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Ways of the World

Carol Stone, business economist & active Episcopalian, brings you "Ways of the World". Exploring business & consumers & stewardship, we'll discuss everyday issues: kids & finances, gas prices, & some larger issues: what if foreigners start dumping our debt? And so on. We can provide answers & seek out sources for others. We'll talk about current events & perhaps get different perspectives from what the media says. Write to Carol. Let her know what's important to you:

Saturday, February 12, 2011

Egypt: a New Day Dawns

"My Lord, What a Morning!"

The people of Egypt have won!

Some scattered thoughts as their country begins a new life.

First comes a fervent prayer that what happens in the next days will bring them peace and a road to genuine opportunity and prosperity.

Second is a recognition that the Egyptian people are strong and proud. I have a friend in California whose sister has lived for many years in a neighboring country. Kim, who visits there regularly, wrote to me in an email Friday afternoon, "the Egyptian people are great. Very nice, wonderful spirit, fun, [they] had been suppressed and tortured for so long. . . . The army . . . and the people are one. The people have respect for the army in Egypt. . . . When the army wouldn't fire on the people, and actually formed a buffer between the people and the police, I knew the people had won."

Perhaps a manifestation of the people's spirit is the fact that they spent Saturday afternoon sweeping up Tahrir Square with mops and brooms. They were sweeping up the dirt and their own debris from living there the past number of days, but they were also sweeping up "the old" and making it ready for "the new".

Third, I am quite amazed at the force, the electricity suddenly evident in any people who have cellphones and social networks. Little did I realize when I wrote here on January 18 about my young holiday guests and their smartphones and their apps, that their counterparts in North Africa were on the way to making literal revolution with theirs.

Fourth, this is now a broader phenomenon, running through that region like an express train. This morning, the train has already steamed ahead to the next stop, Algeria, where thousand of people have defied a ban on demonstrations to do just that.

Lastly, all this excitement notwithstanding, there is, of course, room for considerable apprehension. Will Muslim extremists get the upper hand in a new government? Various pundits, along with my friend Kim, make logical arguments on both sides of this significant issue. Perhaps the mere fact that we are all sensitive to it can foster realism and restraint in facing it.

Also, further concern comes because one cause of the Egyptian people's discomfort has not gone away. A source of economic stress particularly impacting people of lower incomes is that prices of food and energy are rising sharply around the world. This pocketbook issue will clearly be the topic of a more focused and detailed discussion here very soon; for the moment, though, we have to know that it will continue to weigh on the welfare of peoples in Egypt and elsewhere, sapping their purchasing power and/or straining the government programs that provide subsidies which must now increase.

All of this means challenges for the people and for those who would administer their interim government in the immediate future. Part of our prayer is that such mundane matters don't hamper their strides toward political and social freedom.

In this historic moment, we leave you today with some of the words to the spiritual whose title formed our exclamation at the beginning:

My Lord, what a morning!
My Lord, what a morning!
Oh, my Lord, what a morning
when the stars begin to fall.

Oh, you will hear the trumpet sound
to wake the nations underground,
Looking to my Lord's right hand
when the stars begin to fall.

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Tuesday, February 08, 2011


It rained in Cairo Sunday, the 13th day of demonstrations. According to news service Radio France Internationale, "Despite poor weather and signs of protest fatigue, thousands of people remain on [Tahrir or 'Liberation' Square]. A Coptic priest and Muslim sheikh stood together to commemorate the dead, as the crowd shouted 'a single hand, a single hand' to show interfaith solidarity. Prayers of both faiths followed." The Wall Street Journal describes a joint parade of sorts that involved scholars from a Muslim university carrying a Quran, mingling with Coptic Christians holding a crucifix.

Who are the demonstrators? what do they want? News services and various commentators give differing interpretations of the events, and sometimes the same commentator has more than one vision. However, as evident in the above report, some demonstrators from different groups can come together for common purposes. We've explored a bit of the backstory to these goings-on. We're not political scientists, so we're not about to draw hard-and-fast conclusions. But we can share some facts and hopefully they will make some of this more comprehensible.

Population, GDP and Poverty
There were roundly 80.5 million Egyptians, as of July 1, 2010, the 16th largest country by population, according to the CIA World Factbook[1]. The next country in rank, number 17, is nearby Turkey, with 77.8 million people. Turkey's economy produced a gross domestic product of $958.3 billion last year, also 17th in size rank; for its population, then, per capita production of goods and services was $12,300, making it 94th in line for per capita GDP. But Egypt's total GDP was only $500.9 billion, and its per capita output $6,200, 136th of 229 countries tabulated by the CIA.[2] So even though there are as many Egyptians as Turks, their production is much smaller, and individuals are much farther down in the world pecking order.

