by Vali Nasr
Mubarak grudgingly embraced reforms, but they only accentuated Egypt’s problems and exposed its vulnerabilities.17 An unjust, unfree, and corrupt regime is always at its weakest when it begins trying to improve. The fall of Mubarak brings to mind Alexis de Tocqueville’s explanation of the ferment that led to the French Revolution:
Only consummate statecraft can enable a King to save his throne when after a long spell of oppressive rule he sets to improving the lot of his subjects. Patiently endured so long as it seemed beyond redress, a grievance comes to appear intolerable once the possibility of removing it comes to men’s minds … people may suffer less, but their sensibility is exacerbated.18
We should expect authoritarian regimes to go. They cannot survive without changing, and if they change they could fall even more quickly. In the long run it is better to wean ourselves of our dependence on authoritarians and to anchor our interests in democracy instead. But that is a gradual process—and for now America’s policies seem to be divided on this issue. On the one hand, we cheered the downfall of dictators such as Ben Ali, Mubarak, and Gaddafi; on the other hand, we now rely even more heavily than before on our old authoritarian allies, the Persian Gulf monarchs.
The handling of Egypt revealed Obama’s lack of any game plan for Egypt or the region. Tunisia had been transitioning fairly smoothly, so why would Egypt not do so as well? Why not, in other words, just go with the flow? Tunisia had managed a rapid and painless end to dictatorship—the Tunisian army had wisely refused to fire on citizens or meddle much in politics at all, and Ben Ali was allowed to flee to Saudi Arabia. The administration assumed that Egypt—a larger, poorer, tenser, and less Westernized place than Tunisia—would somehow produce a similarly neat and satisfying outcome. Comparisons then abounded in Washington between what was happening in Tahrir Square and the fall of the Berlin Wall in 1989. Obama’s coterie was afraid that unless he pushed Mubarak out, Obama would be caught on the wrong side of history. But the problem was that the administration had no plans for how to manage the messy process of democracy building that was to follow when Obama called on Mubarak to leave. Nor did Obama ever intend to take ownership of the change as had George H. W. Bush with regard to post-communist Eastern Europe in 1989. The administration’s enthusiasm for democracy remained largely a matter of rhetoric.
What sort of strategy are we following when we aggressively push for democracy in Egypt while we double down on support for the region’s stubbornly antidemocratic yet none-too-stable royal regimes? If we think that the protesters in Tahrir Square were on the right side of history, then why cozy up to monarchies that will be washed away by it? If we don’t think the region is in the throes of historic change, why embrace the Arab Spring at all? Our zigzagging policy is confusing and unconvincing.
The administration was happy when the Egyptian military accepted the results of the first parliamentary elections (held in stages from November 2011 to January 2012) and allowed the Muslim Brotherhood to take power.19 The White House thought that letting the Brotherhood experiment with governance—even if there was a danger that it might impose Islamic rule on a quarter of the people in the Arab world—would be less damaging to American interests than suppressing the election result. Short-circuiting the voters’ verdict, the administration feared, might lead to an even worse Egyptian reprise of the bloody, decade-long civil war that broke out in Algeria in 1991 after the generals there shut down an electoral process that the local Islamists were winning.20
The administration was also hoping that Egypt’s Muslim Brothers would take a page from Turkey’s experience and worry less about Islamist ideology than about improving governance and fixing the economy. American envoys met with Brotherhood members, and the White House even hosted a delegation from the group in April 2012 to discuss economic and political issues and future U.S.-Egyptian ties. “They all had PhDs from American universities, and said all the right things,” according to one person who attended the meetings. “It was easy to feel optimistic, but who knows.” Placing a bet that pragmatism would outweigh ideology was a gamble, but it was the right one at the time, and letting democracy take its course regardless of which political or religious force came out on top sounded like prudent policy. It put America on the right side of history and in tune with the public mood in Egypt and the Arab world. But it would not be long before doubt set in, first when Egypt’s new Muslim Brother president, Mohammad Morsi, went to Tehran on a state visit in September 2012, and then, shortly after, when he dragged his feet condemning an anti-American mob attacking the American embassy.
