Egypt's Spring Revolution (2011-2013)

[Rex Brynen]

Cairo had bread riots when wheat prices spiked in 2008, but the time wasn't yet ripe for expansion to full revolt. This time around it was different. Wheat prices spiked in 2008 and 2011; Cairo had rioting in the streets in 2008 and threw out a government in 2011... no relationship?

Bread "scuffles" would be a more accurate description of what happened in 2008--riots implies far more substantial and widespread protests than actually occurred.

Certainly the increase in food prices played a role, although in Egypt those prices increases were typically smaller than in many other countries because of subsidies. Youth unemployment was important too too, although again Egypt was not the worst country for this, nor had it grown much worse lately. Years of authoritarian regime played a role--although as you correctly note, that in itself is an inadequate explanation for revolt. In the Egyptian case, however, the deliberalization of parliamentary politics and a sense of an impending engineered hand-off to power to Gamal Mubarak exacerbated this, heightening discontent with the regime in general and (in the latter case) creating cracks within the Army. The creative use of ICTs certainly played a role.

Critically, Tunisia played a vital role by entirely changing people's perceptions of political opportunity structures. A very similar regime had just been overthrown through popular protest. The mukhabarat and other organs of state power had been shown to be less fearsome than had been previously believed.

I was just finishing up a book on the prospects for Arab democratization in December, when all of this started to unfold. While much needs to be rewritten (grrrrr), I'm quite pleased with what was a central argument of that manuscript: that what the Arab world needed was a "catalytic event" that would alter perceptions of authoritarian power and set in motion democratic demonstration effects... precisely of the sort we now see.

[Surferbeetle]

State Owned Enterprises

A government-owned corporation, state-owned enterprise, state enterprise, government business enterprise, or parastatal is a legal entity created by a government to undertake commercial activities on behalf of an owner government. Their legal status varies from being a part of government into stock companies with a state as a regular stockholder. There is no standard definition of a government-owned corporation (GOC) or state-owned enterprise (SOE), although the two terms can be used interchangeably. The defining characteristics are that they have a distinct legal form and they are established to operate in commercial affairs. While they may also have public policy objectives, GOCs should be differentiated from other forms of government agencies or state entities established to pursue purely non-financial objectives that have no need or goal of satisfying the shareholders with return on their investment through price increase or dividends.[citation needed]

US Examples:

• Fannie Mae

• Freddy Mac

• Federal Deposit Insurance Corporation

Egypt Generals Running Child Care Means Profit Motive, By Cam Simpson and Mariam Fam - Feb 15, 2011 3:00 PM MT, Bloomberg News

As much as one-third of Egypt’s economy is under military control, said Joshua Stacher, an Egyptian-military expert and assistant professor at Kent State University in Ohio whose work has been published in five academic journals. Revenues from military companies are a state secret, along with the armed- forces budget, he said.

It isn’t uncommon for governments and militaries to own or run their own defense-related industries and arms makers. In Singapore and Israel, for example, nationalized production of fighting hardware has been seen as a way to protect national security by avoiding dependence on foreign producers.

What sets apart the Egyptian military, the Arab world’s largest, is that its companies also offer an array of products or services in the domestic consumer economy -- and without civilian oversight.

Military companies play a significant role in consumer food production, said Springborg, the Naval Postgraduate School professor.

Because the Egyptian military wanted to be self-sufficient in meeting the dietary needs of personnel, it runs “chicken farms, dairy farms, horticultural operations. And it of course has its own bakeries,” he said.

The military’s “business interests are very large,” said Bassma Kodmani, executive director of the Paris-based Arab Reform Initiative and a senior adviser at the French National Research Council. Those businesses, though, help build the nation and help keep capital within its borders.

“The army is not seen as corrupt,” she told a group of reporters in Paris last week. “It might seem strange to people in the west, but in Egypt it’s not considered shocking that the army builds highways or new housing projects.”

