Is Egypt's bubble about to burst?

As in most Arab states, the stench of corruption and authoritarianism has stifled progress and left the people poor, needy and angry.

Hosni Mubarak has held onto power in Egypt with an iron fist for 27 years. American support, coming in at roughly US$2billion a year as part of the peace agreement with Israel signed in 1978, has helped to cushion Mubarak's grip on Egypt.

So when Bush's army was driving up the road to Baghdad, flying the flag of democracy in the Middle East, many were asking questions about Egypt. Did America's Arab authoritarian allies, such as Egypt, Jordan and Saudi Arabia, fall in the same category as Saddam Hussein?

Apart from the odd criticism from President Bush and Condoleeza Rice on Egypt's human rights record, little American effort or pressure has been exerted on Mubarak to ameliorate the economic and social situation of millions of impoverished Egyptians.

Popular frustration towards a corrupt and ruthless Mubarak administration has risen to breaking point. A coup or "revolution" in Egypt is a real possibility that will have much wider repercussions on the Middle East than the dismayed Iranian Islamic Revolution of 1979.

Egypt's weight as the most populous and traditionally most powerful Arab state renders its strategic value of great importance. Any change or internal strife in Egypt will be felt across the Arab world. Egypt's Nasserist charge in the 1950s and 1960s created a fever of Arab nationalism that swept the Arab world within an instant. If Cairo were to fall to the Muslim Brotherhood or Islamists of another kind, the world could be waking up to a Hamas in every corner of the Middle East.

The Brotherhood already form the largest opposition group in Jordan, and hold a steady supporter-base in Syria.

The Islamists are aware of Egypt's high strategic value, as are the Americans.

The danger in Egypt has prompted Bush to tone down his criticism of Mubarak and continue financial and military aid to the Egyptian dictator.

But for how long can the status quo be maintained? Can American dollars truly prevent a changing of the guard in Egypt? And how likely is an Islamist takeover?

The Economist's following lengthy feature on Egypt's internal woes offers valuable insight.

Egypt: Will the dam burst?

The Economist - 11/09/08

EGYPTIANS have long excelled at putting a good face on things. Four millennia ago they built temples whose towering façades and grand doorways hid dark and cramped interiors. Relief carvings depicted giant pharaohs smiting dwarf-like enemies, and showed the Nile teeming with fish and waterfowl. In reality, ancient Egypt was often invaded. Ruinous famines punctuated its years of plenty.

Today, a blinkered visitor might choose to see nothing of Egypt but posh beach resorts and gleaming factories, and hear of little but strong economic growth and a stable, secular government committed to reform. In the Smart Village, a campuslike technology park on Cairo’s western outskirts, construction cranes glint in the mirrored glass of office blocks bearing multinational logos such as Microsoft, Oracle and Vodafone, as well as those of fast-expanding home-grown IT firms. Beyond its perimeter, past a strip of hypermarkets, fast-food outlets and car dealerships, stretch thousands of acres of new suburbs, complete with gated communities, golf courses and private schools. Twenty years ago, the highway that stretches 200km from there to Alexandria ran through empty desert. Lush fields now line the entire crowded, six-lane route, many planted with drip-irrigated garden crops for lucrative European markets.

But remove the blinkers, and the flood of impressions could be starkly different. A glance down one of the narrow, rubbish-strewn alleyways of brick tenements where half of Cairo’s people actually live may reveal a crowd of head-scarved housewives pushing and cursing in an early-morning queue for government-subsidised bread. Such daily humiliations are punctuated by bigger tragedies which, all too often, prove to be the consequence of government negligence. Earlier this month a cliff collapsed on the eastern edge of the capital, hurling giant boulders into a warren of flimsy slum dwellings that had been erected, illegally, in defiance of dire warnings that the site was unsafe. The rockfall buried dozens, perhaps hundreds, of residents alive. Locals complain that long-promised alternative housing had been given to friends and relations of government officials, rather than the needy.

