An interesting development in Egypt is happening since the fall of the former dictator Hosni Mubarak. The country is de facto collapsing due to deepening economic crisis driven mostly by political instability and unrest. The last info of increasing inflation and devaluing currency is just another stroke on the picture of the constant economic crash that is making the country poorer and poorer, additionally destabilizing it.
Today the currency reserves of Egypt are $13,6 billion, that for an 80-million populated country is a catastrophe. To compare we must point that about the same level are the reserves of the poorest country in European Union - Bulgaria, that is only 7,5 million as population. I.e. Bulgaria has more than 10 times bigger reserves per capita, than Egypt.
The problem of Egypt is very simple - it is called "democracy". Yes, that is the real problem, as in this Arab country the "democratic spring" has led not to a new and better order, not to a new and wealthy system, but to anarchy, fanaticism and becoming wider poverty.
As of the revolution that removed Mubarak from power Egypt has lost one of the main sources of income and economic growth - the tourism. Much billions of dollars had come to the country in previous years, feeding the growth and the gradual lowering of the poverty. Yes, it happened under the dictatorship with a high corruption and a leader called "The Pharaoh". But anyway this was better than the anarchy that followed and that is leading to a downturn spiral of political instability, bringing economic troubles, the bring additional instability, and so on.
Something similar, but in no so big scale has happened in Eastern Europe after 1989. The communist rulers were kicked out, and under young and unstable democracies, these countries had to make reforms and implement capitalism. The result was an entire economic crash, high emigration and political unrest. Anyway these countries had previous democratic traditions, and were helped by a serious financial flow from the West. So finally after 15-20 years of transition, the situation was mastered and these nations joined the European Union.
But it is good to remember the different and more effective way of reforming that was implemented in China. The Communist Party has kept the power and using it has made deep and controllable reforms that for the same time modernized the country, that now is growing much better than the Eastern Europe.
Anyway nor the Chinese, nor the Eastern Europe model is going in Egypt. This country is simply collapsing and the people that even previously were poor now become even poorer. There is no chance of reviving the tourism, and this makes jobless millions not only in the tourist industry, but also in connected with it service and food industries. Additionally extreme Islamic rulers frighten any investor and also the Christian minority, that is about 10% of the population. And in opposition as possible change of current islamists are even more extreme islamists.
So who will feed Egypt and these 80 million people?
The Arab spring has started due to increasing food prices, that were a result of money-print policy in developed countries. But this revolution did not lead to a better economy. With poor society vulnerable to religious populism, the democracy simply can not work. It is good to remember that even in USA and Great Britain there were no a pure democracy in 19th century when people were much uneducated and poorer. There was a limited democracy with regulated elections and electoral qualification. It is not clear what would happen in USA if there were an unlimited democracy as the one that was brought in Egypt.
So Mubarak went down, economy went down, and there is no salvation now in Egypt. The only chance of this country is a new secular leader, not much dependent of elections. I.e. Egypt needs a new Mubarak. This is the best for the stability and for economic revival. It will be a very difficult way even to reach the standard of living from Mubarak times (the same happened in Eastern Europe that needed 10-15 years to reach the previous standard). But it is the only chance. Any attempt of building an Islamic society will crash in economic disorder, even if in politics the try is successful (Iran case). Egypt has no oil, like Iran. It has to develop more dependent on free entrepreneurship businesses. And this under a fanatic rule is impossible.
So it is time to find the next Mubarak. Every postponing the decision will make it more difficult. And even impossible. Economy is a serious matter. It is not good to joke and experiment with it. Pragmatic decisions are needed, not emotional...
Feb 10th 2013