Egypt's unsustainable path
Last updated: 6 November 2013
Political exclusion of Islamists may be popular on the Egyptian street, but it may also threaten the Egyptian state.


As the trial of ousted Egyptian President Mohamed Morsi begins, and widespread violence continues in response to the post-coup crackdown on Islamist groups, the conditions, favoring what US Secretary of State John Kerry recently called Egypt's "march to democracy", are continuing to deteriorate.

While the constitutional committee ponders how to craft a document that points Egypt down the long path to an inclusive democracy, Defense Minister General Abdel-Fattah al-Sisi's decision on whether to run for President casts a long shadow over the process, and will likely render it moot. With key figures from the Egyptian security apparatus back at the helm, there are strong indications that the latest version of Egypt's semi-authoritarian state will be more militaristic and less pluralistic than ever. And the result for the Arab world's most consequential country could be to slip even further away from a path of political and economic sustainability.

Egypt's military coup was necessary, we are told, to steer the country away from the policy mismanagement of the Morsi presidency and back onto a path of "responsible governance" that would enable its increasingly urgent economic problems to be addressed. In pursuit of that end, it seems clear that a majority of Egyptians were willing to sacrifice a democratically-elected government (however chaotic) and violently put an end to the national experiment with political pluralism that had drawn the Muslim Brotherhood out of the political shadows.

There can be little argument that the Brotherhood's brief tenure was one of damaging incompetence (exacerbated, of course, by the military's deliberate undermining of their ability to govern) that had brought Egypt to the brink of an economic abyss. That the door has now slammed shut on this tragicomic interlude is not, from a policy perspective, to be mourned.

But as the authoritarian hard-drive of Egypt's deep state reboots itself, it is worth considering a deeper question: will Egypt's economic problems now actually become any more soluble than they were under Morsi? Can a military junta with a technocratic veneer, its legitimacy cemented by its role in repressing a what it says is an Islamist threat it has -itself- done much to provoke, be the vehicle that delivers economic prosperity for its people?

Bleak prospects

The answer of history is not encouraging. As pointed out in a recent encyclopedic study of why states fail, the most robust predictor of economic prosperity and state success in the modern world is the existence of inclusive political and economic institutions. Such institutions guarantee property rights, create a level playing field, and open a space for broad swaths of the population to engage with the modern global economy through innovation and entrepreneurship, thus spurring wealth creation and raising living standards.

Their polar opposite, extractive institutions, are designed to funnel the vast majority of a nation's wealth to the hands of an elite few, erecting barriers to any new players seeking to become independently wealthy and who might challenge the authoritarians' grip on politics and the economy. The latter version, of course, with the military as the primary beneficiary (plus a few top businesspeople since the privatisations of the 1990s), have dominated Egypt's politics and economy ever since the British left behind their extractive colonial legacy in the 1950s.

Uprooting this corrupt system and replacing it with a more inclusive one that provided economic security and dignity for all, was the core demand of the revolutionaries who took to Egypt's streets in 2011. Ultimately, it remains the sine qua non of progress towards a stable and prosperous Egypt.

But it is increasingly hard to see how Egypt gets there from here. While it is easy to sympathise with the Egyptian military's decision to intervene and force a political reset back in July, the decision to then embark on a violent campaign to cast the Muslim Brotherhood - whose members and sympathisers may account for a quarter of the country - into political outer darkness, is the very antithesis of the inclusive trajectory that is needed.

It is true that a robust market economy, an efficient bureaucracy and an independent judiciary - should they ever be attained under the current regime - could go a long way towards stabilising Egypt's developmental trajectory even in the absence of pluralistic politics. But to the extent the current crackdown is aimed at permanent disenfranchisement of the Brotherhood - and it certainly looks that way so far - history suggests it will fail miserably to enhance Egypt's long-term prospects for stability and prosperity.

Dangers of exclusionary politics

Informed sources say that even Israel, which has benefitted from unprecedented intelligence and security cooperation with Egypt since the coup, is forecasting chronic political instability on its southern border and has been urging the military regime to rethink their exclusionist course.

The slim hope that does exist for a course correction rests on the shoulders of the technocratic elite brought in by the military to restore political and economic competency. But while there is some dissent in the cabinet on whether to reconcile with the Brotherhood, the exclusionists currently have the upper hand. Moreover, the technocrats have displayed no appetite for challenging the military's vast business empire, which dominates the Egyptian economy and essentially guarantees the continuing extractive nature of the state.

Regional influences are also helping to reinforce Egypt's authoritarian-extractive bargain. A group of counter-revolutionary regimes led by Saudi Arabia, with which Egypt chose to align itself during the coup, have stepped up with around $14bn in assistance since Morsi's ouster. But far from fostering political and economic inclusion, the largesse of Egypt's newfound Gulf patrons is conditional on precisely the opposite - unrelenting repression and exclusion of the Muslim Brotherhood. And while the Gulf's generous dollops of cash may plug some gaping fiscal holes today, their pockets are not limitless, and they have already begun signaling that their support is not open-ended. If, and when, this support dries up, Egypt could find itself painted into a corner; unable to attract investment and aid from Western sources wary of their exclusionist political course, yet equally unable to backtrack towards reconciliation with an alienated Brotherhood and its radicalised offshoots.

To make matters worse, Egypt's physical environment is also becoming less forgiving of economic mismanagement. There was a time when the negative developmental consequences of repressive political choices could be kicked down the road. But in an era when climate change is likely to exacerbate, what are already critical water shortages and food insecurity challenges, a leader in charge of a nation of 80 million souls, no longer has that luxury.

In the leadup to the June 30 coup, Egypt was already careening towards economic meltdown, with an incompetent Islamist leadership at the helm and a circle of embittered political opponents waiting for an opportunity to eliminate them. All Egyptians should have been justifiably alarmed. But tragically, in response, the combined energies of its populace were harnessed to support a political maneuver that is not steering it away from the spectre of state failure - but instead one step closer.

Scott Field is a Visiting Scholar at the Institute for International Studies, University of California, Berkeley.

Dariush Zahedi is the Director of the Berkeley Program on Entrepreneurship and Development in the Middle East at the University of California, Berkeley.