The fact is that most of Egypt’s 75m people struggle to get by, their ambitions thwarted by rising prices, appalling state schools, capricious judges, a plodding and corrupt bureaucracy and a cronyist regime that pretends democracy but in fact crushes all challengers and excludes all participation. The visitor might well conclude that by damming up the normal flow of politics, Egypt’s rulers risk bringing on a deluge. Given rising resentment against the government and a generation-long resurgence of religious feeling, and given the simple fact that Hosni Mubarak, Egypt’s president of the past 27 years, is now 80 years old with no clear successor, it takes little imagination to conjure up an Islamic-tinged revolution sweeping away the autocratic state created in the wake of Egypt’s last big dynastic upheaval, the officers’ coup of July 1952 that overthrew King Farouk. Considering Egypt’s position as the most populous, politically weighty and geographically pivotal Arab state, the ripples could spread wider, too, upsetting the region’s already fragile power structure.

Such visions seem to be common these days. A recent book in English carries the subtitle “The Land of the Pharaohs on the Brink of Revolution”. Another, in Arabic, simply titled “The Final Days”, sports a scowling caricature of President Mubarak on its cover. “This regime is clinically dead and we merely await its funeral,” writes the author, Hamdi Qandil, a prominent Egyptian journalist and critic of the regime. “All paths for peaceful and gradual change are blocked,” he concludes. “The only course left is civil disobedience.”

Many Egyptians appear to have adopted this advice of late. Spontaneous protests have erupted with alarming regularity, ranging from factory strikes to land disputes to urban riots over food prices that have risen even faster than the current, unnerving overall inflation rate of 23%. So far such outbursts have remained disjointed and localised, allowing the government to parry them with a mix of carrots and sticks. Brutal policing has silenced some activists. Wage increases—such as a 30% rise for government workers in May—and a promised widening of state subsidies for essential goods have soothed a few tempers. Yet the common refrain in Cairo salons is of how similar the mood is to the pre-revolutionary atmosphere of 1952.

Then, as now, the gap between a very rich few and the teeming mass of have-nots seemed to yawn ever wider. Then, 2,000 vast estates occupied half of Egypt’s fertile land, while millions of illiterate peasants toiled as sharecroppers. Today, 44% of Egyptians still count as poor or extremely poor, with some 2.6m people so destitute that their entire income cannot cover basic food needs, let alone other expenses. Yet ranks of private jets clutter Cairo’s airport. The flower arrangements at a recent posh wedding, where whisky flowed and the gowns fluttered in from Paris and Milan, were reputed to have cost $60,000 in a country where the average wage is less than $100 a month.

The band of Brothers

Lurking in the background then, as now, was the shadowy force of the Muslim Brotherhood. Having helped prepare the ground for the 1952 coup, the Brothers may have expected reward from the army officers in charge. Instead they were hounded and imprisoned, and allowed to resurface in Egyptian politics only 30 years later. Their suppression radicalised some Islamists, helping spread jihadist ideas such as those that inspired al-Qaeda. Yet the core of Brotherhood supporters remained committed to a strategy of peaceful change.

Since the 1980s the Brotherhood has emerged as the strongest force in a political opposition mostly made up of tiny, fractious parties. It captured a fifth of parliamentary seats at the last elections, in 2005, and would have taken more without blunt police intervention at the polls. That success so irked the government that, in the interim, it has moved again to squeeze the Brotherhood. Aside from changing the constitution so that it formally banned parties based on religion, it has mounted repeated campaigns of arrest and harassment, including confiscation of business assets. Having postponed municipal elections scheduled for 2006 until earlier this year, the regime simply disqualified all but a handful of Brotherhood candidates. The ruling National Democratic Party ran unopposed in 80% of districts, winning all but 1,000 of the 52,000 seats. Voter turnout was reckoned at less than 5%, reflecting widespread disgust with the charade.

Yet the Brotherhood displays some of the same flaws as its oppressors. Its leadership is also ageing and opaque, and has proved slow to respond to events. Recent changes in its hierarchy, arranged behind closed doors, have seen the promotion of conservative ideologues at the expense of younger reformers.

Perhaps more important, the Brotherhood’s diminishing capacity to deliver benefits to constituents has prompted pragmatists, the probable silent majority in a country with an incomparably long and justifiably sceptical political memory, to look elsewhere for patronage and protection. And there is another clear obstacle to the Brotherhood’s progress. The 10% Coptic Christian minority, made nervous anyhow by sporadic outbreaks of sectarian violence, wholeheartedly rejects the Brothers, while fear of further sectarian unrest makes many Muslim Egyptians wary of them, too.