Treuhandanstalt

The Treuhandanstalt (German: Trust agency) was the agency that privatized the East German enterprises, Volkseigener Betrieb (VEBs), owned as public property. Created by the Volkskammer on June 17, 1990, it oversaw the restructuring and selling of about 8,500 firms with initially over 4 million employees. At that time it was the world's largest industrial enterprise, controlling everything from steel works to the Babelsberg Studios.

Paul Brinkley's War, Pacifying Iraq with the Weapons of Capitalism, by Ullrich Fichtner, 04/22/2009, Speigel Online International

Paul Brinkley is the head of a special American task force that aims to bring lasting peace to Iraq using the tools of capitalism. He represents a new approach to waging war, where the economic experts come in with the ground troops.

US Troubled Asset Relief Program

The Troubled Asset Relief Program, commonly referred to as TARP, is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector which was signed into law by U.S. President George W. Bush on October 3, 2008. It was a component of the government's measures in 2008 to address the subprime mortgage crisis.
Originally expected to cost the U.S. taxpayers as much as $300 billion,[1] by 16 December, 2010 the Congressional Budget Office (CBO) estimated the total cost would be $25 billion,[2] although Treasury Secretary Timothy Geithner argued that the final cost would be still lower. [3] This is significantly less than the taxpayers' cost of the savings and loan crisis of the late 1980s. The cost of that crisis amounted to 3.2% of GDP during the Reagan/Bush era, while the GDP percentage of the current crisis' cost is estimated at less than 1%.[4] While it was once feared the government would be holding companies like GM, AIG and Citigroup for several years, those companies are preparing to buy back the Treasury's stake and emerge from TARP within a year.[5] Of the $245 billion invested in U.S. banks, over $169 billion has been paid back, including $13.7 billion in dividends, interest and other income, along with $4 billion in warrant proceeds as of April 2010. AIG is considered "on track" to pay back $51 billion from divestitures of two units and another $32 billion in securities.[4] In March 2010, GM repaid more than $2 billion to the U.S. and Canadian governments and on April 21 GM announced the entire loan portion of the U.S. and Canadian governments' investments had been paid back in full, with interest, for a total of $8.1 billion.[6] This was, however, subject to contention because it was noted that the automaker had only paid back its outstanding debt, while the much larger portion of the governments' investment would continue to be tied up in the company's stock.[7]

• Citigroup

Citigroup strikes deal to repay TARP, By David Ellis, CNNMoney.com staff writer, Last Updated: December 14, 2009: 10:15 AM ET

NEW YORK (CNNMoney.com) -- Citigroup said Monday it has struck a deal with the government to return $20 billion in bailout money to taxpayers.

The New York City-based lender said it would raise the money through a combination of stock and debt, the bulk of which would come from a $17 billion common stock offering.

[Marc]

I'm quite pleased with what was a central argument of that manuscript: that what the Arab world needed was a "catalytic event" that would alter perceptions of authoritarian power and set in motion democratic demonstration effects... precisely of the sort we now see.

Rex Brynen,

In my view, there is too much focus on the revolution itself. Starting the revolution was the easy part. However, it's not the revolution that counts, but the day that follows it. As Mr Fukuyama rightly observed, democracy is not a kind of default condition to which societies revert after the disappearance of an autocratic regime. The only tangible result we currently have is a power vacuum. The power vacuum will soon be filled by the best available alternative. Two organizations have a head start in this race: the Army and the Muslim Brothers. Emerging democratic political parties need time to catch up. The international community has to provide that time by keeping Egypt's graneries well filled. In Egypt, "bread is everything" and the lack of it will quickly lead to riots, resulting in either a military regime or an Islamist government.

For democratic, secular parties to develop, the issue of food security has to be kept out of the debate. If necessary, international organizations have to step in to maintain food subsidies at their current level. However, even this does not guarantee a smooth transition towards democracy. What will the Egyptian political landscape look like six months from now? Three main actors will determine the outcome: secular groups, the Muslim Brotherhood, and the Army. According to me, it is useful to analyze their plan A, their worst case scenario, and their plan B.