Similarly, poverty rates are higher in Egypt. The World Bank calculates the share of the population who live on $2 a day or less.[3] In 2005 in Egypt, this was 18.5%, while only half that much in Turkey, 9.0%. For the region right around Egypt, known as "Middle East North Africa" (MENA), the share was 16.8%; the rate varies widely, generally according as various MENA countries have oil or not. Yemen, also the site of recent disturbances, is at 46%. Turkey's neighbors, a specific group of developing countries in Europe and Central Asia, averaged 8.9% in 2005. Sub-Saharan Africa, in sharp contrast, runs upwards of 70%, while Latin America averages about 17%. So clearly, many people in Egypt are poor, but this is not the extreme condition it is elsewhere and is comparable to many places where governments seem to be in better standing with the populace.

Reported unemployment is also not extraordinarily high in Egypt. Recent reports from the Egyptian national statistics office and from the International Labor Organization show the rate hovering at about 9%. These rates are calculated from among people who actually want jobs, the so-called "economically active population". In Egypt this group was only about 48%of the total population over age 15, so there are many people, mostly women, who do not look for work. Egypt is one of only a handful of countries with such a low "participation rate". That's why reported "unemployment" can be relatively modest; many people have given up job-hunting or never even tried. They may also, of course, be needing to stay home for family, school or illness. Or, they may be occupied in an "informal economy", where their activity and their incomes are not reported to government offices.

As to the share of people who actually have [reported] jobs in Egypt; this was 43% of adults in 2008. Some ten other countries have "employment rates" that low, including – interestingly, Turkey at 42%, and also, among other countries with recent social unrest, Tunisia at 41%, Yemen at 39% and Jordan at 38%. So an unhappy population may go along with weak employment conditions, but that connection is not absolute.

Ease of Doing Business
Some other kinds of gauges may help us understand why it is Egypt where people have gone over the edge in their disgust with government. The World Bank, we've come to understand better, is interested not just in poverty relief per se, but also in bolstering economic structures that can bring sustained strength and vigor to a country's ways of pursuing livelihoods.

Among 183 countries followed by the World Bank, Egypt ranks 94th in 2011 in the "ease of doing business". This is a composite rating of such factors as the legal and registration procedures needed to open a business, enforcing contracts, getting credit and protecting investors, the tax burden – both the amount and the ways taxes are collected – and the ability to effect an orderly closing-down. Extensive surveying of these systems in each country tries to measure the numbers of government approval procedures involved, the amount of time they take and the monetary cost they impose. Egypt's rating puts it pretty much in the middle. Notably, though, in 2006, when these rankings were first reported in their current style, Egypt was 141st of 155 countries. So while it's far from "easy" to start and run a company in Egypt, it's much better than it was just a short time ago. The Egyptian government has clearly been working on reforms of its bureaucratic practices. Indeed, the World Bank indicates that Egypt ranks among the highest in "improvement". Still, of this year's 183 countries, it's well down in "construction permits" 154, the tax burden 136, enforcing contracts 143 and closing a business 131. So there's a ways to go.

Higher Education
We've read in press reports lately that, while Egypt sees to the education of its population, graduates are ill-prepared for careers when they get out of school. We didn't research data on this, but we learned that in 2008 the Mubarak Administration commissioned a study of its higher education system by the World Bank and the Organization for Economic Cooperation and Development (OECD). They issued a report in the spring of 2010, calling for substantive changes to the emphasis and curricula in institutions providing post-secondary education. This report adds to an organized effort already in place in the Egyptian government to work on this significant issue; obviously there hasn't been time yet for them to act on the recommendations.[5]

We also obviously hear about oppression and corruption. Three measures here document these conditions.

Freedom House – do you know them? See footnote [6] – rates "political rights" and "civil liberties" for 194 countries and 14 other territories. Freedom House analysts and academic scholars assess such qualities as genuine multi-party politics, real elections and government functioning for the political index and personal autonomy, associational rights and the rule of law on the civil index. On a scale of 1 to 7 (higher is not better), Egypt's political rights stand at 6 and civil liberties at 5. The organization groups the countries as "Free", "Partly Free" and "Not Free" according to their combined numerical score. The break between Partly Free and Not Free is between 10 and 11 points, making Egypt "Not Free"; there are 22 countries with the same scores as Egypt, including, notably including its neighbors Algeria, Jordan and Yemen, which are also currently seeing unrest. There are 25 countries with Not-Free scores that are higher still.

