Egypt Struggles to Find Its Footing

Egypt’s military rulers, the Supreme Council of Armed Forces (SCAF), made headlines last week for a proposal that would effectively give them veto power over the national parliament and allow them to select the majority of members of a constituent assembly that will be charged with drafting a new constitution. The news has left observers wondering whether the SCAF is really “uncomfortable governing,” as they profess to U.S. officials, or positioning themselves to remain in power. The likely answer is some combination of both: while the generals may not want to bear the responsibility for running the country, they want to protect their significant economic interests.

​With the stated intent of limiting the influence of Islamist parties, such as the Muslim Brotherhood, in a future government, the SCAF’s “constitutional principles” violate the constitutional reforms agreed to by national referendum in March. That referendum—Egypt’s first step towards a democracy—set the stage for parliamentary elections, which, after being pushed back, are now scheduled to start on November 28th. The two legislative bodies elected in those elections, the People’s Assembly and the Shura Council, were then be charged with selecting a 100-member assembly to draft the new constitution. The SCAF’s proposal would only allow the legislature to choose 20 of those 100 members, with the remaining 80 essentially being dictated by the military. The new proposals would also limit the legislature’s ability to oversee and control the military. 

The proposals effectively recreate the wide latitude the military enjoyed for much of the reigns of Nasser and Mubarak. Following the 1967 war with Israel, the military became a large and elite national institution. Wary of the very sort of military coup that he had led in 1952, Nasser sought to co-opt the military through patronage. Eventually, the armed forces came to dominate large swaths of the economy including in the water, olive oil, cement, construction, hotel and gasoline industries.

In the last twenty years, however, their power began to fade. As Mubarak began to undertake economic reforms necessary to keep Egypt’s economy growing, many of the government-owned businesses run by the military were privatized. At the same time, a new class of entrepreneurs arose, led by Mubarak’s son Gamal. With Gamal, and his inner circle of businessmen, anointed to succeed his father, the military’s position was weakened even further. 

The revolution that ousted Mubarak in February spared the country a succession crisis in which the military refused to support Gamal, a possibility discussed in a prescient 2008 State Department cable, released by Wikileaks. The cable claimed that to avoid such a scenario, “The regime…may well be trying to co-opt the military through patronage into accepting Gamal’s path to the presidency.” Today, the situation is much the same, but with the roles reversed. The military is trying to limit the ability of a future government to deny it patronage, as a path to relinquishing power. Hence, this week’s proposals.

Thus, in the short-term, these developments many not bode as ill for Egypt’s fledgling democratic transition as some fear. But in the long-term, a military that wants to remain an economic powerhouse may be worse than one that wants to retain political power. As BPC Senior Fellow General (ret.) Jim Jones argued in a BPC white paper, Investing in the Revolution: Economics and the Prospects for Democracy in Egypt, economic reform will be one of the most important tasks facing Egypt’s next government.

According to a poll by the International Republican Institute, 64 percent of those questioned said that “low living standards” or “lack of jobs” were the factors that most influenced them to support or participate in the protests that ultimately toppled the Mubarak regime. Only 19 percent identified “lack of democracy and political reform” as their motivation. Even more tellingly, 80 percent of Egyptians expect their economic situation to get better next year. That’s unlikely to happen. Egypt’s GDP growth for 2011 is projected to total only 1.8%, far less than the 5.3% it managed in 2010. Moreover, unemployment is expected to jump from 9% last year to 12% this year—with the rate being closer to 25% among youths.

Already, this economic contraction is starting to cause fresh political unrest, leading the government to implement populist measures such as raising the minimum wage. Down that path, however, lies a vicious cycle that can only end with a debt crisis and inflation. The way forward for Egypt requires stimulating job growth and foreign direct investment. As General Jones put it:

“If a viable economic strategy that can deliver long-term economic growth and short-term improvements in the quality of life is not firmly established, Egypt’s fledgling and fragile democracy will wilt on the vine.”

Doing that, in turn, will mean undertaking large structural reforms aimed at privatizing industry and liberalizing government regulations. Unfortunately, these are precisely the sorts of measures that the military is now trying to prevent any future government from being able to take. Allowing the SCAF to maintain its economic interests now may help facilitate a peaceful political transition. Ultimately, however, unraveling the military from the economy is going to be as critical to Egypt’s democracy as the elections that will begin this month.