Economic history of Egypt
This essay seek to look at the history of economic thought in Egypt. It seeks to answer the following questions, the economic history of Egypt, the economic philosophies followed by Egyptian majority, and the major economists who have influenced economic philosophies in Egypt. There is also the major economic events that took place in the history of Egypt, economic policy of Egypt as well as the changes that can be implemented, and finally, how history has shaped the economy of Egypt.
Egypt is a well-placed nation connecting Africa with the Middle East. Its economy has stagnated for years due to lack of arable land as well as the skyrocketing growth in population. As such, the economy of Egypt is greatly hinged to its historic philosophies and policies. The economy of Egypt was highly centralized under the reign of President Gamal Abdel Nasser.
A number of factors that resulted in 1990s such as IMF arrangements as well as external debt relief due to its participation in Gulf war helped the country to boost its macroeconomic performance. In addition, from the year 2000, the country has put in place structural reforms such as monetary, fiscal policies, new business legislations, and privatizations, which have seen the economy shift to a market-oriented economy, coupled with increased foreign direct investment.
The policies and reforms have strengthened the annual economic growth rate to an average of 5% per year, though the gain from economic growth has failed to trickle down. As such, the population is faced with high rates of underemployment and unemployment. As a result, early this year youths went to the streets protesting for political freedoms, a zero-tolerance to corruption, and improved standards of living. This forced President Husni Mubarak to forego the presidencyi.
The ancient economy of Egypt was termed as a command economy; however such a definition worked less as expected. The economy experienced a hallmark of bureaucracy that resulted in a certain class controlling or monitoring a considerable amount of activity.
State officials performed tasks such as reassigning and redistribution of land, assessment of expected crops, collection of taxes, as well as storage and redistribution of the produce. The redistribution and storage were done locally, and during periods of shortfall, regional facilities supplied produce.
The Egyptian economy has been stable averaging between 4-5% annually. The continuous growth is attributed to certain developments that the economy embarked on, allowing the private and public sector participation. In the period, 1952- 1966, the major development was import substitution and nationalization.
During this period, there was the establishment of an industrialization program, and it resulted in the creation of heavy public industries such as steel, chemical, and iron industries. However, the presence of nationalization erodes the importance of private sector. Additionally, the presence of inter-war, during 1967- 1973 affected the economic performance adversely, thus limiting the public sector import substitution role.
During the openness Euphoria period of 1974 to 1982, the economy introduced policies that encourage Arab together with foreign investment through liberalization of trade as well as payment coupled with a number of incentives. As such, the economy recorded good performance, but it proved unsustainable and the growth accordingly scaled back.
The economy faced an external debt crisis during the period, 1982- 1990, which affected economic performance adversely. Furthermore, the period, 1991 – 2007, is regarded as reform era, and the economy was forced to introduce reform policies to meet lenders and donors as well as international institutions terms. The reforms also focused on improvement of the private sector role on all economic sectors.
Under the comprehensive reform era initiated in 1991, the economy of Egypt has reduced subsidies, cut taxes, reduced inflation, and relaxed a number of price controls, as well as liberating trade and investment partially. The public sector has limited dominance over heavy manufacturing industries; this has enhanced private sector opportunities.
The private sector dominates agriculture, non-financial services, retail trades, domestic wholesale and construction. As such, the economy has recorded a steady growth in GDP, as well as the growth rate. In addition, the economy has managed to tame inflation from a double digit figure to a single digit figure.
Economic philosophies in Egypt
Most Egyptians embrace an economic system that ensures fair distribution of resources, free from corruption as well as encourage participation of the private and public enterprises.
Major economists in Egypt
The major economists that have influenced the economic philosophies in Egypt include Professor Galal Amin, Samir Amin, Dr. Ahmed Elhaggar, and Omar Samra.
Important economic event
The major economic event in the Egyptian history is economic liberalization reforms. Since the occurrence of this event, has seen an improvement in economic performance for the country. As such, the economy shifted its concentration from import substitution policies to export oriented policies, this yield an economy that is the private sector reliant.
Additionally, the rooted transformation has resulting to a modern economy that is well-known as the fastest growing among the emerging markets. As such, there has been growth in all sectors of the economy coupled with large inflows of Foreign Direct Investment. The reforms have had a positive effect on the economic performance of the economy, with a proved sustain growth in the futureii.
Economic policy in Egypt
An economic system that serves the interest of all the interest groups is applauded. In this case, a hybrid system will serve this purpose best. The components of such a system are that it provides the private sector and public (government) with the opportunity to equally control part of the natural resources.
These will ensure that the different opinions in the society are well balanced. In addition, the system should be one, which the government plays an important role in providing the necessary solutions and strategies of solving the problems facing the society.