The Heritage Foundation calculates an Index of Economic Freedom[7]. Using numerical data, this measures degrees of freedom in ten areas, including among them doing business, the size of government (bigger is not better), the ability to hire and fire workers, property rights and financial choices. Egypt's score for this year is 59.1, just lower than the world average of 59.7 and the average for its region of 60.6. The U.S. stands 9th on this scale at 77.8; the highest score is Hong Kong's 89.7. The Heritage Foundation Index encompasses a rating on corruption, which led us to

Transparency International computes the Corruption Perception Index. The group defines corruption as "the abuse of entrusted power for private gain. . . . The Corruption Perceptions Index (CPI) ranks countries according to the perception of corruption in the public sector."[8] Egypt is tied for 98th place with Burkina Faso and Mexico(!) out of 178 countries. Its score is 3.1 on a scale of 0 to 10, indicating "highly corrupt" to "highly clean" (higher IS better). Denmark, New Zealand and Singapore are at the top, with 9.3 points, and Somalia is alone at 178th, with 1.1. A separate Transparency International study discusses several conflicts-of-interest built right into Egypt government regulations; for instance, it is necessary to get consent from the president's office to institute the judicial investigation of a government official.[9] Connections and "facilitation payments" are necessary to get required approvals for any number of business or personal activities; a good illustration lies in the very title of a World Bank report, "From Privilege to Competition: Unlocking Private-Led Growth . . . ."[10]

In all of these reports, we found comments that Egypt is trying to improve. It has a corrupt government by many standards, but it has stated that it wants to work on this issue. It has enacted economic reforms, such that the World Bank rates it 13th in improving the business climate over the past five years. As we noted, there's already been a study and recommendations on how to make the higher education system more responsive to the nation's needs.

That these actions and improvements are followed by the unleashing of popular outrage and demonstrations need not be totally surprising. As we read about and watched these current conditions and events, we were reminded of what we learned last year in examining terrorism. Here's what we said then, "Notably, terrorism tends to emerge in countries where there is some amount of freedom, but which freedom may be limited or unpredictable. There has been little incidence of international terrorism from fully democratic countries or from countries where political power is held in an absolute dictatorship in which all dissent is successfully suppressed. It's countries in a kind of twilight or transition away from authoritarianism that seem most susceptible to spawning those groups."[11] Obviously, there are different triggering events now in Egypt and the rest of the MENA region, and the response from the crowd here isn't acts of terrorism, but outright, open rebellion. But it's fascinating that once there seems to be something the people can reach out for, the spirit bursts forth with incredible energy. We can't wait to see how it all turns out – and we pray for the best.

[1] Whatever you may think about the mission and work of the CIA, its "World Factbook" collection of basic economic and political information on some 229 countries is extremely detailed and useful; numerical data are also calculated on a consistent basis so, as with the items we mention, countries can be compared.

[2] These GDP numbers are calculated on a "purchasing power parity" basis, so they adjust for differences in exchange rates and differences in prices of individual goods and services in different countries.

[3] The $2/day standard was established in 2008 when the data were recalibrated to purchasing power in 2005; it updates the previous $1.00/day.

[4] See for complete datasets and explanations of this fascinating issue. The U.S. ranks fifth this year, behind Singapore, Hong Kong, New Zealand and the U.K.

[6] From their website, accessed February 8, 2011: "Freedom House is an independent watchdog organization that supports the expansion of freedom around the world. Freedom House supports democratic change, monitors freedom, and advocates for democracy and human rights. Since its founding in 1941 by prominent Americans concerned with the mounting threats to peace and democracy, Freedom House has been a vigorous proponent of democratic values and a steadfast opponent of dictatorships of the far left and the far right. Eleanor Roosevelt and Wendell Willkie served as Freedom House’s first honorary co-chairpersons." Our data are from their annual survey Freedom in the World, released for 2011 just on January 13.

[7] The report for 2011 was issued on January 12.

[8] Transparency International is a world-wide organization, founded in 1993 and headquartered in Berlin. It doesn't compile the index from its own assessments, but uses other, "third-party" sources deliberately, believing that corruption indeed lies in the eyes of the beholder and in how participants in a country's affairs perceive and experience it. Two well-known economic forecasting firms plus the Asian Development Bank, the African Development Bank and the Bertelsmann Foundation are among the rating sources. The 2010 report was issued on October 26, 2010.

[9] "The Good Governance Challenge: Egypt, Lebanon, Morocco and Palestine", March 2010.

[10] Najy Benhassine, Washington, D.C.: The World Bank. November 8, 2009.

[11]"Terrorism and Terrorists" Ways of the World, January 12, 2010. . Accessed February 8, 2011.

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