Egypt and Syria: beyond repair

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Egypt and Syria suffer from the same problems that cannot be repaired. That is a sad and admittedly very categorical statement. But such are the consequences when political leaders misread the domestic cards and, instead of working to repair their economies and dealing with the specifics of demonstrations, choose to respond with violence. State violence only causes what is legitimate social and political unrest to morph into political protests, which spiral out of control and cause the downfall of autocratic leaders. This is what happened in Egypt and what is now happening in Syria. In both cases, the door was opened for the re-emergence of Islamists who had been kept under lock and key by the strongmen. Let us recall the path to disaster: the economies in the Middle East and north Africa began to decline in advance of the global financial crisis, which started about mid-way through 2007. Then came a rise in food prices in 2008, which caused a bit of unrest. But food prices began to soar in 2010.

This set the stage for the Arab Spring. The cost for Egypt to supply food and fuel staples to the people trebled from 2006 to 2011. Without adequate income from energy exports, the country was in no position to cope with these fundamental economic changes.

Hosni Mubarak’s downfall was on the cards as early as October 2010 when the then president informed his military that he would bypass its leadership and name his son, Gamel, as his successor.

It was just a matter of time before the generals would move to replace Mubarak. They used the opportunity provided by the Arab Spring to do so.

It should have been obvious to anyone who took a sharp pencil to Egypt’s economic numbers: its dependence on imports for 50 percent of its food and energy subsidies, which in turn ate 25 percent of its annual budget, was a bottomless pit.

The same was happening in Syria, where the regime failed to modernise its agricultural system. The failure to reform agriculture in both countries led to hundreds of thousands of farmers giving up and moving to city slums.

It has been a time-tested pattern of Third World strongmen such as Mubarak and Syrian President Bashar al-Assad to keep their farmers and other members of the rural population poor, illiterate and isolated. Why? So as to better control them.

However, when the cities in Egypt and Syria began to swell with the rural poor, it became just a matter of time before this straw broke the camel’s back.

Egypt may be considered the leading country in the Arab world. In hard economic reality, it is a pre-modern society with an unemployment rate of about 40 percent, an illiteracy rate of almost 50 percent and nearly a 90 percent rate of female genital mutilation.

According to the World Health Organisation, 25 percent of Egypt’s population is malnourished. That is a tragedy.

Neither Egypt nor Syria have significant energy export revenue streams with which to offset their leaders’ poor economic decisions, and elite families dominate the bazaar economies of both.

As recently as 2011, no one in the West recognised the true reasons for the revolts in these countries.

Almost everyone just assumed it was a clash between the new culture of the tech-savvy youth and the old hierarchy. But this was not the case. It was the economy, stupid!

Back in 2011, it took about an extra $20 billion (about R200bn) a year to keep Egypt’s economy stable. That number has now risen to about $25bn. In a country with gross domestic product of less than $230bn, that is a staggering number.

Not even a miracle worker could have fixed that situation. And the Muslim Brotherhood certainly isn’t that. The economic incompetence of President Mohamed Mursi’s government is now indisputable.

In fact, Morsi’s government is only deepening Mubarak’s mistakes. It keeps focusing on political issues when the only thing that could make a difference would be deep economic restructuring.

Egypt’s army doesn’t have a solution either. Yes, there were infusions of cash from Libya, Qatar and Saudi Arabia. But make no mistake, they were isolated events to keep things stable while these countries went about the serious business at hand – preparing for a greater region-wide Sunni-Shia conflict.

None of these countries (or those in the West) is prepared to prop up Egypt and throw money down a bottomless pit.

Emergency loans slowed down the haemorrhaging, but did not stop it. Even though the Muslim Brotherhood is now promising a bumper wheat crop, the farmers don’t believe it and it will not come. Egypt is on death’s door.

These disasters in Egypt and Syria were just waiting to happen.

The rise of the Islamists in Syria, who took over the largely secular economic protests against the regime’s corrupt control of the economy, was partly fuelled by the re-emergence of its own Muslim Brotherhood and partly arose out of fear of the regional ascendancy of the Shia led by Iran.

This has reignited the centuries-old conflict between the dominant sects of Islam, which has been marred by extreme violence, as religious wars always have.

There are now two possible outcomes in Syria. One is a split state, with parts controlled by Shia Alawites, Sunnis, Kurds and a hodgepodge of Druze/Christian groups. The second is a state dominated by a Sunni/Muslim Brotherhood hierarchy.

Whatever happens, Egypt and Syria are two failed states that cannot be repaired.

Robert Hardy is the principal writer of The Geostrat, which provides information and analysis on global affairs. He has 25 years of experience in global equity, currency, futures trading and market making. This article is reprinted with permission of theGlobalist.com. Follow theGlobalist on Twitter (@theGlobalist)