Talking economics before Egypt elects its president

Egypt is now days away from electing its new president. Yet, 17 months into the revolution, some pressing social issues have received little more than lip service. Specifically, I would like to focus on the policies that must be implemented in the near future for the lives of ordinary Egyptians to improve. Unlike in France’s presidential poll or in Greece’s parliamentary elections, in Egypt we do not hear of any serious proposals by Parliament or presidential candidates on how to alleviate the distress of ordinary citizens, which is extremely alarming.

Unfortunately Egypt’s economy is crippled with problems of debt, poor infrastructure and 60 years of poor economic planning. This makes it very unlikely that Egypt will witness the sort of substantial economic growth that the "Asian Tigers" (Hong Kong, Singapore, South Korea and Taiwan) or Turkey experienced in the past 50 years. While economic growth is certainly one way to improve peoples’ lives, we perhaps need to be reminded over and over again that it is not the only way forward.

In the immediate term, Egypt can implement some policies that may not translate into rapid income growth but could do a lot to improve the lives of the struggling majority of its citizens. The policies advocated below clearly favor greater social justice, and are to be implemented through a more equitable redistribution of resources.

To date, the labor market does little other than sustain very high profit margins for a handful of capitalists (many of whom had close ties with the disbanded National Democratic Party and the deposed president). Minimum wages need to be enforced, and more importantly, workers must be allowed to organize around effective trade unions that would promote all aspects of their rights and safety in the workplace. Such improvements in working conditions may certainly translate into higher labor costs for firms, or perhaps in a temporary reduction of employment in the formal sector of the economy. But these are choices that need to be put on the table for Egyptians to decide upon.

While an Egyptian born today has a life expectancy of 71 years, there is a lot that can be done to improve the quality of his or her life by reforming the health sector. Firstly, there are productive investments that can be made in primary healthcare delivery, in order to reduce infant mortality and morbidity. Protecting infants from disease can have benefits that are compounded throughout adult life, and can help yield a more productive workforce. Secondly, social health insurance must be made more readily available, and this increased coverage must be complemented by an improvement in the delivery of health services, a cleaner environment and more effective public health programs.

Youth unemployment is a chronic phenomenon in Egypt. The pensions of most Egyptians have been eroded by high inflation, and real wages themselves were, and remain, very low for most workers. Furthermore, it is certainly striking that the massive campaign of privatization and market liberalization that has been implemented in Egypt since the mid-1990s has not been matched by an expanded social safety nets. One factor that sets market economies and Egypt apart is the availability of a wide range of social safety nets in the former to help workers and families cope with the risks of an economically volatile environment. Despite poor public finances, serious efforts must be made to expand and improve social insurance coverage in Egypt.

Finally, if a democratic Egypt were to elect an enlightened and accountable president and government, tax and expenditure reform would urgently be needed to fund social safety nets and other investments in the public sector. In terms of reform, we need more effective patterns of raising tax revenue and more relevant and sensible government spending. Perhaps switching some of the previously unproductive expenditures towards human capital investments in primary healthcare and education could do wonders to enhance the quality of life of a country where the illiteracy rate is as high as 30 percent, and where life expectancy is trailing 15 years behind that of most European countries. Workers, the lifeline of any economy, must be granted the right to organize around unions that would promote and sustain their welfare. Redistribution of wealth is badly needed, and all citizens have an interest in ensuring that the demands of ordinary Egyptians are properly addressed.

Hany Abul Naga is an economist specializing in income distribution and public policy.

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