Yves here. This piece provides an intriguing analysis and a lot of detail to support its thesis that Egypt’s inability to generate the income needed to make payments on IMF loans means the country is likely to have its assets stripped. But be warned that the author clearly is offended by the Arab Spring uprisings and repeatedly, and incorrectly, calls them a mob. As Lambert pointed out:
A6M and the various (Otpor-inflected) non-Islamic resistance groups at Tahrir Square came out of union organizing in new factories in the delta and IIRC in piecework in Cairo. So if the enterprises they organized were closing, that would weaken their social base, and so it makes sense that that they were so weak in the aftermath of Tahrir Square, having done so well during it (even discounting for the usual leftist circular firing squad).
Nevertheless, those comments are asides and don’t bear on the argument.
As plausible as the rest of the piece sounds, I’m not in a position to judge. A colleague ran it by an Egypt expert who gave it a quick read and deemed it to be reasonable. I hope knowledgeable readers will make additions and if needed, corrections.
By Felix Imorti, a retired director of a private equity firm who currently lives in Japan. Cross posted from OilPrice
Three years has seen the overturn of two government, the deaths of thousands of people and the destruction of much of the Egyptian economy. In the end, the mobs have changed nothing, except to make their own lives more miserable.
It was a year ago in August of 2012 that the Morsi government approached the International Monetary Fund for a 4.8 billion dollar loan. That was an increase from the 3.2 billion dollars that the interim military government had sought and that the Muslim Brotherhood members of the parliament had opposed.
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Getting the loan was critical. If Egypt could raise the funds, it would be in a better position to borrow from other sources. The IMF calculated that Egypt needed at least ten to twelve billion dollars to survive for another year.
First, though, Egypt would have to meet certain standards before a loan could be granted. The deficit had risen to 8.7 percent of the budget and that would have to be reduced. Income tax on higher income earners and a higher consumption tax on a variety of goods would have to be imposed. Bread and energy subsidies that consume a third of the budget needed to be cut sharply.
Mubarak had understood in 1977 that the subsidies were a drain on the national budget and tried to raise prices. He learned when the mobs when into the streets the lesson that is as true today as it was thirty-six years ago. A large portion of the Egyptian population views the subsidized items as a right. 40 percent of the population lives below the poverty level and would find their hardship turned into desperation by an increase in prices. A quarter of the population of 84 million faces some degree of malnutrition and can be brought into the streets without much encouragement.
In December, the mobs were already in the streets to protest Morsi’s usurpation of power as he pushed through his constitutional obsession that was the focus of his government when the taxes and prices were raised. Instead of abandoning the constitutional conflict in order to resolve an economic crisis, his administration chose to concentrate upon fighting a political war by abandoning the loan. It was easier for him to defuse one angry mob by canceling the tax increases and the subsidy decreases than it was to appease the mobs opposing his dictatorial rule
He had acquired an economy with structural flaws that would take decades to correct. Egypt was and remains a rent funded economy that puts the source of wealth beyond the control of the state. Revenue from the Suez Canal and the Sumed Pipeline, tourist spending, remittances from Egyptians working abroad, and foreign aid support the state. Before the revolution resulted in the closure of forty-five hundred enterprises and the flight of capital offshore, only 13 percent of foreign earnings came from the export of manufactured goods.
Short of raising fees for use of the Canal or pipeline, that source of income is relatively inflexible. Tourism was discouraged by news reports of twenty-five riots or demonstrations per day somewhere across the country and a three hundred percent increase in the murder rate. The civil war in Libya sent most of one and a half million Egyptian workers home to congested cities, inflated the unemployment rate, and cost the countries desperately needed remittance payments.
The one hope came from foreign aid. Qatar funneled 8 billion dollars to Egypt. Turkey provided another two billion and Libya added 2 billion more. Each contribution made is easier to delay settling the loan with the IMF. It avoided the humiliation of submitting to foreign dictates that threatened to ignite a civil war.
The government was engaged throughout the period in a struggle between the availability of quality bread at an affordable price and the survival of the currency. Egypt must import fifty percent of its wheat. Between 2006 and 2011 the price of wheat and fuel rose by 300 percent. Under usual circumstances, Egypt runs a fifty percent trade deficit that must be offset by the rent sources of income. Once the disorders began inside and outside of Egypt, the collapsing economy meant that the usual circumstances no longer applied.