But there was nothing approximating a strategy here. The laissez-faire method was not a reflection of any carefully thought-out approach to improving democratic prospects in the region. Instead, it was an expression of the attitude of detachment from the Middle East that pervaded the White House. It was the right policy for a president who did not want to get any more involved than he absolutely had to with the problems of Egypt and the Middle East. Any other approach would have meant coming up with a strategy and a plan for implementing it. The detachment would be clear when it came to grappling with economic reform, without which democracy would remain stillborn, and the political stasis that would follow, combined with economic stagnation, could hand over the future to anti-American religious extremists.
The collapse of Mubarak’s regime was nothing short of an earthquake in Middle Eastern politics, a significant historical development with far-ranging regional implications—or so was the consensus high and low in Washington. Egypt was going the way of Poland, the Philippines, Brazil, or South Africa—a key regional power turning toward democracy and pulling the rest of the neighborhood along with it. The democratic wave had at last made landfall on Middle Eastern shores.
If the Arab Spring were to bear fruit, America would have to get involved diplomatically and, more importantly, economically. American engagement had been vital to the success of previous democracy waves in Asia, Eastern Europe, and Latin America.21 In those places, America had led international efforts to anchor burgeoning democracies in the closest alliances with the West that could be managed (the promise of NATO and then EU membership had served as a useful magnet for Eastern Europe). We influenced political discussions and helped with the work of writing constitutions, forming parties, holding elections, and stabilizing young democratic governments.22 It is arguable that the Arabs would not welcome so much close engagement, but in any case we had no intention of offering it.
Of most crucial importance in the previous waves had been U.S. efforts to work in concert with Europe, international financial institutions, and private enterprise to pour vast economic resources into the new democracies. The idea had been to give promising political developments a sound basis in economic restructuring and greater engagement with the global economy. Over a ten-year period between 1989 and 1999, the West directed more than $100 billion to Eastern Europe alone.
During that time period the relevance of economic reform to successful democratization was captured in the so-called Washington consensus, an agreement among international financial institutions and world powers, led by the United States, to push for a regimen of reforms that would change the structure of economies, societies, and, hence, politics. That consensus has come under much criticism for its excesses, and the pain that many countries had to endure as a result. But it offered the benefit of clear direction to the international community and countries facing change—a sense of where they all wanted to go and how they would get there.
Democracy and stability in the Middle East need the same kind of direction, and a similar level of investment. Without economic change, democratic stirrings would not stand a chance. None of the democracy waves comparable to the Arab Spring succeeded without economic reform. Recall that it was stagnant economic growth, chronic mass unemployment, and the resulting despair that fueled protest against sclerotic Arab dictatorships in the first place.23 And America had blamed 9/11 on the same lack of opportunity and e
conomic stagnation.24 Yet now that economic frustration was creating an opening for democracy rather than recruiting foot soldiers for Islamic extremism, Western support was nowhere to be found.
Nowhere was this Western insouciance more evident than in Egypt. None disputed that Arab democracy would be won or lost in Egypt. This is the most populous and, intellectually and politically, the most influential Arab country. The outcome in Egypt would decide whether the original message of the Arab Spring would take hold or be swallowed up in power games waged between military establishments and Islamist movements.
Egypt had started a tentative economic reform process during the last decade of Mubarak’s rule.25 Those reforms were in large measure responsible for the emergence of protests—some 4,000 labor strikes and protests between 1998 and 2011.26 The reforms removed the safety net for workers but expanded the private sector and the middle class, who, like middle classes everywhere, clamored for greater freedoms. Middle-class Egyptians were the first in the country to embrace the Tunisian example, organizing anti-Mubarak demonstrations that drew huge numbers of the frustrated poor who blamed the elderly longtime president for the jobs and social services lost to economic reform.
