|Al-Ahram Weekly Online
14 - 20 February 2002
|Published in Cairo by AL-AHRAM established in 1875||Current issue | Previous issue | Site map|
Chalk and cheeseWhatever the statistical similarities comparisons between Egypt and Argentina don't hold water, writes Rushdy Said*
Argentina's economic crises became the focus of public anger. The masses took to the streets, the government collapsed and chaos reigned. The causes of the crisis have been attributed to the collapse of Argentina's banks and its stock exchange as a result of increases in the country's internal and external debts and Argentina's inability to service such massive borrowings.
Like other countries Argentina had embraced the doctrine of open markets, implemented the prescriptions dished out by the IMF and privatised state-sector companies and institutions all in the hope that it would eventually enter into the world market better equipped to withstand competition and win a share of the market necessary to promote prosperity.
This did not happen and Argentina was compelled, like many other countries, to borrow ever greater sums in a vain attempt to defer the collapse of its economy. Egypt is living a similar experience, and the conditions are almost identical. The levels of internal and external debts of the two countries merit an approximate comparison, certainly in terms of the percentage they represent of GNP.
Yet whatever the overlap in economic indicators, the actual conditions prevailing in the two countries are very different, to the extent that one cannot even begin to imagine Egypt reaching that impasse which prevails today in Argentina. Unlike Egypt, Argentina had taken massive, short term loans, repayable quickly or else subject to punitively high rates of interest.
But perhaps the reason why any attempts to make direct comparisons between the conditions of the two founder so badly has to do with the composition of their respective populations. Argentina has a broad middle class which maintains relations with banks, owns stock investment portfolios, and deals with the world at large. Hence any shock to the world economy or losses suffered by banks or companies have repercussions for the vast majority of the population.
In Egypt, on the other hand, the opening up of the economy cannot be said to have broadened membership of the middle classes. The majority of Egyptians -- and some estimates put the figure as high as 80 per cent of the total population -- survive on earnings gained outside the formal economy. In the absence of reliable statistics, this percentage has been based on the fact that people with bank transactions in excess of LE30,000 a year constitute only 20 per cent of the adult population. One ramification of this huge informal economy is that those who survive within it -- and that is by far the great majority of Egyptians --remain immune to fluctuations at the level of banking system or stock exchange, institutions with which they have no relationship. They are immune to fluctuations in the price of stocks, and the shocks these cause within the formal economy, because they operate outside that sphere.
The hidden economy is not the subject of any statistical quantification or monitoring and, for the majority of those who depend on it for their livelihoods, offers at best a meagre existence at the level of subsistence or else below the poverty line. Members of the population in this group are not government employees at the bottom of the scale: they are, rather, that sector of the population that somehow manages to survive on subsistence farming, poultry keeping, on the proceeds of primitive cottage industries or doing odd jobs which may be difficult to classify. They seem to manage the problem of securing an income in a manner similar to their management of securing accommodation. For shelter, they simply erect their own housing, in a district full of similar informal structures, without any kind of technical support or subjection to prevailing laws and regulations governing construction. They follow the age-old precedent of the squatter, the only path open to them.
Given the large numbers of people involved it is strange that the informal economy has not been subjected to closer academic analysis and research. Yet researchers have been consistent in their focus on the formal sector of the economy, on issues of privatisation, the development of banks, or women's issues, all of which are sure to help capture the attention of the outside world, and particularly of the donors who, in their turn finance the greater part of economic research in Egypt. I feel that not a single institution in Egypt is interested or concerned to become involved in shedding light on the hidden economy, the space in which the great majority of the Egyptian population earns its living.
Yet even for the small minority of Egyptians who live in an open economy, in the formal sector, dealing with banks and managing investments in stocks and shares, there is little to fear. The entire world is offering to help the Egyptian economy overcome its current crisis -- witness the result of the donor conference in Sharm El-Sheikh -- a reward, or incentive, for the role Egypt is expected to play in the so called fight against terrorism.
* The writer is the former head of the Egyptian Geological Survey Authority.
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