What’s Wrong with Egypt’s Economy?

After the demonstrations started in Egypt, a number of commentators asked what was wrong with Egypt's economy. Matthew Kaminski, writing in the Wall Street Journal, noted "To the public at large, Gamal Mubarak symbolizes obscene wealth for the elites, while roughly half of Egypt lives on less than $2 a day and can't read or write." However, he went on to say that the country's 2005 economic reforms were helping. He quotes investment banker Yasser El Mallawany: ""With the right policies, Egypt in 10 years can be Malaysia."

It seems odd to suppose that one of the world's great old civilizations should aspire to be like a poor southeast Asian country, but Malaysia is clearly on the rise–and Egypt just as clearly is not.

Paul Gregory offers an even clearer rebuke of Egypt's economic policies:

Egypt is poised to follow this same path. Its private economy is weak. Some thirty five percent of Egyptians work for the state. Ninety percent of cotton spinning and sixty percent of fabric manufacture is in the hands of the state. The poor Egyptian public receives its food through state ration coupons as it did 3,000 years ago. Only ten percent of property rights are secure.

I'm slowly reading Will Durant's Caesar and Christ, part of his 11-volume The Story of Civilization. (My last related post was about the Roman financial crisis in 33 A.D.) Here is Durant's take on Egypt during the Roman Empire:

Egypt should have been the happiest of lands, for not only was the earth freely nourished by the  Caesar and Christ   Nile, but the country was the most self-sufficient in the whole Mediterranean basin — rich in cereals and fruits — cutting three crops a year — unexcelled in its industries — exporting to a hundred nations — and seldom disturbed by foreign or civil war.

And yet — perhaps for these reasons — 'The Egyptians,' Josephus notes, 'appear never in all their history to have enjoyed one day of freedom.' Their wealth tempted, their semitropical lassitude suffered, one despot or conqueror after another through fifty centuries.

… The state capitalism of the Ptolemies was continued in reduced form. Every step in the agricultural process was planned and controlled by the state. Proliferating buraucrats determined what crops should be sown and in what quantities, annually allotted the requisite seed, received the product into government warehouses, … exported Rome's quota, took out taxes in kind, and sold the rest to the market. Corn and flax were state monopolies from seed to sale; so, at least in the Fayum, was the production of bricks, perfumes, and sesame oil. Private enterprise was permitted in other fields, but under ubiquitous regulation. All mineral resources were owned by the state, and the quarrying of marble and precious stones was a governmental privilege.

… from Augustus to Trajan the country — or its masters — prospered; after that zenith it succumbed to the discouragement and exhaustion of endless tribute and taxation and the lethargy of a regimented economy."


 Fifty centuries without knowing freedom, and plenty more since then.