The four year anniversary of the Egyptian Revolution of 25 January has come and gone and at the moment things are not looking good. But it’s only been four years. Four years after the French Revolution the French were at war with the British, Dutch, and Austrians and the Jacobins under Robespierre were just starting their Reign of Terror in which tens of thousands may have been executed.
To mark the anniversary, I would like to share my undergraduate capstone paper on the Egyptian Revolutions (written a year ago). I make some observations on inequality in Egypt and some (very humble) recommendations. I hope you enjoy and I welcome any commentary or discussion below:
Inequality and the Egyptian Revolutions
The Political Economy of Pre-Revolution, Pre-Coup, and Post-Coup
The University of Oklahoma
College of International Studies
Professor: Dr. Mitchell Smith
Senior Capstone Seminar: Inequality Around the World
December 11, 2013
The Egyptian Revolution of 2011 or the thowrat khamsa wa ishrun yanaayir (Revolution of 25 January) is not quite three years old and despite the difficulty of interpreting root causes of a revolution in a country with a five thousand year old cultural history, a thirty year old regime, and a diverse and complex political sphere, already a common Western narrative has emerged about its causes. One popular explanation for the overthrow of the Hosni Mubarak-led military government is discontent with “inequality” in Egypt. But how accurate is this explanation? If it is accurate, how does it explain the second revolution of 2013? If inequality is a cause of the revolutions, what can we predict about Egypt’s future? This paper will assess the inequality in Egypt prior to the 25 January Revolution, during, during the period between revolutions, and into the present; it will also determine the perception—both international and domestic—of inequality in Egypt during those three periods, and examine the efforts made by the governments to address inequality (if any). Finally, this paper will examine options for stabilizing Egypt through alleviation of inequality.
Data on Inequality Prior to the Revolution of 25 January
The most widely recognized measurement of equality is the Gini coefficient—a comparison in any given country of the income of each person compared with the incomes of all other people individually, and the sum of the differences is divided by the number of people in the calculation and the average income of the group. The resulting number is some where between 0 (complete equality) to 1 (one person has all the wealth). Since the coefficient has both upper and lower limits, Gini coefficients can be compared quite easily. The World Bank measures inequality with the Gini index, which is the coefficient multiplied by 100, thus 0.22 becomes 22.
But if “poverty and inequality helped fuel the revolution . . .in Egypt, where about half the population lives on the equivalent of less than $2 a day,” and “inequality fueled [the Egyptian Revolution],” then what does the Gini index look like in Egypt before the revolution?
While the Gini index decreased (an indicator of increasing inequality) in the decade leading to the January 25 Revolution, from 33 to 31, it is important to note that it is still higher than in 1996, showing an over all trend of increasing. But even if it is increasing, the Gini index in Egypt is relatively low—ranking in about the middle of all countries, and is low even compared to some O.E.C.D. nations. With a Gini index similar to socialist France, it seems that a look at Gini index alone does not explain the relationship between inequality and the January 25 Revolution, despite common perceptions.
But there are more ways to measure inequality than just Gini index. A look at the income share breakdown between different subsets of society reveals more about inequality in Egypt. Over the same timespan, the income share held by the lowest fifth of the population decreased from 10 per cent to 9 per cent while the top fifth remained constant. Meanwhile the income held by the top decile increased from 26 percent to 27 percent while the bottom decile stayed the same. Thus, inequality was worsening in the decade before the January 25 revolution, even if only marginally. Yet there are other indicators of inequality besides the Gini index and income share comparisons—and regardless of the data perceptions of inequality must be taken into account as well.
A look at the household income in comparison to the national GDP is telling. Between 2000 and 2009, Egypt’s GDP per capita in U.S. Dollars adjusted for inflation rose from $2,062 to $2,453 an increase of 18 per cent. Yet national expenditure per capita decreased from 2005 to 2009 from roughly $1,880 to $1,860. Additionally, income per capita decreased during that same timespan as well from $1,780 to $1,700—decreases of 1 per cent and 5 per cent, respectively. So while the Egyptian economy was improving in the decade prior to the January 25 revolution, that economic development was not reaching the average Egyptian.
