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Egypt’s Free Economy Excludes the Poor

By Bisan Kassab | Al Akhbar | January 25, 2013

Egypt’s 25 January Revolution produced few economic benefits for the country’s poor even though they were instrumental in overthrowing the old order. The Muslim Brotherhood has other economic priorities, including pushing measures that further economic liberalization in Egypt.

Given the Egyptian media’s focus, it might be difficult to believe that Egypt’s 25 January 2011 Revolution was not one of the educated middle class. On the TV screen, these shiny young faces appear on talk shows, portrayed as the leaders of the revolution.

But 28 January 2011’s “Friday of Anger” belonged to the marginalized who – using the tricks they learned in their daily battles with the state apparatus in the slums – were able to defeat the police forces. Regardless, the media see the revolution differently: “This is the revolution of dignity and not of the hungry,” they say.

This discourse paved the way for state repression of social demands. It even reached a point where the media began depicting Egypt’s working class – those that bolstered the revolution’s ranks with its mass mobilizations – of deliberately aiding the counter-revolution through strikes that hurt the economy. The first law issued by the Supreme Council of the Armed Forces (SCAF) following their rise to power banned strikes.

As time passed, the voices of social justice were replaced by the murmurings of political battles. These politicians, who have the upper hand in the media, wanted a piece of the revolutionary pie after disregarding its true heros.

Post-Revolution, Little Help for the Poor

Even before the revolution, experts close to the ruling National Democratic Party saw signs of unrest rooted in growing poverty. This was clear in the First Investment Report: Towards a Fair Distribution of the Fruits of Growth prepared by the General Investment Authority in 2009, which warned of sharply rising poverty rates.

Despite the steady economic growth in the last decade of Mubarak’s rule, the proportion of the population living below the national poverty line rose from almost 17 percent of the population in 2000 to 22 percent in 2008, according to the latest figures available from the World Bank.

Nevertheless, when SCAF took power after the fall of Mubarak, they ignored these facts and rejected the expansionary budget presented by Minister of Finance and prominent NDP member Samir Radwan. Instead, the first post-revolution budget was austere: workforce training funds were scaled back to 1 billion Egyptian Pounds ($151 million) from an original 2 billion, and funds for low-income housing were never raised by the expected EGP500 million ($75 million).

Furthermore, SCAF sought to protect the rich from any burdens, such as the tax increase proposed by Radwan on the distribution of capital gains by financial institutions.

Although the last days of SCAF’s rule witnessed an open struggle between the military class and Islamist forces, the conflict was not an indication of different economic policies. “The Islamist parties, which between them won a majority in the 2011-12 parliamentary election appear to favor the continuation of a broadly pro-market policy…” explained an April 2012 report from Chatham House titled “‘Bread, Dignity and Social Justice’: The Political Economy of Egypt’s Transition.”

The new Egyptian Constitution is a glaring example of the bias of the Muslim Brotherhood (MB) towards market liberalization. It stipulated linking salaries with production for the first time and neglected to set a ceiling for agricultural property.

But the constitution aligns with the Brotherhood’s previous positions: the group had been the primary opponent of agrarian reform during the Nasser era and endorsed a 1992 act liberating the relationship between landlord and tenant on agricultural land. The act had abolished gains won by peasants and was faced with wide-scale opposition in 1997.

The knockout blow to the MB’s popularity might be their attempt to implement a package of reforms for tax laws, which was frozen by President Mohamed Mursi a few hours after being announced. It would’ve raised sales taxes on several cement and communications goods and led to a steep increase on the commercial advertising tax – a move that could have hiked up the sales prices of nearly all goods and services.

It seems the MB has learned a lesson from the bread uprising against President Anwar Sadat in January 1977. At the time, the MB magazine al-Daawa described the protests as a “communist conspiracy.”

While the revolution seems to have resulted – at the very least – in a minimum wage increase to EGP700 ($105), the collapse of the Egyptian Pound against the US dollar this past January has precluded any benefits from such a raise.

January 25, 2013 - Posted by aletho | Economics, Timeless or most popular | 2011 Egyptian revolution, Chatham House, Egypt, Muslim Brotherhood, National Democratic Party, Samir Radwan, Supreme Council of the Armed Forces