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Egypt's Economy and the Islamists

Given that the founder of the largest company in Egypt is a Coptic Christian, one might reasonably worry about what exactly this means.
Slate | 04.12.2011
The big thing to do today is to freak out over the social and geopolitical ramifications of strong electoral success for Islamist parties in Egypt. One point that tends to get lost in the shuffle of foreign policy commentary is that the fall of Mubarak and the Arab Spring in North Africa are substantially driven by economics. An authoritarian regime that delivers steadily rising living standards for the bulk of the population is going to find it relatively easy to silence dissident intellectuals and political activist. A regime that can't deliver the goods is vulnerable to mass protests. To give a broad overview of Egypt's problems, the countries of the developing world are now falling into roughly three groups. First, you have India and China who are driving global economic growth and whose rising middle classes and need for production inputs are increasing global demand for all kinds of primary commodities. Second, you have countries -- including much of Africa and Latin America -- who are growing rapidly by exporting primary commodities at new higher prices. Third, you have countries that aren't commodity exporters and that are growing slower than China/India so average people's incomes can't keep up with rising commodity prices. This is a dynamic I've called fall-behind immiseration and the biggest problem facing any new order in Egypt will be dealing with it, rather than with the various kinds of questions Americans are likely to be more interested in.

On the past couple of occasions when I'd had the opportunity to speak to Muslim Brotherhood officials from different Arab countries, I'd always been struck be the incredibly lack of policy thinking on these kind of banal issues of growth and economic management. Oftentimes you seem to see an assumption that there was no issue beyond the corruption of the incumbent rulers. But I looked at the election program of the Egyptian Brotherhood's Freedom and Justice Party last night and they do have a fair number of policy ideas. They're promising the introduction of progressive income taxation and higher pensions to ensure that incomes will be able to keep up with price inflation, both of which seem sensible but don't tackle the fundamental growth issue. The two big ideas they articulate about this are to tackle monopolies and a repeated pledge to try to achieve what is variously described as "self-sufficiency in strategic commodities, particularly of wheat and cotton" or "self-sufficiency in wheat and other essential crops" or "self-sufficiency in staple crops and livestock" or even "self-sufficiency in basic commodities such as wheat, sugar, oil, meat and cotton."

The monopolies thing sounds like a good idea, but given that the founder of the largest company in Egypt is a Coptic Christian and major figure in the largest non-Islamist political movement in the country one might reasonably worry about what exactly this means. The self-sufficiency stuff indicates that Freedom and Justice has correctly identified Egypt's main problem as increasingly unfavorable terms of trade in a resource-constrained world. But is self-sufficiency a realistic strategy? It might be if Egypt's food gap is caused by decades of corrupt mismanagement leading to devastatingly low agricultural yields. But on a per hectare basis, Egypt's cereal farming is already extraordinarily productive. According to World Bank data, only Mauritius, the Netherlands, and Belgium do better. Glance at map and you'll see that Egypt's agricultural productivitiy is much more typical of a rich developed country than of a poor or middle income one. Egypt is a huge wheat importer, but it's also a wheat-growing superstar:

Egypt's problem, obviously, is that the country is mostly a giant desert. Giant desert + long narrow strip of incredibly fertile land = cradle of civilization, but it's not a great long-term growth strategy. This problem hasn't escaped the attention of Egypt's rulers over the past few decades, and a lot of land reclamation has been done already. The problem is that this reclaimed land is of much lower quality than Egypt's core assets so the prospects for further improvement here aren't so great. The leading experts in this area, ironically, are the Israelis who are obviously unlikely to forge a more cooperative relationship with an Islamist new regime. But even beyond the politics, Israel's "make the desert bloom" initiative has actually been deeply problematic. That country's economic success has come from fostering a vibrant high-tech sector that more than compensates for its status as a net food importer.