© 2007 Institute of Current World Affairs
The Institute awards long-term fellowships to develop a deep understanding of an issue, country, or region outside the US and to share that understanding with a wider public.
Institute of Current World Affairs - Home Page

Below is a hobbled text version of a PDF document.
In order to read the actual document please click the link below and register if necessary.
(One-time registration is free and very quick.)
Read article

4/1/1986 - Egypt’s Development and Mubarak’s Inheritance by Dirk J. Vandewalle

INSTITUTE OF CURRENTWORLD AFFAIRS JV I American Research Center Egypt Midan Kasr Doubara Garden City Cairo Apri EGYPT S DEVELOPMENT AND MUBARAK S INHERITANCE Dr Dirk J Vandewalle It almost years since president Anwar Sadat killed Muslim extremists Husni Mubarak assumed leadership Egypt Arab world populous country With Sadat disappeared members those actively participated brought Gamal Abdul Nasser power Except select holdovers Generation their place Egyptian politics being occupied October Generation fought against Israel Demographics important understanding today Egypt Half Egyptians alive after For revolution which galvanized Egyptians Arab world alike longer invokes imagery legitimacy Nasser Sadat generation Although Nasser remains symbol often referred Americans about George Washington Upon closer questioning Egypt youngest generation little about Nasser stood Arab world Husni Mubarak personally symbolically marks break Egypt recent For Gamal Abdul Nasser Anwar Sadat politics lifelong passion Mubarak always professional soldier first reluctant politician second Throughout political tumult early World War II years quietly pursued studies Egyptian War College became commander Cairo West after dismissal senior officers assumed position chief staff force He seemed destined distinguished military career until others surprise Anwar Sadat appointed president Di Vandewalle North Africa Fellow Institute Current World Affairs His interest political economy Egypt North Africa particular development strategies Egypt Algeria Cibya Tunisia Morocco decades Iubarak forty seven years political career began A plodding workaholic determined leave Egyptian political became quickly consolidated power within government By Sadat killed Mubarak become thoroughly familiar political system running country He controlled National Democratic Party important country which police control remains important ingredient power Supreme National Security Council He promised Waterbury called qrant someone would manage Egypt problems competent albeit perhaps unimaginative style But seemingly leade rship Egypt I780s Mubarak since coming power Nasser Sadat refashion Egypt economic character rather formidable strains labor under these bottlenecks result predecessors experiments I shall quite about these lingering structural problems reports The economic legacy former presidents casts large shadow In three decades Egypt experimented successively socialist development cooperation East after Nasser death modified approach favor development Western capital The modification formally announced It usually referred translated either liberalization perhaps accurate since Egypt never completely itself foreign investment Open Door policy Whatever translation infitah meant attract private western investment country attempt centralized economic decision making existed under Nasser Needless rapid change approaches extracted economic about which Egyptian press academics policy makers still heated debates Only nominal economists contend economic decisions neutral value suspects never developing country least Egypt The ruler ultimately includes choice number issues include concerns beyond economic inclinations Both Nasser socialism Sadat infitah effect strong ideological expressions which created circles support opposition refashioned shaped political arena What often referred cruel dilemmas development these issues beyond economics Ultimately choice economic policy Egypt choice superpower support choice touches internal social relations lives fates Egyptian population involved might no___t involved Nasser Sadat chose conscientiously perceived ultimate interest Egypt their speeches invariably reflect their economic policies matter radically different turned would social justice equity One shouldn belittle these efforts always accept value As story development Egypt elsewhere includes number economic gaffes political intrigues outright corruption venality generous political propaganda By sheer geographical position population cultural hegemony Egypt played important although initially isolated Arab world since West intruded Middle East century Its cultural predominance erary liberal ambitions economy relatively sophisticated period produced feeling preeminence among Egyptian elites Egypt rejected Arab nationalism initially favor Egyptian nationalism because leaders Arab nationalism engulfed Middle East parochial often subservient West Not until creation Arab League Egyptian nationalism blend regional Arab nationalism It movement Egypt bound whose presence shaped direction content crucial From concern Egypt position New Arab Order remained great concern Egypt other Arab countries alike If observers disagree creation endurance demise these elusive New Arab Orders there seems little disagreement creation Egypt crucial The creation Arab League Egy ptian revolution Bandung conference political experiments 1960s within Middle East Ramadan above OPEC period during 1970s interpreted turning point Arab world