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Al-Ahram Weekly 14 - 20 October 1999 Issue No. 451 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 14 - 20 October 1999 Issue No. 451
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Books Features Profile Travel Living Sports People Time Out Chronicles Cartoons Letters Coming up with the right formula
By Mohamed El-Sayed Said *
"Plus ça change...": it is tempting indeed to describe thus the recent cabinet reshuffle. After the media fanfare about "a change of major significance", the change that actually took place came as quite a shock. The general reaction was epitomised by the repre-entative of one segment of public opinion -- Al-Wafd. This newspaper was perhaps even more fervent in its campaign for the re-election of President Mubarak than some "official" newspapers. When it announced the results of the recent cabinet reshuffle, on the other hand, its disappointment was palpable.
Its attitude is quite understandable. Everyone who had expected the cabinet reshuffle to bring about new political orientations and fulfil the repeated demands for political reform felt despondent. Compounding the sense of gloom was the fact that the reshuffle left untouched those ministers who had most attracted popular discontent. The continued presence of these ministers suggests that the same policies and styles of implementation will also remain intact.
We are thus left with the fear, for example, that the forthcoming parliamentary elections may witness a repetition of the administrative intervention and wide-scale violence that occurred in 1995. We also have legitimate cause to suspect that the mode of legislation that has prevailed during the past decade -- and is guilty of such scandals as the syndicates and NGO laws -- will continue.
On the other hand, it is inaccurate to assert that the cabinet shuffle brought no change at all, or even that there was no significant change. Nor is it entirely logical for a newspaper or a political party that might loosely be described as liberal to claim it is shocked by the outcome of the reshuffle. None of the president's statements, either before the referendum or after he received overwhelming support for a new term, contained a pledge of political or constitutional reform. The closest he came to such a promise was his reference, in his pre-referendum speech, to "the participatory society" and his affirmation, during his oath of office speech, that "we must enhance the role of civil society and civic organisations in the realm of national social action". The president made virtually no mention of the role of political parties; nor did he suggest that a "national dialogue" -- a rumour circulated by such newspapers as Al-Wafd -- was necessary. In fact, there is nothing to indicate that the Emergency Law, in force since 1981, will not continue to renew itself spontaneously every three years.
Political stability implies inertia in the formation of social institutions and the formulation of national strategic orientations. In fact, the '90s could not contrast more starkly with the '80s in this respect. The '80s have been described as "the lost decade" because they witnessed no notable modifications in modes of economic, social or, of course, political decision-making. The '90s, on the other hand, brought fundamental developments in economic policy as the country plunged into the structural adjustment programme, aimed at transforming an entirely state-run economy to a market economy.
The structural adjustment programme gave rise to a curious irony with important bearings on the cabinet reshuffle. With few exceptions, the former cabinet and old guard among the president's aides had been nurtured on a strictly statist diet. This cabinet was to be responsible for the transformation to a market economy. Given its internal contradictions, it naturally split into two camps. One, consisting of former Prime Minister Kamal El-Ganzouri, along with the ministers of finance, supply and trade, and the majority of non-economic ministers, supported the dual economy, a system combining state planning with market principles. Within this system, the government retains control over the basic economic elements; a market economy emerges under the iron grip of its technocratic apparatus.
The other camp consisted primarily of Atef Ebeid, with the portfolio of privatisation and administrative development, and Minister of Economy Youssef Boutros Ghali. This cabinet minority sought to grant market forces greater preponderance, and embraced economic deregulation through the elimination of red tape and legislative restrictions, which they held accountable for high costs of production, the low competitivity of Egyptian products and the ballooning trade deficit. The recent cabinet reshuffle ousted the old camp and gave control over national economic policy to the pro-market, or laissez-faire, team.
Naturally, the new cabinet will not have an entirely free hand in its pursuit of economic deregulation. Some restrictions will remain in place, as they are part of the ideology of "economic nationalism" that is so deeply rooted in the Egyptian bureaucracy. In fact, this ideology may well be more robust now than ever before.