Mubarak’s reforms had not gone far enough by the time protesters occupied Tahrir Square in January 2011, and whatever gains they had made were washed away by the economic impact of the protests, Mubarak’s fall, and the instability that followed. Political upheaval plunged Egypt’s economy into crisis. In the first year after Mubarak stepped down, the country’s economy contracted by 0.8 percent,27 its GDP falling by 4 percent and manufacturing by 12 percent. The economy lost a million jobs; unemployment rose to 15 percent (25 percent for young people).28 Investment fell by 26 percent, with foreign investment dropping off the table ($6.4 billion in 2010, but only $500 million in 2011).29 The drastic drop in domestic and foreign investment presented the government with a gaping hole of $11 billion in its financing in the second half of 2011.30 International arrivals have nearly halved—a grave problem when, like Egypt, 11 percent of your GDP comes from tourism. Not surprisingly, the government’s budget shortfall ballooned, to $11 billion (10 percent of GDP, the largest in the Arab world). Combined with capital flight, which continues unabated thanks to persistent political instability, this has caused a sharp fall in foreign reserves from a high of $43 billion to $15 billion.31 Given that two out of every five Egyptians live on less than $2 a day, the impact of such jolts has been profound.
It gets worse: Half of Egypt’s 83 million people are under the age of 24. Among the country’s unemployed, as many as 90 percent are young and two-thirds have never worked. The government is hopelessly bloated and corrupt—for every one government employee per capita in Turkey there are eleven in Egypt, where do-nothing state jobs have long served as a thinly veiled form of welfare. The woeful educational system turns out a workforce of graduates who are not competitive in today’s global economy.
Egypt faces a vortex of poverty and instability unless it fixes its economy and finds jobs for its rapidly growing population. To keep up with the youth bulge, the economy must grow faster (in the range of 10 to 11 percent a year) and for much longer than perhaps has been seen anywhere in the world. (Actual growth in 2012 is expected to be 1.5 percent.)32 Failing that, Egypt could face social misery, and worse, radicalism. If the past is any guide, falling wages, downward mobility, and growing inequality are drivers of Islamic activism.33 The deadly attacks on American diplomats in Egypt, Libya, Tunisia, and Yemen by anti-American mobs in September 2012 are just a preview of the kind of radicalism that could take hold of the region if economic stagnation and social misery are to be the lot of its people. Between 1974 and 1984, Islamic fundamentalism exploded in Egypt, especially among urban youth. During that same decade, public-sector white-collar workers (those working in state-owned enterprises) saw their real wages shrink by 8 percent, and, for those in government administration, by 23 percent.34
The level of growth needed would require radical change. Egypt would have to open its economy, shrink its bloated and corrupt public sector (public debt stood at 80 percent of GDP in 2011), reform its laws and financial regulations, invest more in education and infrastructure, and promote privatization, trade, and direct foreign investment.
Unfortunately, the country has been reluctant to do any of this. Egyptians are not ready for economic change, at least not at the pace that was seen in Latin America or Eastern Europe when they went through reform. They want jobs and better services, but their political discussions do not include a serious debate over what to do with the economy.
On the street and in factories the perception was that with Mubarak gone there would be money flowing from the top down. But labor unrest and street agitation squeeze businesses. One ceramics manufacturer told me that he gave his factory workers a 40 percent raise only to have them strike for another 20 percent. He appealed to the government for help. The answer came back: “You are rich, they are poor; give them what they want.” He could not, and started winding down his business. The impasse is driving Egyptian politics into a binary choice between populism, under which the public sector will grow again to feed the frustrated poor, and a return to the law and order of Mubarak days—either way, democracy will be the victim.
Egyptians are suspicious of the West and jealously guard their national rights and sovereignty. They do not want the IMF telling them what to do, and their first impulse was to refuse its loan offers. They thought they could get away with this because Qatar and Saudi Arabia had promised Cairo $11 billion in economic assistance, but none of it ever materialized. One senior administration official told me that the interim government said to Washington and the IMF in private, “We don’t want your help, and if we agree to your help we don’t want you to tell anyone about it.”
