The historic failure of development before the Egyptian revolution

Taha Abdel Alim , Saturday 16 Apr 2011

Many factors led to the 25 January Revolution, not least the legacy of failed industrial development stretching back to the time of Mohamed Ali

Without doubt, economic policies during the Hosni Mubarak era —especially as the scenario to pass down power to his son gained force —wasted exceptional opportunities to achieve development, industry and progress. The problems of development are directly related to the causes and effects of chronic economic stagnation.

This stagnation is behind Egypt’s developmental and social malaise and in all honesty is rooted in eras preceding Mubarak’s. These problems, which expressed themselves after the revolution as strikes in various workplaces, are being used by the counter-revolution to thwart the revolution. We must learn the lessons of history about what has passed and how we can overcome it. This is made the more clear in the following.

First, despite Egypt’s pioneering industrial role since the dawn of Pharaonic civilisation and the Hellenic Empire after Alexander the Great conquered Egypt, and some early and initial achievements in the Islamic Middle Ages, Egypt fell behind. It was wrapped in darkness under appalling Ottoman Mamluke rule in the early stages of the industrial revolution. Egypt was home to non-essential capitalist production during the Hellenic period or Ptolemaic period BC, then in the Fatimid era, as noted by Ahmed Sadek Saad in his book about the Asiatic mode of production. This is the type of industry found in Pharaonic Egypt in later dynasties. This is also cited in Salim Hassan’s tome on ancient Egypt and other reputable research on that period.

Second, the discovery of the Cape of Good Hope dealt a severe blow to Egypt’s trade capitalism and artisan industry, which is the historical and logical prelude to industrial capitalism. Nonetheless, the merchant and artisan elite was privileged at the end of the Ottoman Mamluke period with relatively strong economic prowess. Andre Raymond said as much in his pioneer work on the merchants and artisans in Egypt in the 17th and 18th centuries, albeit under unstable rule, neglected irrigation, decreasing agricultural production, deterioration of cities and skills and a shocking drop in population.

Egypt was not equipped with the political, economic or social tools needed for an industrial revolution, where the leaders of industrial capitalism emerged from the ranks of artisans. Neither did Egypt transform interest and trade capitalism into industrial capitalism, unless it was an exception. Mamluke manipulation of the capital of merchants, artisans and landowners was a deciding factor in destroying any chance of adopting industrial capitalism.

Third, lessons from modern history and the reality on the ground today confirm that the present is a reflection of the past, while the future is a reflection of the present, based on the effects of foreign influence and national responsibility to support industry and development in Egypt’s modern history. I am referring to the achievements and failures during the past two centuries since Mohamed Ali Pacha came to power in Egypt in 1805 until today. Despite Egypt’s achievements in pioneer industry and development projects —according to the standards of the time at launch —they all failed in accomplishing their goals according to international standards and then national aspirations.

Fourth, during the reign of Mohamed Ali Pacha, Egypt witnessed a historic leap in mechanical production and comprehensive economic development before many countries that are more advanced than Egypt today. However, the open door policy, which was imposed by foreign interference, and the rise of colonialism were main factors undermining industry in Egypt. The domestic scene and foreign policy blocked capital associated with government feudal industry during the Mohamed Ali years. The policy of state monopoly denied Egyptian artisan industry the opportunity to accumulate capital, and in fact almost destroyed it.

The foreigners who owned trade and interest capital chose the higher profits and safety of interest lending and overseas trade profits over the risk or making smaller profits by investing their money in funding modern capitalist industry. This failure was also enforced by the negative effects of Mohamed Ali’s foreign policy, which provided the pretext for an imminent clash between the ambitions of the Empire and European expansionist desires as the colonial empire was being created.

Fifth, the largest Egyptian feudal and quasi-feudal landowners who had accumulated monetary wealth from producing and exporting cotton did not invest in industry. They preferred luxury consumerism of the feudal type in the years following Mohamed Ali, other than limited production under Khedive Ismail. However, the policies of colonial Britain, which opposed Egyptian industry, especially by limiting it to cotton production which is the country’s primary crop, was the main reason for the delay in the capitalist industrial revolution in Egypt.

Nonetheless, Egypt —before the majority of new and rising industrial states of today —launched a pioneer initiative of national capitalist industry founded in the fundamental role of modern mechanical production in textiles, thanks to Banque Misr under the leadership of Talaat Harb. Egypt’s transformational industry was able to become a leader among the countries that were under colonial control.

This historical achievement was accomplished during quasi independence to formulate economic policy, a right that Egypt seized during the 1919 Revolution. But the diktat of the English Egyptian National Bank —in collaboration with the owning family and other major landowners, as well as foreign capitalists who monopolised the Egyptian economy and their Egyptian and Egyptianised agents —were the main reason why the Egyptian government imposed a law to support Banque Misr but placed stifling conditions that froze this historical founding role in national capitalist industry.

Sixth, during the July 1952 Revolution, Egypt witnessed an ambitious attempt of independent industry and comprehensive development that placed Egypt in the lead of independent developing nations in terms of the quality of production. This achievement was accomplished because of the country’s leadership, the public sector and investment plans and projects, as well as opportunities of economic and technical cooperation with the former Soviet Union in Egyptian industries. Also, utilising trade relations, funding and investment from the West during an era of competition between the capitalist and socialist camps during the Cold War.

Egypt’s economy, however, was denied historical accumulation of the expertise of national capitalist industry pioneers because of socialist decisions of nationalisation. These included national capitalist industry that could have been an addition to new and expansive investment in the industrial public sector. The economy of directives, which accompanies state hegemony in financial, industrial and economic centres, found itself in a true dilemma when it could no longer gather or develop the necessary resources to increase investment.

Meanwhile, foreign policy choices further polarised and escalated the clash between the Nasserist regime and US interests in a way that exceeded Egypt’s ability to deal with the repercussions and beyond any support that the Soviets as allies could provide. This gave pretext and reason for the US-supported Israeli aggression in June 1967, which dealt a treacherous and severe blow that led to the painful defeat of the Nasserist project.

In conclusion, we must look at the roots of Egypt’s economic development dilemma not only as a result of foreign factors but also of domestic conditions. More is yet to be said about the development dilemma before the 25 January Revolution, and the desired development strategy that should ensue.

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