Demographics and the Urban/Rural DivideIt can also be shown that demographics contributed to the sense of inequality in Egypt. During the nearly 30 years that former President Hosni Mubarak ruled Egypt, the population grew from 45 million to 85 million—an increase of 90 per cent This “youth bulge” has led to a country where one fifth of Egyptians are between the ages of 15 and 24, half the population is below the age of 25, and two-thirds are under 30.One of the difficulties of an overwhelmingly youthful population is employment and education for a disproportionately young society. It is likely that at the time of the revolution at least 90 percent of the unemployed in Egypt were youth—70 percent believed they were unemployed because there was simply no work available. In fact, each year 700,000 graduates compete for 200,000 new jobs and unemployment is 10 times as high for college graduates compared to people with only primary educations. But it is not simply the fact that there is a scarcity of jobs relative to the number of young entrants into the job market, there is also a lack of appropriate education—despite an unprecedented number of males and females enrolled in higher tertiary education. Yet only about half of higher education students polled in 2009 believed their education prepared them for the job market.
In addition to the age demographics that contribute to inequality and government discontent, attention should be paid to the urban/rural divide in Egypt. Despite the January 25 revolution being called “a triumph of the urban” the rural populations have a large stake in the equalization of Egyptian income. Large portions of the Egyptian people are nearly removed from the Egyptian economy at large—being unable to benefit to or contribute from Egypt’s economic growth. The total population living at the poverty line rose from 17 per cent in 2000 to 22 percent in 2010. The rural made up 80 percent of the poor—and one half of Egypt’s population lives in rural areas. The fact is space is at a premium for Egyptians, where the vast majority of the population lives on the banks of the Nile River, an area of just 15,000 square miles.
Egyptian Policies of the 20th Century
After Egypt’s experiment with nationalism in the 1950s and 1960s including the nationalization of the Suez Canal, Egypt was forced to change economic directions under Gamal Abdal Nasser following the fall of the Soviet Union’s Khrushchev (Egypt’s primary financier) in 1964 and the humiliating defeat to Israel in 1967. With a stagnant economy and a pressing security threat next door, Nasser restructured the economy under the March 30 Program which began its economic liberalization and the opening of the private market. Nasser died in 1970 before his policies could be implemented, leaving them to his vice president, Anwar al Sadat.
By 1974, Sadat implemented his strategy of economic liberalization referred to as al-Intifah (the opening) in Arabic. The basic idea of the program was to open the country to foreign investment and Western technology by attracting foreign capital, financial institutions, and liberalizing the labor markets. Public sector companies were allowed up to 49 percent private ownership and non-utilized agricultural land was opened to foreign development to reclaim and grow crops for export.
Unfortunately, Sadat’s strategy did not succeed. Few of the benefits Sadat had hoped for and most of the negative impacts the left had predicted were its result instead. New private investment did not boost industry—it went into luxury construction, tourism, and finance instead. Industrial activity actually declined. To make matters worse, class structure and distribution of wealth changed and it was not the poor who benefited. It was Egypt’s rich who could take advantage of the new economy, while the poor watched their piece of the economic pie grow smaller. By 1977, Egypt broke out into riots when subsidies were cut.
Mubarak continued many of the Intifah policies of Anwar al Sadat’s presidency after Sadat’s assassination. Mubarak further liberalized Egypt both politically and economically. Politically, Mubarak released political prisoners, introduced the ability for opposition parties to run for Egyptian parliament and opened up the media. From opposition periodicals in the 1980s to the tolerance of foreign satellite television stations in the 1990s, to the first independent Egyptian newspaper in 2005, Mubarak slowly opened Egypt’s press. 
Economically, Mubarak continued the policies of his predecessor and in the 1990s implemented the International Monetary Fund-sponsored Structural Adjustment Program that targeted macroeconomic policies in an effort to increase growth. The Egyptian currency was devalued and a general sales tax was introduced—two policies that have augmented negative effects on the poor. There were significant side effects of the SAP as well. The plan did nothing to boost Egyptian production and poverty levels skyrocketed. In 1991 the World Bank noted that one quarter to one fifth of Egyptians lived in poverty, that the richest 20 percent of landowners owned 70 percent of agricultural land, and that food costs for the urban poor were up 40 per cent. The World Bank also noted that the SAP and Intifah would lead to serious problems for the economically vulnerable.
