Tuesday, September 23, 2008

The crunch hits Cairo


In Egypt, the economic shocks rippling out from Wall Street will shake an already fragile political landscape.


-Cairo - September 2008
-Taken from the Guardian's 'Comment is Free'


The world is just emerging from a week of financial turmoil which has dissolved old certainties about the economic system structuring our lives. Yet despite the fact that commentators regularly assure us that we have just witnessed a meltdown of truly global proportions, we've been treated to more pictures of bedraggled London bankers clutching cardboard boxes than we have to any concrete analysis of how the events of past few days are perceived beyond the west.

On Wednesday last week, the Guardian featured a selection of quotes from prominent leftwingers on whether capitalism has had its day, a worthy contribution to the debate at a time when the Telegraph is heralding the end of the world as we know it and Times readers are quoting Marx on the newspaper's online message-boards. But although the demise of the free market may appear a somewhat jarring prospect over cornflakes in Kent, in many parts of the world the ideological spectrum of mainstream political and economic thinking extends far beyond blind faith in the markets – leaving those governments who have staked their credibility on IMF and World Bank-led neoliberal reforms vulnerable to social unrest.

One such country is Egypt, where the long process of reversing Nasser's socialist economic policies of the 1950s and 1960s that was begun under President Sadat and intensified by the current regime, has produced strong growth rates in recent years. However, these percentage points have come at the cost of destroying social welfare institutions and have fuelled spiralling inflation and unemployment. Despite the presence of an ostentatious middle-class enjoying the fruits of economic liberalisation, capitalism is not accepted as an inevitability by many on the ground facing bloodshed in the subsidised bread queues that have lengthened as the government's free-market programmes begin to bite. In this context, the latest round of financial chaos threatens to tip an already volatile political situation over the edge.

So how will chaos on Wall Street shape political and economic developments in the Arab world's largest country? I spoke to figures from across the political divide and asked them how they thought the financial meltdown would impact upon them and their country.

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Rania al-Malky, editor of the independent newspaper Daily News Egypt. The state-controlled press is being increasingly challenged by a new wave of independent media outlets which have been vociferous in their criticism of the government's economic policies:

The impact of the meltdown on Egypt may not be felt by the average Egyptian right now, but it will certainly take its toll within months, especially if the Egyptian pound continues its devaluation against the dollar. A lopsided foreign exchange rate is detrimental to an economy like Egypt, which is service-oriented rather than industry and production-based. Although our exports have increased significantly over the past two years, we still rely almost entirely on imports to support our industries and for agricultural staples like wheat. So with a weakening Egyptian pound, both prices and inflation are bound to keep shooting up, ultimately to the detriment of the struggling Egyptian masses.

Inflamed social sentiment against the ruling regime will naturally ensue, especially at a time when news of the corruption of businessmen and politicians is exposed daily in the media and displays of negligence and the utter lack of competence of bodies like the civil defence authority have revealed beyond a shadow of a doubt that the current administration is incapable of dealing with emergencies.

As for the effect of an economic recession on the opposition, we must distinguish between the generally impotent official opposition parties and the increasingly effective and powerful civil-society based movements that have been able to kick up a lot of dust to lobby for workers' rights and against rising prices. Any serious economic downturn in Egypt will boost the appeal of such grassroots movements and banned Islamist groups like the Muslim Brotherhood.

Hossam el-Hamalawy, a dissident blogger and member of the Egyptian Revolutionary Socialists. The web has become a vibrant outlet for many in Egypt for criticising government's policies and exposing economic corruption:

Neoliberal theorists and apologists have never been on the defensive as they are today. Economic crises have already hit several countries marked as distinguished 'reformers' by international financial institutions like the IMF and World Bank, whose victims were generally workers and the urban poor. Here in Egypt, our economy on paper is booming, with a 7.1% GDP growth rate, yet inflation has already hit 25% and basic commodities have either disappeared from the local market or increased over 50% in price. Two popular uprisings have already taken place this year and this is happening on the back of the biggest strike wave in the country since the end of the second world war. We know panic travels at the speed of light through stock markets, and of course Egypt will not be immune from an economic collapse in the west, because our economy is integrated into the global market and is subject to its fluctuations. I think we can also expect a significant drop in Egypt's tourism revenues, with less people in the US and elsewhere affording vacations.

