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Egypt’s Biggest Problem Is Economic

September 13, 2013 in Economics

By Dalibor Rohac

Dalibor Rohac

In Egypt, violent Islam is on the rise. This week, two bomb blasts in Sinai killed six military officers. Last week, the convoy of the interior minister was hit by a bomb attack in Cairo. Besides political violence by fringe Islamist groups, Egyptians are bracing for more repression from the government. Two and half years since the Arab Spring, Egypt’s ‘deep state’ is back in full form, arresting the opposition and cracking down on independent media.

Although many competing accounts exist of why Egypt’s transition has failed — ranging from the country’s religious divisions to its authoritarian legacies — one should not underestimate the power of the simplest one. What if it’s all about the economy?

In their influential book about the drivers of prosperity, Why Nations Fail, economists Daron Acemoglu and James Robinson argue that, historically, the combination of inclusive political institutions (granting people influence over the conduct of public affairs) and extractive economic institutions (denying access to economic opportunity to most of the population) tends to be unstable and fragile. A representative government that keeps its citizens poor will either cease to be representative or it will have to change the rules of the economic game to allow for mass prosperity.

Looking through this prism, the fragility of new Arab democracies was to be expected. Egypt’s precocious political liberalization occurred at a time when the country’s economy suffered under rampant cronyism, corruption, and byzantine regulations. As a result, in 2010-2011, one quarter of Egyptians were living under the poverty line at an income of $444 a year or less. In the area that was historically known as Upper Egypt, it was more than half of the population.

The upside of Acemoglu and Robinson’s framework is that there is nothing permanent about authoritarianism. Even the most oppressive regimes can relinquish their hold to political power, especially after a period of economic liberalisation and growth. The reason is simple: politically repressing an economically empowered citizenry is difficult.

In Chile, the democratically elected President Allende was overthrown by Augusto Pinochet, whose regime committed human rights abuses against thousands when it took power. After 1975 the military regime also put in place radical economic reforms, including deep budget cuts and a privatization of social security.

These contained in themselves the seeds of the regime’s demise. Between 1975 and 1988, average income in Chile increased from around $2,000 to almost $3,000. In 1987, Pinochet legalized political parties and …read more

Source: OP-EDS

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