Egypt: It's the Economy, Stupid

In the last month, the Mubarak regime has not become more authoritarian. But the price of bread and cooking oil has been rising.

The Tunisian ruler has fled into exile. The headquarters of Egypt's ruling party were lit on fire. The police have been withdrawn from the streets.

So -- another regime toppled? Should we be worrying about a Muslim Brotherhood takeover?

Maybe. But despite the arresting images on TV, regime survival remains the better bet. The army still supports the regime, and the army has determined the outcome of Egyptian power struggles since the Mamluks of the Middle Ages. So it's also worth considering: What if the regime survives? What then?

This week's protests remind us that dictatorships do not deliver stability. Dictatorships do not make reliable allies over the long term. Egypt's friends should be planning -- should have planned long ago--for a transition to a more representative form of government.

Other poor countries have made such transitions: Mexico in the 1990s, for example. Egypt is poor, yes, but so were the Baltic republics at the time they made their democratic transition after the collapse of the Soviet Union.

The Western world should be urging the regime against its plans to bequeath Egypt from Hosni Mubarak to his son Gamal, like some kind of family estate.

Above all, what's needed is pressure and aid to accelerate Egypt's already impressive transition to a more open economy that grows faster and creates more jobs.

Egypt's GDP per capita has almost doubled since the advent of Hosni Mubarak after the 1981 assassination of Anwar Sadat -- an achievement all the more impressive because Egypt's population has doubled over those same 30 years, from almost 42 million to almost 81 million.

Growth has been especially rapid over the past decade, boosted by discoveries of oil and gas, now Egypt's most important exports.

But since 2008, Egypt has been hit hard. The Egyptian pound is linked to the dollar. As the dollar has declined against other world currencies, food prices in Egypt have risen.

Egypt is not more corrupt than it was a month ago. The Mubarak regime has not become more authoritarian. But the price of bread and cooking oil has been rising, and rising faster than wages.

If the regime survives, so will all those problems. It will be tempting to the Mubarak regime to buy a little temporary popularity with populist-nationalist economic policies: more food subsidies, more hiring of college graduates by already over-staffed government bureaucracies, less privatization of state industries. That's the path followed by the oil states of the Persian Gulf, and their rulers lead quiet, wealthy lives.

But Egypt does not have enough oil and too many people for that solution to work for very long. It cannot afford to buy acquiescence. It must earn consent. And that means gradually bringing more and more of the population into politics.

The New York Times reports on how power is monopolized in Egypt: "In local council elections in 2008, there were 52,000 open seats. Government decisions to disqualify candidates meant that 43,600 seats were uncontested and awarded to the ruling party. Out of a total of 51,546 seats, the ruling party won 99.13%.

"In midterm elections for one-third of the Shura Council, the upper house of Parliament, held in 2007, the first elections to be held after the constitutional amendments removed judges from supervising the electoral process, a total of 88 seats were open. The results: 84 seats for the ruling N.D.P., 1 seat for Tagammu, a small opposition party, and 3 seats for N.D.P. members who ran as independent candidates."

And that is in addition to Egypt's notoriously rigged presidential elections. Honest council elections would constitute an important first step toward reform. So would a guarantee that Gamal Mubarak will not succeed Hosni as president. But nothing would help more than a U.S.-led global recovery, more open trade, more demand for Egyptian exports and a surge in Egypt's food-buying power.

Whether this time next week we are facing a new Egyptian regime -- or a bloodier version of the existing regime -- either way, Egypt will face those continuing challenges of political and economic reform.

Originally published in the National Post.