internationally The I770s particular their abundant wealth accumulation billions petrodollars produced euphoria Middle East truly means transform itself Camelot Sadat infitah policies effort profit reality He hoped combination Arab capital lestern technology Egyptian manpower would propel country becoming powerhouse region What Sadat hoped essence creation another New Arab Order which country would again leading But 1970s initiative seemingly slipped hands states Egypt became pauperized patronized after CampDavid agreements ostracized poorer cousin region The early story recounted George Antonius ICWA earlier fellows His The Arab Awakeninq_ London Hamilton various reprints remains important early history Arab national movement It dedicated Charles Crane Not surprisingly better books appeared early 1980s Egypt potential Middle East carried subtitle Egypt New Arab Order And surprisingly either years after publication options prescriptions analyses offered contributors confirm beginning order already negated rapid change events region Malcolm H Kerr El Sayed Yassin Ric Lo States Middle East Eqvot New Arab Order Cairo University Cairo Press D3v But early 1980s proclaimed New Arab Order proven elusive precursors wracked internal disagreements international economic pressures The global recession after number assorted indicated fragile Host exporting countries perhaps Libya remaining great spender petrodollars started retrench Private sectors until neglected given lease Reserves dropped precipitously The unity OPEC fragile times unravelled slowly Saudi Arabia longer willing guide organization defection seemed offer greatest potential reaping diminishing benefits The world moved inexorably toward OPEC world which organization perhaps never again achieve relative stranglehold possessed And paradoxically Egypt relative years earlier already adopted economic better count follow Egypt resilience seemingly stronger predicted It things throughout these decades remained ultimately uniquely Egyptian frustrated those attempted compliant To Soviets under Nasser represented foothold To reectionist states particularly Colonel Qaddafi Libya example emulated after Egypt leaders abandoned pretensions earlier years To recent arrivals United States means seemingly faithful distressingly turbulent region Where Egypt heading under Mubarak What likely major internal restraints opportunities Egypt Middle East years ahead I intend reports country tentative answers these questions But I about where think country heading about opportunit liabilities without delving Nasser Sadat periods giving thumbnail sketch Egypt economy politics under For decisions leaders still constrain certain fundamental Mubarak manoeuver Perhaps believed Egypt centrality Arab world 6amal Abdul Nasser himself For almost decades combination charisma consummate political skills strong tactics proved powerful Tawfiq Hakim Egypt literary Cmi nence wrote after Nasser during reign Uthought dissolved There enthusiasm power Nasser ideas Arabism suspended critical thinking relegated backpages carefully controlled opposition publications Egypt Nasser asserted incessantly represented relevant future Arab world struggle development Iest Israel Until Nasser exploited Egypt indispensability great number issues categorically declared settled Egypt predominance Arab world ability develop cooperation Soviet Union ability create New Arab Order Egypt guiding force For first fifteen years Egypt firmly radical faction Arab world seemingly enough manpower financial reserves Malcolm Kerr called Arab Cold War against others striving ideological hegemony region fighting royalists Yemen The reforms undoubtedly aided appeal masses But Suez debacle captured Egypt Nasser imagination His speech Alexandria announcing nationalization canal vintage Nasser Before crowd Egyptian leader harangued West making American negotiators attempting somehow resolve crisis Th appeal emotional references Egyptian pride determination punctured almost exaggerated gestures Nasser swayed forth front microphones Then almost speech stepped instant With shouts crowd dying again announced almost voice voice seeming indifference Today nationalize Canal people The crowd exploded enthusiasm Nasser statesman symbol together revolution With rhetorical flourish claimed withdrawal Britain France Israel victory Egypt But several contemporary observers clear victory possible through intervention superpowers Taking canal number further nationalizations enemy property British French insurance companies commercial banks appropriated beginning state involvement rapidly growing public sector As harbinger things decade almost immediately differences surfaced among those surrounding Nasser concerning extent public sector private sector But until Sadat infita issue largely resolved favor those advocated expansion public sector The closely associated Aziz Sidqi US educated technocrat whoat Ministry Industry would decade staunchly defend viewpoints interests Sidqis initial plans called level private sector involvement several measures taken limited possible extent participation This contradictory policy continued after first Five Year Plan announced It represented recognition private sector still needed particularly investment The situation altered radically after which obliterated private sector Arab socialism Although private wholesale trading small manufacturing particular farming remained state through control profits credits pressure producers Egyptian policy makers found themselves saddled enormously enlarged public sector