Sunday, February 27, 2011

Abu Atris: A Revolution Against Neoliberalism?

[Thivai: Excellent short essay -- discusses neoliberalism here and abroad, through the lenses of David Harvey, Timothy Mitchell and Naomi Klein. Would be a great intro for people that are not familiar with neoliberalism or political economy or broader global interconnections or problems with free market/privatization in a real world setting.]

A revolution against neoliberalism? If rebellion results in a retrenchment of neoliberalism, millions will feel cheated.
by Abu Atris
Al Jazeera


Rhetoric vs. reality

Two observations about Egypt’s history as a neoliberal state are in order. First, Mubarak’s Egypt was considered to be at the forefront of instituting neoliberal policies in the Middle East (not un-coincidentally, so was Ben Ali’s Tunisia). Secondly, the reality of Egypt’s political economy during the Mubarak era was very different than the rhetoric, as was the case in every other neoliberal state from Chile to Indonesia. Political scientist Timothy Mitchell published a revealing essay about Egypt’s brand of neoliberalism in his book Rule of Experts (the chapter titled "Dreamland" — named after a housing development built by Ahmad Bahgat, one of the Mubarak cronies now discredited by the fall of the regime). The gist of Mitchell’s portrait of Egyptian neoliberalism was that while Egypt was lauded by institutions such as the International Monetary Fund as a beacon of free-market success, the standard tools for measuring economies gave a grossly inadequate picture of the Egyptian economy. In reality the unfettering of markets and agenda of privatization were applied unevenly at best.

The only people for whom Egyptian neoliberalism worked "by the book" were the most vulnerable members of society, and their experience with neoliberalism was not a pretty picture. Organised labor was fiercely suppressed. The public education and the health care systems were gutted by a combination of neglect and privatization. Much of the population suffered stagnant or falling wages relative to inflation. Official unemployment was estimated at approximately 9.4% last year (and much higher for the youth who spearheaded the January 25th Revolution), and about 20% of the population is said to live below a poverty line defined as $2 per day per person.

For the wealthy, the rules were very different. Egypt did not so much shrink its public sector, as neoliberal doctrine would have it, as it reallocated public resources for the benefit of a small and already affluent elite. Privatization provided windfalls for politically well-connected individuals who could purchase state-owned assets for much less than their market value, or monopolise rents from such diverse sources as tourism and foreign aid. Huge proportions of the profits made by companies that supplied basic construction materials like steel and cement came from government contracts, a proportion of which in turn were related to aid from foreign governments.

Most importantly, the very limited function for the state recommended by neoliberal doctrine in the abstract was turned on its head in reality. In Mubarak’s Egypt business and government were so tightly intertwined that it was often difficult for an outside observer to tease them apart. Since political connections were the surest route to astronomical profits, businessmen had powerful incentives to buy political office in the phony elections run by the ruling National Democratic Party. Whatever competition there was for seats in the Peoples’ Assembly and Consultative Council took place mainly within the NDP. Non-NDP representation in parliament by opposition parties was strictly a matter of the political calculations made for a given elections: let in a few independent candidates known to be affiliated with the Muslim Brotherhood in 2005 (and set off tremors of fear in Washington); dictate total NDP domination in 2010 (and clear the path for an expected new round of distributing public assets to "private" investors).

Parallels with America

The political economy of the Mubarak regime was shaped by many currents in Egypt’s own history, but its broad outlines were by no means unique. Similar stories can be told throughout the rest of the Middle East, Latin America, Asia, Europe and Africa. Everywhere neoliberalism has been tried, the results are similar: living up to the utopian ideal is impossible; formal measures of economic activity mask huge disparities in the fortunes of the rich and poor; elites become "masters of the universe," using force to defend their prerogatives, and manipulating the economy to their advantage, but never living in anything resembling the heavily marketised worlds that are imposed on the poor.

Unemployment was a major grievance for millions of Egyptian protesters [EPA]

The story should sound familiar to Americans as well. For example, the vast fortunes of Bush era cabinet members Donald Rumsfeld and Dick Cheney, through their involvement with companies like Halliburton and Gilead Sciences, are the product of a political system that allows them — more or less legally — to have one foot planted in "business" and another in "government" to the point that the distinction between them becomes blurred. Politicians move from the office to the boardroom to the lobbying organization and back again.

As neoliberal dogma disallows any legitimate role for government other than guarding the sanctity of free markets, recent American history has been marked by the steady privatization of services and resources formerly supplied or controlled by the government. But it is inevitably those with closest access to the government who are best positioned to profit from government campaigns to sell off the functions it formerly performed. It is not just Republicans who are implicated in this systemic corruption. Clinton-era Secretary of Treasury Robert Rubin’s involvement with Citigroup does not bear close scrutiny. Lawrence Summers gave crucial support for the deregulation of financial derivatives contracts while Secretary of Treasury under Clinton, and profited handsomely from companies involved in the same practices while working for Obama (and of course deregulated derivatives were a key element in the financial crisis that led to a massive Federal bailout of the entire banking industry).

So in Egyptian terms, when General Secretary of the NDP Ahmad Ezz cornered the market on steel and was given contracts to build public-private construction projects, or when former Minister of Parliament Talaat Mustafa purchased vast tracts of land for the upscale Madinaty housing development without having to engage in a competitive bidding process (but with the benefit of state-provided road and utility infrastructure), they may have been practicing corruption logically and morally. But what they were doing was also as American as apple pie, at least within the scope of the past two decades.

However, in the current climate the most important thing is not the depredations of deposed Mubarak regime cronies. It is rather the role of the military in the political system. It is the army that now rules the country, albeit as a transitional power, or so most Egyptians hope. No representatives of the upper echelons of the Egyptian military appear on the various lists of old-regime allies who need to be called to account. For example, the headline of the February 17th edition of Ahrar, the press organ of the Liberal party, was emblazoned with the headline "Financial Reserves of the Corrupt Total 700 Billion Pounds [about $118 billion] in 18 Countries."

A vast economic powerhouse

But the article did not say a single word about the place of the military in this epic theft. The military were nonetheless part of the crony capitalism of the Mubarak era. After relatively short careers in the military high-ranking officers are rewarded with such perks as highly remunerative positions on the management boards of housing projects and shopping malls. Some of these are essentially public-sector companies transferred to the military sector when IMF-mandated structural adjustment programs required reductions in the civilian public sector.

To Read the Rest of the Essay

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