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Memo to El-Baradei - You Can't Eat Neoliberalism

January 27, 2014 at 2:22 pm

Shortly before riding into the vice-presidency of Egypt on the back of military tanks, Muhammad el-Baradei told Foreign Policy “You Can’t Eat Sharia” in a criticism of the policies (or apparent lack of) of the previous Morsi presidency. The comment appears to have been throwaway humour intended to impress FP’s readership that are, to put it mildly, inclined to view anything other than aggressive capitalist economic policy as unfeasible, impractical and dangerous, coupled with traditional deeply held negative views of Islam. The editorial team duly responded by using the line as the title for the piece.

For all of the rhetoric, el-Baradei would be hard pressed to identify exactly what elements of Islamic law the Morsi government was actually given the opportunity to enact in a general sense, let alone in economic policy. In fact, most criticism of the Morsi government was that it largely continued the same failed polity of the previous Mubarak regime, which implicitly would include its neoliberal economic program that earned the praise of the IMF as recently as 2010 while widening the wealth disparity within the country which was one of the factors which led to the revolt in 2011. El-Baradei alludes to this in his piece, stating that the Morsi administration relied on “the same worn-out ideas” simply carried by more religious figures in power.

One of the reasons that the Brotherhood backed government was accepted, if not warmly welcomed, by Western governments was because of its openly stated commitment to free market capitalism (along with their guarantee to maintain the strategically important Camp David agreements with Israel). As noted by Dr. Jason Hickell, with Morsi as president, a few key Muslim Brotherhood members have espoused free markets, deregulation and attracting foreign direct investment, all of which make up the pillars of neoliberal economics.

Highlighting the acceptance of some central Brotherhood figures to play within the existing neoliberal order rather than comprehensive adherence and application of Sharia, the Morsi government pursued a loan from the IMF despite the Muslim Brotherhood previously condemning such loans due to their being interest based. If there is a single, economic Sharia principle that is accepted and universally known it is the general prohibition of interest – but this position was then altered by religious figures supporting the Morsi administration to claiming that repayments were analogous to administration fees rather than interest.

One of the conditions for the loan was the imposition of sales tax upon 25 goods, something Morsi announced and subsequently pedalled back on within twenty four hours as a result of public outcry (side note – any experts of Sharia economics will recognise the concept of a sales tax upon goods as another non-Sharia compliant policy). Part of the campaign to oust Morsi focused upon the fact that he was pursuing such external loans which were deemed as harmful to the general population, already barely surviving with 25.2% below the poverty line and a further 23.7% hovering just above it.

The Tamarrod campaign, eventually fronted by el-Baradei and used to legitimise the military ouster of Morsi, gave new impetus to the revolutionary call for an end to the wealth inequality that was one of the hallmarks of the Mubarak era and has not improved in the two years since his overthrow. It has since emerged that the campaign was also backed by major businessman Naguib Sawiris, the second richest Egyptian who reportedly has an estimated wealth of approximately $3 billion (eclipsed only by his father, Onsi Sawaris). The Sawiris family empire grew under the Mubarak regime, with Naguib reportedly close to Mubarak’s son Gamal who further advanced a neo-liberal economic agenda in the last decade prior to the uprisings in 2011. Mubarak himself was not averse to going to bat for the Sawaris business interests, for example reportedly advocating on their behalf with the Syrian government in an attempt to resolve a dispute over an Egyptian-Syrian cell phone enterprise between Orascom Telecoms (run by Naguib Sawiris) and Syriatel.

The Sawiris clan is a prime example of the massive wealth disparity in Egypt and represents the tiny neoliberal elite that control about 25% of national income. One of the most visible problems with the Egyptian economy is the fact that an elite few control it. When elites control an economy, they use their power to create monopolies and block the entry of new people and firms, which is how Egypt worked for three decades under the Mubarak regime. The government and military own vast swaths of the economy – by some estimates, as much as 40%. But even when they did “liberalize,” they privatized large parts of the economy right into the hands of regime insiders and friends. Big businessmen close to the regime, such as Ahmed Ezz (iron and steel), the Sawiris family (multimedia, beverages, and telecommunications), and Mohamed Nosseir (beverages and telecommunications) received not only protection from the state but also government contracts and large bank loans. Together this elite put a stranglehold on the economy while creating astronomical profits for regime insiders, but blocked opportunities for the vast mass of Egyptians to move out of poverty. Hence the impressive IMF pleasing macro figures, coupled with poverty and desolation at the ground level.

