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Nationalism or Privatization: The Choice is Not So Easy for Egyptians

May 24, 2011

Outgoing ambassador Margaret Scobey speaks with the Egyptian media May 21. Photo by Ahram Online.

The US thinks Egypt should avoid a return to the nationalism, as some labor movements and intellectuals are advocating.

That’s the (not very surprising) position of the Obama administration as articulated by outgoing US Ambassador to Egypt Margaret Scobey as reported in an Ahram Online story by Salma el-Wardani.

“A return to nationalization will be a huge disincentive to investment,” the United States ambassador to Egypt said in a media roundtable held at the US embassy on Saturday. “I think Egypt has to make its choice and find an economic policy that would solve its prompt problems; to create jobs and social justice.” .

and

“Yet I think the public sector cannot [solve its problems],” she said. “History proves privatization has been very healthy, helpful and successful in helping many countries transform to democracy. … People want decent jobs… social justice, and I think it’s unlikely that public sector having the upper hand can be a way forward,” she said. “On the contrary, the free market and the private sector provide people with innovative ways to work.”

The classic model for thinking about the Egyptian political economy involves an (incomplete) transition from a Soviet style system of state-owned manufacturing to a liberal economy that brought in foreign investment and global consumer goods. That’s true as far as it goes.

But it doesn’t go all that far.

The Nasserist system bankrupted the country, saddling it with huge debts, a labyrinthine bureaucracy, corruption and autocracy.

But it also built schools, roads, parks, and the Aswan dam , created jobs (especially for the new educated middle classes) and seized control of the country’s lucrative Suez Canal from the British. Rent controls and food subsidies on bread, beans and cooking oil meant that most families could afford someplace to live and even the poorest family could always afford to eat.

When middle and working class Egyptians look around for the benefits of economic liberalization, they don’t see much.

Cairo’s urban spaces have been dramatically transformed by skyscrapers, shopping malls, planned cities and gated communities, but these benefit mostly people in the top six percent of the nation’s wealth distribution. Schools and public hospitals are crumbling, costs of living are rising far faster than wages, and job creation does not keep pace with population growth, or even with university graduation rates.

Nor did liberalization reduce bureaucracy and corruption, especially at the highest levels.

Scobey is absolutely right about one thing, though: Egypt needs to deal with immediate economic problems and social justice. Any elected administration that fails to produce some sort of tangible change affecting millions of families–a national minimum wage, for example–is almost certainly not going to get re-elected.

And the Untied States–borrowing money to pay for foreign wars while slashing money for education, infrastructure-building,and regulation, and seeking to delimit collective bargaining–is not a country Egypt will want to turn to for models of how to go forward.

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