Since the start of the Revolution, the Central Bank of Egypt has been engaged in a futile effort to curb the inflation by supporting the exchange rate of the currency. The Strategy has been to allow for a gradual 3 percent depreciation of the Pound by maintaining a managed float. That has drained the reserves from 36 billion to 14 billion of which only half was available for international payments.
A million jobs had been lost since the outbreak of the Revolution in January 2011. Inflation had risen above 10 percent, and foreign reserves had dwindled to a mere two months in funds to finance imports.
These were numbers that the government could not easily conceal from the public. What the Morsi administration was more interested in hiding was that wheat reserves were down to two months and that the people were on the edge of a famine as well as a currency collapse.
The bulk of the imported wheat comes from Russia that produces a high gluten grain preferred for the making of unleavened pita bread that is a staple of the Egyptian diet. The Morsi regime found itself at odds with its main food supplier that was concerned about the spread of radical Islamic movements inside of Russia.
The Russian anxiety was made worse by Morsi’s support of the rebel movement in Syria where Moscow was supporting the Al-Assad regime. In spite of the looming crisis that Egypt was facing, Morsi called on June 15th for a jihad in Syria that assured Russian unwillingness to provide the desperately needed grain.
It was not until shortly after the coup that the United Nations Food & Agricultural Organization announced the social disorders and the abrupt increase in the birth rate threatened a food shortage. The emergency loans and grants of 12 billion dollars from Saudi Arabia, Kuwait, and the UAE has given Egypt the means to purchase the wheat on the open market, and the Russians have indicated their willingness to sell what wheat is available. Just in time, the new government has discovered abundant supplies of diesel fuel and butane that will enable the farmers to complete their harvest and to transport the grain to the mills. The rapidity with which the new administration located the previously scarce fuel reveals that the mismanagement by the Brotherhood of the economy and the negative natural economic forces were made worse by the manipulation by government agencies.
The 6.8 million government employees had a vested interest in bringing down the Brotherhood backed government. The Brotherhood was advocating the privatization of the state owned industries. That was threatening the economic interests of the military that controls a third of the economy and the jobs of the government workers. Morsi was following the same policy that contributed to the mob led coup that enabled the military to remove Mubarak.
Between 1991 and 2009, 382 state companies were sold by the Mubarak administration to private investors for a total of 9.4 billion dollars. Economic reforms to encourage foreign and domestic investment introduced in 2004 attracted foreign investment that grew the economy in 2008 at an annual rate of 7.2 percent from 4.1 percent. In spite of the impressive improvement, the overall unemployment rate remained above 9 percent and 25 percent for the youth that comprise a majority of the Egyptian population. University graduates found that their inferior education did not qualify them for employment and were forced to join the ranks of the unemployed. Neglect of the agricultural sector sent an influx of rural migrants into the crowded slums of the cities. The combined hopeless masses formed the powder in the time bomb that exploded in January of 2011.
Removing Hosni Mubarak was the easy part of the coup that the public imagined was a revolution. Finding a replacement was the harder part especially when the only choice was the Muslim Brotherhood that had been an enemy for sixty years. It was for the military the possibility of preserving its privileges of a separate state within a state. Since Morsi was deposed, the military has separated itself still further from the political system by amending its oath of loyalty to exclude any reference to the president.
The Brotherhood gained from the arrangement access to political power for the first time in its eighty-five year history, but assuring that they would be able to keep that power was not a part of the deal. That was made clear in January 2013. General Abdul Fattah el-Sisi, the defense minister, said in an address to military cadets, “Political, economic, social and security challenges” require united action “by all parties” to avoid “dire consequences that affect the steadiness and stability of the homeland.”
The warning was ignored. Morsi’s call on June 15th for a jihad in Syria provoked General El-Sisi to declare that the military’s duty is to defend the borders of Egypt.
The next step in dooming the Morsi Administration came on June 17th when seventeen new governors were appointed. These included eight Islamists, seven of whom belong to the president’s Muslim Brotherhood party. Of all of the appointments, it was the granting of the office to Adel al-Khayat as governor of Luxor that provoked the strongest reaction.
Al-Khayat is a member of the Building and Development party, the political arm of Gamaa Islamiya. The terrorist organization was responsible for a 1997 attack at Luxor’s Hatshepsut Temple, where 58 foreign tourists and four Egyptians were murdered by six members of the group.
