unemployment is high, the army and the police become primary employers. But, those so employed are separated out from the rest of the population as an arm of a government that is unpopular. They often act with impunity. That is they are above the law and not its servants. If their salaries are sub-standard or they are not well supervised the police may well turn criminal. And their usual crime is extortion. Muhammad Bouazizi committed suicide after police took away his only source of living. They confiscated his street stall in part because he could not afford to pay off those in authority. 
Thus, rampant corruption is a third ingredient often found in societies that are vulnerable to popular revolution. When questioned about employment possibilities, a young man from Bouazizi's town, Sidi Bouzid, responded, "Why don't I have a job? Because I would have to pay people connected to the president's family to receive one. They take everything from us, and give us nothing." 
Egypt too reflects this mix, though in different ways than does Tunisia. In Egypt unemployment is very high, particularly among the young and college graduates. Having a highly educated labor force that is chronically unemployed or under employed is always a dangerous mix. Repression is also high in what amounts to a police state with rigged elections and torture chambers in the basements of local jails. Corruption is pervasive in Egypt. Everyone knows that those close to the dictator control the economy. You want something done, you have to cut them in. more

What Corruption and Force Have Wrought in Egypt
Posted on Jan 30, 2011
By Chris Hedges
The uprising in Egypt, although united around the nearly universal desire to rid the country of the military dictator Hosni Mubarak, also presages the inevitable shift within the Arab world away from secular regimes toward an embrace of Islamic rule. Don’t be fooled by the glib sloganeering about democracy or the facile reporting by Western reporters—few of whom speak Arabic or have experience in the region. Egyptians are not Americans. They have their own culture, their own sets of grievances and their own history. And it is not ours. They want, as we do, to have a say in their own governance, but that say will include widespread support—especially among Egypt’s poor, who make up more than half the country and live on about two dollars a day—for the Muslim Brotherhood and Islamic parties. Any real opening of the political system in the Arab world’s most populated nation will see an empowering of these Islamic movements. And any attempt to close the system further—say a replacement of Mubarak with another military dictator—will ensure a deeper radicalization in Egypt and the wider Arab world.
The only way opposition to the U.S.-backed regime of Mubarak could be expressed for the past three decades was through Islamic movements, from the Muslim Brotherhood to more radical Islamic groups, some of which embrace violence. And any replacement of Mubarak (which now seems almost certain) while it may initially be dominated by moderate, secular leaders will, once elections are held and popular will is expressed, have an Islamic coloring. A new government, to maintain credibility with the Egyptian population, will have to more actively defy demands from Washington and be more openly antagonistic to Israel. What is happening in Egypt, like what happened in Tunisia, tightens the noose that will—unless Israel and Washington radically change their policies toward the Palestinians and the Muslim world—threaten to strangle the Jewish state as well as dramatically curtail American influence in the Middle East. 
The failure of the United States to halt the slow-motion ethnic cleansing of Palestinians by Israel has consequences. The failure to acknowledge the collective humiliation and anger felt by most Arabs because of the presence of U.S. troops on Muslim soil, not only in Iraq and Afghanistan but in the staging bases set up in Kuwait and Saudi Arabia, has consequences. The failure to denounce the repression, including the widespread use of torture, censorship and rigged elections, wielded by our allies against their citizens in the Middle East has consequences. We are soaked with the stench of these regimes. Mubarak, who reportedly is suffering from cancer, is seen as our puppet, a man who betrayed his own people and the Palestinians for money and power. more
 Finally, the really good question posed by the uprising in Egypt.
Where's the Protest at Home?
Robert Kuttner
Co-founder and co-editor of The American Prospect
Posted: January 30, 2011 05:46 PM
On Saturday, I crossed paths with a few hundred protesters marching from Cambridge to Boston to call for the resignation of Egyptian President Mubarak. By appearance, they were a mixture of Arab-Americans, locals, and people from assorted other backgrounds.
The loud, peaceful march was almost startling, because you hardly see street protests in America these days, even in liberal Massachusetts. The Boston Globe quoted one Egyptian-American woman saying that middle class anger in Egypt has swelled with unemployment and inflation.
"You can't live a fairly decent life without being rich," she said.
In 2011, you might say the same about downwardly mobile America.
But where are the protests in our country? Where is the leadership connecting the dots... between the financial meltdown, the record profits and bonuses on Wall Street, the continuing collapse of home equity, the joblessness, and the assault on public services in the name of budgetary prudence? more

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