Tag: egyptian revolution

Egypt’s Shambolic Constitutional Process

Don’t let yourself be fooled by the overwhelming approval of the new Egyptian constitution in the referendum held earlier this week. While, according to preliminary results, the vast majority of roughly 37 percent of Egyptians who showed up at the polls backed the proposal, very little about the document itself or about the process through which it has come about is consistent with the idea of liberal democracy and limited government. Yesterday’s Bloomberg View editorial summarizes all one needs to know about the new constitution:

The armed forces would for at least the next eight years be independent of civilian control, including over their budget, as they were under former President Hosni Mubarak, himself an air force commander. Military courts would remain autonomous and would have jurisdiction over civilians in many instances. The hated police would also get greater independence, while the Supreme Court would be able to decide its size and membership for itself.

Neither should there be any illusions about the events leading to the adoption of the document. The referendum followed months of a deliberate crackdown on the opposition and disbanding of the largest political force in the country – not to speak of the arrests of activists of the ‘no’ campaign.

In short, Egypt seems to be coming full circle to where it was before the events of the Arab Spring, particularly if General Abdel Fattah el-Sisi announces his candidature for the country’s highest office. The question is how long the Egyptians are willing to put up with it.

As a side note, the constitutional process in Tunisia looks much more encouraging, although as Emmanuel Martin and I argue here, the new constitution is unlikely to be a an impetus for the badly needed economic reforms.

Nothing New on the Egyptian Front?

Four months after the military takeover in Egypt, the country’s economy is still a train wreck. With growth well below government forecasts, the budget deficit in 2013/2014 may get to 15 percent of GDP, bringing Egypt into truly dangerous territory, unless the inflow of aid from the Gulf countries continues indefinitely. And instead of reforms, there are discussions of a new stimulus plan, worth $3.6 billion.

Nor are there many reasons for optimism in the political arena. Mohamed Morsi appeared in court on Monday, charged with inciting violence and murder. If convicted, he can face the death penalty. Unsurprisingly, the trial, alongside with the ongoing crackdown on the Muslim Brotherhood, has fostered further violent protests in Cairo.

However, if instead of following the news, one listened to U.S. officials, one could not avoid the impression that everything is going swimmingly. Today’s Washington Post has a brilliant editorial describing the state of denial in the administration:

Not surprisingly, a Freedom House report released Monday concludes that “there has been virtually no substantive progress toward democracy … since the July 3 coup,” despite the military regime’s supposed “road map.” But that’s not how Secretary of State John F. Kerry sees it. “The road map is being carried out to the best of our perception,” he pronounced during a quick trip to Cairo on Sunday. A liberal constitution and elections? “All of that is, in fact, moving down the road map in the direction that everybody has been hoping for.”

The Muslim Brotherhood’s Legacy: Controls, Shortages and Inflation

The Muslim Brotherhood and President Morsi never had a credible plan for the Egyptian economy. Indeed, I doubt that the Brotherhood’s leaders know the meaning of the word “plan”. Over the past year, economic conditions in Egypt have gone from bad to worse. And, it seems Morsi’s brief tenure as president will likely be remembered largely for its shameful economic record – one marred by a decline in GDP growth, a reduction in foreign reserves, and a sharp increase in unemployment.

 

Black markets have also been a hallmark of the Muslim Brotherhood’s economic legacy. Price and capital controls have caused shortages and a substantial slide in the value of the Egyptian pound. In consequence, Egyptians have watched inflation destroy their standard of living. Additionally, controls have delivered shortages of foreign exchange and many goods, like gasoline. In the face of the Brotherhood’s wrongheaded economic policies, official inflation and price statistics took leave of reality, and the black market quickly became a source of material support that the Muslim Brotherhood’s government could not provide.

 

Yes, as the accompanying charts illustrate, the story of a failing Egyptian economy is the story of a troubled Egyptian pound – and of the inflation troubles that accompanied it. Indeed, as of July 1, 2013 (shortly before before Morsi’s ouster), Egypt’s annual inflation rate was 27.1 percent.

 

 

 

These trends have proven fatal for Morsi and the Brotherhood. While Morsi’s final hours were filled by lectures on “constitutional legitimacy”, Egyptians weren’t listening – they were preoccupied with a plunging pound and an inflation rate that is over three times higher than the official rate. Morsi and the Muslim Brotherhood’s policies, of course, contributed mightily to the implosion of the Egyptian economy. In the final analysis, the Egyptian people have taught Morsi and the Muslim Brotherhood a harsh lesson: bread is more important than ideas.