Nassers strategy geared toward heavy Judging speech Sidqi May Nile Hilton Cairo views public sector changed little He strongly defended Nasserist approach attributing shortcomings commitment public sector after Nasser death V industrialization would eventually intermediary stages trickle production consumer durables The Helwan Iron Steel Complex Aswan crucial initial elements The savings stment necessary would public sector household savings despite actions taken against remainder private sector corporate profits outright loans squeezing agriculture called produce cheap locally expensive abroad schemes Judging growth Egyptian economy between Sidqi public sector performed remarkably But economic success short lived along which signed death warrant original proposals initial success already jeopardized Some little economics cotton harvest curtailment US wheat shipments Egypt country spent procuring wheat flour total export amounted expenses Yemeni But there number basic structural problems The ambitious optimistic attempting simultaneously needs industrial expansion growing public sector system promised education opportunities burgeoning subsidies basic foodstuffs All place amidst coordination marked infighting among different ministries bureaucracies These bureaucracies civil service allowed rapidly expanding rates proportion needs country The public sector itself employed almost percent Egypt total workforce perhaps fourth above actual needs almost exempt parliamentary scrutiny A particularly ominous agriculture showed signs becoming savings component total import increased fourth The between needed available economists resource widened steadily Egypt experienced first payments crisis another Thus shortly before economic measures should extended results Nasser Egypt faced serious shortage money continue another In country would another multi economic until The matters worse The Sinai closure Suez canal after meant annual excess million pounds Some adjustment needed But Nasser undoubtedly ideological reasons retained strong resentment against tinkering economy through stabilization devaluation measures something International Monetary Fund asked Neither East particularly helpful So Nasser decided attempt outgrow economic problems Egypt resources Nasser nevertheless realized luxury rhetoric relative inattention economic matters drawing close The revolutionary moment vanished though social pheno there brief outburst energy before final I collapse This hurrah initiated Nasser offer resign defeat Massive popular demonstrations Egypt Arab world spontaneous orchestrated recalled duties It despite economic difficulties looming larger brief moment political triumph Nasser The conservative monarchies Jordan Saudi Arabia Syrian Baathists vying ideological leadership Arab world temporarily disarmed faced adulation masses Nasser But Tawfiq Hakim acknowledged there previously unknown quality dispair Nasser despite outward signs bravado For Nasser extremely astute judging political region willingness terms economic realities impressive He perfectly under stood Egypt against after The psychological schock defeat country believe irreplacibility would eventually shortly Radicalism within region threatened outpace Egypt previously radical position Nasser revolution become defensive Arab Cold thing Economic reality hedging longer afforded random political convictions Egypt verge becoming poorer cousin region The realization Fouad Ajami described social downward mobility clashed sharply image cultural political preeminence Nasser predecessors fostered A widening disjunction appeared between Egypt believed stood Arab world perceived Not purveyor ideas questioned Libyan overs companies harbinger things group states Egypt political compromise Khartoum conference August Nasser Faysal revolutionary conservative agreed Yemen Compensation offered Egypt fight against Israel gratefully accepted Egypt crossroads By Nasser health suffering diabetes heart trouble He grown alongside revolution leader creation showing signs decrepitude Thus after insisting fifteen years represented future Arab world Egypt faltered The young against generation slogans sustained system increasingly called their publications little value A whole generation brought heightened economic expectations Nasser abundantly clear repeated National Charter current generation would asked sacrifices future generations As result Egypt economic compromise never place Nasser lived Ihat generation after gotten instant gratification through implementation within limits possible welfare state And legacy Nasser successors loath Its implementation important economic political repercussions Egypt economy would single couple which receive attention subsequent reports Under socialist rhetoric everyone entitled university education Between number university graduates tripled It continued annually since At government guaranteed those graduates University diplomas became relatively ublic sector bureaucracy The result explosion Egypt bureaucracy everyone extremely unrewarding increasingly salaries During Sadat years government while abandoned commitment education reverted previous market oriented character The system subsidies started during World War II expanded considerably under socialist policies Nasser astronomically under Sadat Initially meant relieve economic needs needy quickly consumed millions pounds increasingly currency assumed corruption One small example A bottle butagas costs piasters about cents In order government spending close million pounds This figure