But if most Egyptians appear to prefer evolution to revolution, there is no clear trajectory. The government itself, a behemoth with 6m employees, appears divided. Its ministries sound like those in other states, but many are run like medieval fiefs. The army, police, secret police, justice, the lucrative petroleum industry and foreign relations fall under the purview of the presidency, which tends to view all of them through a prism of state security and regime survival. This relegates to the hard-working prime minister, Ahmed Nazif, a diminished portfolio restricted to economic and social policy.

Since his appointment in 2004, Mr Nazif and his team of technocrats, many of them Western-educated businessmen, have enacted long-delayed economic reforms. A dramatic slashing of tariffs and taxes, along with crucial changes to investment rules, has helped push the overall growth rate from below 4% to above 7%. Exports have more than doubled, from $9 billion in 2003 to $24 billion last year, with trade volume growing from 46% to 66% of a GDP that is expected to top $150 billion this year. Revenues have been boosted not only by high oil prices and the coming on stream of sizeable gas exports but, more significantly, by a doubling of income from the Suez Canal, a surge in industrial exports and a doubling of tourist arrivals, which reached a record 13m last year. With Cairo’s stock index soaring (at least until a recent summertime slump, in line with the rest of the world), with exchange rates holding steady and property values booming, foreign direct investment has also accelerated, reaching $11 billion in 2007—five times the 2004 level—and a probable similar amount this year.

Cars and bread

Many complain that while Egypt’s industrialists have profited mightily, new wealth has failed to trickle down. Unskilled wages do remain dismally low, yet plenty of evidence points to broadening prosperity. Sales of private cars, for instance, have quadrupled since 2004 as a whole new class of Egyptians has taken to the ever-more-clogged roads. Franchise outlets sprout not only in wealthy parts of Cairo, but in dowdy provincial towns where state-run department stores once offered the only dusty glimpse of glamour. Amid a claimed fall in unemployment from 11% to just over 8% between 2003 and 2008, shortages of skilled labour have rapidly boosted white-collar wages. Indeed, some businessmen reckon that the biggest damper on growth just now is the dismal quality of Egypt’s university graduates.

Although statistics in Egypt are notoriously wobbly, there are signs that some pressing social tensions have eased. Ten years ago, for instance, 63% of Egyptian men remained unmarried at 30, a frightening indicator in a tradition-bound society where marriage is seen as a prerequisite for independence and adulthood. That figure fell to 45% in 2006. This shows that the cost of marriage, which typically includes the purchase and furnishing of a house, remains prohibitive for many, but it also suggests that the level of youth frustration may be dropping. Crucially, too, for a country whose inhabited area is barely the size of the Netherlands, the rate of population growth has slowed, from 2.3% a year in the 1980s to 1.9% today.

And although Egyptians moan, with reason, about accelerating inflation, consumers have been spared the sting of global commodity-price spikes. Bread, the staple food, is still widely available at a subsidised price equal to one American cent a loaf, a fraction of its real price. Bottled cooking gas sells at one-sixth of its cost to the government. And despite a recent hike in petrol prices, a litre still costs one-eighth of its average price in Europe.

Prices for other goods are still surging, but the government, made jittery by the ugly public mood, does try to help. To pay for May’s 30% wage rise, it raised taxes on non-essential items such as cigarettes and luxury cars and put up energy costs for power-intensive industries. A proposed new property tax will exempt most householders, targeting only the relatively well-off. In an effort to hold down local prices, rice exports have been banned.

Whittling at freedom

But the government’s relative nimbleness on the economy has not been matched on other fronts. The crackdown on the Muslim Brotherhood comes in the context of a broader shift towards greater authoritarianism, and in direct contradiction to promises of political reform. Before he started his fifth term in office, in 2005, Mr Mubarak promised more democracy. But despite some advances, for instance in allowing a more critical, privately owned press to flourish, his regime has systematically whittled away civic freedoms.

In May, for instance, the government abruptly extended for two years the official state of emergency, saying that new antiterrorism laws were not yet ready. The emergency laws, which are meant to be applied only against violent threats to the state, have in fact been wielded against every manner of dissent. In one form or another they have been in force for all but three of the past 50 years. More recently, in an effort to tackle the indiscipline and deaths on Egyptian roads, the government passed a traffic law that applies stiff fines and prison sentences for minor infractions. The public is outraged at the higher bribes that police now command.

Despite the occasional disciplining of officers, the regime’s security forces operate with scant accountability. Charges of torture are commonplace. Court action is slow, and subject to both manipulation from above and bribery from below. Citizens therefore resort to private vendettas and the state resorts to security measures, such as sending in riot police, rather than social policies to make things better.

