Nice piece by Roula Khala in the FT on the unfolding crisis that is Egypt’s economy. To no one’s surprise, the Muslim Brotherhood has proven rather inept at economic management – much less reform. One can hope that the learning curve, while steep, is rapidly surmounted, but there’s always the temptation of long, out-of-power revolutionary types to imagine that “now is our time to prove there is an [INSERT NATIONALITY HERE] way of doing things!”
Over time, genuine economic development forces convergence: there are a few models out there (centralized socialism, oligarchic capitalism, state-run capitalism, big-firm capitalism and entrepreneurial capitalism) and there are pathways from one to the other (e.g., Russia from centralized socialism to oligarchic capitalism, China from centralized socialism to state-run capitalism, Japan from state-run capitalism to big-firm capitalism, Singapore from state-run capitalism to entrepreneurial capitalism, America from big-firm capitalism to a hybrid of that + entrepreneurial capitalism (i.e., industry sectors dominated by a handful of go-to-market options, surrounded by a sea of entrepreneurial small firms)). But everyone ends up running the same pathways – to wit, state-run China dreams of achieving its own Goldilock-style mature capitalism by “going global” in the direction of big-firm capitalism, pursuing “indigenous innovation” in the direction of entrepreneurial capitalism, and splitting the difference with domestic-led consumption (basically, the US model).
So no, there isn’t anything new under the sun; there’s just the same old game of hopscotch.
The fundamental flaw of the MB in power to date, according to Khalaf:
Mr Morse, an Islamist, has yet to understand that politics and the economy cannot be managed separately. A lack of political consensus is destroying his chances of taking difficult austerity measures, including cutting a costly subsidies bill and raising taxes, all of which are required by the IMF.
The IMF only matters here because of a $5B loan agreement on the table. Yes, Mr. Morsi can try to sell Egypt to China for a similar amount, but there he might find that the new neo-colonialism practiced by Beijing (you sell us raw materials and we sell you finished goods) isn’t the great liberation it’s made out to be for a country with such massive underemployment (and no serious material wealth). It’s hard to follow the China model unless you’re China, which means it’s not really a model at all.
Khalaf preaches an IMF programme (oops, went Brit there for a few strokes) “accompanied by substantial funding from an international support group made up of Western powers and Middle East oil states.
Me? I would hope Egypt might split the difference and go for a bigger international support group that includes rising Eastern economies. Because if it’s just the West and oil-rich sheikhs making demands, that gives Morsi the ideological “out” of resistance. So including China and India et al. in such things would be a nice way of evening out the demands, the message, and sense of us-against-them.