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Friday, 13 December 2019

Egypt’s poverty economics

Changing the living conditions of Egypt’s poorer classes could take the economy as a whole to higher skies, writes Hatem Ezz Eldin

Hatem Ezz Eldin, Tuesday 12 Nov 2019
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The Egyptian economy has been doing a great job in recent months in terms of aggregate numbers. 

Its gross domestic product (GDP) is one of the few in the region and the world exceeding a five per cent growth rate. Unemployment is now at its lowest level in decades, Suez Canal revenues are increasing, and tourism earnings have stabilised and recovered to pre-2011 levels. 

Natural-gas production has gone to historical levels thanks to the giant Zohr Field. Foreign-exchange reserves are up nearly threefold over 2011. Egypt’s sovereign credit ratings have improved, and sentiments among investors have been on the rise.

All this is a credit to the government and to its considerable efforts that no one with a rational mentality can deny.

But at the same time poorer people in Egypt still ask if the country’s economy is performing well, as local and international reports say, then why is the impact of such improvement not yet reflected in their living standards. Why are they still suffering and paying more to get their needs? They are right to ask such questions.

The reports usually speak about numbers and macro-economic indicators, but they give little notice to suffering and the increased needs of the middle and lower classes. They usually underestimate the effects of corruption, injustice and income inequality, which are sometimes hard to measure. The government has shown good intentions to meet such challenges and has taken some successful steps, but the burden is still heavy for a fast-growing society. Lots more work is needed.

Egypt’s poorer people are not responsible for the faults of the country’s previous regimes. They have also showed much patience and support for the current economic reforms. The government understands this, and it knows that any economic policy worth its salt will certainly have social effects. However, the answer to economic questions should not depend on economics alone.

Poverty means that a person’s income level from employment is so low that his or her basic human needs cannot be met. After the urgent and much-needed austerity reforms in 2016 that included the devaluation of the Egyptian pound, imposing taxes and lifting energy subsidies, the purchasing power of a considerable part of Egyptian society became weaker. Consumer prices skyrocketed, and it appeared to many people that the government was no longer able to regulate the market and control increasing prices.

A financial solution to such problems is useful, but it is not enough. It is true that social-solidarity programmes like Takaful and Karama, for example, have proved successful for a considerable number of poorer families across the country, but such financial assistance will not help if such families are not living in a proper environment where they can find equality and justice. 

The effects of such financial assistance will be doubled if such families have equal access to schools, healthcare and work. They will be doubled if these families feel that the government is determined to end any kind of discrimination against their children, or that they can earn what it is their right to earn by law without fear of revenge from the wealthy or powerful classes.  

Economic policies should be implemented in conjunction with social measures to facilitate the quality of life of poorer people and help them overcome difficulties. Educational, healthcare and legal amendments that ensure equality are as necessary as financial assistance packages.

Another important measure the government could take to help the poor is to raise the level of awareness among them, especially regarding what they receive from social media. The role of social media in Egypt regarding the performance of the economy since the 2011 uprising has been against the truth and many times against logic and the national interest. The pace of posting lies and rumours over social media channels has been quick and almost unbelievable. 

The justification of economic problems and disasters is always linked to political stakes. The government’s ability to clarify, coupled with its ability to enhance transparency and accountability, will yield positive results. Poorer people in Egypt will then be ready to learn and to work with much more determination and much more hope. They will start considering options and alternatives for every single detail of their lives. They will respond more actively to the job openings provided by the government and will struggle to help the economy to assist themselves.

Poor people are not a burden on the economic reforms. These largely powerless classes have the power to stimulate the economy to even better rates than the economists and officials are targeting. Just water plants in a clean and fertile environment, and then see how weak stems strengthen. Watch how they are slowly able to grow leaves and shoot upwards. Do the same thing for Egypt’s poor.

Last month, a young vendor died after officials forced him and a friend to jump from a speeding train because they did not have tickets. His friend was injured. The incident sparked an outcry, with the government saying it would be compensating the families of the victims financially. Social media was busy as usual blaming the regime. But not much has been said about how we could change the environment that led to such a disaster through organised and specific steps in such a way as to prevent incidents of this type being repeated.  

This year’s Nobel Prize-winning economists Abhijit Banerjee and Esther Duflo have argued that the lives of the poor can be improved when we change various inputs, like changing the way they are educated or medically treated. They believe there are no magic bullets to end poverty, but there are a number of things that could be done to improve poorer people’s lives.

These include providing them with information, improving healthcare and education and teaching the new technologies. The two economists believe that the world’s poor countries are not doomed to failure because they are poor, or because they have had an unfortunate history. What really needs to be fought is ignorance, ideology and inertia.

The economics of poverty could be a real blessing. In Egypt, we should not turn it into a curse.


The writer is an economist and political analyst based in Riyadh.

 

*A version of this article appears in print in the 14 November, 2019 edition of Al-Ahram Weekly.

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