Al-Nizam Al-Kawy wal Dawla Al-Dai'efa
(The Strong Regime and the Weak State) by Samer Soliman, Cairo: General Organisation for Cultural Palaces, 2013. 312pp
It was 2004 when I sat in a small room in Munira district in Cairo to attend a board meeting of “El-Bosla” independent magazine, with the late Samer Soliman, who as one of its founders. This was our first encounter.
I had not heard much about Soliman until that time; the age and knowledge difference between us made me somewhat careful around him. At that time he was known to me as one of the heroes of the attempt to establish a Social Democratic Party during Mubarak era, but the attempt had failed.
As meeting attendees started disucssing the coming issue of the non-periodic, semi-academic publication, I observed for the first time discussion among leftist intellectuals, referring to writings I had never heard of. Samer Soliman started speaking about the crisis of Mubarak’s regime from the standpoing of political economy, deeming it a crisis facing the capitalist transformation in Egypt, analysing the obstacles that hinder the emergence of productive capitalism in Egypt capable of competing internationally.
On top of these obstacles was the impairment of the state institution and the flabbiness of its apparatuses that fail to formulate and apply laws to support this transformation. In addition, there's the continous financial challenge resulting from the state's failure to collect taxes from the owners of Egypt's capital.
Soliman concluded that the success of the spluttering capitalist transformation, since the era of President Sadat (1970 to 1981), is profoundly related to the readjustment of relations between the state and society, which in turn relates to the political system. This was his entry point to understand the explosion of political and economic crises in what would become the latter years of Mubarak’s regime, which eventually toppled it. As they toppled its Muslim Brotherhood successor.
Shortly after, Soliman released the first edition of his book, The Strong Regime and the Weak State: The fiscal crisis and political change in Egypt under Mubarak, in 2005. The updated and modified edition, now published eight years later, establishes that the book is still the most important Arabic reference on Egypt's political economy under Mubarak. What’s important about the book is that it offered a new notion that helped explain what happened in Egypt before and after January 25 Revolution — which is the end of the "Rentier state" in Egypt and the beginning of the "Tax state," with all its economic and political ripple effects, bound for far-reaching and deep impact.
The rentier state refers to the condition where the country totaly relies on financial returns from sources like natural gas, petrol, Suez Canal traffic charges, and money transfers to the central bank, instead of tax collection from capital owners and high income individuals. The foreign currency resources that came through foreign aid, the Suez Canal and petrol represented 80 percent of state revenues during the 1970s. This fiscal structure had a very deep impact on the nature of the political system in Egypt. Politically, the reliance on rentier revenues supported authoritarian regimes in Egypt as it guaranteed independence from society, and in return doubled its ability to escape the democratic transformation and to continue repression.
On the economic account, rentier revenues isolated the state from the wider base of the economy, thus also establishing reluctance to encourage investment and put forward new economic policies and building necessary institutions to transform the Egyptian economy to compete and grow. In short, rentier revenues that dominated the Egyptian budget played major role in political and economic stagnation and supported authoritarianism.
In his book, Soliman monitors the steady decrease in foreign rentier revenues since the 1990s for many reasons, including the drop in foreign aid, population increase, and the urgent need of the state to adopt programmes to liberate the economy, which reduced its dominance over the economy. This is exactly what put Egypt in a critical situation when oil prices collapsed in 1986 and the state was about to declare bankruptcy in 1989. Mubarak managed to halve Egypt's foreign debt after aligning Egypt politically and militarily with the international coalition against Iraq, forged to liberate Kuwait.
Nevertheless, the 1990s witnessed a great fiscal crisis that escalated with the decrease of general state revenues and a stable level of expenditure. The state started to finance the budget deficit from local borrowing, depending on insurance deposits and the Egyptian banking system.
This fiscal crisis was key in Samer Soliman's analysis to understand many of the political and institutional changes in Egypt that took place as the government began to realise the imperative of transforming into a tax state. That meant increasing the state’s share of gross domestic product by imposing higher taxes. From here we can understand the attempts to impose changes during Mubarak’s latter years, to try raise the efficacy of collecting taxes, which was impossible in a state that didn’t encourage the economy to grow, which ties again with the spluttering capitalist transformation.
Samer Soliman notes the difficulty of achieving change in the political and economic situation in Egypt under Mubarak’s rule, simply because it was a repressive police state that lacked any alliance with broader social classes that could support tax increases and restructuring expenditure, and thus support rearranging the state’s role in the economy.
From here, political analysis was reinforced with fiscal and economic analysis. Samer Soliman believed that increasing taxes in Egypt would lead in the direction of democratic transformation, because there's “no taxation without representation,” therefore conditioning the relation between the state and the classes that own property and capital, and also mapping its relation with the middle classes, workers, and the poor.
In short, rearranging the relation between the state and society, Soliman argued in his book, is not possible without a political transformation that ends with the establishment of a social democratic coalition that contributes to an efficient and productive economic system and enjoys legitimacy and popular support at the same time. That was the difficult equation that Mubarak and the Muslim Brotherhood couldn’t reach. Their successors will also fail if they don’t recognise the engines of political economy that push political change in Egypt.