While the people of Luxor protested the appointment of a terrorist to the govern ship, the military was lamenting the loss of the destination for retiring military officers. The office of governor was one of the privileges reserved for their members.
The environment that allowed for another coup that the mobs could label the reclaiming of its revolution was set with the petition circulated by the Tamarod Movement that called for nationwide demonstrations on the anniversary of the Morsi presidency. The mob bolstered by the support of the army has become addicted to the taste of political blood with the defeat of the Hosni Mubarak regime and the real possibility that Morsi too was fall. The mob became its own Roman Circus. Screaming for the destruction of the Brotherhood had nothing to do with solving the real problems that require massive reforming of the economic and political structures. What the mobs failed to grasp while they were urging the armed forces to oust Morsi was that the military is a major source of the poverty and tyranny. The generals cannot make those changes without surrendering the deeply entrenched privileges that is a key part of their elite standing.
The privileges of the military take many forms. Only 8 percent of land is registered. The remaining 92 percent cannot be counted as part of the national wealth and is not available to the average citizen. The lack of confirmed ownership means simply that investing in the property is not possible and that holds down the opportunity for people to accumulate wealth. It does not prevent state businesses or friends of the authorities from using the land that will not appear on any official records.
Government regulations block those without the connections from acquiring within a reasonable period of time and at a reasonable cost something as simple as a telephone. It is why 9.6 million people are employed in the underground economy where they can escape the burdensome regulations and costs while only 5.9 million are employed by the private sector that is public. The businesses in the underground economy do not have access to regular sources of financing and are not available to provide tax revenue.
None of this will change so long as the leadership has access to foreign loans and grants. How long the money will keep flowing remains to be seen. In Cairo, there is the general view among the leadership that Egypt is simply too important to be allowed to fail. It was one reason that Morsi thought that he had the advantage bargaining with the IMF and with Washington. The generals also hold the view that Egypt is entitled to the aid and will in one way or another get it from someone. Who that someone is really doesn’t matter.
The only real concern is how they will pay for the contributions. The United States demands little more than the assurance that Israel would not be attacked, but then, the American aid of 1.5 billion dollars is a minor sum that gives little demanding rights. The Saudis are offering 8 billion with additional funds of 4 billion from close allies; and that gives the Saudis considerably greater demanding rights. What they will demand is likely to take the Middle East into a new era.
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Reading this post made me think of the similarity to Spain with the exception of the military in one country being the bankers in the other.
Ongoing 25% unemployment among the youth is a death knell for both countries.
We are failing as a species….and the global plutocrats think they will survive this. They are deluded.
Calling the Tahrir Square protesters against Mubarak a mob is insulting, demeaning and historically criminal. These were freedom seekers that risked their life and accomplished a revolution without violence. Not many countries can claim such an accomplishment.
Egypt is an almost 100 million people country with a primitive economy and high levels of illiteracy. These are extremely difficult conditions to sustain a country. That’s not news; that was known ten years ago. That’s one of the reason Sadat made peace. He wanted to channel resources to the economy instead of wars. He didn’t live long enough to make a difference. Mubarak’s regime was corrupt and its interest in the economy limited.
We should be interested in helping Egypt instead of badmouth it.
The summary as given is reasonably accurate as far as I know following events. As far as it goes, which is one crucial step short. To see that, the issue is best recast in political terms.
Perhaps 60% of the Egyptian population is sympathetic to political Islam—a larger majority in rural areas—including a fluid population of 5-10% sympathetic to much more radical Islamic positions such as those of Gamaa Islamiya. A minority of those are weakly attached to that position, there for the handouts of the Brotherhood and perceiving them as perhaps a bit more honest. Maybe 25% are close to the Deep State and the Army. Christian Copts at about 10%, are largely urban and caught in the middle, leaning toward the Deep State who has abused them in legitimate fear of the most radical Islamists who despise them (tough choice, that). Secular liberals and leftists might amount to 5%, are entirely urban, and dislike the Islamists almost as much as they do the Deep State, i.e. they have no friends. Political Islam handily won every election, but the Deep State retained control of the police, the obstructionist judiciary of Mubarak functionaries, and or course the Army.
