Egypt (2)

Egypt's ongoing crisis won't end soon -- or very easily -- because the military that has staged the coup represents a coalition of groups with differing interests. These interests are the sources of the same problems and challenges that brought President Mohammed Morsi down in a matter of one year, reminding us of the colloquial dictum It's the economy, stupid! Indeed, the mother of all problems is a large and unproductive population that can no longer be catered to by the subsidies of a state-centered political system. Even the basic staples of everyday life, like wheat for bread and gas for cars, have become rare commodities. Egypt's economic assets are dwindling. Its balance of payments is negative, which puts a lot of stress on the central bank's resources. Imported wheat and fuel are subsidized by the government. This is a huge burden on the budget, which has an ever-growing deficit. A foreign-exchange shortage makes the government(s) unable to fund suppliers. This has led to shortages in consumer goods and price increases. Egyptian governments have tried to raise subsidies in the past, leading to mass riots. Now the new government has the chance to end subsidies and allow price hikes to stop the drain on the national treasury. But this is a highly unlikely scenario, given the turmoil in Egypt. Bread is a staple food and has been subsidized for decades. Egypt produces half of the wheat it consumes, no more, because there isn't enough arable land to produce more. So the country is vulnerable to international market conditions. What worsens food shortages is population growth. Urban centers are very dense and getting even more congested. Resentments and expectations are more easily transmitted to wider groups in city life. Egypt's birth rate, at 32 births per 1,000 people, brought the country's population up to 84 million in 2012. The Egyptian population is expected to exceed 100 million by 2030. What this means is that the country will be under more stress to feed its growing population. Furthermore, a growing pool of young people will be demanding jobs and satisfaction as they compare their condition with that of their equals in other countries. An authoritarian government suppressing demands rather than meeting them will be more at odds with the young generation. Interesting enough, these are exactly the same problems that ousted Egyptian President Hosni Mubarak had to face. Unstoppable poverty, lack of sufficient productivity and capital accumulation, and a narrow job market in the face of an increasing young population were and will be the root causes of past and future uprisings in Egypt. Both Mubarak and Morsi are victims of these insurmountable structural problems that seem to destabilize their country. The major difference between the two leaders is that the latter is the first democratically elected president of the country. Hence the way he was brought down is stained with illegitimacy. So far Egypt has been successful in levying strategic rents from both the US and fellow Arab countries like Qatar, Saudi Arabia and formerly Iraq and Libya, using its traditional leadership position in the cross-section of Arab North Africa and the southern Mediterranean basin. Egypt's control of the Suez Canal, through which strategic portions of the world's natural resources are transported, makes the nation's stability a concern of many nations. But unless Egypt solves basic problems that could plunge it into chaos at any time, maintaining its stability will be a financial black hole for its supporters. Maybe the new government will be able to unlock negotiations with the International Monetary Fund to provide relative financial relief that were frozen because the Muslim Brotherhood leadership was not considered friendly or stable enough. It remain s to be seen whether the new government will provide political stability as cleavages within society widen and conflict between opposing factions grows sharper. In any case, as long as demographic pressures and economic shortcomings persist, managing Egypt and securing its stability will remain a real challenge for whoever dares to claim the country's government.