The Economist and Egypt: Where does the truth lie?

There is no denying that The Economist is an opinionated magazine. It is known for its liberal economic position and slightly presumptuous prescriptions of what governments and markets need to do, while picking at its mistakes from a distance.

Something about their analysis does reflect the hubris of "Washington Consensus" reform recommendations of the 1980s, which aim to push the world's economies to enact liberal reform in a way that somehow conforms to the prevailing American model at the time. For some - especially those who ascribe to the same policy framework - it is a benchmark. As a journalistic publication, however, the paper is known for its factual rigor and robust statistical references.

Last week, The Economist launched a biting criticism of the current Egyptian regime's handling of the economy since it came to power just over two years ago. In two articles entitled, The ruining of Egypt, and State of denial, the magazine took specific aim at President Abdel Fattah al-Sisi's method of rule and what they describe as his squandering of opportunities.

Opportunities such as the demographic "youth bulge" and the billions of dollars in aid have been "fecklessly" disregarded while the investments and private sector development have been curtailed by a crippling bureaucracy, and the regime's focus on developing mega-projects with limited returns, such as the Suez Canal expansion project. The Economist also views the authoritarian rule of Sisi, and his over reliance on the military to execute major projects and infrastructure developments, as counter-productive to the concept of sustained economic growth.

Few could fault the way in which the magazine laid out the information underlying such tepid growth. Their analysis that government has not gone far enough in implementing liberal policies, however leaves ample room for debate and disagreement, the way any policy recommendation invariably does.

One could argue that the problem is not only the regime's lukewarm application of structural readjustment as prescribed by the IMF and other International Finance Institutions (IFI), but the continuing lack of structural change in how the government itself functions and the lack of social safety nets afforded to a population that has long been accustomed to subsidies to face debilitating inflation.

The articles do not mention the external and internal setbacks the Egyptian economy has faced since 2011

However, the articles do acknowledge that the economy may be able to better cope with structural adjustments if small businesses were given more room to operate and grow. This would involve less red-tape and corruption, and more poignant educational policies designed to address the lack of appropriate skills for its very youthful (and growing population).

The Egyptian government's response to these articles was a curious one. Instead of acknowledging the economic realities laid out, and engaging with their analysis in a constructive manner, they resorted to their habitual reductionist defense mechanism, accusing The Economist of falling prey to an international conspiracy theory against Egypt.

In a retort titled, The Ruining of the Economist, the spokesperson for the Ministry of Foreign Affairs, Ahmed Abu Zeid, lambasted the articles for veering "towards stereotyping a vision of a region in chaos without any consideration to the facts and progress on the ground".

The response, published on the Ministry's official blog - as opposed to on the pages of The Economist itself, where they are afforded the right to reply - was combative, to say the least. For one, it seems a bit of a stretch for a ministry to reply to a magazine in such a personal and vitriolic tone.

As far as "tone" goes, The Economist laid themselves open to such a personal attack by their very direct reproach against the regime and to Sisi himself. There is one point where Abu Zeid has been able to express and actually air legitimate grievances.

The articles in fact do not mention the external and internal setbacks the Egyptian economy has faced since 2011, be it changing regimes, political uncertainty, internal strife, terrorist attacks and some global economic shocks. The global oil price collapse has also caused a decrease in revenue from oil sales (and also Suez Canal revenue) but also saved the government some money on its energy subsidies bill. 

However, what is clear, is that the government is refusing to listen to some very legitimate critical analyses on the state of the country's political economy. An in-depth look at the 2011 revolution would reveal that at the heart of what set millions of people to the streets was a combination of suffocating authoritarianism and a neglect of major issues such as the freefall in standard of living and high levels of youth unemployment.

Understanding that any structural changes must attempt to resolve these issues at their roots, should be merely academic. The Economist's articles are doing what most external analysts would: express bemusement as to why the Egyptian government is failing to address this.

They have understood - as do most - that trust in the economy must stem from within, and that an economy attempting to attract billions in foreign investment must have an actual vibrant, functioning private sector to showcase to investors, rather than fancy conferences and military-sponsored mega-projects.

Ultimately though, there is no mistaking that the Egyptian government aspires - or at least claims - to implement the kind of economic reforms the The Economist advocates (discounting social and political reform). The MFA retort even mentioned the regime's commitment to liberal reform.

Both will be pleased with this week's agreement between the IMF and Egypt, that seals a $12 billion gradual aid package for Egypt. It will lead to, among other things, a radically devalued (floating) Egyptian pound, further decreases in subsidies and enhanced tax collection. The Finance Minister said social safety nets would be in place to deal with the inevitable drastic inflation, however, as always, this seems like one of the cloudier points of the deal so far.

What is clear, is that the government is refusing to listen to some very legitimate critical analyses on the state of the country's political economy

That does not discount that the safety nets could be viable. But there is a growing crisis of confidence in the country's political economy, especially as the government is already reportedly shopping for trusts to the tune of $2 billion in the short term, to face the negative effects of floating the currency.

There is a sense that this loan, like many others before it, will overexpose the Egyptian budget to compiling debts that would greatly diminish the ability to internally run the economy. The IMF claims that their loan would decrease Egypt's foreign debt from 98 percent of GDP, to 88 percent in the coming fiscal year, however it does not mention the following few years, when interests and payments are due again.  

The Ministry of Foreign Affairs, needs to stop bickering with harmless civil society organisations, and thoughtful journalism or academia. These responses have been frequent over the past two years, and seem to fall in line with the government's periodic PR blitzes to improve Egypt's image abroad.

Magazine articles and op-eds should be countered like for like, using the same media. The general public deserves more explanation from the ministries, and an outline of a long term executable plan, that clarifies the direction of the political economy in the short, medium and long term. 

The MFA seem to have taken The Economist's bait on this one. Their response should have included more acknowledgement of the articles' undeniable truths, and countered their analysis in equally a thoughtful manner, at least. Disregarding the criticisms as part of a conspiracy against Egypt is not a tactic that has been working well for Sisi.



Mohamed ElMeshad is a journalist and a PhD candidate at SOAS, focusing on the political economy of the media. He worked extensively in Egypt, Bahrain, West Africa, the UK and US.

Recently, he contributed to the Committee to Protect Journalists’ book, Attacks on the Press (2015).

Opinions expressed in this article remain those of the author and do not necessarily represent those of al-Araby al-Jadeed, its editorial board or staff.