Morsi and the Brotherhood have known all alone they would face a counter-revolution. To block that, they needed to do three things, but were unsucessful in them all. They needed to push through a new Constitution which would break up some of the linkages of the Deep State. They pushed it through, but the Deep State aborted it, and the process terrified the seculars who had no part in the deliberations. The Islamists needed to get the economy going, as the commentor in the post describes in pretty solid detail. An IMF loan was necessary to that, and getting heavy industry going also. The IMF doesn’t do ‘new kids on the block,’ and wouldn’t play. Attempting to rein in subsidies cost the Islamists very severely with the soft part of their base, the urban poor who live on the subsidies: this was the worst single harm to the Islamists position. At the same time, the labor movement spawned a massive wave of strikes after finally getting (temporarily) out from under the neoliberal Deep State; very legitimate demands but effectively shooting themselves in the foot, with the Islamists getting the blame for massive economic contraction. The Islamists also needed to gain some significant backers in the international arena. The US had a real opening, but is too terrified of political Islams specifically and change generally to do jack. Russia loathes them. The Saudis are terrified of them. To Israel, political Sunni Islam is the real existential threat and ‘game over’ if and when (when really) it gains political power in the Near East. The EU is, well _the EU_ with no foreign policy. Everyone leery or more so of political Islam generally internationally has been sneering “Those people just [invective here].” The real issue is that the Brotherhood couldn’t get any backing, while the Deep State dug the sand out from under their feet.
The nail in the coffin was the principled backing of the Brotherhood (their principles) for the Sunni insurrectionaries in Syria, offering them what material support they could, and bringing tens of thousands of Syrian refugees to Egypt. To the Egyptian Deep State, political Islam is the end. The Deep State is corporate fascism controlling the military and its personal wasp-larve-in-the-nation industrial and real estate apanage. Its simulacra across the Near East have been the single biggest ball and chain on any kind of economic development, political pluralism, or geopolitical engagement. Where political Islam has advanced—being the only social force capabale of sustaining a push for change—it has pried the greedy, bloody fingers of the fascist apparatus off the body politic. This is what has happened in Turkey, where the power of the fascistic Deep State is finaly broken, and past criminals from the ranks of its generals are on trial. THAT is the outcome which Egypt’s military knows awaits them if they left change run its course. Where the Deep State was more of a ‘personal emirate’ as in Libya and Syria, it is being blasted from power. —And about frickin’ time, too, because it is the corporate fascists within even more than Israel or the US or the ossified monarchies who have made squalid prisons of the nations there. Want peace, love, and growth in the Near East? The military fascists have got to go then; else not.
The Islamists in Egypt suffered the typical situation of post-revolutionary governments: an insoluble political turmoil, severe economic contraction, and an unpopularity with outside states who might stabilize things with money and friendship (with strings attached of course, but whaddayagonnaduu?) Facing a counter-revolution from within on top of that, the Islamists had no room to maneuver, a situation exacerbated when much of the urban poor, for the moment, turned back to the Army in hopes of increasing their payout. The EU and the US decided on a ‘clammy handshake and nothing else’ to political Islam in Egypt and Syria. The Army in Egypt read that, correctly, as weakness and an opening, and struck.
The fascist Deep State is incapable of reform. It is worth noting that the Egyptian Deep State has been _entirely dependent upon foreign funds_ for close on a generation. The IMF, direct subsidies, and a trickle down from sanitized tourism. Without the fizz of that, economic stagnation on toward collapse would have done them in long since. If the Saudis bankroll them, they may be capable of holding out for, who knows? A decade? They have nothing to offer, but hold all the bullets. The real question in Egypt is whether an ‘Algerian solution’ of mass repression and death squads will be launched. If the international community shrugs and looks away, that seems highly likely. International pressure on the Egyptian junta—let’s stop calling it a ‘government,’ they’re coup birds—including a restriction of their subsidies, and a strong international response to criminal actions by the Syrian regime may forestall that. Given that the Saudis, Israel, and Russia are all likely to promise the Egyptian junta the moon, and deliver them funds in quantity, I’m not too sanguine about ‘restraint’ by the Egypitan junta. Given that ‘Let’s You and Him Fight’ is Israel’s operative strategy—getting internal factions in perceived opposing populations shooting at each other—mysterious ‘provocations’ are highly likely. . . . The Egyptian Interior Minister’s motorcade _was_ just blown up by a carbomb, wasn’t it. NOT the Brootherhood’s methodology at all. Hmmm . . . .