Professor Abdelaziz EzzelArab, director of the Economic and Business History Research Centre at the American University in Cairo:

Capitalism has proven resilient and adaptable in its history of dealing with crises, and although it will not collapse overnight, it will gradually evolve into an increasingly regulated market and ultimately some form of market socialism. How will this be perceived by Egyptians? Probably with a shrug of the shoulder, if not with a sense of content. Two broad factors contributed in recent years to a dramatic reversal in the public mood towards capitalism, which followed the initial excitement surrounding the hesitant steps towards a free market taken from the late 1970s to the mid 1990s. One factor comes from abroad: the attitude, policies, and actions of the US which have earned it the popular image of an "evil empire". The other is domestic: the bitter record of the market in the past 17 years since the adoption of free market mechanisms through 'economic reform and structural adjustment policies'.

The outcome of the reforms was an unholy alliance of political and business magnates, to the benefit of a tiny clique that controls both domains to the detriment of the masses. The scandals, crimes, and failures in 2008 alone are too numerous to recount and have become common talk even among ruling party columnists. The nation's experience with the system is that it lacks compassion, a basic trait in Egypt's social fabric, and it thus becomes perceived negatively. When the system is severely shaken in its global centres, as is happening now, it will likely be seen as a deserved end for capitalism, in a way not dissimilar to the attitude towards the collapse of the USSR – perceived by the public as the expected end of a tyrannical model.

Recurrent scandals eradicated much of the regime's moral foundation in recent months. The current crisis of capitalism is untimely for the regime, inasmuch as it deprives it from the ideological underpinning of its present economic policies. The theoretical soundness of the adopted model is itself doubted and its dilemma is therefore deepened. It may be a ripe moment for the regime to realise the necessity of embracing recent calls for a new constituent assembly that would lay the grounds for an alternative order and a new constitution. But this presumes a sense of political far-sightedness that the regime has not so far displayed.

Dr Abdul Hamid al-Ghazali, consul to the supreme guide of the Muslim Brotherhood and professor of economics at Cairo University. Despite being officially outlawed, the Brotherhood is the strongest parliamentary opposition group to the ruling NDP and the most tightly-organised Islamist political force in Egypt. It has been criticised by other opposition movements for being supportive of free-market capitalism:

We are in a chaotic situation in Egypt by our own making. We are witnessing corruption scandals every day, all of which are symptoms of shocking economic management. Over and above, we now have this international economic chaos which is being reflected in our own financial markets. I don't think foreign investors will be deterred from putting money into our economy, but the foreign and domestic factors together do make the situation very dramatic at a time when the government is already very weak. It has no popular support, no strength, and for the regime this financial crisis is the beginning of the end.

The Muslim Brotherhood has been supportive of the free market and against monopolistic practices, and we continue to maintain that stance. The difference between our economic programme and that of the current regime is that we oppose the corruption and monopolising that has led to key strategic industries like oil and steel being destabilised. But free-market reforms, with strong government safeguards to prevent these kind of practices, remain Egypt's best hope for progress.

Although we have suffered a lot from this government's economic reforms I don't think the Egyptian people have lost faith in the free market altogether. A managed free market that serves the public and provides for fairness and security, instead of capitalism which serves the interests of the regime alone, this is what people want. The crisis gives the whole country an opportunity, a chance for a new constitution and a new choice of government through the ballot box.

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1 comment:

Nabeel said...

suggested credit crunch solution: read more of jack shenker's writing.
perhaps if the masters of the universe had displayed the sort of rationality that reading your fine prose encourages, we would not be in this disastrous mess