From the Editors
This is our third in a series of interviews we conducted in Cairo during our recent trip. We had the fortune to meet with a friend and prominent journalist, Wael Gamal, whose column in al-Shurouq's economy section is closely followed in Egypt and beyond--and is also published here on Jadaliyya (see video below). We discussed the overarching question of "social justice" after the revolution. In particular, how do you finance social justice in a country like Egypt?
The left has always prioritized or privileged the question of social justice over and above the elastic notion of democracy. Nonetheless, in this post-revolutionary environment, everyone, it seems, is advocating social justice, including the business people we met with as well as particular individuals who are considered by the left to be part of the cause of social injustice during the past several decades. Thus, the term possesses some elasticity of its own as well, though only at the level of proclamations.
Once this question is asked ("how do you finance or bring about social justice?") the fog begins to dissipate. The customary answer within business circles is invariably one about investment and growth, which have their own correlates that do not depart too far from some of the previous arrangements under Mubarak and company. These answers have relied on a particular set of theories and/or mentalities/notions of development. So much so that they have become axioms of what we will venture to call the self-proclaimed "realistic left," i.e., that portion of the left, whom we also encountered now and in the past in Egypt and elsewhere, propagating that at the end of the day there is no development or social justice without growth (where questions of distribution, taxation, etc., seem untouchable).
However, some of the more recent literature in political economy circles, sometimes emanating from the World Bank itself, or its employees (current and former), has been emphasizing that sustainable growth is itself a pipedream in some cases in the absence of equity. This finding or claim is rather recent for some in the center or center-right as opposed to many on the left, and it was triggered (or evidenced) by the experience of "trickle-down economics" (in Latin America and elsewhere, including the Middle East) that are largely associated with neoliberal economics. The caveat that is often put forth is that these experiences were distorted by the context: that the implementation of neoliberal prescriptions was filtered through the corrupt, authoritarian governments and their cronies. Fair enough, except that these observations about the context must have been evident to International Financial Institutions (IFIs) before their prescriptions, loans, funding, conditionalities, support were given/offered to the same crony actors that are blamed for the misapplication in retrospect. Hello.
So, there must be something else going on. The prescriptions themselves are based on axioms that require serious revision in light of actual experiences and developmental busts--not to mention their performance globally in relation to social justice. This claim of ours holds with or without considering the politics behind IFI's, which muddles the scene further as it reveals some (and sometimes strong) affinity between authoritarian rule, neoliberalism, and sponsor countries.
But we will stop here and turn to the content of the interview that examines these arguments and polemics in the Egyptian context. The interview is in Arabic, and is now translated by Christine Cuk, and edited by Hesham Sallam (transcript below video).
You can watch the two previous interviews we conducted with Mohamed Waked and Wael Khalil on the Supreme Council of the Armed Forces and on the "What Next?" questions here and here. Both interviews are translated. We promise that the gender bias, so far, was completely a function of who responded to our calls and of timing issues. We could only leave work for so long. But more interviews are on the horizon.
This is our third interview conducted in Cairo by Jadaliyya Co-Editors Bassam Haddad and Ziad Abu Rish.
Bassam: Thank you, Mr. Wael. We would like to ask you about the subject of social justice. People often ask, "How do we finance social justice in Egypt after the revolution?" There are many proposals, some positive, some negative, so how do you answer this particular question?
[00:45] Wael Gamal: The subject of social justice has become a part of the agenda of every political force in Egypt after the revolution for a simple reason, which is that it was the main demand of the masses who came out into the streets and brought down the dictatorship. Social justice was a part of the main feeling of the revolutionaries beginning even from 25 January. It's also been difficult for the political forces that want to enjoy a following in the street to ignore this feeling. However, of course, there are different conceptions of this feeling and the idea in the first place. There is one conception that says that it should be restricted to some small gains that can be passed to the general public in order to keep things the way they are. And there are some conceptions on the far right that talk about some simple changes, such as spending on education, or developing education, or things of that nature, or small improvements in wages. And then there are concepts that are in my estimation sounder and closer to what the people wanted, and that are a closer translation of the true spirit of the revolution. The issue is no longer merely that of a simple gift from the market system to the masses producers, the poor, the workers, and the farmers in Egypt. Real growth has to be built upon development, and development has to be built on human beings.
[2:30] Secondly, social justice is not merely a [certain] level of improvement in the distribution of wealth and profits; rather, it must also be built upon an improvement in opportunities, meaning that the majority of the people must have equal opportunities in education, in obtaining decent healthcare, and equal work opportunities vis-à-vis the rest of the population. This is a composite concept, meaning that it has to follow policies that prioritize the people and not just "growth," or the abstract indicators of growth, or the budget deficit, or the economic concepts that are connected to the free-market policies that the Nazif government and the Mubarak regime in Egypt in its last years fostered in their extreme form.