In that regard, I take exception to the poster’s emphasis on ‘It’s the economy, stupid.’ The political context dictates the meaning of the economic situation. Yes, the economy was a major factor in erosion of majority support for the Islamists, especially in the main cities. The economy will be a big factor for the junta. If they get it going, they’ll have a working plurality of domestic support; if not, they will be at once rejected by the urban poor again. To get the economy going, they’ll need Saudi and Israeli money, and mass repression against the labor movement. My view is we’ll certainly see both. If the ‘Algerian solution’ can be headed off, then things may simply play out over several years as transformational swings do. If an Algerian soluition is launched, none of the rest really matters a damn. This winter is critical. And outside pressure on the Egyptian junta will be decisive.
@ Richard Kline
I am willing to follow your endorsement of political Islam to a certain extent. For instance, Peter Turchin in War and Peace and War notes that:
However, your two-world theory — political Islam good; Deep State bad – drags us into propaganda, distortions, and untruths. After all, as Robert Hughes reminds us, “to preserve complexity, and not flatten it under the weight of anachronistic moralizing, is part of the historian’s task” (Robert Hughes, Culture of Complaint).
For instance, you begin by asserting that:
Well no, Richard, for anyone who has done even the most cursory invesitagion into the history of the IMF, the IMF has no problem doing “new kids on the block.” What the IMF doesn’t do is “get the economy going.” What the IMF does, at least when it comes to the non-OECD Seven countries, is austerity. Imorti explains this very clearly:
Next you go on to claim that:
Well again, no. It was the Muslim Brotherhood who was walking the neoliberal straight and narrow – austerity and privatization – and not what you call “the Deep State.” As Imorti points out:
Your biggest zinger, however, is probably when you claim that:
Well again, no. Double no. Triple no. The US, EU, Israel, and Saudi Arabia have no problem backing political Islam, as their current backing of it in Syria amply illustrates. The only country that has a real problem with backing political Islam is Russia, this due to the great security challenges it has caused Russia on its own territory and in its own back yard.
Oxymoron of the day! Oxymoron of all time, if things go bad enough. Anyone who support this foul movement is an enemy of the entire human species.
Thank you for identifying yourself as a foaming bigot, S M T. You know nothing of the Ikhwan but the fantasies you project upon it. I’ll know where to file the pixels you occupy subsequently . . . .
Anyone who so desires can read about and listen to antifascist researcher Dave Emory’s FTR #731 Interview with John Loftus about “America’s Nazi Secret” and learn the whole filthy rotten story of the Muslim Brotherhood’s collaboration with Nazi Germany. RK’s show of moral indignation is thus shown instead to be a display of moral inversion.
So from, I’ll agree that ‘political Islam’ vs. ‘Deep State’ is an inadquate categorization. You understand that in an already excessively long comment it’s necessary to make some generalizations?
‘Political Islam’ merits an entire post of its own, since patently most folks who think they know what that means don’t have the first clue. And even if one has a little information, there are many factions, with varying goals, and those goals _change_, or at least shift situationally. As with any other political faction trying to actually advance and implement policy. There are definitely cadres marching under the ‘political Islam’ banner who are plain bad news from their local population and about everyone else: they are the minority there, though. Gamaa Islamiya is not a faction I would support at any time, for example. I neglected to mention, for instance, that they deserted the Muslim Brotherhood when a coup was imminent to have the Brotherhood take all the blame and themselves try to push their more radical views upon disappointed religious conservatives in the aftermath. Not folks who play nice . . . .
There wasn’t space to develop this issue here. I’m not unaware of the weaknesses within political Islam as well as the potentials, I’ll keep it to that in this reply. Question in view of that: Your candidate for a reformist/transformational faction in the most Near East societies other than religious conservatives is . . . ?
“Your candidate for a reformist/transformational faction in the most Near East societies other than religious conservatives is . . . ?”
If that’s the only option, it would be better the army stayed in power.
Better for whom? The majority of the population, who are in fact conservatively religious? Better for post-imperialist Westerners continuing to perpetuate divide-and-rule by enabling or paying off grossly repressive military fascisms?
