Over the past decades, the US and EU have been investing in the economic reforms in Egypt, while showing less commitment to promoting political liberalization, believing wrongly that economic reforms would eventually pave the way for political reforms. From the 1970s onward, The United States have been offering tens of billions of dollars in military and economic aid, pursuing thus economic reform in Egypt. But to what extent do recent events in Egypt invalidate this logic of prioritizing economic over political reforms?
In their article “Egypt: How a Lack of Political Reform Undermined Economic Reform” published by Carnegie Endowment for International Peace, Michele Dunne and Mara Revkin state that not only the Egyptian uprising has turned the logic of prioritizing economic over political reforms on its head, but also discredited the economic reform program that former President Mubarak undertook with the approval of the US and international financial institutions.
In response to Finance Minister Samir Radwan who reassured on February 22nd that the transitional government would not retreat from economic reform or change the basic economic philosophy pursued by Mubarak since 2004, Dunne and Revkin confirm the difficulty of changing the political system in Egypt while preserving the old regime’s economic orientation despite the latter being a bright spot in Mubarak’s policy.
One cannot but notice the impact of the uprising on the Egyptian economy. Over the past weeks, “Egyptians have demonstrated their fierce determination to dismantle the old regime and everything associated with it, including neoliberal economic reforms”. Dunne and Revkin expressed their concern about emerging economic populism as a compelling alternative to the neoliberal policies associated with the old regime. “Deteriorating economic conditions will make it difficult for Egypt’s new leadership to resist populist tendencies. The protestors may have left Tahrir Square, but Egypt’s economy is still reeling under the strain of paralyzing labor strikes, a frozen financial market, capital flight, and rising food prices”. According to foreign ministry officials, the total economic losses incurred by Egypt since the start of demonstrations on January 25 is over 15 billion USD.
The public demand for relief is not the only factor, according to Dunne and Revkin, pushing Egypt’s leadership toward economic populism. In their article, they discuss the financial interest of the Egyptian army in promoting a regression back to the state-controlled economic model that prevailed under Nasser’s rule; being the proprietor of a vast business empire over the public and private sectors and the provider of tax-free manufactured goods and services.
“What Egypt needs now is a new blueprint for sustainable development, including policies to address structural inequality and sweeping reforms to resuscitate a floundering educational system that has failed to prepare Egypt’s youth for an increasingly competitive labor market”.
Dunne and Revkin finish their article by urging the US officials to apply a lesson from Egypt to their dealings with other governments in the region, “economic reform programs may not be sustainable unless they are accompanied by parallel improvements in political conditions and the rule of law”.