small compared other subsidies require From total slightly million pounds I760 subsidies required million pounds Subsidies furthermore politically sensitive They government legitimacy maintain minimum threshold political support In lower class Egyptians function tripwires indications where government economic There interesting footnote Egypt educational policies As infitah education increased chances employment foreign became eagerly sought after primarily since salaries fifteen times those public sector Thus American University Cairo previously educational backwater attracted those students could Cairo Ain Shams university during socialist period under Sadat became remains practical purposes equivalent better known professional schools United States producing substantial workforce needed multinati onals An oasis tranquility amidst bustle Cairo AUC tuition dressing remind visitor American Ivy League schools Unfortunately academic standards The policy providing university graduates meanwhile become nightmare government Sadat forced May reinstate program guaranteed government university students Only couple months government provide enough those graduated The backlog years This situation become worse large numberSof Egyptians continue return Gulf States write report dealing specifically problem returning expatriate labor Egypt brain drain policies heading To almost always politically unwise Sadat slight increases price bread heavy rioting It helps explain Egypt resisted IMF standards which invariably abolishing subsidies The combination subsidies inability agriculture industrialization effort partly explains national savings capital accumulation Egypt never reached those levels judged necessary initial country development strategy But socio political implications worse The Egyptian state after longer resources promote professional social aspirations large segments population attempted before The economy simply grown enough accommodate rapidly expanding population The government forced adjustments became clear Nasser outgrow strategy failed After fifteen years experimenting period transition between Nasserist experiment Sadat inauguration infitah biblical seven years between arrived They demonstrated ambivalence Egyptian leadership On economic retrenchment unavoidable On other retrenchment almost completely subordinated struggle against Israel maintencance subsidies which required heavy outlays Very little capital productive investment whatever investment place largely obtained through borrowing international market through internal deficit financing If shortages money occur government often responded printing money starting inflationary circles issuing treasury bills development bonds After inflation would excess annually Another remnant period whose effects became clearer after infitah already place public sector borrowed heavily easily available money In process become progressively indebted Egyptian banks inefficient effort maintain welfare system continued Imports consumer goods including increasing amounts increased sharply Public private consumption increased substantially In armed forces absorbed hundreds millions pounds Although expenditure subsidized other Arab countries absorbed badly needed local capital According Egyptian development specialists population pressure perhaps worst oblem country With population approaching million growth appro imateiy Egypt basic provisions additional million people every months After having lived little while people already margin truly mindboggling One reports focus problem Politically years marked student unrest internal prestige within region The light sentencing military responsible defeat provided catalyst student revolts But clear there serious discontent economic situation beyond whole array issues silent Once unleashed frustrations quickly spread criticisms Arab Socialist Union Egypt political party perquisites Egypt power intelligence organizations police among others Revolts would place intermittently between The military defeat furthermore diminished Egypt standing within region It interesting recurring reference after bifurcation between reality writings articulate writers Egypt In Fuad Aami The Arab Predicament Egyptian writer Muhammad Jalal Kishk declares Egyptian Arab Although perhaps trifle exaggerated there little doubt Egypt position within Arab world changed after The often violent admonition Palestinians reectionist states Ustay courseu something larger purely Egypt inability fight region battles It recognition leader Arab world considerable trouble realization impotence brought among lesser players debacle For question perhaps Palestinian issue important ultimately struggle Egypt trying terms itself assimilate military defeat choice again among superpowers their interests creeping pauperization country In thereaa strong psychological element Arab world reaction defeat became clearer 1970s unfolded The perceived failure Egypt failure region large If powerful state could settle lingering problem Israel worse might disengage struggle there Arab world I Egypt verge becoming poorer cousin system would happen under Sadat turned West about New Order general Thus there strong element recognition other countries inability something failure Egypt through The reaction again surfaced after Camp David agreements There recognition Egypt decision could attributed ailure other Arab states viable alternative stalemate However promise billion Egypt itself could persuade Sadat again throw country remainder Arab countries I0 D3 Nasser tried could