Your lack of commitment to the reality of self-determination is completely unsurprising, Synoptiicist. I can se you living quite comfortably under Franco, or the Argentine junta, or the Greek Colonels. “Better that they stay in power.” Better for you, sitting pretty: for the 90% living a lesser existence under repression, not so much. Thank you for identifying yourself as a fascist sympathizer, Synopticist—wait, you don’t see yourself as that _at all_, do you? Well we’re downwind: we don’t need eyes to figure out your party . . . .
So from, with regard to the IMF and Egypt, we’re in agreement that the IMF is a pernicious organization which maims all it touches. But you seem to see the willingness of the Brotherhood-led Egyptian government to privatize enterprises or otherwise engage with the IMF as ‘bad.’ It’s far from clear that that is other than a knee jerk reaction from you; I can’t say you have a demonstrated record of thinking a situation through either.
The government had to get several billion $ to get heavy industry going and bring in essential food imports. Where do _you_ suppose that they were going to get that money from? The Saudis weren’t going to bankroll them. Russia wasn’t going to give credit. The US and the EU weren’t offering even chump change. So where? Criticize all you want, but if the government doesn’t get the money, they were going to face economic collapse and a counter coup. No hedging: your solution, please.
More than that, though, you seem to completely misunderstand the function of ‘privatization’ in the Egyptian context. We are talking about crony capitalist fiefdoms run by the military or their political .0001%ers in Egypt. It is essential to shift such enterprises out of the control of the Deep State, in no small part because it is by these means they pay off their factional base. In most cases ‘privatization’ is theft from the public, and a damn bad outcome. In this case, it’s more in line with ‘expropriating the fascists.’ Now: do you _still_ think that is a bad thing, or something the Brotherhood should not have pursued?
Cutting the subsidies wasn’t politically smart. The IMF demanded it. And furthermore, the subsidies were an inherent part of the fascist patronage apparatus, buying quiescence from the poor. Furthermore, many in the Brotherhood are in business, and know from first hand that the subsidies make it impossible to get a _market economy functioning in Egypt_, something much closer to a goal of the Brotherhood than the Deep State since the Deep state is the quintessence of corporatist fascism. Look at the whole picture before you let fly: there is more in play in that issue than the Brotherhood groveling to the IMF alone.
One has to look at the context of actions to understand what they mean, from. I know that’s a new idea for you, but try it sometime.
Richard Kline said:
It would be nice if I were smart enough and well informed enough to think all this stuff up. But I’m not. So I, like many I suppose, look to sources I believe are credible, such as this one, which was written months before the final demonstrations which led to Morsi’s overthrow:
Of course now the military dictatorship has swung to the opposite extreme, and is blaming and scapegoating the Muslim Brotherhood for everything, as is explained here:
Richard Kline says:
Well that’s quite a different accounting of things than what others, including Imorti, are saying. These others seem to think Russia was quite willing to help Egypt, at least until Morsi shut the door on Russia by choosing jihad over food:
I suppose putting one’s strongly held convictions over eating like Morsi did could be considered to be an honorable thing. But did Morsi have the right to make that decision for all Egytians? Many Egyptians seem to think not.
.” Want peace, love, and growth in the Near East? The military fascists have got to go then; else not.”
Jeez, you’re delusional. Hows that peace and love thing going in Iraq and Libya? Think the syrian jihadis are going to bring a lot of love?
You’re part of the pro-Islamist left, who think islamism is the social democracy of brown people. it isn’t, it’s the clerical fascism of brown people.
There are of course many political and geo-political factors at play. But let’s not skip by a very important point: “Between 2006 and 2011 the price of wheat and fuel rose by 300 percent”.
The Arab Spring was ignited not by a groundswell of political awareness, but by big rises in the price of bread and other foodstuffs.
Can we lament one more time the pernicious role of central bankers and the political hacks who protect them. Manufacturing global inflation to protect a few billionaire bank bondholders should be a war crime. Not that those get prosecuted any more these days…
Yep… Classicist political shenanigans aside. Since WWI and then more so after WWII a *desert* was transformed to benefit the market desires of the West. Exploding population and consumptions over burden of sparse resources meets climatic change.
skippy… and it will not get any better.
