The effect of the Washington Consensus on Egypt was disastrous, to say the least. The neo-liberalistic policies proposed by the West to bring economic prosperity to the country only backfired and may have contributed to Egypt’s Arab spring as well as the current political instability that marks the nation. However, Egypt was previously thought of as a Washington Consensus/neoliberalism model for other countries to emulate as it has continually received financials support from Western Donors under the government of President Mubarak. It was labeled a “world’s top reformer” by the World Bank for four consecutive years. (1) “The US Government alone has distributed close to 114 billion USD in economic and military aid to Egypt for its geo-strategic importance and regional influence, much of which has been predicated on the implementation of neoliberal reforms.” (2) (3)
Why then did the Washington Consensus ruin Egypt?
The basic concept of the Washington Consensus, a term originated by John Williamson in the 1990’s, states that “markets promote growth better than states. For countries enshrined in fiscal imbalances generated by ISI policies and international shocks of the 190’s, the view was that stabilization had t0 precede and then be followed by structural adjustment or microeconomic change.” (4)
These policies focused on such things as:
- Fiscal discipline
- Tax Reform
- Unified and Competitive exchange rates
- Tade Liberalization
The Washington Consensus included many more policies that limited government intervention within the economy and promoted free trade, privatization, and deregulation the most thus pushed for market inspired growth rather than top-down, government policies.
Sounds good, right? Get the government out of the economy! But that thinking is wrong as neoliberal policy often provides and an inadequate understanding of the needs of the nation, and doesn’t address the reasons as to why there are civil unrest and social problems within a developing country. Neoliberal policies work for some, but definitely weren’t a right fit for Egypt.
Between 1980 and 2010 the Egyptian elite successfully implemented neoliberal economic policies while retaining political control through the exploitation of middle and working class citizens, thus widening the inequality gap between the classes class. This enabled the Egyptian elite to implement a form of crony capitalism through directing state resources into the hands of a few at the expense of the many. (5) When people realized they were getting ripped off, they got angry, thus leading to the Arab Spring ignited by Tunisia who experienced a similar class-class stemming from neo-liberal policies as well.
As stated in the first post on this blog, many view Egypt’s revolution as a country fighting for political freedoms, but in reality, the problems that sparked the revolution that Egyptians were enraged by were economic ones.
(1) “Most Improved in Doing Business 2010,” World Bank Group
(2) Huffington Post, (2013), “After $300 Billion in US Aid to The Middle East, Still No Stability,” Huffington Post
(3) Sharp, J. (2014), “Egypt: Background and U.S. Relations,” Congressional Research Service
(4) Richards, Alan, John Waterbury, Ishac Diwan, and Melani Cammett. A Political Economy of the Middle East. Boulder: Westview, 2015. Print
(5) Bogaert, K., (2013), “Contextualizing the Arab Revolts: The Politics behind Three Decades of Neoliberalism in the Arab World,” Middle East Critique, Vol. 22, No. 3, p. 213-234.