Egypt hasn’t had it easy. After years of British colonialism, then decades of regime rule, a revolution that is seen as a key factor in the greater Arab spring protests, and a recent overthrow of the democratically elected government, Egypt is still trying to establish itself as a key player in the Middle East North Africa (MENA) region. As talked about in previous blogs, Egypt is slogging behind with the lack of government focus on investing in education, the continuance of the misallocation of economic resources, as well as the mismanagement of natural resources, are only leading Egypt away from political and economic stability. What about Egypt’s history has stifled its economic development?
Postcolonial attitudes in Egypt and throughout the MENA region have driven countries to attempt to reverse all colonial “damages” by focusing on utilizing human and material resources putting much of the power in the government and military.
Egypt practiced “State Capitalism” which focused on strengthening the private sector through providing
- Roads, railroads, ports, electrical power
- Raw materials (coal, oil) and manufactured goods (iron, aluminum,chemicals, synthetic fibers) through its industries and mines
- Credit and protective legislation–Safety net by taking over failed businesses (1)
This was the main process for accumulating resources and government leading economic growth within Egypt in 1974 till present day. The goal was to provide the private sector with the tools to build while still maintaining control of most resources and how they were allocated. There was a desire to redistribute wealth, educate youth, build cities, increase defense spending, and focus on Egyptian or in-country business rather than international trading.
So what was wrong with the idea of this radical transformation of Arab socialism? Isn’t redistributing wealth to help curb or eliminate income inequality and government involvement in the economy to help monitor the private sector a great idea?
The answer is that Arab Socialism and State Capitalism were great theories with aims to distance the culture away from colonialism and into modernization, but in reality unless the state could anticipate ALL of the economic variables and how they played out, this practices did nothing but hurt the economy.
President Gamal Abdel Massar led this Era which was from about (1952-1970). The Revolutionary Command Council (RCC) which Nasser led took charge of the country’s affairs. The military officers who overthrew the government did not have a ready-made set of policies or programs nor did they have a political base or much knowledge to operate from. They had to create these as they proceeded to govern the country, which is a characteristic that still dominates Egypt’s government.
The RCC made the following goals in attempt to completely restructure Egypt’s institutions post World-Ward II. (2)
- End imperialism and its agents
- End feudalism
- End monopoly and capitalistic control
- Establish a powerful army
- Establish social justice
- Establish sound democracy
“While succeeding in bringing in major changes, the regime ran into severe difficulties in terms of resource availability and had to change course towards its end.Nasser came to power in the post-colonial period when many newly independent countries launched a program of Import Substitution Industrialization (ISI) and massive expansion of the public sector. This was the era of massive industrialization through rapid public sector expansion. Instead of allowing a system of competing political parties to develop, Nasser expanded his political base by expanding the role of the state and brought in different groups into its umbrella. While retaining the private sector, Nasser launched a program of mass nationalization and expanded the role of the state in the economy. What he envisaged was “a kind of humanitarian socialist order in which all the major means of production were owned or controlled by the state” (2).
However in reality, “This system ran into serious difficulties within a few years. While consumption continued to rise, domestic savings and investment failed to materialize, leading to a huge fiscal gap. To cover the gap, the state had to resort to massive external borrowing. On top of that, with poor export performance and unrelenting rise in imports, a severe balance of payments crisis also developed” (2).
Egypt’s government did not get better with Anwar Sadat who took over after Nassar’s death. He pledged to keep the same socialistic policies, but in reality, he created policies that weren’t successful or peaceful. Mubarak didn’t do any better, and the restriction of beliefs and tightening of freedom took Egypt’s progression and pushed it backward leading to more income inequality than during the British colonial era. (4)
- (1) In-class lectures/power point slides.
- (2) http://www.ijhssnet.com/journals/Vol_3_No_10_Special_Issue_May_2013/3.pd
- (3) Richards, Alan, John Waterbury, Ishac Diwan, and Melani Cammett. A Political Economy of the Middle East. Boulder: Westview, 2015. Print
- (4) Cooper, Mark N. 1982. The Transformation of Egypt. London: Croom Helm.