This is a shame because such changes have a record of working. Reform was not easy. Eastern Europe had to endure 20 percent inflation along with drops of 20 to 40 percent in GDP. There were many setbacks, social hardships, and acts of political resistance. But in the end, economies were transformed, and Eastern Europe is better off for it. The same is true of Latin America.
Democracy (and also political and religious moderation) depends on economic growth, and economic growth depends on reform. It is that simple. Reforming Egypt’s economy will not be easy. The country lacks leaders resolved to push painful change, however badly needed, and there is no unified vision of the future. Egyptians want prosperity but are not ready to sign up for real economic reform and the belt tightening and economic hardships that go with it. Many think Mubarak already tried and failed at those kinds of reforms. President Muhammad Morsi, a sixty-one-year-old engineering professor with a PhD from the University of Southern California, talks about development and the economy all the time. He says that he favors the private sector and a business-friendly environment, and wants to work with international financial institutions to reform Egypt’s economy. His presidential campaign banners touted him as “Egypt’s Erdogan.” But he represents a Muslim Brotherhood that has a strong populist wing and has promised an economic safety net for the poor.35
The single biggest obstacle to economic reform and democracy alike is the Egyptian military. Something of a state within the state, it controls vast holdings in every economic sector from manufacturing to construction, agriculture, and tourism.36 It runs four-fifths of all industrial concerns and accounts for upward of 30 percent of the economy.
The generals have a different view of Egypt’s future and are jealously guarding their economic assets, which means resisting reform. They think that Egypt’s strategic importance would bring in enough aid for it to function—they have a hard time seeing why things could not go back to the way they had been under Mubarak. A senior American diplomat told me, “The military and its new government are not keen on reform, they think we should pay up for the country’s upkeep, and are resentful that we are not [doing so].”
The military does not want to give up i
ts control of the economy, and that is a large reason it does not want to give up political power. It used its influence over the interim government in 2011 to say no to the IMF. And when it looked likely that an independent Muslim Brotherhood government would take over, the military tried to wrest control of the parliament and the constitution-writing process and tightened its grip over the judiciary, in part to have veto power over economic reform.
Egypt eventually entered talks with the IMF for a $4.8 billion assistance package (which would demand some reforms). The Muslim Brotherhood delegation that visited the White House in April 2012 was surprised to learn that the IMF had offered a package twice as large, but the Egyptian government (at the military’s prodding) had said no.
Many Egyptians, the Muslim Brothers foremost among them, say that they want democracy and prosperity. But unless the military’s grip on the economy is loosened, democracy will not stand a chance, and poverty will remain Egypt’s lot. Breaking the hold of the military over the economy will not happen absent fundamental reform with strong international backing. So far, Washington has neither endorsed economic reform forcefully nor used its considerable leverage (in the form of massive military aid) to nudge the military to consent to change.
Many hope that Egypt will embrace the “Turkish model,” mixing democracy and capitalism with a somewhat toned-down brand of Islamism to produce an open and prospering society. But the Turkish model was built on the back of a series of IMF-prescribed reforms and the EU’s deep economic and political engagement with Turkey. Absent similar fundamental economic reforms, Egypt looks to be going the way of Pakistan, its economy reliant on U.S. aid, constantly on the brink of disaster, and avoiding it only thanks to timely infusions of Arab aid and rescue packages put together by international financial institutions. Meanwhile, the country gets poorer, its problems grow, and its escape from the cycle of crisis and poverty becomes more daunting and less likely. Anti-American extremist forces would then reap the fruits of political frustration and social misery. On the political front, the military’s “deep state” controls key sectors of the economy and wields considerable influence over the bureaucracy, the judiciary, and the still-potent security services. Prospects for civilian rule, let alone true democracy, are dim. The Obama administration may have bet on democracy turning Egypt into Turkey, but Turkey got where it is thanks to sustained European engagement. There we have fallen short.