Plan A of the secular groups is to unite around a democratic project and lead Egypt towards freedom, security, and prosperity. Their worst case scenario is to be marginalized or oppressed by either a military autocrat or an Islamist regime. Their plan B is a power sharing arrangement between themselves and the Muslim Brotherhood to marginalize the regular army.

Plan A of the Muslim Brotherhood is an Islamic republic. However, the Muslim Brothers are pragmatic enough to realize this is not within reach at the moment. Such a project would require a popular Islamic army (like the Pasdaran in Iran) to balance the power of the regular army. At the moment, this is simply beyond their reach. Their worst case scenario is the emergence of a military autocrat like Nasser who removes them from the political scene. Their plan B is a power sharing arrangement between themselves and secular groups to marginalize the army.

Plan A of the Army is to found a military regime. However, the generals are not blind to the fact that this is precisely what the revolution was all about. At the moment, the generals are simply unable to put the genie back in the bottle. Their worst case scenario is the loss of all their priviliges as the prime political and economic power in Egypt. Their plan B is to bide their time and foster disagreements between the Muslim Brotherhood and secular groups and within secular groups themselves. Political instability will put the army in the role of arbitrator, a steppingstone towards a monopoly on political power.

I guess that, at the moment, all actors will opt for their Plan B. This will result in a system that is much more democratic than Moubarak's regime. However, it will be very fragile. Every actor will look for the first opportunity to move to Plan A and every actor will fear the worst case scenario is just around the corner.

[Dayuhan]

Bread "scuffles" would be a more accurate description of what happened in 2008--riots implies far more substantial and widespread protests than actually occurred.

They were widely called riots at the time, though that might be considered overstatement. 7 dead is a fair scuffle, though.

Certainly the increase in food prices played a role, although in Egypt those prices increases were typically smaller than in many other countries because of subsidies. Youth unemployment was important too too, although again Egypt was not the worst country for this, nor had it grown much worse lately. Years of authoritarian regime played a role--although as you correctly note, that in itself is an inadequate explanation for revolt. In the Egyptian case, however, the deliberalization of parliamentary politics and a sense of an impending engineered hand-off to power to Gamal Mubarak exacerbated this, heightening discontent with the regime in general and (in the latter case) creating cracks within the Army. The creative use of ICTs certainly played a role.

Critically, Tunisia played a vital role by entirely changing people's perceptions of political opportunity structures. A very similar regime had just been overthrown through popular protest. The mukhabarat and other organs of state power had been shown to be less fearsome than had been previously believed.

Certainly Tunisia provided the spark, equally certainly economic conditions played a part in building the volatility that the spark ignited.

The whole bread conversation got pulled off track... I didn't originally cite it because it was "the cause", but because I see it as a significant factor in the aftermath, simply because it's a place where immediate policy can have an immediate impact. Tunisia may have been a major contributor to igniting Egypt, but it won't be a major concern for a new government, unless of course the military decides to hold onto power. Food prices and unemployment will be major concerns going forward: the populace doesn't just want freedom, it wants jobs and cheap bread.

All this matters for a specific reason. Given Egypt's enormous debt, government deficit, and trade balance, IMF assistance and loan restructuring will probably be needed. The IMF and other creditors typically insist on terminating subsidies as a condition for assistance. This is good economics and it is necessary in the long term, but politically it could be a real problem. Egyptians have been addicted to that subsidy for a long time, and if they are forced to go cold turkey things could get ugly. I'm hoping the US and EU will use their influence to push for a gradual withdrawal of subsidies rather than an abrupt termination. A major shock early on could badly destabilize what's likely to be a very fragile transition government, creating conditions that could generate a radical takeover or a military coup, which would in turn create conditions that Islamic radicals could and would exploit.

This article from 2008 gives a little rundown on events then, and a hint of the dimensions of the subsidy...

http://www.telegraph.co.uk/finance/e...ad-crisis.html

A 100 kilogram sack of subsidised flour is worth about $3.14. The same sack costs $377 on the black market.