[3:36] At the level of immediate measures, and building on what has happened in Egypt in the last few years where a transfer of public wealth from a framework of ownership by all the people of Egypt to a few limited businessmen created a huge level of capitalist accumulation and created in the space of a few short years multinational corporations headquartered in Cairo in fields such as cables and others. It offers a great opportunity for you to take urgent steps that does not even introduce fundamental changes to the system. At the same time, it has given some gains to those who undertook these great sacrifices in order to bring about a new regime in Egypt. By means of such steps you can at least offer an opportunity to a large number of Egyptians to receive a wage that would give them a better standard of living. This includes harsh implications…one of the errors that I would like to point to in this regard, are the subsidies, for example, allocated to natural gas used in manufacturing. The Egyptian state pays businessmen, especially those in sectors that consume large quantities of energy, billions of dollars annually from the pockets of Egyptian taxpayers in order to increase their profits and their competitiveness on the international market. The most important sectors in this regard, for example, are cement, fertilizers, steel, and some petrochemical products and ceramics. These sectors obtain gas at a price that ranges between two and three dollars—two and a half and three dollars —per one million thermal units of natural gas. Meanwhile, the world price ranges between $12 and $14. This is a huge subsidy.
[5:55] Also, this support is not due to, for example, a problem of competitiveness. No. This subsidy is reflected in the astronomical profit rates compared to competitors in the region, in Europe, and internationally. If this government, the government wanted to act in the interests of the poor who gave them power, and wanted make a quick change to fund the budget – this is a problem inherited from the previous regime, a budget deficit problem—without adding on burdens, they could decide, at the stroke of a pen, that they will raise the price of gas supplied to these factories. Here I also want to say these sectors in particular, most of them taint business conditions for companies whose majority shares are owned by businessmen with connections to the former regime. In steel it is Ahmad 'Ezz, in ceramics it is Ahmed 'Ezz and Mohamed Abu el-Enein, in fertilizer it is Sherif el-Gabaly, who was a leading member of the National Democratic Party. There is also a political dimension to the issue; there is no open competition even by capitalist logic. By merely raising the price of gas offered to these factories, and still keeping it lower than the world price, from the rate of two and a half or three dollars per million units to between six and eight million dollars per one thermal unit, this would provide 7.5 billion Egyptian pounds to the budget every year.
[7:42] That's not all. The profit rates of the companies in these sectors would remain above global averages. That is, their ability to compete internationally will still be high. Also, in a step such as this, there is something that has become important with respect to the long-term economic future and the economic preferences of Egyptian citizens: Egypt is on the verge of an energy crisis. So does it make sense to keep promoting energy-intensive industries in Egypt at a time when you are possibly exposed to energy depletion anyway? Raising prices and raising these industries' costs could be an entrance of an obstruction because it would encourage people as a result to stop using cement that also pollutes the environment. And in addition, [cement], like steel and fertilizer, is capital-intensive. Setting up a cement factory requires huge amounts of money in order to create only a few jobs. Redirecting funds in society to pay the costs of this production will let people and new investments go to sectors with a better effect on the environment—less harmful to the environment—and at the same time, it might require more workers [and thus] create better job opportunities, improving the inequality situation in society.
[9:15] Social justice, from my point of view, is a precondition, a long-term precondition for political improvement and change in Egypt. Because if the history-making achievement of toppling the dictatorial regime is not able to translate itself into a direct improvement in the living conditions of citizens who live in this country and who made the revolution, most of whom are poor, then a very important part of the demands that were the basis of the revolution in the first place will be snatched away from the revolutionaries. Social justice involves redistribution of wealth in an equitable way, fair wages for workers, and oversight of businessmen and market capital, allowing society to make its realize its own choices. It involves the possibility of creating patterns of production that avoid the historical bilateralism between the public sector and the state, for example agricultural cooperatives, or even in services, or consumer cooperatives, which have a sound productive performance, and at the same time a sound democratic aspect that meets the needs, the desires, and economic preferences of the people before the dictates of the world market or local market, which are motivated only by profit considerations.
[10:50] But also, the mere organization of people into independent democratic unions, as has started to happen in Egypt on an immediate scale, merely this organization that moves to defend the rights of workers in workplaces, is a fundamental guarantee that political activity will not once again be concentrated in the hands of businessmen whose economic power and control over the economy remained untouched by the revolution, because it only stopped at getting rid of the old [political] regime. Also, the ability of the people to organize themselves into unions, confront their bosses, and to fight for better wages, or to negotiate for the sake of better working conditions for the people who are the majority of the country….this creates degree of political balance in confronting the political parties representing businessmen that have begun to appear in Egypt in the past two months; it puts pressure on them, makes alliances with them in order to amend their programs and imposes the voices of these people on the ground and hence on the political stage.
[12:14] Older economic ideas [theories] that say that people must increase their own productivity first before their economic and social situation can improve have been shown in the literature on economics to be unsound. The idea that says that we have to concentrate first on economic growth because the size of the cake that is going to be distributed has to increase first, and economic growth will only be achieved by encouraging investment in the private sector first, and later…. There is a theory built on that which says that a "trickle-down effect" will spontaneously take place and everyone will be happy; or there's even an improved theory that says that social safety nets will guarantee a degree of equitable economic distribution, that is, later, in the future.
