Elliott Abrams

Pressure Points

Abrams gives his take on U.S. foreign policy, with special focus on the Middle East and democracy and human rights issues.

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Tourism, the Egyptian Economy–and Augusto Pinochet

by Elliott Abrams
May 15, 2014

Egypt’s next president, sure to be Abdel Fattah al-Sisi, will have a monumental task handling Egypt’s economy.

More bad news was reported yesterday regarding the tourism sector. Al Ahram reported that tourist visits were down 32 percent, but that figure actually understates the problem. Visits were also shorter, so the number of tourist visitor nights was down 43.6 percent.Tourism revenues were down 43 percent overall.

Tourism should be a bright spot for Egypt, and the new government should do all it can to restore visits and revenues. It is hard to see what other sectors could give the economy a quick lift, and over time it’s hard to see Egypt competing well with low-wage countries in Asia for many manufacturing sectors. Moreover, as I’ve noted here before, the Egyptian Army controls too much of the Egyptian economy–a likely barrier to movement towards a free market.

When the army seized power in Chile in 1973, it soon combined a very repressive political approach with a free market economic model that has paid dividends for Chileans now for 40 years. How was it that Pinochet knew anything about economics, and realized what he must do to make Chile prosperous and lift so many out of poverty? I once asked a Chilean economist, one of the “Chicago Boys,” the Chilean economists trained in free market economics at the University of Chicago and who were advising Pinochet, that question. He replied that Pinochet had known and understood nothing about economics, as one might expect. But his economic advisers told him that the Left, especially the Communist Party, hated free market economics and would surely denounce him if he adopted their “Chicago Boys” proposals. That was enough, the story went: if the Reds hated it, Pinochet thought it must be the right approach. Whatever his reasons, he adopted immensely successful policies.

General Sisi does not seem to have any “Chicago Boys,” but he badly needs some. He will enter office on a wave of good will and could make some important moves toward freeing up the Egyptian economy. If he lets the opportunity pass, if he lets the moment slip by while he attends to things that seem more important, he will be dooming Egypt to more years of economic stasis and millions of Egyptians to poverty. Here’s hoping that from Chicago or the Gulf donors or the IMF and World Bank, he is getting good advice–and takes it.

Post a Comment 3 Comments

  • Posted by Peri

    Type your comment in here…Not having a reputation for raping women may help their economy. I can’t think of one reason to visit Egypt. Not even the pyramids or the sphinx is reason enough.

  • Posted by Alar J.

    This is a flawed analogy for two reasons:
    1. Surely the author is not proposing that al-Sisi should follow the Chilean formula of brutal political repression combined with liberal economic reforms? He may as well propose following the Chinese model which is more relevant considering the state socialist legacy of Egypt and its bloated public sector, something which Chile never “achieved” under the abbreviated rule of Allende;
    2. al-Sisi’s declared enemies are neither leftist nor statist opponents of free-market economics. Indeed, the Muslim Brotherhood or rather its political arm the FJP was, just prior to the al-Sisi led coup d’etat, actually preparing to launch a series of neo-liberal economic reforms such as price reforms (phasing out of the fiscally ruinous system of subsidies) and a gradual but incremental reduction of the public sector. These policies were strongly supported by its base of middle-class entrepreneurs and professionals and would have met the approval of the IMF and the EU, triggering massive macrofinancial assistance therefrom. These reforms, effectively nipped in the bud by al-Sisi, would incidentally have threatened the priviliged position of the Egyptian military in the economy. Therefore we should not be surprised that in his first televised interview last week, as part of his campaign for the office of President, al-Sisi’s only remarks on the economy featured a populistic attack on the private sector and indications that he would support an even stronger role for the state in the Egyptian economy if confirmed as the new ruler. As long as his Gulf patrons are willing to throw billions down the yawning black hole that is the Egyptian state budget deficit, this strategy may temporarily keep the state afloat but eventually his patrons, having succeeded in crushing democracy in Egypt will either run out of cash or patience and the party will be over for al-Sisi and his cronies.

  • Posted by ah

    Peri – I would suggest you look at rates of rape around the world, and then re-assess your view of Egypt. It’s a rather safe country which yes, definitely has its problems, but one which has significantly less crime than the US or many other developed countries.

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