Egypt: It’s the Economy, Stupid

As Egypt descends into violence, it is worth remembering that the origins of its current predicament are largely economic. The events of Arab Spring were as much about access to economic opportunity as they were about democratic governance. After all, Mohamed Bouazizi, the Tunisian fruit vendor whose death triggered the mass protests in the region, self-immolated after being constantly harassed, fined, and mistreated by police and local authorities, unable to find other source of employment than selling produce.

In Egypt, the popular support for last week’s military coup is related to the disenchantment with the previous government dominated by the Muslim Brotherhood’s Freedom and Justice Party, which failed to even begin to address the country’s economic problems: unsustainable public finances, rural poverty, and youth unemployment.

In June, the country’s foreign exchange reserves fell by $1.12 billion to $14.92 billion. The outflow is driven by the imports of subsidized commodities, most notably fuels. To avert insolvency, the government will have to put in place a credible reform program that will phase out subsidies – or perhaps replace them with a less wasteful and more targeted social assistance program. Subsidy reforms are tricky, both technically and politically, and the present political environment will make them more, not less, difficult.

The current political uncertainty also adds to a long list of institutional deficiencies that make Egypt a tough place to do business. Many of these can be addressed aggressive reforms expanding economic freedom. Many low- and mid-income countries, including Rwanda, Botswana, Mauritius, or Thailand, have made rapid progress in cutting red tape and scrapping unnecessary regulation, with remarkable economic results. Can Egyptians generals follow their example?

The future of Egypt hinges on whether its new leadership – regardless of whether it is chosen democratically or not – will be able to make rapid and sustainable progress in reducing public debt, restoring the rule of law, and improving the business environment. While one hopes for the best, there are reasons to be wary – not only are the country’s economic problems growing more severe every day, but also the divisive authoritarian politics and the rise of violence are hardly conducive to clear-headed economic reforms.

Egypt’s Transition: The Generals Take Over

Following its 48-hour ultimatum, it is expected that the Egyptian military will proceed any moment with its plan to suspend the constitution, dissolve the parliament, and put in place an interim caretaker government. The reported travel ban imposed on President Mohamed Morsi and other Muslim Brotherhood officials seems only a first step.

President Morsi has been a bad leader and it will be heartening to see him go. Still, even if the transfer of power is peaceful, the military solution is a bad one. One hopes that the events lead U.S. policymakers to reconsider their commitment to Egypt’s military–after all,  American military aid, currently amounting to about $1.3 billion annually, has propped-up the growth of Egypt’s bloated military complex, which might currently control up to 40 percent of the country’s economy.

Most importantly, the military acting as a deus ex machina whenever things take a bad turn sets a terrible precedent for the future of the Egyptian democracy. To whom will the future democratically elected leaders of the country be accountable–voters or the generals?

And even if it is only temporary, a rule by the military–or rule by an interim caretaking government–will inexorably lead to reform paralysis. For months after February 2011, the Supreme Council of the Armed Forces (SCAF) was effectively running the country, without any remotely impressive results. The country is in a dire economic situation, requiring an urgent fiscal adjustment and deep structural reforms. Neither the military nor the interim government will have the mandate to pursue such reforms. Even if adopted, economic measures introduced without a popular mandate will be easily reversible.

While unsavory and inept, the presidency of Mr. Morsi and the government of Prime Minister Hisham Qandil had at least some claim to democratic legitimacy. An overhaul of the country’s constitutional order–which is what the military is effectively doing–means a return to the situation two years ago. A continuation of the constitutional status quo, however unsatisfying but perfectible through the democratic process, is almost certainly preferable to yet another convoluted discussion about the country’s constitution under the auspices of an opaque military.

A general lesson from post-communist transitions is that countries in which the political elites were able to make credible commitments to pro-market reforms and limited government early-on fared much better than those that became trapped in protracted power struggles. Egypt now risks ending up in the latter category.

It is a disappointment that Egypt’s political crisis is unlikely to result in a cross-party agreement to shorten Mr. Morsi’s mandate, bring forward the presidential and Shura elections, and set a firm date for the election to the Lower House. A second big-bang political and constitutional change since 2011, overseen by the SCAF, heralds prolonged instability and government dysfunction. It is unlikely that the Egyptians can afford it.

Whither Egypt?

On Sunday, one year since President Morsi’s arrival in office, Egypt saw what might have been the largest protests in the history of the country. The anti-Morsi ‘Rebel’ campaign claims they have collected over 22 million signatures asking for his departure, and they are asking the Egyptian head of state to resign by 5 p.m. tomorrow.

