Abstract
After a short period of growth in the late 1970s and early 1980s, Egypt’s economic and social circumstances deteriorated dramatically. Due to a massive budgetary deficit and external debts of $50 billion at the end of the 1980s, economic stagnation gave rise to an acute crisis. Fiscal policy reform, called for by creditors and international financial institutions during negotiations over the stabilization and structural adjustment program of 1990–1991 aimed at restoring the financial viability of the Egyptian state.’ Two broad sets of policy and institutional reforms were central to these negotiations. First, general changes needed to be made in budgetary spending patterns. This required redefining the role of the state in the national economy to pave the way for the reform of the public sector. Along with other redistributive programs and subsidies, transfers to an inefficient public business sector had contributed to Egypt’s fiscal crisis. In the early 1990s, state-owned enterprises (SOEs) still produced roughly 75 percent of Egypt’s overall industrial value added.2 Thus, the IMF and the Word Bank insisted on a structural adjustment program that explicitly included demands for privatization.3 Second, patterns of revenue generation for the budget had to be adjusted, involving a rise in, as well as the introduction of, new kinds of taxes and the intelligent use of privatization proceeds.
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Notes
World Bank, “Technical Assistance Project for Privatization and Enterprise and Banking Sector Reforms,” for the Arab Republic of Egypt, 1992.
Privatization was intended to contribute to the overall reform objectives: to help reform public finances and provide more momentum to private sector development (including the financial business sector) and to attract foreign direct investment. As the subsidization of loss-making enterprises out of total tax revenues could be prevented through privatization, government spending could be redirected to subsidize social programs or profitable projects. See Peter Heller, Richard Hemming, and Rupa Chakrabarti, “Macroeconomic Constraints and the Modalities of Privatization,” in Mario I. Blejer and Teresa Ter-Minassian, eds., Fiscal Policy and Economic Reform: Essays in Honour of Vito Tanzi (London: Routledge, 1997), 32–49.
This general observation is described as a major point of departure for the research project of which this volume is the result. For a summary of reform results in Egypt during the 1990s, see Dieter Weiss and Ulrich Wurzel, The Economics and Politics of Transition to an Open Market Economy: Egypt (Paris: OECD Development Centre, 1998);
and U. Wurzel, Ägyptische Privatisierungspolitik 1990 bis 1998. Geber-Nehmer-Konflikte, ökonomische Strukturreformen, geostrategische Renten und politische Herrschafissicherung (Hamburg, Münster: Lit., 2000), 225 ff.
For an introduction into the discipline of economic sociology, see the introduction in Mark Granovetter and Richard Swedberg, eds., The Sociology of Economic Life (Boulder: Westview Press, 1992).
For an overview on network research, see Walter W. Powell and Laurel Smith-Doerr, “Networks and Economic Life,” in Neil N. Smelser and Richard Swedberg, eds., The Handbook of Economic Sociology (Princeton, NJ: Princeton University Press, 1994), 368–402;
and Dorothea Jansen, Einführung in die Netzwerkanalyse. Grundlagen, Methoden, Anwendungen (Opladen: Leske und Budrich, 1999).
To be sure, some commentators have noted a contradiction between network analysis, with its socialized conception of economic behavior, and neoclassical rent-seeking theory that views behavior solely in terms of means—ends efficiency as conceptualized in rational choice theory or new institutionalism (Thrainn Eggertsson, Economic Behavior and Institutions [New York: Cambridge University Press, 1990]).
However, it is important to note that research on rent and its consequences for socioeconomic and sociopolitical development has not been the exclusive domain of methodological individualism. See Mushtaq H. Khan, “Rents, Efficiency and Growth,” in M. H. Khan and K. S. Jomo, eds., Rents, Rent-Seeking and Economic Development: Theory and Evidence in Asia (Cambridge: Cambridge University Press, 2000), 21–69.
See Stephan Haggard and Robert Kaufman, “Institutions and Economic Adjustment,” in S. Haggard and R. Kaufman, eds., The Politics of Economic Adjustment: International Constraints, Distributive Conflicts, and the State (Princeton: Princeton University Press, 1992), 3–37;
John Waterbury, Exposed to Innumerable Delusions (New York: Cambridge University Press, 1993);
and S. Haggard and Steven B. Webb, eds., Voting for Reform: Democracy, Political Liberalization, and Economic Adjustment (New York, NY: Oxford University Press, 1994).