internal external dimensions perhaps severe crisis office But Anwar Sadat decide economic political legacy revolution An often about Sadat first office pictures presidential palace Nasser driver still behind wheel When reach intersection driver direction Sadat return wants direction Nasser I Nasser always turned Sadat responds Signal right The particularly effective since direction Nasser inclination always symbolic connotations educated Egyptians The captures perhaps anything Sadat initial political strategy least until Ramadan Israel Sadat consolidate regime decide number vexing political economic matters The outcome these deliberations radically economic policy infitah replacement Soviet Union superpower patron United States Much spilled attempting explain infitah A prominent leftist economist interviewed persisted could explained colonialist point Egypt nineteenth century found itself desperately needing capital further promote development plans overextended itself financially domestic capitalists West His viewpoints value Sadat combine Western financing technology Arab capital Egyptian labor seems sequence underlying causes mixed number economic issues crucial In toward infitah seems combination interlocking variables There first number objective facts By practically standard economic indicators Egypt plight become alarming Abd Aziz Higazi minister finance estimated fully third Egypt national income spent military purchases struggle against Israel Debt spiralling upward exports geared toward Soviet Union under conditions brought neither currency imposition standards would allow competition either within Arab world international market Added dismal performance public sector which notable exception undertakings As report shows fully agree Hith explanation sequence events initah But interesting economist talked repeatedly prided himsel scientific iectivity several times erred Egypt havin West Even defenders initah however often appalled sometimes reerred Cocacola ization Egypt One reports called appropriately In Search Egypt Soul focus cultural social effects economic liberalization policies Aswan Dam Suez Canal authority quagmire ineTficiency outright corruption Amidst Nasser previous admonition steadTastness against Israel seemed luxury Egypt could longer aTTord Sadat termed luxury would become Clear aTter illusions about Egypt ability deTeat Israel His analysis situation stren hened May Nixon Brezhnev meeting which promised inaugurate period detente He stressed superpowers would allow place region while detente active It better thereTore initiative policy encou raged Muhammad Haykal Nasser conTidant Peace Israel Western capital could create prosperity It seemed clear Sadat initiative there would little Tot Soviet Union nTitah could successful relative stability existed judged right wrong turned United States settle issues between warring sides Also there enormous amount unhappiness economic policies advocated USSR Soviet behavior their deliveries weapons Egypt desperate position conTronted political economic deadlocks The October attempt Sadat break these deadlocks means increase power within Egypt Some writers argued simultaneously prepare Tot economic inTitah Sadat October Paperu March seems conTirm analysis From would choosing economic direction leaving Nasser legacy behind Overwhelmingly approved means popular referendum stage Tot reTorms A Tew months later June Egyptian parliament passed Law Arab Foreign Investment which Tormed basis inTitah In effort attract petrodollars Arab investors given special privileges All these interacting political economic considerations explain coming inTitah regard thoughts closely coincide analysts John Waterbury given relatively short shrift notion PL_itah orced country individual joint action Western capital domestic capitalist lobbies The attack Nasser public sector intense slightly decade later relatively observe least happened Although I shall write detail about impact future liberalization general remarks point order The economic political social impact init_ah perhaps proTound articulate proponents predicted The government certain important initiative determine which investment opportunities wants attract encourage John Waterbury The Eovot Nasser Sadat The Political Economy Two ReQimes Princeton Princeton University Press Within years public sector those areas originally excluded protected onslaught foreign investment Most visible perhaps rapid formation upper middle class called infitah class Egyptians profited enormously liberalization Those belong intent enjoying these rewards amidst increasing hardship lower classes Ironically Egypt millionair prior revolution This control reasons The first reappearance strong private entrepreneurial class preferred foreign investment rather inefficient public sector Second managers within public sector often eager start joint ventures individually simply public sector better outside In regard Egypt experience noticeably different other developing countries where public sector acted training ground generation private entrepreneurs Not surprisingly adamant infitah Egyptians I interviewed exactly category Also foreign firms often eager respond deals public sector since those managers often bringing ventures successful The pressure investors institutions World Bank toward these joint ventu efficiency greater control process Finally about areas investment They tended cluster around tourism banking investment companies The criticism infitah opponents these contribute little direct production little value