The Egypt of Nasser and Sadat: The Political Economy of Two Regimes

by John Waterbury

Overview

A balance sheet of thirty years of revolutionary experiment, this work is a comprehensive analysis of the failure of the socialist transformation of Egypt during the regimes of Nasser and Sadat. Testing recent theories of the nature of the developing states and their relation both to indigenous class forces and to external pressures from advanced industrial societies, John Waterbury describes the limited but complex choices available to Egyptian policy-makers in their attempts to reconcile the goals of reform and capital accumulation.

Originally published in 1983.

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Product Details

ISBN-13:	9780691641287
Publisher:	Princeton University Press
Publication date:	04/19/2016
Series:	Princeton Studies on the Near East , #515
Pages:	502
Product dimensions:	6.30(w) x 9.40(h) x 1.50(d)

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The Egypt of Nasser and Sadat

The Political Economy of Two Regimes

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By John Waterbury

PRINCETON UNIVERSITY PRESS

Copyright © 1983 Princeton University Press
All rights reserved.
ISBN: 978-0-691-10147-7

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CHAPTER 1

THE NATURE OF THE STATE AND OF THE REGIME

The stage of revolutionary administrative measures is in fact outmoded. The time has come for us to rely upon the popular conscience of the people and not upon government intervention. ... The only path that will allow us to meet the challenge of reaction and imperialism, the only way that will enable us to accomplish the transformation from capitalism to socialism is that of political and not governmental action.

[Gamal 'Abd al-Nasser, November 12, 1964, cited in Mahfouz 1972, p. 185.]

Egypt's geopolitical significance, its overall weight in the important Arab world, and the fact that it was one among a handful of Third World states to move in the 1950s toward a socialist transformation, would in themselves constitute adequate justification for a one-country case study. Much of this book can be considered just that. Where Egypt has been in the last quarter century, no less whither Egypt, are questions of intrinsic significance to experts and laymen alike. I cannot pretend to advance authoritative answers to these questions, but I shall certainly give my own best estimates.

The balance sheet of Egypt's "revolutionary" experiment, both in political and economic terms, is highly mixed. In the following chapters the reader will be barraged with assessments of what went wrong. This is not a pleasant task and it is one that legitimately draws the fire of policy-makers who cannot enjoy the luxury of carping on the sidelines. My carping is not intended, however, to show up Egyptians as hopeless bunglers. To the contrary, unsatisfactory as it may appear, they could have done much worse, and in many respects have done quite well. Still, because of my respect and affection for them as people, I know they deserve better, and perhaps they will get it.

Yet, more important, Egypt's problems are reflected with more or less acuity in dozens of other developing societies. Egypt is in some ways unique as a society but in ways that matter most to economic performance, the ordering of national politics, and the conduct of foreign affairs, it has no claims to separate categorization. Thus it is hoped that through a detailed assessment of the elaboration and implementation of development strategies and the political structuring of domestic interests, we may better grasp the dynamics of other like polities.

This is, of course, a two-way street, and I have learned much about Egypt from studies of other countries seemingly far afield. Egypt has made abundantly clear to me the commonalities linking Third World countries, commonalities that partially wash out the significance of cultural variations in general and those of political culture in particular. This is not an easy confession for one who devoted most of a book to the cultural determinants of political behavior in Morocco. But in emphasizing the socio-economic characteristics that link developing countries regardless of their cultures, I incur a major risk of falling into crude and insensitive determinism. For instance, a recurrent analytic theme in this study will be the degree to which the policymaking elites of Egypt or of any other LDC can make sovereign, autonomous decisions with respect to domestic and foreign policy. In Marxian and dependencia analysis there has been a tendency to deny national elites meaningful scope for independent action. Each step of these polities in the implementation of their development strategies and in their dealing with the outside world is, so it has been argued, preprogrammed by the "world capitalist system." I do not believe that there is compelling evidence to support this proposition in its more extreme forms. By the same token one must discount the claims of leaders of LDCs who insist that they are not moved by nor will they tolerate external influence in the shaping of their policies. For its part, Egypt appears to be the prisoner of two kinds of situations that severely limit the range of policy responses it can reasonably contemplate (everything hinges, of course, on the definition of reasonable). One emerges from its socioeconomic makeup and the other from its dependency upon external sources of finance capital, technology, markets, and arms.

Egypt is a large semi-agricultural country about half of whose population participates in one of the oldest and most intensive peasant-based societies in the world. It manifests a number of characteristics that one commonly associates with the societies of the underdeveloped world. The general standard of living is low, with per capita income at about $300 a year. The rate of private savings is commensurately low. Among the adult population a majority remains illiterate. Illiteracy is particularly marked among women. One major result of this situation is that it is very difficult to bring about broad technological changes in agriculture or the development of a skilled nonagricultural labor force. The cities themselves, rapidly approaching the point where they will harbor more than half of the total population, survive not on the strength of a growing manufacturing sector, but on the private and public consumption of the sprawling civil service. Alongside this salariat are hundreds of thousands of urbanites in the "informal" sector who, at very low levels of capitalization and productivity, make up the private service sector.

