Views expressed are those of the author and may not reflect the opinion of Egypt Business Directory.
Often when the theme of social justice is discussed, people unintentionally confuse it with the notion of social protection. The fact of the matter is that the latter concepts are distinctively dissimilar. Social protection denotes a direct government intervention to protect the most vulnerable groups in the society. This could take the form of cash transfers, unemployment benefits, child benefits, price subsidies for food and electricity, public works and pensions. The main aim of social protection programmes is to prevent those vulnerable groups from falling below a certain level of poverty. Astonishingly, Egypt spends over a quarter of its aggregate expenditure on social safety nets or what we can call social protection programmes. According to 2014/2015 budget plan, Egypt will spend nearly 275 billion of its 789 billion total expenditure on subsidies. The breakdown entails 100 billion on petroleum subsidies, 60 billion on pensions, 30 billion food subsidies, 27 billion electricity subsidies, 10 billion social security pension, students’ exemptions from public transportation fees, farmers’ subsidy and child benefits among many others. The government significantly raised its spending on those programmes as to alleviate the potential pain the poor would suffer from as a result of its intended tough austerity measures.
Despite their necessity, the extensive expenditure on social protection programmes will not achieve what Egyptians aspire to, that is social justice. Subsidies, debt relief and benefits are all weak and protective means and do not allow for the inclusion of poor people into the growth and development process. Social protection programmes focus primarily on easing consumption of basic goods for poor citizens. They are not meant to expand the production capabilities of people or enhancing their skills in order to utterly escape from the poverty trap. As noted earlier, social justice is a completely different concept than social protection. Notwithstanding the controversy around the exact meaning of social justice, I believe it is concerned more with empowering people rather than protecting them from the shocks of a failed economic system. Social justice is about fair opportunities in life, expansion of people’s capabilities, endowing people with the necessary skills in order to allow them to effectively utilize their talents and entrepreneurial minds, political freedom and is also about people feeling they are an active and important part of a society that respects them and does not undermine their dignity.
Thus, if we aspire social justice, we would devise strategies to lift millions of people out poverty for good rather than just protecting them from falling below unacceptable levels of poverty! In simple terms, we would be aiming that those vulnerable groups would one day be able to pay their own bills from the financial rewards of their employment. We would aim to convert those vulnerable groups to be a major productive force in the society. Thus, The design of the economic policy shall consider the ending of inter-generational poverty. Deprived people in both urban and rural Egypt are trapped into poverty just because their parents are poor. They neither have the financial resources to send their children to decent schools nor do they have the network that would allow their children to get a financially rewarding job. They generally lack the necessary skills to compete, as they do not have access to decent education, training and health care systems. This in turn prevents them from obtaining financially rewarding employment opportunities that would end their struggle and allow them to climb the social ladder. Hence, they usually end up working in the low-wage informal sector, primitive agriculture or the low-wage public sector.
The problem, however, is that the core structure of the Egyptian economy produces poverty over and over again and hence Egypt excessively spends on social protection programmes in a long inefficient and incompetent vicious cycle. It is no surprise that Egypt still generously (taking into account its low national income) spends on social protection programmes as to maintain the patriarchal structure of the economy, that is the government generously compensates the poor for their own poverty and also employs millions of Egyptians in its overstuffed and inefficient public sector with low wages. The core structure of the economy is heavily skewed towards the wealthy and systematically excludes the majority of Egyptians from the growth process itself. The provision of good education and training is only a monopoly for a few international schools and universities with exceptionally high tuition fees and beyond the financial ability of 90% of Egyptians. One could safely conclude the same with regards to the health sector. Obtaining a decent job in Egypt is still to a large extent subject to family networks and of course education, which is directly related to the social and financial status of the family.
The financial sector or the banking industry focuses mainly on giving out loans for big projects rather than lending money for micro, small and medium enterprises, which employ the majority of Egyptians. Furthermore, major profitable industries in Egypt are both energy and capital intensive such as iron and cement rather than manufacturing that entails a high element of labour such as textile industries. Those capital-intensive industries also benefit from low tax rates, energy subsidies, trade protection, cheap labour and cheap land. Thus, they make enormous profits not based on their technological innovations but rather on the benefits they receive from the governments relying on their strong ties with policy makers. An important study by Ishac Diwan, Philip Keefer, and Marc Schiffbauer concludes that the superior corporate performance of connected Egyptian firms before 2011 relative to non-connected firms is systematically related to their ability to capture policies such as trade protection, energy subsidies, and rule enforcement. They also find that the presence of more connected firms is associated with less firm entry, higher market concentration, and a higher skewness as well as dispersion in the firm size distribution, which severely harms SMEs growth and prospects for innovation and development.
Therefore, one could safely argue that what Egypt really needs is not maintaining acceptable levels of poverty. What Egypt needs is an effective policy that directly intervenes in the areas that create such massive distortions. Some social protection is always needed in this process, yet the focus shall be on empowerment and the inclusion of poor people in the development process itself. Increasing the expenditure on the quality of education and health sectors will always remain a pressing necessity. This can also be achieved through the corporation of the government with NGOs as to alleviate some of the burdens from the executive and hasten the process and results. Moreover, the government shall also intervene in the financial industry and create incentives for them to lend small producers and entrepreneurs. Existing social protection programmes shall also be modified and utilized as a developmental and productive tool rather than just for consumptions purposes. In other words, the likes of cash transfers for poorer families can be subject to sending their children to school or visiting the local health center at least once a month among many other ideas that could be implemented.
Photo 1 via Shutterstock.
Photo 2 via Hang Dinh / Shutterstock.com.