The current events were predictable. There was a long build-up of popular dissatisfaction with the direction Mr. Morsi and his Freedom and Justice Party (FJP) had taken the country. Little has been done to reduce the deficit, restore robust growth and tackle the country’s debilitating subsidy problem. To the extent to which the events of the Arab Spring were driven by people’s desire to access economic opportunity, Mr. Morsi’s presidency has been a lost year.

Politically, Mr. Morsi’s presidency has been marked with a disdain for civil society, and few signs of a genuine commitment to limited, constitutional, and democratic political order. So is it time for Mr. Morsi to go, as many in Egypt seem to believe?

Though we may agree that Mr. Morsi is an inept leader, what are the alternatives to the continuation of his presidency? Given the severity of the country’s economic problems, and the existing political uncertainty, a protracted transition – with a likely involvement of the Supreme Council of the Armed Forces – might be even worse than the status quo. The journalist Farah H. Hope, who runs the blog Rebel Economy, says:

While politically his exit may be required by the millions who want him out, economically, the last thing Egypt needs is another period of chaos, uncertainty and confusion. Investors and Egyptians alike are looking for rule of law and order, not another limbo period.

However that may be, Mr. Morsi’s political mandate is tenuous. If he goes, it is imperative that the transition is orderly and planned. Setting a firm early date of the parliamentary election – which has already been postponed – would be a good place to start, accompanied by a broad agreement to shorten Mr. Morsi’s presidency and convene an early presidential election.

Although it looks like Egypt is quickly running out of good options, it may well be that the current unrest is exactly the impetus needed for political elites to start addressing the country’s economic problems. The sooner we see credible reformers fixing the country’s public finance problem and removing barriers to trade, entrepreneurship and innovation, the better.

Is Egypt Molded in Pakistan’s Image?

Last year, in a piece for AOL News titled “Will Egypt Follow Pakistan’s Troubled Path?” I warned that U.S. policymakers must be careful of whatever government follows ousted Egyptian strongman Hosni Mubarak by not repeating the mistake of giving lavish material support to a distasteful regime, as America did with Pakistan’s General-President, Pervez Musharraf. I had argued that the ample generosity of American taxpayers—in the form of lavish military and economic aid—to a foreign dictator’s all-powerful military hardly produces the desired outcomes, and results in a military that is further entrenched and able to ignore the popular demands of its people.

Sadly, that scenario is playing out in Egypt. An editorial in today’s Wall Street Journal picks up on my point from last year, stating, “the result may be a state that is less an Islamist-tinged democracy a la Turkey and more a military-Islamist condominium akin to unstable Pakistan.”

Indeed. The political turmoil in Egypt took yet another disappointing turn yesterday when its Islamist president, Mohamed Morsi, decreed that the military will assume responsibility for security during the country’s constitutional referendum, to take place on December 15. Amid protests against the referendum on a constitution hurried through an Islamist-dominated assembly, Morsi made his decrees immune from judicial review and gave the military the power to arrest civilians. As the Journal explains, the Egyptian military is the most powerful institution in the country and has its own reasons—such as maintaining de facto control over much of the economy—for keeping the status quo.

As for America’s role in this unfolding controversy, the Washington Post’s David Ignatius writes today:

The [Obama] administration’s rejoinder is that this isn’t about America. Egyptians and other Arabs are writing their history now, and they will have to live with the consequences…[B]ut it’s crazy for Washington to appear to take sides against those who want a liberal, tolerant Egypt and for those who favor sharia. Somehow, that’s where the administration has ended up.

Oddly enough, as Ignatius suggests, claiming that “this isn’t about America” is disingenuous. After all, America’s Egypt policy continues to tip the scale on both sides: it backs Egypt’s liberal protesters and the authoritarian government that oppresses them. The world is standing witness to a head-on collision between the Bush freedom agenda and the Cold War relic of U.S. grand strategy in the Middle East, as foreign policy planners in Washington pay lip service to principles of self-determination and political emancipation while simultaneously assisting authoritarian leaders who suppress the popular demands of their people.

In the end, while what is happening in Egypt is unfortunate, come what may. The best way to discredit Islamists is to let their record speak for itself. Egypt’s new Muslim Brotherhood President should be allowed to fail on his own terms. The Egyptian people voted to bring Islamists to power and it was their prerogative to do so. If Washington truly wants to leave Cairo’s future “to the Egyptian people,” then it should do so by phasing out aid to Egypt completely.