The system, as well, will ensure an integration of both the private sector and government units in the production of various goods and services to amicably solve the issues prevailing in a society. The government cannot solely provide quality and affordable goods and services that are equitably distributed among the members of the society. For instance, the government cannot provide quality health and education facilities to all members of the societyiii.
When the resources and production is shared between the government and the private sector, the government will have surplus resources that can be used in providing services such as health, education, infrastructure, legal, and military defense to the society. The system should also have components such as, the government ability to take precedence in any decisions that move around quantity of goods to be produced.
The government is responsible in making final decisions whenever there is an issue that brings contention, and the two parties are not in a position to strike a balance. The private sector contribution in the economy should be geared towards the achievement of objectives that adds to equitable and fair distribution of available resources. The resources should be utilized in a manner that will consider those of future generation. The utilization of the resources should be socially oriented.
Reason for the economic policy
The overall pattern of economic system has changed due to a change in some trends in the economy. Some of these trends include; democratization, significant shift to market economies as well as the revival of cultural and ethnic politics.
Democracy is taking the center stage in political arena of the Egyptian economy, with economies engaging in free, regular and fair elections. Democracy has nurtured civil liberties like freedom of speech, assembly and belief, neutrality in legal aspects, civilian control of the military, presence of civil societies that provides individuals with opportunities to own and operate their property as well as a rule of law that ensure equal opportunities for all the citizens in an economy.
The resulting competition that arise when an economy facilitates the commitment of the private and public sectors of the economy has influenced the shift by the Egyptian economy to a market system. The economy of Egypt has moved to systems that foster success and recently a term known as marketization has been adopted by the current economy.
Marketization describes a re-creation in the economy where labour, goods, services and property are all allowed to function in a market that is competitive environment to determine their price. The move has seen privatization of state owned property, where the government decides to sell some property they own to private individualsiv.
Fragmentations that exist among the members of the society play an important role in determining and shaping politics in the world. Nationalism is on its diving mode due to the increasing globalization. The revival of cultural and ethical conflicts can hamper the system prevailing in an economy. This is because nations that have varying ideologies and socioeconomic differences may lead to a shift in economic system from a market economy to a command economy.
How history shaped Egyptian economy and factors influencing it
When an economy embraces a particular economic system, there is some degree of success. The success of an economy is measured in what is termed as economic progress. The main indicators of economic progress include; equal distribution of resources, low levels of poverty, low levels of illiteracy, life expectancy rate improvement, improved agriculture, as well as equitable access of opportunities. As such, the Egyptian economy was influenced by the following internal factors during the recent revolution.
A transitional government has necessitated a shift to an economy that is changing from a command economy to a free enterprise. This kind of economies went through economic liberation, in this sense the economy prices are set by the market forces as opposed to the central planning authority setting prices. In addition, there are no trade barriers; a financial sector is created as well as privatization of resources and enterprises that are owned by government. Transition process exhibits some of the following features creation of institutions that are privately owned, the role of the government changes among others. For transition to occur there must be a complete restructuring of institutions that are state-owned from being providers, but enablers of growth with the private sector playing the part of an engine to realize that growthv.
The other factor that has had weight on the Egyptian economy is reform on, it mean to change or put something into a better condition or form. Therefore, reforms facilitate and enhance transition to take place in an economy. The radicals will use their need for reforms to seek for an improved system in the economy. Reforms can be in different sectors of the economy and there main focus is to promote better living standards for the members of the society.
In conclusion, Egyptian economy has traversed through difficult circumstances in the past; however, its economic performance is currently doing well, as indicated by the economy ability to meet its macroeconomic objectives.
Footnotes
i Hinnebusch, R 2000, Liberalization without Democratization in Post-Populist Authoritarian States, Syracuse: Syracuse University Press.
ii Shaw, I 2003, The Oxford history of ancient Egypt, Oxford: Oxford University Press.
iii Scheidel, W, Morris, I & Saller, R, 2007, The Cambridge economic history of the Roman world, New York: Cambridge University Press.
iv Johnson, E 2000, Egypt Economic history, The Journal of economic history, 60 (1-2).
v Goldschmidt, A 2008, A brief history of Egypt, London: Infobase Publishing.
Bibliography
Goldschmidt, A 2008, A brief history of Egypt, London: Infobase Publishing.
Hinnebusch, R 2000, Liberalization without Democratization in Post-Populist Authoritarian States, Syracuse: Syracuse University Press.
Johnson, E 2000, Egypt Economic history, The Journal of economic history, 60 (1-2).
Shaw, I 2003, The Oxford history of ancient Egypt, Oxford: Oxford University Press.
Scheidel, W, Morris, I & Saller, R, 2007, The Cambridge economic history of the Roman world, New York: Cambridge University Press.