Regime change is much easier than nation building. It appears there are enough people in Egypt who are capable of the former and very few interested in and capable of the latter. That is a fertile ground for outsiders to exploit them. If the only card that Egyptians have to play in order to avoid a collapse is that their descent into chaos is unpalatable to some around and expect them to shore up the Egyptian society, it is not likely to last. However, I am hopeful that Egypt will throw up a leadership that can set realstic expectations to the population and take up nation building. It will be a huge tragedy to see the land of the pyramids turn into a failed state.
“Just in time, the new government has discovered abundant supplies of diesel fuel and butane that will enable the farmers to complete their harvest and to transport the grain to the mills. The rapidity with which the new administration located the previously scarce fuel reveals that the mismanagement by the Brotherhood of the economy.”
Extremely disingenuous. The “just in time” discovery of essential goods strongly suggests, contrary to the author’s glib assertion, that the shortages were artificial and intentional, aimed at squeezing Morsi’s government. This tactic is well documented in the lead-up to Pinochet’s coup in 1973 and no doubt other cases.
The Egyptian Deep State did everything _possible_ to sabotage the economy of their country and discredit a popularly elected government unpopular with them. Another story the international media could barely be bothered to cover. ‘Stupid, erratic, Muslims grabbing power and wrecking the economy’ was the working meme put out as I watched the proceedings. And yeah, exactly the treatment Allende was given, a close analogy; different puppeteers, same playbook. But America didn’t write it: the French did, having learned the fine points from the Brits, who had a ‘popular opinion’ they needed to manage.
I appreciate your thoughts and take them very seriously. What bothers me on a deeper level is that people like me, secular and small “d” democrats, are always looking for a narrative wherein a majority here, there, or anywhere really wants a democratic and secular state. I don’t doubt that Obama and many of the people around him–hell, even Bush–twist reality into a pretzel so that they can imagine that the people they back are in some way vaguely democratic and secular, or at least potentially so, Jeanne Kirkpatrick’s Authoritarians and not those dreaded Totalitarians.
In the real world, in most places and times, a majority of people are not in favor of, or at least uncomfortable with, a democratic and secular state. Hell, I think if they thought they could get away with it, more than a few Southern and Western states would adopt systems that enshrined “Biblical” law and limited the franchise to white, property-holding native-born people. But we secular folks want “good guys” to root for and support, or we feel we need to back a horse in every race, so we pretend that this fact is not so.
I’m sure there are some in the American Power Elite, or Deep State, or whatever you want to call it, who don’t give a damn about representative governments or Enlightenment values. But I think they are the minority. Americans love to believe, love to have ideals, even if they never act on them. They want to think that “our” overseas factions really, deep down, want nothing more than to be like us. This is a dangerous illusion. It is why, nine times out of ten, it is better to stick to your own business and let others fight their own fights.
So James, ‘democratic’ and ‘secular’ are fundamental and hard-earned values in American society. They are deeply believed. What is often missed is that these came out of specific, historical experiences: they were _learned_ values, in other words. The Enlightenment did not create ideas, it endorse learned experience into explicit philosophies. Other societies haven’t had the same trajectory of learned experience, so the people of them will put together their values somewhat differently, even if ‘something like secular’ and ‘sort of democratic’ is what they attend, not to say what they achieve. Bear in mind that _these things take time_. It took England at least five generations to get around to something like ‘republican’ and another four to act something like ‘democratic’—and that was quick compared to many!
“‘Our’ faction . . .” Personally, I think it’s a bad idea for the government of the US as a matter of policy to identify ‘our’ faction, and engage a society through them. That is a long discussion which I won’t attempt here. What I can say is that the US does not have an faction to engage as ‘ours’ in the Near East which is both workable and acceptable on ‘democratic and secular’ grounds—because out policies have been so anti-democratic no one credible would shake our hand or take our money except under duress. The US had an historic opportunity to engage with emergent ‘democratic’ factions in the Near East—and flubbed it spectacularly, in part because those factions included moderate religious societies which were going to be less tractible to American policy.
