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Whether or not Egypt flowers into a model democracy, whether or not Egyptians tomorrow live more freely than Egyptians today, today they threw off a tyrant. The surge of overwhelming bliss that has overtaken Egyptians is the rare beautitude of democratic will. The hot blush of liberation, a dazzled sense of infinite possibility swelling millions of happy breasts is a precious thing of terrible, unfathomable beauty, and it won’t come to these people again. Whatever the future may hold, this is the happiest many people will ever feel. This is the best day of some peoples’ lives. The tiny Dionysian anarchist on my other shoulder is no angel, but I cannot deny that there is something holy in this feeling, that it is one of few human experiences that justifies life—that satisfies, however briefly, our desperate craving for more intensity, for more meaning, for more life from life. Whatever the future holds, there will be disappointment, at best. But there is always disappointment. Today, there is joy.
– [Democracy in America - The Economist 02/11/11]
The moment of elated disbelief has not quite passed though the murderous neighboring madman, tone-deaf Gulf monarchs and cacophonous democratic debates of Tunisia and Egypt are quickly seeing to that.
For all the wonderful and consequential discussions of political process and system, it is the economics of Egypt that may be the country’s most pressing challenge.
A few characteristics of the required economic destination seem obvious (although I don’t know the Egyptian economy well enough to be certain):
Shrunken public sector.
Egypt’s legendarily bloated (6 million strong) and incompetent public sector is perhaps the biggest deterrent to economic growth. It’s the primary source of graft and a major source of inefficiencies in the economy. A smaller, better paid public workforce is needed alongside simplifying reforms to regulations and the tax system. Although the government undertook significant privatization programmes over the past decades, the government still has scope to reduce its direct role in the economy. The roles of the police and armed forces in the local economy need to be curtailed as well.
Subsidy free economy.
Unsustainable and highly distorting, subsidies will need to be dealt with to address the fiscal deficits. Probably makes sense to start with fuel ($12bn) and then tackle food (fuel. $3-4bn wheat not to mention associated terrible consequences to Egyptian’s well-being brought about by promoting bread based diets). Handouts to the needy can be introduced as the subsidies are wound down.
Export powered.
High unemployment, young demographics, proximity to rich markets (Europe, GCC) all point to the potential for export driven growth. The poor spending power of the local population necessitate an outward looking approach.
Corruption.
A cancer that permeates every layer of society deterring investment (foreign and domestic) and hindering growth. Transparency, free press, simpler rules and taxes, a well-payed public sector all have a role to play.
Infrastructure.
Though important strides were made over the last decade, much more needs to be done to upgrade Egypt’s urban, rural, coastal and air infrastructure. Tourism, agriculture and industry will all benefit.
Agriculture.
An important source of employment and a sector likely to enjoy secular growth over the coming decades, there will be opportunities to improve productivity and attract investment.
Tourism.
Woefully underperforming sector but important source of employment and foreign currency needs more agressive targets and should offer areas for quick wins once the security situation stabilizes.
Devolution.
I love the idea of Paul Romer charter cities sprouting throughout the mostly unpopulated country, but if that’s asking too much, there’s still much that can be done to encourage economic development in secondary and tertiary cities across the only large country to have become less urban in the last 30 years.
