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Al-Ahram Weekly 4 -10 February 1999 Issue No. 415 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 4 -10 February 1999 Issue No. 415
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Book Fair Economy Opinion Culture Features Living Travel Sports People Time Out Chronicles Cartoons Letters Beware the lure of globalism
By Gamal Essam El-DinA report discussed by the Shura Council, a consultative upper house, warned the government last week "not to be deceived any longer by calls for capitalism and globalisation." The 25-page report, drawn up by the Council's Economic Affairs Committee, cautioned: "These calls are prescribed by Western economy and finance ministers and institutions for developing countries as the panacea for all of their economic woes and financial troubles."
Worse, it said the world was now in the grip of a new "Great Depression" because of capitalism. To support its gloomy view of the global economy, the report quoted a warning by Malaysia's Prime Minister Mahathir Mohamed made last year after his country, along with a number of Southeast Asian countries, was hit by severe currency devaluations. "The currency attack is now at a dangerous and irresponsible level. Not only do they [financial speculators] not want to help, they are also preventing us from restoring our economy. Please see what free-market capitalism has done to us," the report quoted Mahathir as saying.
To emphasise the point, the committee report also highlights the problems experienced by Russia last year, when a sudden shift to "extreme capitalism" led to financial chaos and looming bankruptcy, Brazil, where the IMF-inspired currency devaluation has led to wide-scale financial turbulence, and Indonesia, where, it said, mass riots and widespread social unrest were the results of 30 years of capitalism.
"Market capitalism has boosted the number of billionaires in the world to 358, while more than 100 developing countries, with a combined population of more than 2.5 billion, are swamped by recession, poverty and a variety of social illnesses," said the report.
Against this pessimistic background, the report urged the Egyptian government to rethink its socio-economic policies: "Social equality should be reinstated by the state as a top priority. This is urged not only because of fears that there will be turbulence here similar to that of Indonesia and other parts of Southeast Asia, but because Egypt's ancient and modern history is rife with bloody social upheavals against the rich," it said.
The report stated that in the 1997-1998 budget, the government allocated LE29.8 billion -- 36 per cent of overall spending -- to meeting the social costs of economic reform. "This, however, is not enough," said the report. "The state should extend its role so that it can regularly intervene to protect social classes not only from the forces of an unbridled market economy but from the risks of hasty integration into the global economy."
It also urged the government to reconsider its privatisation policies. "In many cases, privatisation, or Thatcherism as it was called in the early days, proved to be destructive when it went to extreme levels, such as selling-off airports and public utilities. Let us emphasise that strategic assets such as these should remain state property," said the report.
Another report, submitted by Shura Council member Samir Tobar, an economist, warned that the macroeconomic successes achieved by the six-year-old economic reform programme will face a number of challenges if the government failed to adopt certain policies. On the subject of Egyptian exports, the 27-page report said: "Due to the launch of several mega-development projects, 80 per cent of Egyptian imports are now in the form of equipment, machinery and production inputs. The state's role here is to boost exports to such levels as to redress the trade balance and fund imports." It also urged the government to meet the housing demands of the low-income classes and ensure the provision of basic services. "Seventy five per cent of housing costs in this country should be borne by the state, while the provision of basic services, such as education, health and nutrition should remain the main responsibilities of the state," the report said.
It also called on the state to reinforce its financial institutions, especially the Central Bank, to stem the tide of capital inflows and curb the influence of multinational corporations on the economy. It urged the government to step-up its efforts to achieve Arab economic integration. "This aim should be the state's greatest role in the next century as a last-ditch attempt to confront global economic blocs," Tobar's report said.
Both reports drew diverse responses from a number of cabinet ministers and MPs. The liberal Economy Minister Youssef Ghali, for one, strongly defended the application of market capitalism in Egypt. "When President Hosni Mubarak decided a long time ago to implement market capitalism, it was to give people a greater say in the economic decision-making process," Ghali said.
According to Ghali, the gradual application of market capitalism in Egypt will mean resources will be used more efficiently, production will be of a higher quality and citizens will be protected from sudden economic decisions.
"Market capitalism is the best system for achieving prosperity in Egypt provided that the instruments of this system operate naturally and spontaneously," Ghali said. He said the government was aware of its responsibility for the social dimension of market capitalism. "The state strengthened the role of the Central Bank to exercise strict supervision on the banking system. In Southeast Asia, it was the failure of supervision agencies that led to financial chaos, while in Brazil, market capitalism resulted in the poor getting poorer and the rich getting richer. In Egypt, the state is continually ensuring that the fruits of market capitalism, such as higher growth rates, are distributed fairly among most of the country's citizens," Ghali said.
Trade Minister Ahmed Guweili, took a different approach. He defined the government's role in market capitalism as one in which all possible means are employed to protect citizens from its ravages. "Leaving the instruments of market capitalism to operate naturally always leads to economic chaos," said Guweili.
Prime Minister Kamal El-Ganzouri said international lending institutions such as the IMF and The World Bank are tools for turning developing countries into markets for developed countries. "This will never be viable because prosperity in developed countries will be doomed if developing countries are left to suffer," he said. "In Egypt, we learnt these hard lessons and are trying our best to raise our production." He said that with regards to market capitalism, it was the role of the Egyptian government to ensure that private investments, either domestic or foreign, are made in line with the objectives of the state's development plans.
