Why Egypt Is No Longer Too Big To Fail
Over the past three years, most Egyptians have failed to see beyond the most immediate aspects of its crisis. Meanwhile, in the outside world, the most basic formulas have changed.
CAIRO – Over the past three years, most commentators on Egypt’s affairs, and even participants in its public life, have been preoccupied with the present moment, rarely pausing to scrutinize the whole picture.
This preoccupation with immediate concerns has led to a failure to grasp the intricacy of the broader Egyptian “crisis.” The complexity of the crisis must be understood before we can prescribe solutions.
We must begin at the end of the Mubarak era in order to better confront today's crisis. The nation's economy was, and still is, both vulnerable and primitive, weighed down by grave defects inherited from the eras of former President Gamal Abdel Nasser and President Anwar al-Sadat. Had the Gulf War not erupted in the beginning of the 1990s and consequently restored Arab-Egyptian relations, the economy would have completely collapsed.
Egypt is no longer too big to fail.
The political formula that allowed the Mubarak regime to persist and almost completely dominate the political sphere was based on a strategy of preserving the socioeconomic gains granted to the mainly urban middle class after the 1952 revolution. But over time, maintaining these gains — the bedrock of the regime’s legitimacy — became highly exhausting. As a result, some extremely important developments took place.
End of state monopoly
First, the regime began including new economic players, who broke the state’s exclusive control of the economy. These included multi-national and national private companies.
The regime also controlled the new upper class, which rose as a consequence of this development, by pushing them to develop projects in partnership with the “jihat siyadiyah” (entities of sovereignty), a euphemism for state security institutions. These were either direct partnerships or partnerships by proxy through middle agents. They were also an attempt to alleviate direct burdens on the state.
But this also led to a grave consequence: The state institutions partnering in these projects gradually developed their own economic interests.
Secondly, the regime followed extremely impulsive policies vis-à-vis handling state assets and revenues, which contradicted standards of sound renewable economic measures. It did so to cover the high cost of maintaining the gains of the traditional middle class, which formed the basis of its legitimacy. This naturally led to a severe depletion of state resources.
Thirdly, the regime soon realized that it was unable to stretch its socioeconomic protection to a wide sector of the Egyptian citizenry, known as “low-income groups.” The state’s protection was gradually eroded as the regime attempted to control these low-income groups by the stick-and-carrot method: Turning a blind eye to their “arbitrary” violation of the law, but also instilling fear of state security repression.
These combined developments led to a number of consequences, including the knockout punch of the January 25 revolution.
What the regime didn’t realize
The regime did not realize that, as the state was giving way to the private sector, not only a new “controlled” upper class was created, but also, and more importantly, a new middle class with no direct interests in partnering with the regime was being formed. This new middle class did not rely on the regime as its traditional counterpart did, nor was it subdued by the "stick" method used against the low-income groups. Hence, this class revolted against the regime, igniting the first spark of the Jan. 25 revolution.
Additionally, the regime did not recognize that despite all its attempts, it failed to quell the fears of the traditional middle class, especially since this class had been constantly threatened by the rapidly changing socioeconomic reality. The regime also seems to have missed that the majority of the populace — the low-income groups — had enough grievances to support bringing down the regime.
Thus, the first revolutionary spark ignited by the new middle class quickly escalated into a high-intensity blaze of protests. The low-income groups fuelled this fire with the aim of dismantling all the security and non-security defenses that the regime had long been constructing.
But the fatal blow against the regime was finally delivered by the “jihat siyadiah” that had developed their own special economic interests by partnering with the private sector, as explained above. The regime’s policies allowed these entities, especially the Armed Forces, to develop special economic interests, and safeguarding them ultimately required sacrificing the regime itself.
What's most broken now
Examining the situation today — eschewing the distortions surrounding the Brotherhood's rule — we will find ourselves in the midst of a full-fledged crisis as follows:
The first and most important problem relates to the terrifying depletion of the state's resources — especially after the last three years, during which economic conditions have significantly deteriorated. This depletion reached the point where it became impossible to preserve the socioeconomic gains of the 1952 revolution that were granted to the traditional urban middle class. In order to prevent total economic collapse, it became necessary to withdraw support for this class in a way that foreshadowed its revolt. This class’s potential for revolt poses a great threat to any new regime hoping to institute its legitimacy.
The second problem lies in the failure to include this incendiary new middle class in the political process. On the contrary, this class is expected to face more political marginalization in the post-June 30 era. In addition, deteriorating economic conditions have hit this class particularly hard, making it even more prone to rebel against any regime that fails to fulfill its ambitions.
Thirdly, the living conditions of the low-income groups are only getting worse, and they are likely to explode with anger at any time.
The fourth problem is that we are facing a political situation in which the “jihat siyadiya” are, by virtue of their very definition, sovereign or independent, since each entity has its own economic interests and special agenda. This creates a situation where they become a burden on any newly formed regime, even if those entities are a main component of the regime itself.
Accordingly, we may find that the Egyptian crisis is bigger than any new regime could be expected to handle. The reality is that any step towards finding real solutions to the crisis — apart from managing it or temporarily relieving its symptoms — would break any fragile new regime. And alleviating the crisis is no longer even possible, since living conditions will only deteriorate further and increase the vulnerability of the state.
As things stand, the only possible scenarios entail state failure, whether that comes through another knockout punch or a slow bleed.
Criteria for the new regime
Therefore, any new regime capable of getting Egypt out of its crisis must have a wide political and societal consensus. This is necessary to allow it to make critical, bold decisions at sensitive times. The regime will also have to develop a political discourse that would convince wide segments of society to suffer certain sacrifices in order to overcome the crisis.
But before all else, the regime's cadres must have special qualifications, and must include experts well-versed in economic issues to guide the regime and enable it to take the right decisions at the right time.
By all means, the Brotherhood’s regime lacked all of these factors, and its failure was inevitable — whether that failure was expedited due to a conspiracy or not. Similarly, the about-to-be-formed regime lacks those qualifications, and its failure is thus also inevitable.
Egypt is no longer too big to fail. While regional and global systems do not want Egypt to fail, the country is now too heavy to be rescued. The global/regional powers are no longer capable of bailing it out, unless it rescues itself — or at least starts to do so.