Egypt for Sale

A informative piece on Egypt by Barak Barfi in Project Syndicate.

  1. When Muhammad Ali defeated the British in 1807, Egypt became the first Arab country to gain de facto independence. But Ali’s grandson, Ismail, squandered that independence with profligate spending, establishing a dependency on external assistance that persists to this day.
  2. Egypt’s dependence on the British continued until Gamal Abdel-Nasser took power in 1952. He welcomed the Soviets, who provided sophisticated weapons in exchange for the same kinds of IOUs that doomed his predecessor. By the time Nasser died in 1970, the Soviet Navy had transformed the port of Alexandria into a virtual Soviet republic, with Russian spoken as a second language.
  3. Meanwhile, Nasser pursued costly populist economic policies. He expanded the bureaucracy by offering every college graduate a government sinecure; today, 24% of the workforce is employed by the state. He introduced subsidies for commodities, from bread to oil, that amounted to 8.1% of GDP in 2013-2014. In 2014-2015, 81% of the budget went to debt service, subsidies, and wages, crowding out education and other investments essential to long-term growth.
  4. Nasser’s successor, Anwar Sadat, attempted to revive Egypt by liberalizing the economy, making peace with Israel, and abandoning the alliance with the Soviets in favor of the US and Western Europe. He was rewarded with an aid package that averaged more than $2 billion per year. But, with Egypt’s population growing at an annual rate of 2.2%, even this was not enough
  5. Egyptians rarely hear about their country’s dire financial straits. Instead, the government-controlled press boasts about new bridges and increased industrial production, while highlighting Egypt’s role in regional affairs, such as the dormant Israeli-Palestinian peace process and the cobbling together of governments in Lebanon.
  6. Instead of delivering on these imperatives, Egyptian President Abdel Fattah el-Sisi has been forced to relinquish territory to the Saudis to secure the aid the country needs to stay afloat, facing considerable mockery in the process. In the zero-sum game that is Middle East politics, however, one party’s loss is another’s gain. And in the case of Egypt today, it is radical Islamists who are reaping the rewards of popular disillusionment with the government.
  7. The Islamists are offering their own narrative: The modern nation-state has failed Arabs and Muslims. This resonates with a population that is experiencing the state’s failure every day. Focusing on restoring past Islamic glory is becoming more appealing than resurrecting a regional power that could never even secure rights for Palestinians.
  8. Egypt’s leaders retain the legitimacy and strength needed to curtail this dangerous narrative. But, if they are to succeed, they will have to acknowledge what Egypt is – and what it is not. In a country where ancient artifacts are deeply cherished, the myth of regional greatness is one relic that should disappear soon.

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