“Nine times in ten it’s better to let others fight their own fights.” I couldn’t agree more, in principle. The issue is to identify the exceptions to that, and where so what to do. I would put it more generally, eight times in ten, it’s better to stay out. One time in ten, one of the fighting parties has _you_ in it’s sights after, so waiting is strategic self-harm, however one gauges the morality. A tough choice, and the US hasn’t faced _any_ such situation in more than 70 years. Pretty rare, yeah. Then one time in ten, one of those parties is perpetrating a massacre of huge scale and open end, and there is a responsibility to intervene. Those have been extremely common over the last {however long you want to pick], so the issue becomes more a) make it better/make it worse?, and b) means to achieve ends. To me. The Syrian conflict certainly is such a situation. Mali, by contrast, might or might not have been; one could do the same evaluation and arrive at a different conclusion. Somalia, we should never have touched, and do only harm there yet. It’s a difficult choice . . . .
“Getting the [IMF] loan was critical.” I’ll bet that’s a claim Argentina would take issue with.
All the crazy talk about “money,” where will it come from, how will this or that enterprise or state agency honor its liabilities … all of it lacks foundation in the means by which credit is deployed for the sake of organizing capital in all its forms, how investments credit facilitates would serve to increase the Egyptian nation’s capital stock, thereby raising to virtual certainty the likelihood that, debts incurred for causes related to this intention to raise the sovereign’s capital stock through the deployment of credit are easily extinguished.
The main thing a financing mechanism external to the sovereign, like the IMF, could and should provide is assistance with the aquisition of capital stock not currently available to the sovereign, this for the sake of expediency serving the sovereign’s intention to increase its capital stock through its allocation of credit provided via its national bank.
The paradigm in which the IMF presently is situated is failed, however. Whether this larger issue is one the Egyptian military has come to realize is uncertain. Whether Egypt will move to form a Hamiltonian national bank and cajole the BRICS to launch their promised “Development Bank” for the sake of Egypt acquiring capital stock it presently needs to organize investments in its physical economy whose subsequent leveraging will serve to guarantee the nation’s development intentions are met, helping it meet both its promises to its people, as well as its foreign partners, this too remains to be seen.
Any other analysis of the Egyptian situation is an exercise in fantasy, I believe, as today’s globalized moneterist system positively is doomed in its present, wildly imbalanced, much, much too heavily financialized, and highly parasitical state.
“Egypt’s inability to generate the income needed to make payments on IMF loans means the country is likely to have its assets stripped . . . ”
Huh?
Egypt is Monetarily Sovereign, so has the unlimited ability to create its money. It can pay any debt denominated in Egyptian pounds, so why did Egypt borrow from the IMF?
Further, since Egyptian pounds are freely exchanged on world markets, why would Egypt need to worry about any foreign debt?
It is absolutely, 100% impossible for any Monetarily Sovereign government to be forced into bankruptcy. Yves surely must know that.
I’m sorry that Yves does clarify the differences between Monetary Sovereignty (U.S., UK, Canada, Japan, China . . . and Egypt) vs. monetary non-sovereignty (Chicago, Ohio, the euro nations), because lacking this background, the post is nonsensical.
Come on, Yves. Get to the facts.
Oil is bought and sold in US dollars, not Egyptian pounds. What I believe the lady means by bankrupt is unable to pay for critical items (like oil and food) because their dollar reserves are all gone.
My god, Britain, whose pound was until 1931 the international medium of exchange, had to go into de facto receivership in March 1941 because her reserves of foreign currency where down to $60 million dollars. That’s how we got lend-lease. The Americans were completely disinterested in accepting sterling. Before Lend-Lease it had been “cash an carry”, wherein the USA gobbled up about $3 billion in Anglo-French assets (those are 1940 dollars, by the way). Britain hasn’t crawled out from under that financial fiasco since.
Expanding the money supply works for debts denominated in the sovereign currency. It doesn’t work so well for imports and balance of trade issues, which appear to be a fundamental element of the problem in this case:
Egypt must import fifty percent of its wheat. Between 2006 and 2011 the price of wheat and fuel rose by 300 percent. Under usual circumstances, Egypt runs a fifty percent trade deficit that must be offset by the rent sources of income. Once the disorders began inside and outside of Egypt, the collapsing economy meant that the usual circumstances no longer applied.
“It is absolutely, 100% impossible for any Monetarily Sovereign government to be forced into bankruptcy.”
Egypt can print all the Egyptian pounds it wants. Getting sellers of wheat or oil to accept them is something else again.
A Monetarily Sovereign government can not be forced into bankruptcy as long as it only issues an amount of money more or less proportional to its perceived ability to extract revenue from a viable economy or if it has no trade deficit.