Mubarak’s privatization policies worsened inequality in a number of ways. In the housing market, the economy was growing through real estate by building massive suburban developments to house expatriates. Development was subsidized by cheap land and the state’s transportation infrastructure—this Egyptian housing bubble caught the attention of speculators attempting to make a quick profit and eventually crashed only to be bailed out by the government. While the government was financially assisting the rich, the poor were losing government support and there numbers were growing.Perceptions of Inequality under Mubarak
Equally as important as the real affects of policy to create inequality and increase the number of poor are the perceptions of inequality. World Views Surveys in 2000 and 2008 help measure popular perceptions of inequality in Egypt across all deciles of income by ranking inequality on a ten-point, bad to good scale. What the surveys found is that in 2000, the mean value across all deciles of income varied by not even one point. However, in 2008 the mean value shifted two points, with the second wealthiest decile favoring inequality at the same level as 2000, with all other deciles of income significantly lower. This illustrates that tolerance of inequality decreased in that eight-year period.Other indicators of Egyptian perception come from the chants of the protestors themselves. Some of the most common chants were, “Bread, freedom, social justice,” and “Leave, O Pharaoh.” Both of these chants hint at discontent with inequality, whether it is income inequality or equality of opportunity. On February 11, 2011, President Hosni Mubarak stepped down as president of Egypt. The military ruled until the Muslim Brotherhood’s Mohamed Morsi was elected president on June 24, 2012. By July 3, 2013, he was removed from power by the military following mass protests in what some have called a second revolution, a counter-revolution, a continuation of the revolution, and a coup d’état. If inequality helped fuel the January 25 revolution, did it also fuel the 2013 coup?
Inequality in Egypt Before the Fall of Morsi
It is impossible to examine long-term economic data in such a truncated amount of time, and during Morsi’s presidency he had a lot to concern himself with, so economic censuses were not a high priority. Due to the relatively short presidency and recent departure from the political scene, data from international organizations such as the World Bank and IMF have not been released. However, perceptions of Morsi’s presidency from 2013 before the coup were recorded in a survey where 74 percent of those polled said that Morsi was doing a poorer job than expected and 72 percent said the Egyptian Parliament was doing poorer than expected, even though 77 percent of Egyptians reporting they expected Morsi to do a good job when he was elected. So, Egyptians were clearly unhappy with the status quo after the revolution, which was not surprising considering Morsi’s lack of a defined economic policy.
Morsi’s Economic Failures
Despite the fact that the Muslim Brotherhood was essentially the only organized political party in Egypt at the time of the January 25 revolution, and despite the fact it had been ruralizing itself for years to better integrate into society, and despite they were well-funded by anonymous donors with a history of providing education and welfare services to the poor, Morsi and the Muslim Brotherhood failed to enact a clear economic policy to decrease unemployment, reduce inequality, or reduce poverty. Under Mubarak inflation rose, debt rose, education continued its decline, and crime rose. While reform policies would have taken years to fully implement, Morsi did nearly nothing to correct the economy except attempt to secure IMF and international loans (unsuccessfully).
Inequality in Egypt Now and in the Future
The state of Egypt now, six months in to General Abdel Fattah el-Sisi’s de facto leadership as commander-in-chief of the Supreme Council of the Armed Forces, is largely the same as it was under Morsi: the economic situation is grim but not as bad as the period during the constitution crisis or the coup. Any signs of recovery are likely to be temporary, however, until new economic policies are put into place. After the loss of American aid in October, Egypt has increased its reliance on aid from Gulf states. Since the January 25 revolution, Egypt has spent $20 billion in foreign reserves and billions from its foreign allies and foreign oil companies. The government has not outlined any long-term economic plans, though it has pledged to focus on labor-intensive infrastructure projects and public works projects. Making the assumption that Egypt will be able to strengthen its economy without more wide-scale liberalization or austerity measures, Egypt must also make efforts to alleviate income inequality to prevent more riots and another revolution.
How Egypt Can Alleviate Inequality
Considering Egypt’s precarious economic future, special care must be made to create government programs that invest tax dollars. Traditional tax and transfer programs can be utilized to alleviate inequality while also improving the economy. Egypt’s current subsidies on low cost stapes such as food and fuel are not an adequate welfare program because they do nothing to improve the social mobility of the people they are targeted to assist. Egypt can take some cues from Mexico and Brazil, two countries that used governmental policies to successfully alleviate inequality in a world where inequality is by and large growing.
It is important to note that history has proven liberalization in Egypt has failed. Intifah failed and Mubarak’s linearization policies destroyed his regime. Time and time again countries like Egypt and China that liberalized their economy worsened inequality, causing widespread unrest. While some, like the IMF, may encourage Egypt to double down on liberalization and promote austerity in order to increase economic growth, this will not solve the problem of inequality. Let’s examine what might.
There is only one source for the reduction of inequality and that is income, which generally falls into two categories: labor income and non-labor income. In an effort to increase labor income, the government of Egypt can make changes in the demand for labor and/or changes in the labor supply or quality. Under the category of non-labor income, the government can increase the supply of transfers, but it almost should act to increase the demand for transfers—though in Egypt there is plenty of demand already (bread, freedom, and social justice).
