Issue No. 598
Economy
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8 - 14 August 2002 Issue No. 598 Economy |
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| Published in Cairo by AL-AHRAM established in 1875 | Recommend this page | ||
Cloth of the revolution
The July Revolution may have failed to promote democracy or keep Israel at bay, but it supposedly injected new life into the country's industry, Salah El-Amrousi* debates the validity of the Nasserist claims to an industrial revolution
Let's assess the objectives and performance of the industrialisation programme initiated by the July Revolution. The Free Officers made industrialisation one of their top priorities. In doing so, they were answering a vague national, populist as well as bourgeois aspiration to catch up with advanced industrial economies; and to alter the agricultural nature of the economy which colonialist and reactionary forces claimed was Egypt's pre-ordained fate. The July revolutionists did so in order to win popularity and strengthen their hand in the internal political struggle. As time went by, development and industrialisation became central to the economic and social course of the July Revolution.
In other words, the importance of industry was not confined to the economic side alone; it was part and parcel of the ideological makeup of Nasserism. One of the primary ideological justifications given for the wave of major nationalisations during the 1960s was the reluctance of private capital to venture into industrial investment. This was the developmental, or industrial-based, argument in favour of state-capitalism.
This ideological stance was crucial, for it explains much of what happened in the 1950s and 1960s. The High Dam project, which was central to the country's economic and agricultural development programmes, was a direct reason for the nationalisation of the Suez Canal. The latter brought about the 1956 War and paved the road for extensive nationalisation of French and British ventures.
One should keep in mind that economic interventionism was common in the post-war period even in major capitalist economies. The tribulations of the Great Depression and the requirements of post-war reconstruction gave governments a social and economic role that required an increased measure of state interventionism. The ability of the Soviet Union to achieve a high rate of industrial growth, while averting most of the crises that gripped the capitalist world, caught the imagination of many in the recently decolonised world.
In Egypt, the call for interventionism preceded the July Revolution. One example is a report Banque Misr submitted to the finance minister in 1928. The report argued that the fledgling business class was unable to raise the necessary capital for industrialisation and that the state should step in to fill the gap. "The country has a great need for industrial ventures, but savings are low. The participation of the government in industrial ventures would, certainly, help to construct these ventures at a faster pace," the report advised. State interventionism, as envisioned by the authors of the Banque Misr report, was to be of a limited and temporary nature. In time, the report opined, "savings will increase, and local investors will be able to replace the state."
Similar calls were made by the Federation of Egyptian Industries. The magazine Misr Al-Sina'iyah (or Industrial Egypt, March 1952 issue) calls for "founding state-run or state-subsidised industries", but stresses that interventionism should be conducted without "harassment of private business". The July Revolution followed half the advice.
In assessing the industrial achievements of the July Revolution, one can focus on the quantitative or, alternatively, the structural aspects. Quantitatively, the assessment has to be favourable. From 1952 to 1969, industrial production, in companies employing 10 workers or more, increased by 215 per cent. Employment in manufacturing rose by 150 per cent. With industrial growth rates in the late 1950s and early 1960s remaining consistently in double digits -- rates never seen before or matched since, it is tempting to describe what happened as an industrial revolution. But the structural aspects were less impressive.
The quantitative approach, summed up in the preceding paragraph, cannot reveal the cluster of contradictions that has stifled Egyptian industry since the mid-1960s and which continue to this day. Despite the double-digit growth rates, the old industrial structure remained largely unchanged. Egyptian industry focused mainly on consumer goods, with a sputtering of intermediate industry. No serious attempt was made to produce machinery.
The textiles industry, the mainstay of the pre-revolution industrial structure, received approximately one-fifth of the total manufacturing investment in the late 1950s and early 1960s, and its portion in the total industrial output rose steadily from 33.1 per cent in 1957 to 38.1 per cent in 1965.
A number of intermediate industries grew at an impressive rate, such as chemicals, mostly fertilisers, paper and rubber. The iron and steel industry remained mostly feeble, until the Soviet Union provided substantial assistance with the Helwan complex. Assembly of durable consumer goods, such as cars, televisions, and refrigerators was introduced on a significant scale.
The focus on the textile industry reflected an age-old national aspiration -- that of exporting quality fabrics instead of raw cotton. The way industry planners went about this matter ended up hurting both the industry and the balance of payment. The main aim of the planners was to turn the industry away from churning out cheap fabrics for local consumption towards up-market, exportable fabrics. The industry, however, lagged behind in the expertise and research needed to achieve international competitiveness in fabrics. As a result, Egypt lost much of the revenues of raw cotton exports and made no breakthrough in the exporting of fabrics.
Egypt's industrial revolution, so to speak, had no clear sense of direction. It shunned the Soviet model, which was based on heavy industry -- make the machines first, and the consumers will, at some point, get what they need. This approach was not good enough for the Egyptian planners, and not just for economic reasons. The July Revolution leaders made it clear that the nation was not going to sacrifice "this generation" to achieve prosperity for "future ones". This indictment of the Soviet model had its basis in the populist dimension of the revolution.
Egyptian planners were hopeful that the assembly of foreign durable goods would, at one point, turn into a full- fledged manufacturing base, by replacing imported parts with locally-produced ones. This was mere wishful thinking. Some argue that the 1967 defeat brought this process of industrial transition to a halt, but I find this hard to believe. If the economy were geared toward such transformation, it would have happened, even at a slower pace, despite 1967.
The July Revolution's focus on consumer goods, rather than machinery, was a political decision. The argument about the welfare of the "current generations" is not entirely convincing. What actually happened was that the revolution preserved an economic reality that continued to serve the privileged classes. The share of consumption of the richest five per cent of the population was 17.6 per cent in 1958, and this declined by no more than one per cent following the nationalisations of the early 1960s.
The developing countries that managed to achieve so- called industrial revolutions -- China, India, South Korea, and Brazil -- did so by creating capital and intermediary industries and by obtaining the necessary technological skills. Nasserist Egypt made quantitative achievements, but it failed to turn these into a qualitative, dynamic outcome. It could develop neither the industrial base nor promote the technological skills consistent with sustained development.
* The writer is an economist with the Arab Research Centre.
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