Egypt Is Perched on the Precipice of Chaos

Image: Egypt Is Perched on the Precipice of Chaos The deteriorating Cairo subway is a metaphor for post-revolutionary Egypt. Seen here is the subway hallway of Sadat Station, Tahrir Square, Cairo, Feb. 7, 2013.

Friday, 05 Apr 2013 10:41 AM

By Judith Miller

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Judith Miller's Perspective: The Cairo subway was one of Hosni Mubarak’s proudest achievements. Built at a cost of several billion dollars in the late 1980s, it reflected Egypt’s ancient civilization and modern Egypt’s national pride. Air-conditioned in summer, quiet as a pharaoh’s tomb, the subway was well-lit and beautifully appointed. Display boxes of ancient Egyptian artifacts lined its platforms. A special police unit kept the stations clean, safe, and graffiti-free.
 
Then came the Egyptian revolution in January and February 2011. Today, the subway that transports roughly 4 million passengers a day throughout this vast city of roughly 17 million is a wreck. The tile walls of its central hub, Tahrir Square — the epicenter of the protests that forced Mubarak from power — are chipped and filthy. Its platforms are strewn with litter. A main passageway from the platform to the square has been dark for weeks; no one has changed the burned-out bulbs. There are no policemen in sight. The passageways stink.

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The subway is a metaphor for post-revolutionary Egypt. The square that symbolized the revolution is now occupied by riffraff and protestors who assemble periodically to show the government that the people remain in control. Traffic around the Middle East’s largest public square has been diverted.
 
While Cairo may still be safer than Chicago, or even New York, Egyptian women, for the first time in memory, fear shopping or taking cabs at night. Cairo’s police, blamed for the deaths of protesters and unhappy with their pay, working conditions, and lack of respect, sit in their precinct houses, refusing to provide security that Egyptians once took for granted. Tourists have vanished, depriving Egypt of a vital source of jobs and hard currency.
 
Unemployment has risen from 9.8 percent in 2010 to 13 percent today. Inflation is officially 8.7 percent, though more like 9.5 percent, or even higher, for food and basic commodities, say economists. Even these figures are misleading, since an estimated 40 percent of Egypt’s economy is “black” or informal, unregulated by and unreported to the government, according to Hazem el-Beblawi, an economist who served as deputy prime minister under the army’s unpopular transition government in 2011.
 
Beblawi, a strong advocate of free-market liberalism who resigned his post that year, accusing the army of taking Egypt in the “wrong direction,” says youth unemployment probably tops 19 percent. Egypt, he estimates, has less than its officially claimed $13.5 billion in hard-currency reserves (versus $36 billion before the revolution). “Egypt imports roughly $60 billion worth of goods and services,” he says. “It exports under $25 billion.”
 
By summer, Beblawi predicts, the government will be unable to import the wheat that sustains the poor — Egypt imports 10 million tons of wheat per year, the most of any nation — or the diesel that fuels bread ovens and transports 99 percent of everything that moves in this country of more than 85 million.
 
Egypt’s dilemma is this: it cannot politically afford to stop providing the costly subsidies to the poor that distort its economy. Poor Egyptians spend 70 percent of their income on food, versus 55 percent for Egyptians as a whole; Americans spend roughly 14 percent. But unless it reduces these subsidies and adopts a pro-growth budget, Egypt cannot secure the $4.8 billion International Monetary Fund loan it needs to unlock what Angus Blair, a Cairo-based former investment banker and founder of Signet Institute, an economic think tank, estimates could be $14 billion in aid and investment.
 
Egypt spends about 20 percent of its budget on fuel subsidies alone. In other words, the government would be committing political suicide to do what economists say must be done to sustain the country’s economic viability. Only a government that enjoys public confidence can risk taking such steps. “Egypt’s economic crisis has political roots,” Beblawi says. “And a political solution is needed.” So far, he adds, none is in sight.
 
With their legendary “sabr,” or patience, nearly exhausted, Egyptians blame the lack of growth, jobs, fuel, services, security, and stability on what many call the “incompetence” of President Mohammed Morsi and his ruling Muslim Brotherhood.
 
And they blame the United States, too, for supporting Morsi, who eked out an election victory last year and took power last July thanks only to low voter turnout and a fractious, divided secular opposition. “People no longer trust Morsi,” Beblawi said, speaking for many among Cairo’s professional elite and middle classes.
 
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Just about the only consensus in this deeply divided country is that Morsi and the Muslim Brotherhood are failing. The Brotherhood is seen as repressive politically and inept economically. The MB opposed the IMF loan before it was forced to support it. Even so, two years and three rounds of negotiations later, Egypt seems no closer to securing the IMF’s stamp of economic approval than it was when the Brotherhood took power last summer.
 
Last year, Morsi announced that the government would cut subsidies to meet the IMF’s demands, only to renounce his decision hours later, fearing a public backlash. The MB’s legal moves against allegedly “corrupt” businessmen from the ancien régime — former finance minister Youssef Boutros-Ghali, activist trade minister Rachid Mohamed Rachid, and Coptic billionaire activist Naguib Sawiris, Egypt’s second-wealthiest citizen, all of whom have denied charges of financial impropriety — have alienated potential foreign investors and prompted many wealthy Egyptians, even die-hard patriots, to move money and assets out of the country.
 
Sawiris’s claim that the Brotherhood is “distorting” Egypt’s legal system to punish its political opposition rings true among middle-class Egyptians. “What’s happening now in Egypt resembles Mussolini’s rise to power in fascist Italy,” Sawiris recently told Al-Ahram Online.
 
