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Sunday, February 13, 2011

Curb your enthusiasm for reform in Egypt

David Frum warns that we should not get too far ahead of ourselves in enthusiasm for Egyptian reform.
Mubarak fell because he could not deliver prosperity to his people. Half the population of Egypt lives on $2 a day or less. Millions of Egyptians depend on state-subsidized bread. When Hosni Mubarak took power in 1981, the average Egyptian was 2.5 times richer than the average Chinese citizen. Today, the average Chinese is 50% richer than the average Egyptian.

Egypt has the largest population of unemployed university graduates in the Middle East. It is the world’s largest importer of grain: Sixty percent of the grain eaten in Egypt is purchased abroad, and at prices that have risen sharply since 2005.

Egypt has lost the ability to feed itself in large part because the population has doubled since Mubarak took power in 1981 — and quadrupled since 1950. Displaced peasants move to urban slums: Cairo’s population is estimated at some 17 million.

Disappointed by meager opportunities, these new city-dwellers turn for consolation to more intense forms of religion, which promise that Islamic government can deliver social justice. If Egypt’s new government does not deliver quick results, that Islamic message will gain appeal.

I agree with the analysts who say that Mubarak’s long hold on power strengthened the Islamists. Gradual democratization will stabilize Egypt. But of all transitions, gradual democratization is the most difficult to manage.

To hold power, Egypt’s new democratizing government must do what Mubarak did not do: deliver quick economic benefits while accelerating long-term growth. Unfortunately, those two goals radically conflict with each other.

Egypt is a heavily state-directed economy, led by inefficient state-owned industries, overseen by a bloated bureaucracy. Long-term growth demands that bureaucracy shrink and that industry be privatized. In the short run, however, those two economic reforms imply higher unemployment, especially for the university-educated.

Unemployment will bring discontent — and in a more democratic Egypt, governments will be less able than Mubarak’s police state to survive the protests of the discontented. Those rejoicing over the changes in Egypt should remember that other revolutions have inspired similar hopes. And they should remember what became of those hopes within a very few short months and years.
Read it all.

For Israel, the bottom line is that given the rampant anti-Semitism in the Arab and Muslim world, the odds are high that this 'reform' will be bad news for us. While I still hope and pray that whatever peace there is between us and Egypt will remain intact, contrary to what some of you thought based on the post linked above, I acknowledge the reality that the little bit of peace that exists between us is very much in danger of collapsing.

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At 6:24 PM, Blogger NormanF said...

Carl - the problem as Barry Rubin observed, is that rational policymakers in Cairo should be creating millions of low paying jobs for young people and letting the market set prices. The problem of course is if they do that, there'll be riots in the streets and the politically safe thing to do - even if its an economically counterproductive one, is to subsidize the economy and keep food prices and rents low.

Even if that doesn't lead to the real long term economic growth Egypt needs to provide jobs to the young and grow the standard of living in its economy. Given that reality, no one really expects real reform to happen in Egypt in the foreseeable future.


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