Corruption, Neoliberalism and Entrepreneurialism in Mubarak’s Egypt

The regime’s corruption did not stifle entrepreneurialism–it encouraged the creation of new businesses by elites for elites. Photo by Sophie Peterson.

In the light of Mubarak’s acquittal on charges of corruption, and even more shocking, that of his sons, it is interesting to review what is known about corruption during the Mubarak era.

Fortunately, there’s a paper posted to Scribd entitled “The Nexus of Power and Money in Mubarak’s Egypt” by a guy named Christopher Haynes that does a very good job of aggregating the literature on corruption during the Mubarak regime. (Hayne’s bio on Scribd doesn’t reveal many specifics about him but I think he might be the Chris Haynes studying for a Master’s Degree at the American University in Cairo who sometimes writes articles about Egypt for the Atlantic Sentinal. Certainly his papers read like good grad seminar papers).

And middle class entrepreneurialism struggled on amidst the declining infrastructure and widening gap between rich and poor.

His thesis in this paper is a variation on the readily accepted fact among most Middle East scholars that the US and European push for Egypt to adopt neoliberalism as part of its repositioning in the global economy became a way for a business elite closely connected to the regime to enrich itself at the expense of the people by avoiding competitive bidding for state properties, buying land at sub-market rates, and so forth.

He argues–correctly, I think–that this goes beyond mere corruption and describes a whole structure for doing business.

One part gave me pause. He quoted my account–in this blog–of people in Luxur complaining that their houses have been razed by a company connected with Gamal Mubarak against which they were helpless to do anything.

Okay. So far, so good.

But the lesson he draws from this anecdote is not one with which I’m entirely comfortable. He writes:

If neoliberalism had intended to create an entrepreneurial class in Egypt, it failed.

Well…yes and no.

I wish he had read Chapter Six in Connected in Cairo where I describe some of the strange complexities of entrepreneurialism, development and state-guided privatization via neoliberalism. Neoliberalism, and its related practices, did indeed create an entrepreneurial class among the Westernized elites that occupy, say, the upper six percent of the Egyptian population.

Initially, I had this working hypothesis that this was unstable, and doomed to failure. Then, while talking with an entrepreneur who was a partner in one of the gigantic new malls in Cairo in 2005, I asked him how he thought he could run a shopping mall that 94% of the people of Egypt could not afford to buy anything at.

He smiled, and said (I’m paraphrasing), “I’m glad to hear that you calculate our customer base at 6%. Our own figures put it at 4%.”

He smiled even more broadly at my look of confusion and said, “Dr. Peterson, you must remember that Egypt is a very big country. Four percent of 80 million is more than the entire population of Kuwait or Dubai, and nobody questions whether they can sustain their consumer economy.”

In other words, as I describe in Chapter Six, the regime’s economic policies created entrepreneurs of the cosmopolitan class who created venues for other members of the cosmopolitan class to continue to establish their cosmopolitan credentials through consumption. Thousands of entrepreneurs drawn from an affluent population of 3-5 million creating establishments to serve the rest of those millions–while the remaining 75,000,000 remain excluded.

(To be clear, this educated cosmopolitan elite were not necessarily supporters of the regime–indeed, members of this wealthy, well-educated class were among the leaders of the uprising)

Outside the elites I studied, entrepreneurialism remains live and well among Egypt’s struggling middle classes. Indeed, I recommend Mr Hayes read Julia Elyachar’s brilliant book Markets of Dispossession (Duke University Press, 2005) which shows why Egyptian entrepreneurial craftsmen continue to do better, in general, than university graduates starting small businesses whose heads are crammed full of all the neoliberal assumptions about how to run a business (the link is to my review of her book).

Finally, I would recommend that Mr. Haynes read Timothy Mitchell’s excellent Rule of Experts: Egypt, Techno-Politics, Modernity (University of California Press, 2002), which describes Egypt’s changing political history from the apex of British colonial power to the period of “structural adjustment” mandated by neoliberal agencies like the International Monetary Fund, World Bank and so forth, which lays bare the ideology of expertise through which power and neoliberal economics are linked.