[13:08] This is an idea that has proved false, and it suffered a huge blow with the global economic crisis. All of the new economic theories and ideas after the economic crisis of 2008 talk about the opposite. A report came out at the end of last year that talked precisely about the exact opposite. International transformations say you have to create demand locally in order to ensure the protection of the local economy from the fluctuations of the international economy. Local demand can only be created through an increase in wages first. Not only that. The precondition for increasing productivity is an increase in wages. This is a well-known phenomenon in economics. When you invest in human beings you invest in the productivity of human beings. When a person engaged in production feels that the financial return that comes back to him from his labor reflects itself in a direct way, and he can sense it as a tangible change in his wages and improvement in his living conditions, that keeps him productive and makes him work harder.
[14:20] That is a type of system that can achieve social justice in Egypt. It is the highest democratic example in workplaces for workers and producers. There is a political role played via their organizations in the imposition of the interests of those people on the political and social agenda empowers them not just to be free to choose between similar candidates in an election, but allows them also to choose people who represent their own interests, which they understand the most. The Egyptian revolution showed that the elites did not lead the revolution; on the contrary, the elites arrived late at most of the stages of the revolution. The common people were conscious of their interests and were ready to fight for them and were able to sort out the regimes, and the political, economic, and social ideas and views in a democratic way and to determine who will work for its interests, if we offer the opportunity by means of independent democratic organizations.
[15:41] Egypt used to have a growth rate of up to seven percent. This was a recurring complaint among businessmen who wanted reinvestment and expansion: that there isn't enough of the necessary competence to achieve such expansion, even from the perspective of capitalism, because the state does not pay for education….even from the perspective of—I am not talking about radical economists; I am talking about the mainstream economist today and how he works. The International Monetary Fund put out a research paper in May that talked about the relationship between inequalities and sustainable growth. And the empirical results put out by the International Monetary Fund, which represents the mainstream in international economics; the right-wing, actually…the conclusion that emerged from this study showed the opposite: The more equality there is in society, the more opportunities and sustainable growth increased, and economic growth spells became longer, stronger, deeper, and had more lasting effects. The converse is also true. It gives the example of Brazil, for example. When social equality improved through steps that involved a level of wealth redistribution, opportunities for economic (capitalist) growth opportunities increased and fluctuations reduced, the idea being that shorter spells are followed by violent recessions and so on.
[17:37] The same thing even applies to thinking about how to evaluate the economy in the first place. The rates and indicators that are always promoted by the Washington consensus, the ideas that are built on the absolute freedom of markets, it is dealing with indicators such as economic growth, growth in the GDP, and indicators such as budget deficits; this is a theory that says that when the indicators are met, then the economy is sound. This is also something that has revealed that there is a big problem with these indicators, because they do not tell you what peoples' living conditions are like. Also, even that goes to the ability of economists to predict people's behavior and predict economic crises themselves. Thus, for example, the French president Sarkozy, who is on the right as well, appointed a group of economists including Joseph Stiglitz, Amartya Sen (Nobel Prize winners) to come up with a new indicator that measures the economic situation while taking into consideration not just a number, which might not show...7% growth might be 1% of the population who benefiting from it while most of the population do not get anything. To show the reality of the situation with respect to distribution of wealth, education, social mobility, so that analysts and policy-makers can have a better idea about what the economy looks like on the ground, in people's lives, not just about the health of the indicators.
[19:28] With respect to the issue of the budget deficit for example, the traditional goal of those who are called "monetarists" in political economy, if that indicator is met and the state has a balanced budget, it will reduce distortions and give the market mechanism the opportunity to work in the most efficient way possible to allocate resources. These indicators are no longer sacred. On the contrary. And of course, the basic idea essentially contains a contradiction. For example, the heart of capitalist production in the world and largest economy in the world has a budget deficit of 12%. Egypt, even while being in a significant crisis, still has not reached that level [of budget deficit]. This economy has the largest government debt in the world. The American economy. Nevertheless, no one says that the American economy is backward, or weak, or whatever. It has a crisis that has a different logic. Someone can talk about how that has costs and has no relationship to supplying China's growth and the worldwide economy is contingent on a position that is somewhat untenable, and some people produce and export, and some consume, and the worldwide economic system is built on American's huge propensity for consumption. However, at the moment there has come to be a widespread idea that the deficit is not by itself the goal; employment might be the goal, the economic ideal. It might be the creation of a better basis on which to allocate resources in society, or also better management of resources. In this respect—of course nobody defends leaving the deficit wide open—but it could be subordinate to the first goal and that is perhaps what might diminish this process in the end, because if you raise the ability of society to invest in the basic energy of human beings, who are the ones who create true economic value, on the ground, this will make the potential of society as a whole better, and also, the benefit from this result will be better and its distribution will be better.wonderful
Basam: Wonderful. Thank you very much
Wael: What for?
Bassam: Thank you
Wael: I kept you here too long.
Bassam: On the contrary, we did that to you.
Wael: Not at all.
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