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When Cheap is Costly: Rent Decline, Regime Survival and State Reform in Mubarak's Egypt (1990–2009)

2011; Taylor & Francis; Volume: 47; Issue: 2 Linguagem: Inglês

10.1080/00263206.2011.542310

1743-7881

Amr Adly,

Economic Growth and Development

Abstract It has been held that external rents significantly affect the formation of state institutional capacities as constant flows of rents tend to weaken the capacity to regulate, monitor and restructure the economy. This gives rise to the formulation of a question in reverse: would a steady and consistent decline in rents instigate state capacity building? This study argues that the impact of rent decline on capacity building is politically mediated by the institutional features of the ruling regime which determine the extent to which dwindling rents adversely affect the incumbents' chances of political survival. In Mubarak's Egypt, the ruling incumbents could survive with less rent by resorting to more repression and curtailing political participation and could thus evade the cost of state reform. In that setting, cheap regime survival proved to be quite costly for the overall economy. Notes 1. T. Besley and T. Persson, The Origins of State Capacity: Property Rights, Taxation and Politics (Working paper no.13028, Cambridge, MA: National Bureau of Economic Research, 2007); R. Schwarz, ‘The Political Economy of State-Formation in the Arab Middle East: Rentier States, Economic Reform, and Democratization’, Review of International Political Economy, Vol.15, No.4 (2008), pp.599–621; T.L. Karl, The Paradox of Plenty: Oil Booms and Petro-States (Berkeley: University of California Press, 1997); K.A. Chaudhry, The Price of Wealth: Economies and Institutions in the Middle East (Ithaca, NY: Cornell University Press, 1997). 2. S. Soliman, Aldawla al daeefa wal nizam al-qawi, Idarat al azma al maleya fi misr[The Weak State and Strong Regime: The Management of the Financial Crisis in Egypt] (Cairo: Dar Meret, 2005), p.62. 3. IOGA, History of Illinois Basin posted crude oil prices http://www.ioga.com/Special/crudeoil_Hist.htm (accessed 14 Oct. 2009). 4. Ministry of Petroleum, http://www.petroleum.gov.eg/MinistryMinisterStudies.aspx. 5. Ibid. 6. Soliman, Aldawla al daeefa. 7. Central Bank of Egypt, Time Series, http://www.cbe.org.eg/timeSeries.htm (accessed 10 Oct. 2009). 8. R. Springborg, ‘Gas and Egyptian Development’, in R. Looney (ed.), Handbook of Oil Politics (London: Routledge, 2010), p.2. 9. Figures calculated from the Central Bank of Egypt, Time Series. 10. Soliman, Aldawla al daeefa. 11. Springborg, ‘Gas and Egyptian Development’, p.11. 12. World Trade Organization, Time Series. 13. Springborg, ‘Gas and Egyptian Development’, p.11. 14. The average share of fuel and mineral exports was 59 per cent for the 1980s, 47 per cent for the 1990s and 41 per cent for the 2000s. WTO, World Trade Organization, Time Series on International Trade, http://stat.wto.org/StatisticalProgram/WSDBStatProgramHome.aspx?Language=E (accessed 13 Feb. 2009). 15. R. Springborg and H. Clement, Globalization and the Politics of Development in the Middle East (London: Cambridge University Press, 2001). 16. S. Soliman, State and Industrial Capitalism in Egypt, Cairo Papers in Social Science, Vol.21, No.2 (Cairo: The American University in Cairo Press, 1998). 17. G. Abdel-khalek, Stabilization and Adjustment in Egypt: Reform or De-industrialization (Cheltenham, UK and Northampton MA: Edward Elgar, 2001). 18. World Trade Organization, Trade Country Review 2003. 19. Ministry of Industry and Mineral Resources, Nashrat Al-Intag Al-Sinaii[Industrial Production Bulletins], 1994, 1998, 2004). 20. F. Ibrahim. Former Minister of Industry. Phone interview conducted by the author, 18 Aug. 2008, Cairo. 21. H. Beblawi and G. Luciani (eds.), The Rentier State in the Arab World (London: Croom Helm, 1987), p.51. 22. Soliman, Aldawla al daeefa. 23. G. Luciani, ‘The Oil Rent, the Fiscal Crisis of the State and Democratization’, in G. Salame (ed.), Democracy without Democrats: The Renewal of Politics in the Muslim World (London and New York: I.B. Tauris, 1994); Soliman, Aldawla al daeefa; Beblawi and Luciani, The Rentier State in the Arab World. 24. Karl, The Paradox of Plenty. 25. R.F. Doner, B.K. Ritchie and D. Slater, ‘Systemic Vulnerability and the Origins of Developmental States: Northeast and Southeast Asia in Comparative Perspective’, International Organisation, Vol.59 (2005), pp.327–61; Besley and Persson, The Origins of State Capacity; Swartz; Karl, The Paradox of Plenty, p.26 J. Knight, Institutions and social conflict (Cambridge and New York: Cambridge University Press, 1992), p.24. 