Due Diligence Will Morsi Go the Way of Mubarak?

If Morsi is undone, it will probably be more because of Egypt’s disastrous economy than resistance to an increasingly repressive Islamic rule.

David Rosenberg
David Rosenberg
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David Rosenberg
David Rosenberg

Egypt is going Islamist and it’s doing so according to all the democratic rules, with the first half of the voting last weekend providing the latest evidence.

There has been a lot of fuss about the quality of the Islamists’ victories in two constitutional referendums and a series of votes for parliament and president - whether the turnout was big enough, voting irregularities, and whether the Muslim Brotherhood and Salafists did so well because they were better organized rather than because their ideas appeal to so many Egyptians.

But the complaining is sour grapes on the part of Egypt’s secular democratic minority, who together with Western experts and media, miscalled the revolution but are still determined to award victory to the side they thought would inherit the presidential palace from Hosni Mubarak. For all the flaws of Egypt’s nascent democracy, the Islamists won fair and square.

The next battle will be over whether Mohammed Morsi & Company plan to run Egypt along the same democratic lines that won them power.

The answer is probably not. The days when revolutionaries – Islamists, Marxist or fascist – quickly took over the radio and newspapers, arrested or exiled the opposition, stifled freedom of expression and monopolized civil society – seem to be over. Iran’s Islamic revolution was perhaps the last of the old-style upheavals. The post-modern dictator – Vladimir Putin and Hugo Chavez, for instance – chip, chip, chips away at democratic institutions, disfiguring them but never quite destroying them. Morsi seems to be moving the same direction.

Distracted by veils versus bikinis

The Islamists’ critics have been preoccupied with the issues of veils versus bikinis at home and whether Egypt will abandon its alliance with the West, becoming a threat to Israel and a friend of Iran. But then there’s the unpleasant business of Egypt’s disastrous economy. That is more likely to undo Morsi than is resistance to an increasingly repressive Islamic rule.

The narrative that developed at Tahrir Square nearly two years ago was that the revolution was sparked by years of repressive rule by a population yearning to breathe free and all that. No doubt that was the agenda for many of its leaders, but when it came time to choose a new leader the voters preferred an Islamist or a holdover from the old regime, neither of whom are paragons of democracy or liberty. The fact is most revolutions start in the belly and Egypt’s was no different. If Morsi doesn’t want to find himself in the jail cell next to Mubarak, he’ll be spending less time worrying about fatwas and more about fiscal policy.

That’s easier said than done. Egypt is in far worse shape than before the revolution. Far from recovering with a new president in power and some semblance of political stability, economic growth slowed to a 2.6% annual rate in the third quarter from 3.3% a year earlier. Unemployment was 12.5% in the third quarter versus 9% at the end of 2010. Foreign currency reserves last month stood at just over $15 billion, a dangerously low number that is down from $36 billion on the eve of the revolution. The government is running a fiscal deficit equal to more than 11% of gross domestic product.

The cost of insuring Egyptian sovereign debt against default has risen more than anywhere else in the world in the past month, although it is less than when Tahrir Square was alit in February 2011, indicating investors have little faith in Morsi's prospects of restoring stability. Morsi hasn’t shown nearly the same audacity in pursuing economic policy as he has on the political front: In the face of oppositions, he retracted plans last week to raise taxes to help cover the deficit and put off taking an IMF loan.

In search of sustainable growth

Mubarak, during his years in power, did all the things that orthodox economists (read the International Monetary Fund) say you should do. He liberalized the economy, privatized companies, kept his fiscal nose clean and got the results that he was supposed to get: Growth averaged 5.1% in the last half decade, not quite China but certainly quite respectable, and income inequality was actually less than in some Western countries. But it wasn’t nearly enough.

Magda Kandil, executive director of the Egyptian Center for Economic Studies in Cairo, says in a paper that middle-class Egyptians – the ones who led the revolution before the Islamists took it from them – didn’t share in the economy’s growth. The civil service no longer provided the job security it once did, but private enterprise was stifled by a burdensome bureaucracy. Corruption and nepotism was rife. University graduates had the same rates of joblessness as the rest of the population.

During the elections, Morsi and his Freedom and Justice Party offered up pastiche of economic prescriptions that sound remarkably like Mubarak’s policies. The difference is they were labeled Islamic economics, which believers understand to mean that they will succeed where they didn’t before because a true Islamic government won’t countenance corruption and will pay serious attention to social justice.

Perhaps, but if Egypt’s Islamists succeed, they will be the first. Long-standing Islamist governments, with years to inculcate politicians and bureaucrats with proper values, have failed to do so. In Transparency International’s Corruption perceptions index, Turkey is ranked 54 of 176 countries, Saudi Arabia 66, Iran 133 and Sudan 173. On the United Nations’ Human Development index, they rank 92, 56 (thanks, oil), 89 and 169, respectively.

Like the economic ills in the rest of the Arab world, Egypt’s are severe and are not curable by applying the usual IMF medicine, as Mubarak learned to his distress, even if it packaged as Islamic. Egypt’s economy, for instance, needs to grow at a 7% rate just to provide jobs for those entering the workforce every year. It will need even more to soak up the already existing masses of jobless.

Even when markets are made freer, the kind of business dynamism that has animated Asian economies doesn’t exist in the Middle East to take advantage of it. Where there is prosperity, it is because there oil paying for it; where there isn’t, there is poverty and stagnation.

No economy is the region, whether it is Islamic ruled Iran or Saudi Arabia or the more secularly minded ones in Syria and the United Arab Emirates has lifted itself by the bootstraps to create competitive industries, provide jobs and generate sustainable growth. Faith in Morsi and Islam won’t substitute.

Egyptian President Mohammed Morsi.Credit: AP
Egypt's ousted President Hosni Mubarak in Cairo October 19, 2010.Credit: Reuters

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