In the past, the statist system was so protective of the Egyptian market, in the interests of local producers and the national treasury, that it hampered the development of Egyptian industry and undermined its competitivity. The dual economic system, however, did not produce better results. The trade deficit skyrocketed as Egypt became one vast supermarket for foreign imports; export trade, meanwhile, remains as feeble as ever. As a result, many are given to argue, with some justification, that Egypt was better off before it adopted the open-door policy. At least we had a national industry to speak of, however modest, they say. Economic liberals reply that the failure to boost local industry and improve the balance of trade is due to the continued distortions resulting from excessive government intervention permitted by the persistence of the dual economy.
The liberal argument appears cogent, but in fact lacks any evidence beyond the classical economics reference books and the encouraging results of the financial and currency reforms -- which, incidentally, El-Ganzouri's team staunchly resisted. To the liberals, the sharp rise in the rate of the dollar that began early last summer does nothing to refute their argument. Moreover, they consider the former prime minister's intervention to support the Egyptian pound a gross infraction of an economic axiom. It is logically inconsistent, they hold, to decide to float the Egyptian pound and then forestall its fluctuation on the market by pumping in hard currency reserves, thereby artificially lowering the price of the dollar.
In all events, the removal of El-Ganzouri will prove a good test of the laissez-faire camp's wits. This is indeed a significant, although partial, change in the overall scheme of national policy.
More importantly, however, the change that has taken place must confront a virtually immobile patriarchal bureaucratic state apparatus. Through the last cabinet reshuffle, the country has drawn much closer to the Asian model of economic development, characterised by the linking of a market economy to government autocracy and laissez-faire policies to political patronage. The model worked in Asia, but will it work in Egypt?
There are three reasons we might feel some sympathy for economic liberals working in a patriarchal political system. Their first difficulty is of a purely economic nature. The previous government has funnelled a large portion of the nation's resources for the foreseeable future into a number of "mega-projects", costly irrigation schemes with long gestation periods and relatively low profitability. It will not be easy for the liberals to enhance the competitivity of the Egyptian economy by developing information technology, because the government does not have sufficient funds to encourage research and development.
The second difficulty is the bureaucratic culture. The educational system, almost entirely based on rote, is hardly conducive to inculcating a spirit of individual initiative and creativity. Even the private sector exhibits the acquired inclination to obey orders, to conform, to wheedle exemptions and seek the greatest returns for the least exertion. In another distressing example, major companies have turned from industrial investment to land speculation and real estate development.
But the third difficulty, probably the most daunting to the laissez-faire liberals, is that their reference books offer no ready-made solutions. In fact, classical economics are harmful to the economic development of a country such as Egypt. I am particularly keen to caution against a repetition of the "American model" of economic development, in which consumption patterns are altered drastically simply in order to boost the demand side of the economy. The perpetual problem of laissez-faire economic management has been how to stimulate supply. This entails encouraging economic actors to engage their intellectual capabilities and creative facilities with a view to obtaining the best possible product for the lowest possible price, on the condition that the product in question contributes to improving the quality of life. Egypt has the lowest ratio of personal savings to GDP among all middle-income countries, due to compulsive consumption habits. We also have astounding discrepancies in our wage structure and our occupational skills structure. We want to imitate the Asian model, but we lack the traditional Asian virtues of self-discipline, strict precision and rigid austerity. We frequently boast of our heritage and authenticity, but eagerness to learn, the desire to build and the appreciation of collective work are beginning to decay.
Development is a process that requires a brilliant formula. The problem in Egypt is that the necessary chemical reactions are inhibited by a rigid patriarchal political system that excludes participation. In addition, we have yet to come up with the theoretical framework that must underpin the brass tacks of development.
* The writer is deputy director of the Al-Ahram Centre for Political and Strategic Studies.