Rising above, although sometimes just barely, the urban and rural ruck are the elite of industrialized labor, the vast civil service growing parasitically at exponential rates, the upper echelons of the public bureaucracies and their counterparts in the private sector, and, finally, the middle-level commercial farmers of the countryside. All of these groups will be described in much greater detail in the following chapters. My point here is that the roster I have just presented does not differ in any major respect from that of several developing societies. Consequently one may argue that the range of development strategies open to the elites of these countries is rather narrowly circumscribed and takes on a certain sameness.

The second situation of which Egypt is a prisoner arises from the search for great power patronage, arms supplies, external aid, and investment capital. Once again Egypt is not fundamentally different from other developing countries that experience chronic balance of payments difficulties and foreign exchange crises. To develop and grow these states rightly assert that they must live beyond their means until such time as their economies can pay their own way and service the debts incurred during the transition to self-sustaining growth. National elites find themselves in a continual scramble for external financing. If it comes, it does so either with political strings attached if bilateral public aid, or with financial strings if private commercial (banks) or multilateral (IMF). Meeting short-term obligations frequently propels such states into policies of expediency which nonetheless have long-term consequences limiting future options. Moreover, even the short-term expedients are greatly influenced by domestic concerns (e.g., should one allow peasants to grow produce for lucrative domestic urban markets or "force" them to produce for export when foreign exchange is in short supply?) and the grinding momentum of existing policies (e.g., continuation of the government as the employer of last resort whatever the cost in efficiency).

Reconciliation of these countervailing forces often proves impossible and the country limps from one external or domestic crisis to another. Salvage operations, austerity programs, reform packages and the like are invoked to deal with the immediate situation, but once the heat of the crisis subsides they dissipate or are forgotten. If one adds to this, as one must with respect to Egypt, the constant possibility and regular recurrence of war one has all the elements of a formula for transition without end.

There are some predictable patterns inherent in the process of transition, especially as they relate to both sequential and cyclical crises in the process of capital accumulation and growth. To get a grasp on these patterns, I shall examine some general propositions on the nature and functions of the state in the process of development. These propositions are grouped under three headings:

1) Authoritarianism and economic development — the paradigm of the bureaucratic-authoritarian (BA) state

2) State autonomy and state capitalism

3) External dependency and the peculiar characteristics of states in the semiperiphery

The Bureaucratic-Authoritarian State

Guillermo O'Donnell's original and revised formulations of what he calls the "bureaucratic-authoritarian state" (O'Donnell 1973, 1978, and 1979) have stimulated a useful debate that has for the most part been confined to Latin America. What he and others are dissecting is the domestic or internal end of a series of linked factors that lead to varying degrees of external dependency and "dependent development."

The crux of O'Donnell's argument is that import-substituting industrialization (ISI) proceeds through an easy phase of expansion into basic consumer goods (textiles, food processing, beverages, some consumer durables, vehicle assembly, etc.), and that this phase, as in Argentina (Peron) and Mexico (Cárdenas in the 1930s), is accompanied by political mobilization, populism, and welfare policies that bring about some redistribution of national income.

It has often been the case, however, that the initial stages of ISI provoke an upsurge in the imports of raw materials and capital goods needed to supply the new consumer goods industries. At the same time the latter are highly protected and have little incentive to become competitive in international markets. The ISI enterprises do not generate their own foreign exchange so that their expansion becomes contingent on external borrowing. Once they have satisfied middle and upper class demand in particular and domestic mass markets (for beverages and textiles) in general, the easy phase is over and the crisis or challenge of "deepening" begins (cf. Lewis 1978, pp. 31-32).

The final moments of the easy phase are typified by high rates of inflation, costly welfare programs, some degree of worker mobilization and/or political liberalism, and economic stagnation frequently exacerbated by a balance of payments crisis. As long as the country continues to operate within a capitalist framework, the situation calls for a number of painful remedies: a reduction in welfare outlays, a lowering of protective measures for local industry, and a concentrated effort by the state to capture and reinvest the surplus of the most productive sectors. There may or may not be an export drive, but almost certainly there will be a turn toward foreign investment. The goal is to promote backward linkages from existing enterprises so that intermediate and capital goods industries emerge. This is the process of deepening, but to meet its capital and raw materials needs requires increased efficiency, high rates of investment, and labor docility. Populist inclusivism is brought to an end, labor unions are decapitated and contained, and wages are allowed to lag behind inflation and production. The actual seizure of the state apparatus by authoritarian actors and the shift to exclusivism may be triggered by perceived threats of mass upheaval that threaten orderly capitalist growth.

