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By Isobel Coleman
The youth-led demonstrations that started in Tunisia in December and now spread to Egypt have likely claimed two governments. Egyptian President Hosni Mubarak announced that he would not seek office again, signaling the beginning of transition in Cairo.
Still, crowds swarm the streets of Egypt's main cities and no doubt will continue to do so until they are assured of real political change -- not just a passing of the baton to a hand-picked Mubarak crony, but a wholesale restructuring of the government, complete with constitutional reforms that allow for open elections.
Much has been made in the press about the economic roots of the revolutions underway in the Middle East, and these are certainly a significant factor, but what has been sustaining the protests is a quest for freedom.
Indeed, Egyptian demonstrators have been singularly focused in their demands since they first took to the streets: No more Mubarak. This week, the swelling crowds had a near-celebratory air about them, as they appeared to inch closer to their goal of saying good riddance to the only leader they have known for the past thirty years.
No matter what emerges from this upheaval, it is likely that any jubilant mood will dissipate as Egypt's harsh economic reality sets in. As revolutions in other parts of the world have shown, removing a corrupt, authoritarian leader through people-power is the easy part. Constructing a new system with inclusive, transparent institutions that can meet the heightened expectations of the people is far harder. Resorting to populist economic strategies -- in particular, a return to higher subsidies for basic commodities and higher public sector wages -- will be tempting, but no more affordable than before the revolution. Any new government still has to find ways to feed its huge population and deliver basic services.
Egypt faces three distinct economic challenges that point to tough times ahead.
First, rising income inequality and a failure to address root poverty have given rise to widespread economic grievance.
Gains from structural reforms and increased growth in recent years have not trickled down to the population at large. Beginning in the 1990s, Egypt began to implement a series of reforms in line with terms set by the
During a visit I made to Egypt last week, the contrast between rich and poor was readily apparent. On the road from Cairo to the new campus of
Poverty has long been a challenge in Egypt, with the worst levels of poverty among rural poor in Upper Egypt. (By most estimates, more than a third of Upper Egypt's population lives below the poverty line.) Urban poverty has also been a chronic issue, with ever-expanding slums around major cities as more of the population leaves the arid countryside for cities every year. But while the percent of the population living below the poverty line decreased over the past decade -- falling from about a quarter of the population in 2000 to less than 20 percent before the 2008 global downturn -- it jumped back up a few points in the past few years, even as per capita GDP increased countrywide. It is the widening of the gap between rich and poor, as much as the absolute disparity, that has fueled frustrations propelling the current uprising.
Second, rising commodity prices have exacerbated Egypt's economic situation and stirred instability.
In early 2008, grain prices soared, leading to bread riots throughout the country and clashes in the Nile Delta city of Mahalla al-Kubra. Egypt is the world's largest wheat importer, buying about half of its wheat and other staples from abroad to feed its population of eighty million people. It spends upwards of $15 billion a year on food subsidies -- an economic lifeline for those living at or below the poverty line. In recent years, inflation has become more acute, climbing to 12 percent in 2009 and 13 percent in 2010 in a period where wages did not keep pace and unemployment increased.
Third, while Egypt has expanded access to education, it has failed to improve quality and link progress in education to the needs of the economy.
Starting from very low levels four decades ago, Egypt has now achieved near-complete enrollment of boys and girls at the primary level and similarly large gains at the secondary level. Even tertiary education has doubled since 1990, from 14 percent to 28 percent.
Reports by the
While the eventual political outcome of the current unrest remains unclear, the economic repercussions are all too apparent. Uncertainty is reflected in the price of oil, which this week topped $100 per barrel, partly on concerns about the stability of Suez, through which the majority of Europe's oil passes. It is also reflected in Egypt's stock market, which has fallen 17 percent since January 24. Coca-Cola,
Whatever government emerges from Egypt's turmoil will inevitably have little economic room to maneuver. The country relies heavily on trade through the Suez Canal, which generates $5 billion in shipping receipts alone and generates much more in other economic activity. Tourism is another economic driver, employing 12 percent of the country's population and yielding over $11 billion annually. Foreign direct investment has also been a growth spot for Egypt in recent years, rising nearly 10-fold over the past decade to $7 billion last year.
Egypt's new government will be under immediate pressure to restore the confidence and stability required to keep shipping, tourism and foreign direct investment humming. Its ability to address the longer term, structural factors of persistent poverty, vulnerability to rising commodity prices and an uncompetitive educational system will determine whether it can meet the demands of its people.
(Isobel Coleman, is a Senior Fellow for U.S. Foreign Policy; Director of the
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