Egypt’s Tragedy Is In The Mix Of Impossible Politics And Total Economic Collapse 40% unemployment, currency reserves are gone. Saudi Arabia to the rescue, while Washington has become irrelevant

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By Paolo von Schirach

July 16, 2013

WASHINGTON – The unfolding Egyptian drama sadly tells us that the Arab Spring was no Spring at all. It was a convulsion affecting populations made miserable by amazingly obtuse tyrants who failed in all respects. They believed that autocracy was the best and only political option for the Arabs, while they did not promote any meaningful economic modernization, allowing their countries to be left way behind by a rapidly advancing global economy. 

New politics?

In Egypt’s case, getting rid of shop worn Hosni Mubarak, as difficult as it seemed at the time, was in fact the easy part. After that, the Egyptians would have needed pragmatic, middle of the road and mostly secular reformers to lead the country into the mostly unknown territory of democracy and rule of law, while at the same time breaking a new path leading to economic modernization, something that should have included the emancipation of women.

Morsi: arrogant and incompetent 

Well, Egypt got none of the above. The majority of the population (mistakenly) believed that the Muslim Brotherhood could provide stability. Well, they were profoundly wrong. President Morsi proved to be arrogant, stupid and incompetent to the very end. A more pragmatic leader could have salvaged something by compromising with the opposition once the military issued its ultimatum. If Morsi had been more conciliatory, today he would still be President, albeit with far less power and latitude. Whereas he made thing worse by doggedly refusing to acknowledge that more than half the country was vehemently against him and his semi-autocratic aspirations.

Political rebellion in the midst of economic chaos

And now? Now it is a lot worse. The military is in control. Their claim that they only want to steer Egypt towards a more inclusive democracy may very well be genuine. But the country is in a terrible political mess, while teetering towards bankruptcy. And here a dreadful situation becomes truly awful. It is pretty clear that the anti-Morsi crowds were protesting against both the politics of the Muslim Brotherhood and the deteriorating economy. Now there is a totally unrealistic expectation that a new government will bring economic relief. If this expectation is not met, expect more turmoil. So, here is the mix at the root of this new chapter in Egypt’s crisis: political rebellion in large part driven by genuine hunger. 

Turning a page on the political front will be an incredible challenge. Morsi does have genuine followers who believe that he should be reinstated and who are therefore refusing to participate in any new political arrangement sponsored by the military who ousted him. But if finding a new political equilibrium is a daunting task, recreating economic stability in Egypt is almost impossible, at least for several years. 

Egypt’s economic collapse

If you want a detailed picture of the depth of systemic economic management, please read the excellent analysis provided in a WSJ op-ed piece by David P. Goldman, President of Macrostrategy LLC, (The Economic Blunders Behind the Arab Revolutions, July 13-14, 2013).

Here is an excerpt:

“Egyptians are ill-prepared for the world economy. Forty-five percent are illiterate. Nearly all married Egyptian women suffer genital mutilation. One-third of marriages are between cousins, a hallmark of tribal society. Only half of the 51 million Egyptians between the ages of 15 and 64 are counted in the government’ measure of the labor force. If Egypt counted its people the way the U.S. does, its unemployment rate would be well over 40% instead of the official 13% rate. Nearly one-third of college-age Egyptians register for university but only half graduate, and few who do are qualified for employment in the 21st century.”

Got that? 40% unemployment. And then there is the daily bleeding of state coffers due to the established practice of government subsidies for staple food and more.

Saudi Arabia will give cash

For the moment it looks as if this exhausted country of almost 90 million will get some emergency cash from Saudi Arabia, Kuwait and the UAE. But this welcome relief is not a substitute for new economic policies.

And so, here is the picture. The Egyptians will have to find the wisdom to elect a coalition government that will be able to navigate the treacherous waters of a society deeply divided between fundamentalists and urban secularists, while at the same path charting a course leading to meaningful economic improvements.

While we should wish the Egyptians best of luck, realistically we should acknowledge that this is te closest thing to  “Mission Impossible”.

America has become irrelevant

One last note. In case you haven’t noticed, America has become essentially irrelevant in this whole process. Until yesterday Cairo’s strongest ally, now Washington is routinely vilified by everybody in Egypt, liberals and conservatives.

Sure enough, it would be good for America to retain and in fact strengthen its historic ties with the Egyptian military. Therefore, by all means, do not suspend the US assistance package. But let us also recognize that the $ 1.3 billion we give to the Egyptian armed forces is not that much, considering what the country needs just to stay afloat.

The Obama administration wanted to create a new era with the Muslim World. (Remember the Cairo Speech?) But it was caught completely off guard by the Arab Spring. As the profound upheaval was taking place, a mix of timidity and lack of money proved that Washington today is at best a spectator in a Region in which it used to exert an enormous amount of influence.

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