The process of deepening calls forth an alliance of state technocrats, military, and less frequently, civilian political leaders, with foreign investors and select domestic entrepreneurs. Foreign creditors and the IMF may have a considerable voice in the process, as Pinochet's Chile indicates, but that is not an unavoidable ingredient. These then are the basic elements of the BA state, and, according to O'Donnell (1979, p. 298), the political and economic exclusion of the working and lower middle classes is reenforced by the regime's reliance upon "the upper fractions of the local bourgeoisie and of transnational capitalism." While still invoked, corporatist ideology, elaborated during the populist phase, can no longer contain divergent class interests, and police repression becomes the glue of the polity. Political parties and liberal institutions are tamed or abolished and interest expression becomes fragmented and channeled along access routes to the bureaucracy and the presidency. Even then, O'Donnell suggests (1973) internal cleavages take shape within the ruling coalition. Typically the status and well-being of the middle class shows no improvement, and the elimination, in the name of efficiency, of some public enterprises serves to alienate that part of the coalition with vested interests in parastatal activities. Thus in an advanced stage of BA and of the process of deepening (Brazil of the late 1970s) the regime must strike new colors (O'Donnell 1978, p. 22):

... the state must become less orthodox and more nationalist; it must be more protectionist ... it must reserve for itself and for the national bourgeoisie hunting grounds forbidden to the direct access of international capital; and it has to be itself more entrepreneurial in directly productive activities. In other words the BA state must come to restrict international capital to a degree almost unthinkable during the initial orthodox stage ...

STATE'S ROOM FOR MANEUVER

Failing this, the BA state may give way altogether, as has occurred in Turkey after 1946 (Okyar 1975) and in Peru after 1977 (Stepan 1978; Lowenthal 1975; Handelman 1980). But the eclipse of the BA state, which in itself is not inevitable, is not necessarily part of a sequence but rather part of a pattern of oscillation between accumulation and reform.

In fact this oscillation has been suggested by Albert Hirschman who, along with several others, has tried to test and refine O'Donnell's paradigm (Hirschman 1979). Hirschman sees the consolidation of authoritarianism not so much in terms of deepening as in terms of the political traumas of transition from reform to accumulation. This occurs in three stages (although there is nothing rigid about this: cf. Kaufman 1979). The years of "easy" ISI lead to a period of inflation, overvaluation of the national currency, import controls, and resort to foreign finance. This in turn provokes balance of payments difficulties, which require anti-inflationary policies, devaluation, and export promotion. In both the latter stages working class elements must be closely policed and repressed. Deepening may or may not be important in this process, and may or may not be a stated objective of the regime. Like the reform and redistribution stage, that of belt-tightening and accumulation cannot be sustained indefinitely and will give way to another period of reform.

For Hirschman the two kinds of processes alternate. What Nasser's Egypt of the 1960s and Nehru's India of the second Five-Year Plan (although India was clearly not a BA state) demonstrate is that reform and accumulation can be attempted simultaneously, albeit with disappointing results on both counts. One of Hirschman's most intriguing speculations offers an explanation of what happens next. During an initial period of accumulation what Hirschman (1973) calls the "tunnel effect" applies. The groups least favored by the process, like motorists stopped in one lane of a tunnel watching the other lane move ahead, will tolerate their condition so long as they expect their turn to move ahead is coming soon. If their expectations are disappointed, which they often are, then protest will follow. This will usher in a new period of reform which, under certain circumstances, "can act as a strong homogenizing influence on society so that ... the stage is set for highly uneven development and prolonged tolerance thereof, even and perhaps particularly in countries where the reduction or elimination of inequalities was one of the principal aims of revolution or reform." Hirschman cites Mexico from Cardenas to the riots of 1968 as an example (1979, p. 94).

(Continues...)

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Table of Contents

• FrontMatter, pg. i
• Contents, pg. vii
• Tables, pg. ix
• Preface, pg. xiii
• Acknowledgments, pg. xix
• A Note on Transliteration, pg. xxi
• A Note on Citations, pg. xxii
• Abbreviations, pg. xxiii
• One. The Nature of the State and of the Regime, pg. 3
• Two. Sovereign State or Link in the Chain of Dependency?, pg. 21
• Three. Demographic Reality and Revolutionary Intent, pg. 41
• Four. The Emergence of Egypt's Public Sector, pg. 57
• Five. The Public Sector in Crisis, pg. 83
• Six. The Public Sector: Performance and Reform, pg. 101
• Seven. The Open Door to the Triple Alliance, pg. 123
• Eight. The Private Sector: Out of the Shadows, pg. 158
• Nine. Reprise: Accumulation and Deepening, pg. 189
• Ten. Equity and Inequity without Pain, pg. 207
• Eleven. State and Class, pg. 232
• Twelve. Land Tenure and Rural Class, pg. 263
• Thirteen. The Arab Socialist Union: Corporatism and Containment, pg. 307
• Fourteen. Instruments and Processes of Control, pg. 333
• Fifteen. Controlled Liberalization under Sadat, pg. 354
• Sixteen. Socialist and Capitalist Dependency, pg. 391
• Seventeen. The Club of Friends, pg. 406
• Conclusion, pg. 423
• Bibliography, pg. 435
• Index, pg. 465