26. Schwarz, ‘The Political Economy of State-Formation'. 27. P.A. David, ‘Path Dependence and the Quest for Historical Economics: One More Chorus of the Ballad of Qwerty’ (University of Oxford Discussion Papers in Economic and Social History, 1997), p.40. 28. B. Amable, The Diversity of Modern Capitalism (New York: Oxford University Press, 2003), p.42. 29. A. Kohli, State-directed Development: Political Power and Industrialization in the Global Periphery (Cambridge and New York: Cambridge University Press, 2004), p.8. 30. R. Doner et al. ‘Systematic Vulnerability and the Origins of Developmental States', pp. 327–61. 31. C. Tilly, Coercion, Capital and European States, AD990–1992 (Cambridge, MA and Oxford: Blackwell, 1992); Karl, The Paradox of Plenty. 32. M.D. Shafer, Winners and Losers: How Sectors Shape the Developmental Prospects of States (Ithaca, NY and London: Cornell University Press, 1994). 33. Karl, The Paradox of Plenty. 34. Shafer, Winners and Losers. 35. Karl, The Paradox of Plenty, p.57. 36. Abdel-khalek, Stabilization and Adjustment in Egypt, p.117. 37. In the absence of external debt financing and low tax revenues, the Egyptian government relied primarily on domestic debt to finance the budget deficit. Domestic debt stock soared from 54.49 per cent of total GDP in 1990/91 to 85 per cent in 2007 with an average annual increase of 13 per cent. The main source of domestic credit has been the National Investment Bank using deposits of pension and social security funds on which management the State keeps a monopoly. 38. Central Bank of Egypt, Time Series. 39. The president's verbal instruction to keep external loans within the limits of the annual debt service. 40. In the absence of external debt financing and low tax revenues, the Egyptian government relied primarily on domestic debt to finance the budget deficit. Domestic debt stock soared from 54.49 per cent of total GDP in 1990/91 to 85 per cent in 2007 with an average annual increase of 13 per cent. The main source of domestic credit has been the National Investment Bank using deposits of pension and social security funds on which management the state keeps a monopoly. 41. Soliman, Aldawla al daeefa, p.79. 42. The number of employees in the government bureaucracy increased from 3,948,000 in 1990/91 to 5,657,583 in 2007/08 (Ministry of Administrative Development). 43. Central Bank of Egypt, Time Series. 44. Soliman, Aldawla al daeefa. 45. R. Springborg, Mubarak's Egypt: Fragmentation of the Political Order (Boulder, CO: Westview Press, 1989). 46. Soliman, Aldawla al daeefa, p.84. 47. Ibid., p.245. 48. S. Soliman, Al Musharaka alseyaseyya fi alintikhabat alneyabeyya 2005[Political Participation in the 2005 Parliamentary Elections] (Cairo: Algamiyya almisriyya lilnohoud belmusharaka almogtamaeyya we mufawadeyat elitihad alurobi, 2006), p.85; E. Kienle, A Grand Delusion: Democracy and Economic Reform in Egypt (London and New York: I.B. Tauris, 2001). 49. Alreyadh, 25 Oct. 2005, no.13637. 50. Soliman, Al Musharaka alseyaseyya, p.85. 51. N. Ezeldin, Al-Ommal wa Rigal Al-Aamal: Tahawolate Alforass Al-seyasseyya fi Misr[Workers and Businessmen: The Changes in Political Opportunities in Egypt] (Cairo: Markaz al-Ahram lilderassat al-seyasseyya wal strategeyya, 2003), p.303; Soliman, Aldawla al daeefa; Kienle, A Grand Delusion. 52. Soliman, Aldawla al daeefa. 53. Central Bank of Egypt, Time Series. 54. Soliman, Aldawla al daeefa, p.63. 55. Central Bank of Egypt, Time Series. 56. Soliman, Aldawla al daeefa, p.64. 57. Information and Decision-making Support Centre (IDSC), Report No.13, Al-Da'm Adat Litahkik Al-Adala Al-Ijtimaeya, 2008, p.7 (in Arabic). 58. J. Beinin, Egyptian Workers, 2004–08: A New Kind of Social Movement on the Margins of the Neo-liberal Order? (Paper presented at the Mediterranean Program 10th Mediterranean Research Meeting: Workshop on Social Movements in the Middle East and North Africa, Florence, Montecatini Terme, Italy, 25–28 March 2009). 59. BBC Arabic, 26 Dec. 2007, http://www.bbc.co.uk/arabic/ (accessed 16 Nov. 2009). 60. Almasri-alyoum, No.687, 1 May 2006, http://arabic-radio-tv.com/newspapers/egypt/almasry-alyoum.htm (accessed 16 Nov. 2009). 61. Aljazeera, 5 Feb. 2007, http://aljazeera.net/portal (accessed 16 Nov. 2009). 62. Beinin, Egyptian Workers, p.22. 63. Soliman, Aldawla al daeefa, p.187. 64. Beinin, Egyptian Workers. 65. BBC Arabic, 30 April 2008, http://www.bbc.co.uk/arabic/ (accessed 16 Nov. 2009).