i just listened to a podcast of the Egyptian finance minister and I am very surprised. Egypt has initiated some sweeping economic reforms and they are having an effect. They are on track for a 7% increase in GDP this year and they expect that to continue now that certain things have been put into place. What reforms? They streamlined their infamous customs regulations, completely redid their tax system by slashing tax rates across the board and greatly simplifying the process, and perhaps the most important thing, they are in the process of cutting through the enormous bureaucracy and shrinking the size of their government. Foreign capital investment has gone through the roof and consumption is way up.
He said a couple of things that really struck me as being amazingly astute. First, he noted that Egypt now has a current account surplus, he wants a deficit. You may be more familiar with the hot phrase in the media here, a trade deficit. It’s the same thing.” Wait a minute, isn’t that what everyone here is getting all upset about? isn’t everyone worried that we’re “losing” to the Chinese? Egypt’s finance minister is correct when he says that a positive (exporting more than importing) current account balance means that they are lending money to other countries. What you want to to be borrowing in order to finance capital improvement. Or as he says, “We’re not rich enough to be lending out money.” The other thing he said was in response to a question about the permanency of the reforms he has overseen. Very often, good economic policy is implemented only to have the political winds shift before the effects can be felt. As a (former) prime minister of Belgium said, “We know what to do (economically), the trouble is that we don’t know how to be re elected once we do it.” The finance minister pointed out that what many people want is predictability and stability. He has had people tell him that they wish that the Soviet style government would come back even when it is pointed out to them how much better things are without it. Many people fear change and it holds back real economic improvements. His rather amazing method to try to guard against this is to make sure that the underlaying bureaucracy and control is destroyed. It is easier to reverse course when a small number of people control something, it is far more difficult when that power is spread across millions of people like it is in a market economy.
He went on to make many great points about government power, economic progress, and how people’s lives improve through market processes. It’ s an amazing talk and he was amazingly eloquent considering that English is not his first language. Although he did graduate with a doctorate from MIT, so maybe that’s not all that surprising. I highly recommend anyone interested in developing countries, easing poverty, and economic progress to check it out, it can be found here.
But but but… there’s an elephant in the room and his name is Mubarak. When it comes to freedoms like free press, speech, assembly, etc. he is a typical autocrat. He has a slew of people rotting in jail for disagreeing with him. God only knows how many people have disappeared under his watch. He does not allow any real political dissent and his he is trying to set up his son as his successor to the throne, er, I mean the presidency. I do think that the Muslim Brotherhood will be allowed on the ballot. They are the main opposition party, it’s sad to think that the best chance a country has of getting rid of a terrible leader like Mubarak is by adopting an economic plan that has mired the entire middle east in poverty and corruptiuon. SIGH. Well, maybe Mubarak is fitting my description of the economically savvy SOB that an Arab state needs to get out of it’s hole. I’m probably giving Mubarak too much credit, his only real accomplishment is probably just not getting in the way. Still, it gives me hope.
Isaac
Egypt middle east mubarak economics poor government red tape cato