country though temporarily helpful balance payments problems By Sadat death Soviets expelled their economic presence largely eliminated Substantial Arab funds attracted West particularly after responded investments projects terms always Egyptian policymakers which control anticipated Diplomatic relations Washington resumed latest superpower proved generous friend Between billion civilian assistance flowed Egypt addition periodi increases million USAID after Egyptian troop disengagements Sinai In autobiography Sadat draws picture himself enlightened ruler Egypt although explicit Arab world No doubt uncommon attempt Jerusalem Fuad Ajami The Arab Predicament quotes fraction conversation between Sadat Kissinger which American Secretary State Egyptian president expect upcoming visit King Faysal Saudi Arabia Sadat answer Well Dr Henry probably preach about communism Jews The small fragment conveys Ajami perceptively note_ cultural pretension reality Sadat Arab world beyond Camp David agreements gesture jeopardize further Egypt standing Arab funds necessary success infitah Autobiographies however important revealed author actually conveys In Search Identity waxed grandiloquently president attachment Egypt villages people The profits Nobel prize money turned improvement Mit Abu Qum native village Invariably evening television broadcasts showed Sadat praying local mosque often dressed galabiyya Ironically utterly divorced increasingly became words religious opponents pharaoh In contrast Nasser funeral million people thronged Cairo streets common Egyptians allowed attend Sadat funeral In death separate This difference between Sadat personal pretension reality revealed dilemma Infitah larger strategy included controlled democra country But superficial experiment subject point curtailment regime threatened Sadat reaction opposition increasingly consolidating power hands In May I780 assumed premiership appointed deputy prime ministers rubberstamped policies He National lemocratic Party which created I TB which monopoly representation country A constitutional amendment I780 abolished requirement presidents could serve terms Judging autobiography debatable whether Sadat understood strong socio economic basis which dissent place about I774 For generation future compromised state enough money guarantee futures which there seemingly enough money luxurious minority This included Sadat famil whose daughters married families profited enormously under infitah Under Sadat frustrations generation offset possibility social advancement through employment abroad estimated million Egyptians chose For those middle classes remained however there increased marginalization For elite class under infitah profited migration often educated Muslim fundamentalism proven catch their hearts minds It therefore surprising bright young middle class often blame Soviet Unioni their predicament religious fundamentalists overwhelmingly student elections student unions Egyptian universities between I775 I777 Sadat promptly dissolved Fuad Ajami he_Arab predicament Cambridge Cambridge University Press It seems those fully intent correcting perceived faults Nasser regime faced dilemmas disappointments By Spring situation become desperate The highly efficient secret police unable contain islamic militants Egyptians their actions brought nightmares Nasser period The peace talks which jeopardized remained stalled Carter longer House Israel bombed Iraq nuclear reactor after Sadat Begin foolish worse Within Egypt disparity between those profiting infitah those there Ironically foreign during period contributed problem capital intensive projects construction industry barely touched lives ordinary Egyptians It reinforced their feelings infitah primarily benefit West feeling repeatedly expressed leftist religious publications When trouble flared again September Sadat responded throwing large number shades opposition It ultimately militant fundamentalists person Khalid Islambouli struck killed Sadat All nutshell Mubarak inherited which built future Egypt Beside lingering problems Sadat Nasser however faces problems High prices allowed Egypt profit substantially marketing 1970s But 1980s prices falling OPEC solidarity effective economic force 1970s Egypt production stagnated Earnings Egyptians working Persian Gul Middle East estimated between billion jeopardized countries their foreign workers The impact Egypt bound enormous spend report estimating consequences economically politically At infitah subsidies public sector political liberalization remain subject heated debate shall quite about future reports And beyond economic realities there remain other problems region Sadat peace initiatives Egypt traditional eminence although Saudi Arabia other heavyweight region careful completely irrevocably Mubarak advantage which skillfully exploited outsider Sadat Camp David accords economic moves president One early statements infitah called onsumer development strategy drinks luxury goods But enormous amount obstacles remain intentioned policy After years leading country there indicators actual changes taken place It however expect substantial changes years The economic legacy continues constrain options Egypt decision makers bureaucratic population urbanization pressures execution whatever options considered Egypt suffered considerably effects international economic during early Despite Mubarak seems indeed performed n__qrant until But manager actual planner years office Much depend whether effectively issues I II covering upcoming reports All Received Hanover