In May the American president, George Bush, raised hackles by declaring, in the resort boomtown of Sharm el-Sheikh, that Egypt had disappointed hopes that it might lead the region in democratic reform. “Too often in the Middle East,” he intoned, “politics has consisted of one leader in power and the opposition in jail.” His host disdained to listen to the speech, and even many of Mr Mubarak’s Egyptian critics bristled at being lectured by a singularly unpopular Western leader. Yet many admitted, too, that Mr Bush was on target, especially considering that Ayman Nour, a young, secular politician who was the distant runner-up to Mr Mubarak in the 2005 presidential election, has languished in jail ever since, on flimsy charges of forgery.

The displeasure signalled by Mr Bush reflected another fact. During his administration Egypt’s relations with the United States have sunk to their lowest point since the 1973 war with Israel. This reflects not just a shift in American attention towards other parts of the region, and American ire at Egypt’s ugly human-rights record, but also Egyptian annoyance over policies such as the invasion of Iraq and the Bush administration’s uncritical embrace of Israel. Diplomats on both sides downplay differences, ascribing recent bitterness to the kind of sharp words exchanged between friends. Yet Egypt now has few supporters in Washington. Its influence in the region is also diminished. Egypt has recently struggled simply to effect a ceasefire between Israel and Hamas, the Palestinian Islamist party that seized power last year in neighbouring Gaza, or to calm the squabbling Palestinian factions.

Since he has been in office, Mr Mubarak has cleverly used the occasional sign of difference with America to bolster his nationalist credentials, while using Egypt’s regional weight to please Washington. Such legerdemain is no longer possible. What concentrates both American and Egyptian minds just now is not what Egypt’s president will do, but what happens after he goes.

This, understandably, is a staple of Cairo conversation. Government spokesmen point to rules that call for elections within 60 days of the presidential office being vacated. The constitution’s finer print stipulates that candidates can come only from parties that are legal, have held parliamentary seats for at least five years and can garner signatures from hundreds of elected local officials.

The only party that can easily fulfil all these criteria is Mr Mubarak’s National Democratic Party, which might then choose, for the sake of window-dressing, to endorse a few rival candidates from the handful of weak secular parties. There is little doubt who the NDP would choose for its own presidential ticket. The party’s vast patronage network, which began as a legacy of one-party rule in the socialist 1960s, has been slowly taken over by a newer breed of businessmen loyal to Mr Mubarak’s 44-year-old son Gamal, who chairs its policy committee.

A murky succession

Yet although the younger Mr Mubarak has been an earnest champion of economic liberalism, the word among Cairo’s chattering classes is that he lacks popular appeal, representing precisely the business elite that ordinary Egyptians have come to loathe. More important, it remains an open question whether Gamal Mubarak has the support of the army, police and intelligence services. Some assert that this “deep state” would not countenance an inherited presidency, preferring instead to promote a more trusted figure from within, in a Putin-like shift to ungloved control. As yet, however, no such person has developed the kind of public profile that might be expected of a likely contender. Indeed, one of the reasons for the elder Mr Mubarak’s endurance, aside from his aversion to risk, has been his skill at sidelining potential rivals and playing the various security branches against each other.

In another country, the murkiness of the succession, at such a time of severe social strain, would be a cause for grave alarm. Many Egyptians are, in fact, worried. Yet the consensus is still that, in line with previous transitions between Egyptian presidents, serious unrest is not likely to accompany the change, whether it is brought about by the rules, or in breach of them. The security establishment, assuming it remains unified, is large and ruthless. The frailty of Egypt’s economy, with its reliance on tourism and foreign investment, makes a powerful argument for pursuing continuity rather than taking radical departures. And the mix of Egypt’s geostrategic importance with its weakness suggests that it could continue to rely on generous foreign patrons.

The country’s future administrators may be tempted to make populist gestures, and would likely reap a quick reward of loud public relief, after too long under familiar rule. They might even opt for a tactical alliance with the Muslim Brotherhood. But the fact is that, whoever runs Egypt, the task of housing, feeding and schooling all those millions, let alone overhauling the country’s myriad crumbling institutions, will leave little energy for other adventures. No wonder that most Egyptians, when asked what is in store for their country, tend to use the open-handed shrug with which they meet life’s daily mysteries, and invoke the protection of God.