Three months after the uprising in Egypt, former President Hosni Mubarak now faces charges for planning to kill unarmed protestors. The Egyptian people want to see justice, but Mubarak’s trial is distracting the country from a bigger issue- the economy.
Since Mubarak’s downfall, the Egyptian economy has contracted 7 percent and its foreign currency reserves are shrinking. The International Monetary Fund projected that Egypt’s economic growth may slow to 1 percent this year, the lowest level since 1992.
The new government has launched investigations into supposed corruption by Egypt’s business leaders, which has also contributed to the poor economic performance. When you stifle entrepreneurship and venture capitalism, chances are economic growth will suffer as well. In addition, civil unrest, lawlessness, and protests have frightened away foreign investors.
Mubarak’s replacements must find ways to lure back foreign investment and jump start the economy internally. In the early 2000s, economic reform started with the lowering of corporate and personal taxes to allow people and businesses to have more disposable income. The reduction and elimination of some tariffs encouraged foreign goods to flow into the Egyptian economy. These two measures lowered Egypt’s debt and raised gross domestic product and per capita income. These strategies hurt the lower socioeconomic classes. Privatization of industry caused a loss of blue-collar jobs and benefits. The gap between the richest and the poorest grew wider and wider at an surprising rate.
These reforms were initiated by Mubarak’s regime, and the next wave of Egyptian leadership must distance itself from Mubarak. Unfortunately, this tension might cause the new Egyptian leaders to more government-controlled economy, which will further damage the already injured system.
The Egyptians must find ways to curb the crony capitalism of the late Mubarak years, but it also must continue to let the free markets work their magic. Improved government oversight of political leader’s income and greater disclosure of government salaries are a start. Regulations that restrict the use of state funds for personal gain must be put in place. There should also be a push to increase trade with the European Union, the United States, and China.
Economic and political stability is crucial in Egypt, a country that is arguably the hub of the Arab world. The United States already realizes this, and we should consider forgiving the $3.6 billion amount Egypt owes us.
Egypt can recover from the devastating blow its economy has taken in the past four months, but the buck stops with the new parliament and president, both of which will be elected in September of this year. Egypt’s new government must continue the reforms from the Mubarak years, but it should make sure government officials are held accountable and forced to disclose information to the people.
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