Laissez-faire, laissez passer and demilitarising the economy

November 30, 2011 5:48 pm0 commentsViews: 2

The economy of Egypt is a breadth away from collapsing and paving the way to a failed state. As we are witnessing with the EU, operating under a free market and an open economy does not necessarily correlate with a free society. As the West struggles through debt and the economic crisis, Egyptians may consider looking for a different economic model, Laissez faire or Laissez passer?

Lets not forget that the main incentive behind the Arab uprisings were the mass poverty that had stricken Middle Eastern society. During the first three months since the start the Egyptian revolution more than US$8.6 billion in bank deposits left Egypt, according to the Bank for International Settlements. A strong and vibrant economy in Egypt can allow for greater education and economic independence. What Egypt needs to do is uproot the militarized economy and focus on improving a free but local market through allocation of sources.

Although, Nasser brought about some agrarian reform, industrialization introduced minimum wage and improved the working conditions of labour workers. But what he focused on was nationalizing the Suez Canal and much of the industrial, financial, and commercial sectors of the economy. Yet, Nasser still made the military his priority and spent more than what he had on it. Which evidently prevented real economic progress. Military expenditures began to absorb about 25 percent of Egypt’s gross national product according to 
 American Museum of Natural History.

Under Sadat the economy took a very different route. He opened up its market and economy and also its doors to more aid, loans and debt. Sadat encouraged private investment in Egypt and carried out agreements with the IMF. However, the economy suffered further from a boycott by Arab nations that were against Egypt’s separate peace with Israel, which, resulted in its expulsion from the Arab League.
Mubarak’s further pursuit of a free economy led Egypt to its largest ever divide between the elite and the poor, the middle class was quite nearly obliterated. With the encouragement of the US and the IMF, Mubarak focused on denationalization in 1991 and the IMF with Public Law 203 aimed to eliminate all state enterprises and national sovereignty in the economic sphere.

According to the NYT, Amr El-Shobaki, a political scientist at the Ahram Center for Political and Strategic Studies, “privatization was a way for the friends of the rich and powerful to grow more rich and powerful. Even the government acknowledges that the economic changes have had little impact on average lives.” This brought the working class to its knees and pushed the economy to a downward spiral. Egypt does not want to see a repeat of this.

Nasser, Sadat and Mubarak shared one thing in common; creating a government and economy for and by the military. Military expenditure alone has drained the wealth of Egypt and has made it rely on aid and loans. The control and distribution of economic resources has given the regime the opportunity to control most of Egypt’s public and private economic activity.

CNN states that the Egyptian military is one of the world’s largest recipients of U.S. military aid. Washington agreed to a $13 billion, 10-year aid package to Egypt in 2007. U.S. aid made up for 25% of Egypt’s defense spending in 2008. This is excluding the money it takes from Egypt, what it receives from Saudi Arabia and earned foreign exchange from exports of domestically manufactured military equipment, according to The Military Balance.

Egypt’s economy can thrive and most importantly also stand debt free based solely on its natural resources. So, the solution to this may not be easy but it does exist. By demilitarising the economy and now with the exodus of foreign investors this may be an opportunity for local businesses to gain their piece of the economic pie. Should Egypt not take this into account as it begins to look into reforming its economy and finally ending the poverty that was leading Egypt to becoming a failed state?

Ayya Harraz

Views expressed in articles are the author’s and do not represent Comment Middle East