International efforts to bolster Egypt — Qatar recently gave the MB government some $4 billion in aid; Saudi Arabia has donated $1.5 billion; and the United States, during Secretary of State John Kerry’s recent visit, kicked in $190 million — are “drops in the bucket” given Egypt’s monumental needs, says Beblawi. He estimates that, before this fall, Egypt must have an injection of between $10 and $15 billion in hard currency to prevent widespread hunger and fuel-shortage riots. “The aid so far is aspirin,” he says. “Egypt needs cortisone.”
 
Tourists, who once brought over $10 billion a year into the country, will not return without security and political stability, neither of which the Brotherhood has restored. Foreign investment, which under Mubarak topped $13 billion a year, or about 9.5 percent of GDP, has shrunk to roughly 0.4 percent under Morsi. Suez Canal revenues total no more than $5.5 billion.
 
Remittances from Egyptians working abroad — the third major source of income and hard currency — have increased, but this is deceptive, Beblawi says. Because many overseas workers have been laid off — more than 1 million Egyptians once worked in neighboring Libya, for instance — Egyptians are bringing their savings back home. “This is a one-time injection of funds,” Beblawi says. “Soon, these workers too will be demanding jobs.”
 
Some 750,000 Egyptians enter the labor force each year. The government has been able to create work for only a small fraction of them.
 
Egyptians are growing desperate for change. Many are now calling for the military to take control. “Most Egyptians believe in the integrity of the military, but the military does not want to be back in charge,” says Blair. A military coup is unlikely, many diplomats and Egyptian analysts agree. The military “was badly burned by the pounding it took when it ruled Egypt after Mubarak’s departure,” says a Western diplomat.
 
Foreign and domestic analysts alike give poor marks to the Supreme Council of Armed Forces, the so-called SCAF, which to quell public opposition to its rule increased wages and hired more public workers, even as productivity growth remained flat.
 
The Muslim Brotherhood’s passion for secrecy; the opacity of its political wing, the Freedom and Justice Party; its ham-handed drafting of Egypt’s new constitution, which led Christians and most non-Islamists on the drafting committee to quit; its reluctance to work with other political parties and factions; its arrests and the charges of torture of political opponents — all fuel suspicion that the tightly disciplined organization is seeking to solidify its control of Egypt and may be unwilling to relinquish it, no matter what.
 
Since a court decision struck down the country’s electoral law, the Brotherhood is unlikely to face elections for a new parliament until the fall.
 
“They won’t work with others,” complained Mohammed Nour, the leader of a Salafist (fundamentalist) rival to the MB in an interview last week. As the Brotherhood’s popularity plummets, that of the Salafists grows. Egyptians increasingly see the Salafists as honest and pure, a plausible alternative to the Brotherhood.
 
Meanwhile, the secular democratic opposition is growing despondent. “The Brotherhood is a fascist organization in democratic clothing,” said Bassam Fathi, a secular activist who was a leader of the Tahrir Square protests that ousted the Mubarak regime. “I fear that only the military can save Egypt.”
 
Some leaders of the National Salvation Front, the coalition of liberal, secular groups opposed to the Brotherhood, now favor the formation of a so-called “national unity government” to enable Egypt to manage its impending economic implosion. In an interview, Amr Moussa, the former head of the Arab League and a former foreign minister under Mubarak, said that to “save Egypt,” he was willing to work with the Muslim Brotherhood to form a government that would have the “broad-based legitimacy” that economic reform and political reconciliation required.
 
“We must consider such a step for the sake of Egypt,” Moussa said. But President Morsi has shown little interest in such inclusion or compromise. Nor have other members of Moussa’s own National Salvation Front, such as Mohammed el-Baradei, the former head of the U.N. atomic energy agency. Many political dissidents want Egyptians to hold the Brotherhood solely accountable for the slow-rolling economic collapse that they see as inevitable, given current trends.
 
As for the Brotherhood, it seems to have no interest in or strategy for healing Egypt’s political rifts or solving the country’s economic woes. “The price for saving Egypt may be the Muslim Brotherhood itself,” said Gehad el-Haddad, a Brotherhood spokesman who heads an internal reform effort called the “Renaissance Project.” Membership in the MB’s political party has grown to 600,000, he says, but 75 percent of its new members are not part of the Brotherhood.

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“We’re new to governance,” said Haddad in an interview. “We have splits on the left and on the right. The Brotherhood exists for social change, but was pushed by circumstances into electoral politics — far beyond our comfort zone.”
 
What was really damaging President Morsi’s rule, he concluded, was Egypt’s bureaucracy. “The SCAF added a million public employees to our payroll,” he complained. “And we can’t fire anyone!” Most of Egypt’s public servants were hostile to the Brotherhood’s Islamist agenda, he asserted. “The bureaucracy was a thousand times worse than we ever anticipated. We’re stymied. We control only the top positions in ministries, so getting anything done has been difficult, given such entrenched resistance.”
 
That Egypt’s would-be “Islamic fascists,” as their critics call the hapless Islamists, blame their woes on Egypt’s 7 million public employees speaks volumes about the nation’s crisis of governance — never mind its increasingly grim economic situation. Somewhere, in an ancient tomb, a frustrated pharaoh must be smiling. Or weeping.
 
Judith Miller is an author and a Pulitzer Prize-winning investigative reporter formerly with The New York Times. She also is an adjunct fellow at the Manhattan Institute and a contributing editor of its magazine, City Journal. Read all of Judith Miller's columns on Pundicity.com. Read more reports from Judith Miller — Click Here Now.

 

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