When asked to evaluate the effect of the “Arab Spring” upon the economy in Egypt, I guess my response would have to be: “Probably, not much.” The revolution in Egypt, which is one of the main events within the “Arab Spring”, was mostly a political revolution. They ousted Hosni Mubarak, cleaned up corruption in the government and demanded a rewriting of their constitution. However, as fine and dandy as all of those things are, they are going to have little economic impact. Alright, one could cite the fact that state officials used their influence to create business trusts for their benefit, the most notable being in the steel industry with over half of the entirety being controlled by Egyptian political figures, but the other trusts are much smaller. That steel industry fact is misleading as well, considering that Egypt’s economy is only 40% industrial production [1]. The true problem that Egypt faced was, and still is, unemployment. With unemployment figures hovering in the low to mid teens; the job market is in dire straits in Egypt. This is caused by a massive youth bulge within Egypt; the population has more than doubled in the past 40 years and the labor force is growing at the size of 4% a year [4]. That is a problem that is not going away with a simple political revolution. The Egyptian economy could have possibly kept up with this massive population growth, if it hadn’t been for the collapse of international markets a few years after the turn of the century. The growth of GDP has been crawling along for the past couple years, and the recent revolution has lowered the projected GDP for the country, the World Bank actually is predicting a slowing of all growth in developing countries in the next few years [2] . This in combination with unrest over low minimum wages, which means that the newly elected politicians will probably cave in an attempt to curry favor, means that unemployment will probably rise even more. So I retract my previous “not much” statement, and replace it with, “it’s going to get worse.” Now while there will be some changes in the economic environment with the reduction of corruption, Egypt scored a 3.1 on the Corruption Perceptions Index in 2010 so it’s not like they could get much more, it is doubtful they will be able to even come close to combating this unemployment problem [3]. The closest thing Egypt has to a chance of overcoming this, in my opinion, is for the new government to take the hit. Raising the minimum wage, while reducing taxes, specifically payroll taxes, would serve to boost the economy. An expansion of the bureaucracy and government sponsored projects to reduce unemployment, similar to the method championed by Rick Perry in Texas, would also serve to boost the economy. This, however, would increase the government’s debt, with it occupying over 85% of GDP already [1]. The future does not look bright for Egypt in my opinion, I foresee it having a rough couple of years, with bigger problems looming farther down the line. That is because Egypt’s problems result from severe structural issues within the economy that cannot be rectified through a simple regime change.
[1] https://www.cia.gov/library/publications/the-world-factbook/geos/eg.html
[3] http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results
[4] http://www.marketplace.org/topics/world/new-egypt/long-term-economic-challenges-egypt-must-overcome