The Islamists, the Economy, and the People
Can capitalistic polices achieve economic growth as well as alleviate poverty? Mr. Hernando de Soto can provide Mr Khayrat Al-Shater with viable ideas
Maha Ghalwash , Friday 17 Feb 2012
During this time of outrage over the killings at the Port Said soccer match, near-daily street battles with security forces at Mohamed Mahmoud Street, and the debates over the aims of the civil disobedience movement, it is easy for the Islamist-dominated parliament to focus on the revolution’s demand for protection of civil liberties, justice and freedom while sidelining the equally important demand for social justice. This would be a grave mistake; for large numbers of impoverished Egyptians eagerly anticipate the introduction of measures that would bring about noticeable improvement in their living conditions.
The Islamists proudly claim responsibility for the failure of the civil disobedience movement to spread beyond college campuses; they point out that their refusal to participate in this movement certainly influenced their supporters and ensured its failure. This may be true; but the more important explanation for the noticeable disinterest in this movement is people’s concern for their livelihoods. In a time of rising inflation and unemployment, large numbers of Egyptians already living at subsistence level could not risk job dismissal.
It is concern with economic deterioration, too, that allowed the Islamists to capture the majority of seats in Parliament. While some analysts attribute this win to the organisational abilities of the Muslim Brotherhood and others point to Egyptians’ disenchantment with imported Western ideologies and their interest in trying a “home-grown solution”, there is near-general agreement on the impact of the Islamists’ charity work on the minds of the majority of Egyptians. As state services in the areas of health, education, housing, and welfare/pension payments deteriorated, Islamist organisations picked up the slack and provided much-needed relief to large numbers of Egyptians.
A measure of the beneficiaries’ appreciation can be seen in the stunning win of the Nour Party in the recent parliamentary elections. It suggests that voters “forgave” prominent Salafi leaders for their early hostility to the Revolution, when these latter urged people to obey their rulers and endure the hardships they imposed on them.
Thus, by voting the Islamists into power, Egyptians have mandated them to bring about the kind of economic growth that would improve the living standards of ordinary folk. Here we ask: what kind of economic reforms will the Islamists introduce? How do they intend to alleviate poverty in a country where nearly half of the population is barely living at subsistence level?
That the Freedom and Justice Party, the political arm of the Muslim Brotherhood, recently proposed the formation of a national government to be headed by the MB Deputy General Guide Khairat Al-Shater provides us with possible answers to these questions. In a word, Al-Shater is a multimillionaire businessman who seems interested in fine-tuning the conservative economic policies introduced by Mubarak’s regime. Thus we are certain to see the Muslim Brotherhood-led Parliament support policies that aim to increase privatization, attract foreign direct investment, reduce state subsidies and tame the labour unions. This capitalist strategy for development is certain to generate growth, but also involves stark economic inequality—as occurred during the Mubarak era.
So how will the Muslim Brotherhood respond to the demands for poverty alleviation? We certainly cannot expect them to condone policies that aim at redistribution of assets—Nasser’s answer to the problem of socio-economic inequality—as this runs counter to their capitalist logic which centres on the sanctity of private property.
But the Muslim Brotherhood can be expected to expand their charity work; for they currently manage a number of organisations that provide countless grateful Egyptians with basic foodstuffs and a variety of services at discount prices. The problem with this approach, though, is that it allows people to continue to “merely subsist” while the Revolution’s promise of social justice carries with it the assurance of tangible improvement in living standards for ordinary citizens. Thus Egypt’s poor no longer look for charity, but demand a share in the nation’s wealth.
Thus we ask: can the Muslim Brotherhood support conservative economic policies (which will certainly gain the approval of leading international financial institutions) while also addressing the problem of wide-spread impoverishment? Here the work of Peruvian economist Hernando de Soto and his think-tank, the Institute for Liberty and Democracy might be helpful.
This work finds, contrary to popular perception, that the poor of developing countries are not lacking in ingenuity, lazy or mentally deficient; rather the opposite is true. This finding is abundantly reflected in the vibrant informal sectors in these countries, which grew out of ordinary folks’ insistence on adapting to and coping with highly restrictive legal environments that impose prohibitively high fees and cumbersome bureaucratic procedures on economic activities. Thus the majority of citizens operate outside of the formal market; they build their homes and establish small businesses but neglect to register them. In turn, they are unable to access important instruments of the formal market (e.g. bank loans) that would facilitate further improvement.
De Soto refers to these assets as “dead capital”; their holders cannot put them to work in the market and so they will not experience the benefits of macro-economic reform. De Soto concludes that most citizens of developing countries hate capitalism, but that is only because they have never really experienced capitalism. His work aims to transform dead capital into “live” capital: to provide owners of unregistered businesses and homes with official titles to their assets; or to “formalise” these assets. This would ultimately enable the poor and the economically marginalised to dig themselves out of their poverty.
Egypt is one of those developing countries with a burgeoning informal sector that holds much potential for future economic growth—which de Soto promises to unleash. And while some critics claim that such a programme does not constitute a miracle cure for imbalanced and/or sluggish economic growth, others rightly observe that it can only help.
Mr. Khayrat Al-Shater should be encouraged to place a call to Mr. Hernando de Soto.
Maha Ghalwash is a Lecturer at the British University in Egypt