Increasing Labor Income
To increase labor income, Egypt needs to make changes in the demand for its labor. Egypt should search for new trading partners in an effort to bring higher wages to its workers. For example, when Mexico joined NAFTA foreign automobile companies brought jobs and high wages. Egypt should look to its European neighbors for ways it can offer its large, educated labor pool. Changes in labor supply and quality must also be made. Considering Egypt’s current problem of having too much young, educated labor but not enough jobs, Egypt must make efforts to change its education system to produce viable candidates for career employment. By identifying where the demand in education and training is, Egypt can reform its secondary and tertiary schools. Today’s lost generation of 20-30 year olds should also be re-trained to fit current demands for labor—an education in preparation for a career in civil service is not enough. Public works and infrastructure projects are another way to decrease the labor supply. By putting people to work and bettering Egyptian infrastructure, future businesses will have better access to laborers and there will be less unemployment driving wages down.
Increasing Non-labor Income
To complete the two-pronged approach to alleviating inequality, Egyptian policy makers must also increase non-labor income. The first way to do this is to increase the demand for transfers in accordance with the power-resource theory. While Egypt might already have plenty of demand for transfers right now, if that demand is not realized in ways other than mass protests and revolution, the government will not be able to provide the security for long-term economic planning. One way to ensure this demand is properly channeled democratically is to introduce mandatory voting. Mexico and Brazil both have compulsory voting and have decreased inequality. Research has shown that compulsory voting is inversely related to income inequality. Compulsory voting will increase the number of voters and allow more people—who would otherwise be disenfranchised or apathetic to the system—will vote to strengthen welfare programs, especially in unequal Egypt where people have made their feelings about inequality clear. (See figure 7.)
Lastly, Egypt must increase the supply of transfers to alleviate inequality. A modern universal welfare program—unlike Egypt’s current subsidies system that involves bread lines—can increase the income of the bottom half of society will decreasing the top earners’. While such a program may not be initially popular, it is important that whoever Egypt’s next leaders are that universal welfare programs are an investment into Egyptian society. Better a better healthcare and education system will invest in Egyptians who would otherwise be left behind due to a poverty they cannot escape and were born into. Access to quality healthcare is a principle determinant of generation economic mobility. Not only are healthy people are more likely to do better in school, but prenatal and early childhood healthcare directly impact a child’s potential to succeed. This loss of human capital is what will keep the Egyptian economy stagnant in the long-term.
Additionally, by enacting state-mandated work weeks and vacation time, children in low-income families will be able to receive more attention from their families who might otherwise be forced to spend all of their free time working to provide basic shelter and sustenance for their family. This investment of paid time off means that people will be able to use their free time to better themselves or their children through education, promoting more generational mobility. Likewise, without state-mandated vacation time, some families might never be able to leave the more hazardous environments where the poor live.
|Labor Income||Non-Labor Income|
|Changes in Demand for Labor
· New trading partners
· Identify labor demand
· Job retraining
· Public works/infrastructure projects
|Increased Demand for Transfers
· Compulsory voting
|Changes in Labor Supply and Quality
· Reform secondary and tertiary education
· Job retraining
· Public works
· Better infrastructure
|Increased Supply of Transfers
· Modern universal welfare programs
· Healthcare reform
· Education reform
· State-mandated work weeks
· State-mandated vacations
Figure 8. Methods for alleviating inequality in Egypt
To summarize, inequality is often listed as one of the causes of the Egyptian uprising and revolution in 2011 despite Egypt’s most widely accepted measure of inequality, the Gini coefficient, being on par with many stable developed states. A closer look at the data in Egypt reveals that a country’s Gini index alone cannot tell the whole story of inequality within its borders. By examining income share, national expenditure and income per capita, demographics, poverty, and attitudes about inequality we are able to paint a much more dynamic and well-rounded picture of inequality in Egypt and find that worsening inequality was likely one of the major reasons behind the Revolution of 25 January. Inequality did not improve after the fall of Mubarak and the economy did not improve under Morsi so the people took to the streets again, resulting in the SCAF’s removal of Morsi from office. Considering the Egyptian government’s hesitance in forming a coherent economic policy, Egypt may still be in danger of continuing revolution if the people’s lives do not improve. To address this, I have offered a two-pronged policy to alleviate inequality by increasing labor income and non-labor income through changes in demand for labor, changes in labor supply and quality, increasing demand for transfers, and increasing supply of transfers. Through these methods Egypt might reverse the worsening inequality in Egypt, improve the quality of life of its citizens, and strengthen its economy and government.
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