Economists say Egypt’s revolution could lead to long-term growth

Economists say Egypt’s revolution could lead to long-term growth

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Tue, 08/02/2011 - 16:37

Short-term economic effects of the 25 January uprising have included price hikes in some staple goods and a stand-still in some major sectors of the economy such as tourism.  

Some analysts and social workers believe these effects are the result of a temporary shock to the system, but that the potential long-term economic benefits of political change could far outweigh recent short-term losses.

The recent price increases have left Cairo residents with an unsettled feeling concerning the revolution’s effects. “Economic shocks such as this will undoubtedly lead to price increases,” said economist Mahmoud Abdel Fadeel.

In some places, prices of vegetables and propane tanks more than doubled at times during the last two weeks. MP Fathi Gleed said he and his staff were working to provide propane tanks at LE4 to his neighborhood Manial when he found out that other vendors were selling them for up to LE25. “Most of the price increases are a result of opportunistic middlemen hiking them up,” Gleed said.

Vegetable sellers in the area complain of similar problems. “We only buy from one seller in the nearby market. He raises his prices, and it affects everyone in the neighborhood, buyers and sellers,” said Anwar, a vegetable vendor.

Tourism and the stock market have experienced paralysis over the past two weeks.

Economists say the stand-still is a result of the government’s response to the protests, rather than a direct result of the protests themselves. “It’s because of difficulties with transportation by the government-imposed curfew.  There’s also the added effect of lawlessness and police disappearing that might have caused some shops to close,” said Abla Abdel Latif, professor of Economics at the American University in Cairo.

“Issues regarding tourism and transportation are temporary. There’s no indication of chronic shocks to either sector,” she added.

Many of the ills exhibited by the economy since 25 January are seen by some as a near continuation of the dire economic state Egypt has found itself in since the beginning of Mubarak’s regime thirty years ago. “There’s been a near stand-still for the past 30 years,” said Gouda Abdel Khaleq, professor of economics at Cairo University.

On the contrary, they see a potential upside to the revolution--if it is successful--propelling the country in a positive direction. “What’s happening now is transforming people from subjects into active citizens. I believe that if the revolution succeeds, Egypt will experience an economic boom--aided by the country’s immense resources--as a result,” said Abdel Khaleq.

Egypt has a relatively low rate of labor productivity. “One of the potential upsides is that labor productivity increases when the system’s cathartic atmosphere changes as a result of the revolution,” said Abdel Latif.  

International investment has not lost faith in Egypt, she added.  “I think that if the revolution is successful, they’ll have more confidence in the economy afterwards.”

Abdel Latif, along with many other economists, believes that the government deliberately neglected development, agriculture, unemployment, and education. “The regime was responsible for all the government’s ills,” Abdel Latif said.

One of the main concerns of the 25 January uprising is eliminating corruption and ensuring the existence of a representative government that introduces and implements positive economic measures to improve the per-capita GDP as well as the distribution of wealth.  

“Historically, popular uprisings that lead towards democracy have a positive effect on economies. Unless the 25 January uprising is completely crushed, it is likely to at least lead to some sound policy changes,” said Sherif Younis, professor of modern history at Helwan University.

Economic historians tend to link economic prosperity with democracy, and in Egypt, observers believe that the 25 January uprising has caused a tectonic shift in local policy.

“We are at a profound transformation point. Don’t believe the lies that any of the losses will be permanent,” said Abdel Khaleq.

Abdel Latif believes that the length and manner of this transitional period will have a decisive impact on the revolution’s long-term effects.

“If the result of this revolution is a quick transition, reform will surely propel the country forward economically.”