With such financial support for the campaign to oust Morsi it is unlikely that the military appointed government is going to change course from the same failed policies of the past, especially given the military’s vested interests. Having already been promised a government of “technocrats,” the code-word for ostensibly politically neutral experts (whose only allegiance is to the nebulus “markets”) who will enact measures to make Egypt more “attractive” for “international investment” and financial aid, the appointment of liberal economist Hazem Beblawi as interim Prime Minister certainly bodes well for those who would like to see a continuation of the neoliberal experiment in the post-Mubarak era.

In his last interview before agreeing to front the future technocratic government, Beblawi talked about how the Egyptian people needed to understand that the current level of subsidies in Egypt were unsustainable, taking up 25% of the budget, and that “the cancelling of subsidies requires sacrifices from the public and therefore necessitates their acceptance.” He also praised some of the economic performance of the Mubarak era, stating that “right before the revolt, growth rate was 7% for 4 consecutive years, foreign investments were on the rise and investing in the stock market became more attractive,” failing (in the same manner as the IMF) to note that these macro indicators mean absolutely nothing about the state of the economy as far as the average Egyptian living on the bread line is concerned.

Beblawi’s call for the Egyptian public to sacrifice echoed the words of el-Baradei two months earlier who talked about how austerity was the price that Egypt had to pay for the sake of the assistance of the IMF, which would then encourage foreign private investment. Indeed, if there is a universal constant in these times of “austerity,” it can be found in the ease with which the moneyed liberal elite inform everyone that the masses have to bear the brunt of suffering in the name of the greater good. As more time elapses after the global economic crash brought on by the financial sector, the liberal elite only appear to have grown more assured as the blame for economic woes has been shifted from greed at the top to the supposed profligacy of those at the bottom. Ideological preferences aside, the state of the Egyptian poor provides ample empirical evidence that you can’t eat neoliberalism.

Rather than rely upon trying to implement a “cleaner” version of the tried, tested and failed policies of the past, Beblawi might actually do better to consider radical options provided by Sharia economics. A real attempt to move to an Islamic economic system would entail a revolutionary shift and upheaval of the current economic paradigm. An economy based upon agriculture and heavy industry rather than tourism, wealth and land taxes rather than income and indirect taxation, direct rather than indirect redistributive policies, a currency backed by gold and silver rather than pegged to the dollar, no privatisation of vital state resources, the abolition of the predatory stock markets and significantly no interest based loans or investments with risk-sharing enterprises in their stead.

Such a program would obviously conflict head-on with the vision of a neoliberal world economic order, in part because self-sufficiency means less debt and market opportunity to be exploited by international finance, meaning that it would take a brave person to follow them through. Whether that bravery would be shown to be born out of naivety or a visionary outlook is something that history would judge, but at the very least it is worth understanding that there are possible substantial answers to el-Baradei’s initial throwaway quip that could be explored, even if the previous presidency was unable to provide them.

Bravery aside – Beblawi has already proven to be a man of many contradictions – as pointed out by Joshua Stacher, he coined the phrase “rentier mentality” to critically describe the manner in which the Gulf states purchase loyalty for their regimes by largesse rather than through good governance, while he now leads a government brought in via a coup financially rewarded by aforementioned Gulf states. He also resigned from his position in the SCAF administration in 2011 after the Maspero demonstrations which resulted in the deaths of 28 protestors, while he accepted to join the current SCAF appointed government after the killing of more than 50 protestors at the Republican Guard palace. However, expecting a liberal economist to adopt an economic policy derived from Islamic law is probably a contradiction too far.

This means that Beblawi and his technocratic colleagues will likely try to move down the line of conventional wisdom in times of “austerity” – more international debt in exchange for cutting state subsidies, adherence to IMF conditionality, the promotion of stock markets and a call for (more) public sacrifice. None of these ideas appear particularly original, or are likely to satisfy an ever-more impoverished population still seeking its bread and social justice which bear little relation to macro-economic indicators. With the price of basic foodstuffs increasing and the country’s continued dependency on others for their daily bread, the stage is set for future upheavals irrespective of whether the current military junta government successfully excludes its opponents from the political scene.

Dr. Reza Pankhurst (Twitter: @rezapankhurst) is a political scientist and historian, specialising in the Middle East and Islamic movements.His latest book, The Inevitable Caliphate? A History of the Struggle for Global Islamic Union, 1924 to the Present, is published by Hurst and available now. He was formerly a political prisoner of the Mubarak regime.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.