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February 9, 2011

Economic Reforms a Must for Democratic Egypt

By

What's behind Egypt‘s unrest? Is it really lack of democracy?

The protesters agree that Egyptian President Hosni Mubarak must go, but there does not seem to be a unifying vision of what should happen next. What kind of government and society do they want to see replace the current regime?

We need to figure it out. If we don’t, if we misjudge the situation, we will find ourselves ill-prepared to deal with the new order or leader that emerges.

Let’s start with what the situation is not: An Islamist revolt. While many Egyptian Muslims may hold illiberal views about other religions, most of the protesters are young and secular, not motivated by a desire to get closer to Allah. The Muslim Brotherhood will certainly try to take advantage of the unrest, but their cause did not spark this rebellion.

Nor do most protesters seek a Western-style liberal democracy. Though they speak of elections and freedom of speech, most do not view “democracy” the way we do — a system based on representative government and the rule of law, with protections for individual liberties like freedom of expression and religious freedom.

In a Pew poll of Egyptian Muslims last year, most (59 percent) said democracy is preferable to any other form of government. But the poll found much stronger backing for Islamist policies, such as executing Muslims who change religion (84 percent) and executing adulterers by stoning (82 percent). And most (54 percent) favored making segregation by sex at work the law of the land.

If it’s not liberal democracy, then what does motivate most of the protesters?

They are fed up with being poor. One of every five Egyptians lives below the poverty line, earning less than $1 a day. Double-digit unemployment plagues this country of 80 million, the median age of whose populace is just 24.Inflation is running around 12 percent a year — making even the cost of bread so high that the government has to subsidize it for more than 14 million people.

Such poverty results from a fundamental lack of economic freedom. In the Heritage Foundation/Wall Street Journal 2011 Index of Economic Freedom, Egypt ranks 96th out of 179 countries and only 11th among the 17 countries in its region. It performs so poorly for many reasons: Corruption is rampant; property rights are ignored; the government controls most commodity prices, suppressing productivity; inflation and food prices soar; and most of the real value of the economy is hidden in the black market.

society is dysfunctional because its economy is dysfunctional. Even with a new government headed by the most pristine democratic leader in the world, Egyptians still wouldn’t have a prayer at political reform, unless that new president understands this problem and figures out how to fix it.

The only way a new democratic regime in Egypt could fix the economy — and create the conditions for democratic values and governance to rise and survive — is to liberalize it. Some people mistakenly think this already happened. It hasn’t. The Mubarak regime’s so-called “neo-liberal” economic reforms were cosmetic at best and little more than a smoke screen for crony capitalism. They didn’t make a difference because they ignored the structural cause of the problem: The fundamental lack of economic freedom.

Egypt needs root-and-branch reform of its economic and judicial institutions: Getting rid of rigid controls of the labor force; getting the government out of the business of controlling commodities pricing; making it easier to start a business; cleaning up the judiciary and protecting the sanctity of contracts; reducing government spending; and lowering taxes to boost private initiative and job creation.

Many of the illiberal values in Egyptian society today are not a result solely of the rising influence of Islamist groups such as the Muslim Brotherhood. They are also caused by a culture in which individual economic responsibility is undervalued.

If you’re comfortable with a paternalistic government that pretends to take care of your every economic need, then you may not care about elections. If you’re lucky enough to depend on government patronage, the last thing you want is a new democratic order that doesn’t guarantee you a job.

After all, this is what Mr. Mubarak promised, and he’s so hated now not because people hated the idea of the bargain, but because it didn’t work.

Any Egyptian, such as Mohamed ElBaradei, could take over power tomorrow and hold free and fair elections the day after, but unless Egypt‘s economic structures are changed, the country will be in a state of perpetual crisis. The economy will remain stagnant. Unemployment will remain high. And the real cause of the unrest — the lack of economic freedom and opportunity — will persist and strangle Egypt‘s infant democracy in its cradle.

Democracy without real economic and political liberalization will fail. Let’s hope the administration has this in its talking points for Egypt‘s potential new leaders.

Kim R. Holmes, a former assistant secretary of state, is a vice president at the Heritage Foundation.

First appeared in The Washington Times

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