When a subsidy of a staple need is that large, removing it in one swoop is going to cause all kinds of trouble, something that the beady-eyed economists in the IMF back office may not realize. Yes, it has to go, but I'd suggest taking it slow and easy... not that anyone cares what I suggest!

[Steve the Planner]

n an urban environment with a large number of economically marginal residents the price of food is always a key issue, and it's been a major concern for despots for a long time: one recalls the Roman emperors placating the masses with bread and circuses, and Marie Antoinette's infamous "let them eat cake".

Micro is what it's all about: urban insurrections involve a very small percentage of the population. Overall employment rates mean less than the ability to absorb young people coming into the labor force, and GDP growth has little impact on the ability of poor people to put food in their stomachs or the ability of the government to supply cheap food.

Food security and affordability are a major driver in all CENTCOM areas, and interplays with drought/weather patterns and urbanization/rural abandonment.

Urban systems are just plain complicated.

Lately, I have been fascinated with the structure of governments in these areas, from North Africa to Afghanistan.

All have governance systems built on the original Persian satraps, later appearing as Greece, then Roman provinces, all arranged in top down hierarchies from empire/nation, down to provinces, and in turn, down to districts and subdistricts, all inferior sub-entities under the empire/nation.

It's interesting to me that the later rulers/occupiers/dictators all kep[t the structure, assuring the subservience of sub-national government entities to the empire/nation.

Not that "form" must dictate result, any more than geography or climate does, it is a substantial influence.

Older systems of City-States (cities, towns and the regions associated with them) pre-dated the empire/nation satraps/provinces) and provided formats for numerous alternative and changeable affiliations within a framework that, in reality, was a lot closer to "democracy." No doubt, local rulers could be as bad as any, but they faced many obstacles to deep insanity, not to mention loss of local support, loss of revenues from trade, and loss of people (voting by feet).

I wonder how much the actual top-down structure of these empire/nation's governance systems will continue to minimize emergence of local and representative governance, whether in Iran, Iraq, or Egypt?

I have long suspected that, once we were gone, Iraqis would (and are) developing alternate systems of cities and regions that will, in the end, break the "eternal" mold of conquerors' governance systems.

What was one of their first big constitutional steps in Iraq? Article 123 that provides for regions and alternative systems and structures.

Absent structural changes, will most Egyptian aspirations be limited? Still under a system biased towards centralized controls, as our "provinces" plan for Iraq was?

[Surferbeetle]

Catherine Ashton discussed a potential role for the European Bank for Reconstruction and Development in the stabilization of Egypt during a recent op-ed in the Financial Times.

The Country Assessment from the ERBD's 2010 Transition Report, regarding Turkey, was interesting:

In 2009 a total of 106 privatisation deals were completed, including 52 small-scale hydropower plants, electricity distribution companies in 13 regions and infrastructure. Tenders were announced or completed for another eight distribution companies between November 2009 and August 2010. Privatisation also progressed in the transport sector, with two ports sold this year: Samsun and Bandirma. Further sales of state-owned ports, toll motorways and bridges are envisaged in the privatisation portfolio for 2010-11. In total, privatisation revenues amounted to US$ 2.3 billion in 2009 (0.4 per cent of GDP compared with a target of 0.5 per cent) and US$ 941 million for the period of January to July 2010 (the target for a year as a whole is 1.0 per cent of GDP). Foreign direct investment (FDI) inflows in 2009, which contracted by more than half compared with the previous year, were mainly directed at the electricity, gas and water supply sectors, in line with the government’s 2009-10 privatisation programme.

Efforts are under way to diversify Turkey’s energy sources. In May 2010 the government signed an agreement with Russia, estimated at US$ 20 billion, for a Russian firm to build and own a majority stake in Turkey’s first nuclear power plant. Another agreement valued at US$ 1 billion was signed with Iran to construct a new gas export pipeline from Iran via Turkey to Europe, with construction expected to take three years. Lastly, important progress has been made on the Nabucco pipeline, with a memorandum of understanding signed by Turkey and Azerbaijan in June 2010 to develop trade in natural gas.