Behind Egypt’s revolt: A dictatorship without development

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I was in Cairo in November, and a friend, Hasan, was kind enough to invite us to his house for dinner. Hasan is not a member of the super elite, but he’s not among the poorest in Egypt either. (His daughter has a new Samsung smartphone.) Yet as we turned onto the streets around his apartment block, I was dumbfounded by what I saw – mounds of garbage lining the roads. Not scattered litter tossed out of car windows, but bags of household trash stacked up by local residents, waiting to be collected. Apparently, that doesn’t happen very often. The garbage buried the curbside like drifts of plowed snow.

This is how people live in Cairo. Is it any surprise the average Egyptian is so angry? If you’re going to be a dictator, at least collect the garbage. In other words, if you’re going to deprive your people of civil liberties, you’d better deliver economic development – jobs, rising incomes, new opportunities. Perhaps the ultimate failure of the tottering regime of Hosni Mubarak is that he allowed his country to fall behind much of the rest of the emerging world.

When Mubarak became president in 1981, GDP per capita in Egypt was $514. In 2009, that had grown to $2,270, so it more than quadrupled. That’s not so terrible. Egypt’s performance was roughly similar to Indonesia’s (though the latter had to contend with a much larger population). But Mubarak’s record isn’t good enough, either. China was much, much poorer than Egypt in 1981, with GDP per capita of only $195. But in 2009, China’s had jumped 19 times, to $3,744. Thailand’s more than quintupled during that same time period to $3,893.

Mubarak’s problem is that he never managed to attain those huge growth spurts experienced by the rapidly expanding economies of Asia – those 7% to 10% rates year after year. Egypt has been performing somewhat better in recent years, after reforms liberalized trade, cut corporate taxes and restructured the financial sector. Egypt’s GDP grew a more Asia-like 7% a year between 2006 and 2008, with only a slight dip to 4.7% in 2009. That’s up from the 3% to 4% of previous years.

But Egypt still remains relatively disconnected from the world economy. Exports as a percentage of GDP fell from 33% in 1981 to only 25% in 2009. Nor has that mini-growth spurt done enough to improve the everyday lives of ordinary folk. Unemployment remained stubbornly high, at 8% to 11% during those same years. The World Bank estimates some 18% of the population still subsists below the poverty line (with that rate jumping to 40% in certain rural areas) while 20% of the people flip-flop in and out of poverty, a sign of a high degree of economic uncertainty. Egypt also trails in some important social indicators. China and Thailand have literacy rates above 90%; Egypt’s is around 70%.

The failings of Mubarak are symbolic of those throughout the Arab world. While East Asia and increasingly Latin America leap from strength to strength, becoming more and more important to the world economy, the Middle East has tended to remain on the outside of the globalization story, with its impact on the world economy generally limited to the oil sector. The result is a region that has in certain respects been frozen in time. Compare poverty alleviation efforts, for example. Though 40% of the people of emerging East Asia lived on less than $2 a day in 2005, that share had plummeted from 93% in 1981, according to the World Bank. In the Middle East and North Africa, fewer people live below that line – only 19%, in fact – but there has hardly been any progress in the past 30 years. In 1981, 29% lived on less than $2 a day in the region. That’s why citizens of the Middle East are marching against their governments from Tunisia to Yemen. They’ve been left out of the growth story enjoyed by large swaths of the rest of the planet.

And even when the people of Egypt work hard, hustle, and manage to earn a bit of money, it can get sucked away by corruption. During my visit to Egypt in November, my wife and I hired a taxi to drive us from Luxor to Aswan for 450 Egyptian pounds (about $80). Every 20 or 30 minutes, we’d pass through a police checkpoint, and the officers would tell the driver they wanted to get some tea. That is a not-so-subtle request for a bribe. The driver passed one bill after the next out the window. Then he was flagged down by a policeman who claimed he was speeding (he wasn’t) and extracted 150 pounds from him on the spot with a falsified ticket. By the end of the trip, only a fraction of the money we paid the driver actually remained in his pocket. I felt so bad that I gave him extra to compensate for the money he lost through corruption.

The genius of China’s great economic reformer Deng Xiaoping is that he realized the link between dictatorships and development. In the late 1970s, when China’s market-oriented reforms began, Deng and the other elders of the Communist Party were concerned they would face an uprising from a population that was trapped in desperate destitution after 30 years of misguided economic policies. Deng hitched the party’s future to delivering jobs and better livelihoods for the average Chinese. In other words, Deng struck a grand bargain with the Chinese people: You submit to our rule and we make you rich. Mubarak’s version was something like: You submit to my rule and I don’t do anything for you in return. So far, the Chinese have accepted Deng’s offer. As we can see now, the Egyptians don’t much care for Mubarak’s.

I’m not saying the Mubarak could have survived even if he had implemented the kind of policies that brought the average Egyptian new jobs, cars and homes. Authoritarian regimes in places like South Korea and Indonesia were eventually ushered off the scene by angry protests as well, despite their success in bringing development to the nation. But if Mubarak and the other leaders of the Arab world cared more about people’s wallets (other than their own), I think it’s fair to say that the political process in the region would likely have been playing out differently today.