Poverty Has Consequences

05.03.13

Egypt's Ticking Population Bomb

1952. Gamal Nasser seizes power in Egypt. Egypt's population: ~20 million.

1981. Anwar Sadat assassinated; Hosni Mubarak succeeds him. Egypt's population: ~40 million.

2011. Mubarak overthrown. Egypt's population, over 80 million.

KHALED DESOUKI/AFP/Getty Images ()

New York Times today:

After two decades of steady declines and modest increases, the birthrate in 2012 reached about 32 for every 1,000 people — surpassing a level last seen in 1991, shortly before the government of the longtime president, Hosni Mubarak, expanded family planning programs and publicity campaigns to curtail population growth that he blamed for crippling Egypt’s development. Last year, there were 2.6 million births, bringing the population to about 84 million, according to preliminary government figures.

A rapidly rising population is not inherently a sign of trouble. But Egypt has clearly tumbled into a Malthusian trap. Once a major agricultural exporter, Egypt ranks now as the world's largest importer of wheat. A surge in world wheat prices after 2006 lead to economic crisis in Egypt, where deeply subsidized bread has become a cherished social entitlement.

A story from 2008 gives the background to the collapse of the Mubarak regime. And no, it had nothing to do with Twitter and Facebook.

On a recent morning, the people crowding into a Cairo alley and trying their luck at snagging subsidized bread are not, for the most part, unemployed. In fact, many of them are civil servants who likely live near one of the numerous bakeries that sell loaves of bread for 40 piasters — less than eight cents each.

But eight-penny bread would be an outrageous extravagance in these times. Meager salaries mean these Egyptians stand in line — sometimes for hours — to buy state-subsidized five-piaster (less than one cent) bread.

Hosma, 62, is one of these people. She says she doesn't understand why there have been bread shortages recently — she can't read or write and doesn't keep up with the news as much as much as she'd like. But she knows that her earnings — less than a dollar a day — don't even come close to covering her basic needs.

"Everyone is upset with the high prices. I work for 150 pounds (approximately $30) a month, and everything is so expensive now," Hosma says. "People give me donations; that's how I get by. A few weeks ago, we couldn't find any bread, and there used to be fights. It's also bad quality bread."

By 2010, disaffection had intensified to riots and strikes.

Egypt has not been able to put its growing population to work in productive industry. Egyptians leave the country to seek work elsewhere, whence they can send remittances home. Remittances now rank second only to tourism as a foreign-exchange earner for Egypt: $9.5 billion in the last full fiscal year before the 2011 revolution. That one income source covered more than one-third of the country's 2010 trade deficit.

At home, though, the Egyptian economy languishes. More than one-third of Egyptians who work for wages - that is, who are not peasant farmers - work for government in one way or another. The Egyptian government has since the 1950s used government employment as a social welfare program, multiplying especially civil service jobs in order to create appropriately dignified work for its over-abundant and under-qualified university graduates.

MOHAMMED ABED/AFP/Getty Images ()

The weight of supporting all these government jobs, however, has crushed Egypt's once-robust private sector. Half of Egyptians live on less than $2 per day; average incomes in China overtook Egypt long ago.

In these daunting conditions, it's no wonder that so many Egyptians have responded to the slogan, "Islam is the solution." Nothing else seems to work, after all.

But Islam as propounded by the Muslim Brotherhood doesn't work any better as an economic program than did "Arab socialism" before it. Tourism has collapsed since 2011. More Egyptians are leaving the country to work, sending remittances surging to $19 billion - but net-net, Egypt is falling further behind.

Foreign investment has dwindled away in the face of government hostility.

Vishnu Swaroop Baldwa is one investor who won’t be returning to Egypt any time soon.

“We see better opportunities elsewhere,” said the chief financial officer of Indorama Corp., one of eight companies seeking arbitration at the Washington-based International Center for Settlement of Investment Disputes after an Egyptian court stripped it of its local unit, a textile producer.

The debt to GDP ratio has climbed past 80%, a level that might be handled with safety in a developed country - Germany's ratio also exceeds 80% - but signals danger in a poor country with a primitive financial market, now further hobbled by Islamist ideology: Egypt last year began experimenting with "Islamic bonds," that pay no interest but offer profit-sharing based on increases in the value of underlying assets.

The country's other financial lifeline is borrowing from the International Monetary Fund, a task that becomes ever more fraught as Egypt's foreign policy turns ever more doubtful from the point of view of IMF lenders.

A man walks with his bread bought from Magra El-Oyoun market on January 24, 2012 in Cairo, Egypt. The country is struggling with falling tourism figures and rising unemployment following last year's revolution, which ousted President Hosni Mubarak. The Egyptian parliament, chaired by Mahmoud el-Saqqahm, met yesterday and elected leading Muslim Brotherhood member Saad al-Katatnias as speaker.. (Photo by Jeff J Mitchell/Getty Images) ()

The Financial Times reported on April 30:

When Egypt next sits down with the Fund, its best negotiator won’t be present and it will probably not have the necessary legal framework to enact the reforms required.

Add into the mix another dissenting voice: leftist leader Hamdeen Sabahi, who came third in the presidential election that brought Mursi to power, has repeatedly said the country should reject the IMF’s conditions and the loan. He was quoted this week as saying: “If the political situation remains unchanged, the January 25 [anti-Mubarak] revolution will be followed by a new wave that could erupt due to poverty once the IMF conditions are implemented and there will be a revolution of the hungry”. Hardly helpful.

Back of all the troubles is the continuing ticking of the population bomb. Islamist ideology is hostile to family planning - and (even more!) to the female education and empowerment essential to making family planning successful. Despite worsening economic conditions, the birth rate is rising. Egypt remains a significantly more advanced country than, say, Pakistan, with higher incomes and longer life expectancies and more availability of such basics as electricity and clean water. On the present course, however, the two large Islamic states seem to be converging on a similarly dismal future.