See Mario I. Blejer and Teresa Ter-Minassian, eds., Fiscal Policy and Economic Reform: Essays in Honour of Vito Tanzi (London: Routledge, 1997);
and Jeffrey Davis et al., Fiscal and Macroeconomic Impact of Privatization (Washington, DC: International Monetary Fund, 2000).
The privatization of SOEs is also intended to generate positive developments in employment, investment, and growth in the mid-to-long term, as a direct result of enhanced private sector and financial market development, as well as of an increase in foreign direct investment. See S. Kikeri, J. Nellis, and M. Shirley, Privatization: The Lessons of Experience (World Bank, 1992), 10. While in larger and more open economies the relative impact of privatization on the proportion of public and private ownership in the economy might be limited, “in a small and relatively closed economy or an economy where public sector assets are substantial as a percentage of total assets, the magnitude of the transfers associated with privatization could readily lead to significant effects on the portfolios of the private and public sector.” See Heller et al., “Macroeconomic Constraints,” 37.
“Public sector reform and privatization are public policy issues that are always embedded in other issues pertaining to structural adjustment, degrees of state economic intervention, and the regulation of markets. They are organically linked to the quintessentially political issues of public resource allocation, the provision of collective goods, and the distribution of wealth in society. It is an artificial exercise to separate out these issues, especially privatization, from the larger policy context. Public sector reform and privatization never take place in isolation from broader efforts at macro-economic and political adjustment.” See Ezra N. Suleiman and John Waterbury, eds., The Political Economy of Public Sector Reform and Privatization (Boulder and London: Westview Press, 1990), 1.
See Robert Springborg, Mubarak’s Egypt: Fragmentation of the Political Order (Boulder: Westview Press, 1989);
John Waterbury, The Egypt of Nasser and Sadat: The Political Economy of Two Regimes (Princeton: Princeton University Press, 1983); Waterbury, Exposed to Innumerable Delusions; and Weiss and Wurzel, The Economics and Politics of Transition.
D. Weiss, Wirtschaftliche Entwicklungsplanung in der VAR (Ägypten)—Analyse und Kritik (Köln und Opladen, 1964).
Paul O’Farell, Privatization in Egypt: A Review of Program Development and Current Status (Cairo, 1995), 12.
S. Heydemann, Economic Networks and the Political Economy of Fiscal Poliry Reform in the Middle East: Conceptual Starting Points and Some Preliminary Hypotheses (unpublished, 1999), 13 ff.
See Henk Knaupe and U. Wurzel, Entwicklung der Entlastungsstadt Tenth of Ramadan in Ägypten: Erfolge und Fehlschläge in Industrie, Wohnungswesen und Infrastruktur (Münster, Hamburg: Lit, 1996).
Ibid., 173–183; S. Gräfe, Die politische Rolle ägyptischer Priaatunternehmer im Prozess wirtschaftlicher Liberalisierung der Saatgutbranche (Magisterarbeit, Universität Leipzig, Institut für Politikwissenschafr, Leipzig, 2002), 37 ff.
Noah El-Mikawy et al., “Institutional Reform of Economic Legislation in Egypt,” ZEF—Discussion Papers on Development Policy, no. 30 (Bonn: August 2000), 45.
Omar el Shafei, Workers, Trade Unions, and the State of Egypt: 1984–1989 (Cairo: The American University in Cairo Press, 1995).
This shift in interests is captured by Joel Hellman, “Winners Take All: The Politics of Partial Reform in Post-communist Transitions,” World Politics 50, no. 2 (January 1998): 203–234.
Mark Granovetter, “The Strength of Weak Ties. A Network Theory Revisited,” in Peter Marsden and Nan Lin, eds., Social Structure and Network Analysis (Beverly Hills: Sage, 1982), 105–130.
See David Krackhardt, “The Strength of Strong Ties: The Importance of Philos in Organizations,” in Nittin Nohria and Robert G. Eccles, eds., Networks and Organizations: Structure, Form, and Action (Boston, MA: McGraw Hill, 1992), 216–239.
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Wurzel, U.G. (2004). Patterns of Resistance: Economic Actors and Fiscal Policy Reform in Egypt in the 1990s. In: Heydemann, S. (eds) Networks of Privilege in the Middle East: The Politics of Economic Reform Revisited. Palgrave Macmillan, New York. https://doi.org/10.1057/9781403982148_4
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