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Experts debate correlation between economic and political reform - Daily News Egypt

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Experts debate correlation between economic and political reform

Up until the onset of the global economic crisis, Egypt had embarked on a program of economic reform that has spurred growth, encouraged foreign direct investment and promised that – with patience – it will trickle down to all levels of the economy. As the global economy derailed over the second half of 2008, the …


Up until the onset of the global economic crisis, Egypt had embarked on a program of economic reform that has spurred growth, encouraged foreign direct investment and promised that – with patience – it will trickle down to all levels of the economy.

As the global economy derailed over the second half of 2008, the country’s reform-minded bureaucrats turned towards helping Egypt weather the storm while reaffirming their commitment to a long-term reform agenda.

While economic reform this year has been steady and largely progressive, attempts to reform Egypt’s political system have languished, gaining little of the traction that the economic reforms have.

Subsidies have long been a lightning rod for criticism, but the government has committed to reforming them so that they reduce the cost for the poor without giving handouts to the rich.

The privatization program is another prime example of a mechanism undergoing a major reworking by the government.

For many in the country, privatization represented an elitist economic program whereby privatized companies underwent massive short-term job cuts in the restructuring process.

Though many in the government argued that privatization would ultimately lead to greater job creation as the privatized companies grew, the ministries remained sensitive to public criticism and adapted accordingly.

Last month, the Ministry of Investment announced plans to give away shares of over 150 state-owned companies to all Egyptians above age 21. The public will then be free to hold or sell the stock as they please.

Most, however, remain skeptical of the proposed program, which has stirred heated debate in the media and among the public.

With reform programs like subsidies and privatization, questions have begun to arise about the state of Egypt’s political system. Will it follow suit and undertake greater reforms? Is there a ceiling for economic progress if no meaningful political reforms are enacted?

Experts tend to agree that there is little correlation between political and economic reform. That is to say, a country is capable of pursuing a strong economic reform program without necessarily subjecting its political system to major changes.

“There is no strong link between economic and political reform, said Ola El-Khawaga, an economics professor at Cairo University.

“The important fact here is that there does not seem to be any one-to-one relationship between economic and political reforms, echoed Mauro Guillen, director of the Lauder Institute at the Wharton School in Pennsylvania.

Guillen offers a host of evidence, suggesting that the historical record is mixed with regard to the correlation between political and economic reform.

“There is a great deal of research on what is the best sequence of economic and political change. Unfortunately, the evidence is inconclusive, he said.

He noted that from the 1970s to the 1990s, Chile acted to make ambitious economic reforms first before successfully overhauling the political system.

Russia, on the other hand, reformed its economic system under Gorbachev in the 1980s without bringing about subsequent enduring political change.

Guillen also noted that the historical record is littered with the successes and failures of affecting political change first, before reforming the economic system.

Some experts in Egypt, though, argue that both political and economic reform might be better off if enacted hand-in-hand.

“Economic reform is going faster than political reform in Egypt, argued El-Khawaga. “It will be faster if economic and political reform go side by side.

The central target for many of Egypt’s economic reforms has been the nation’s vast lower class, which still languishes in poverty.

Among the most pressing issues for those working on poverty alleviation in Egypt is whether reform in the political system is a key element in lifting the masses.

“The poor are unlikely to participate in the political process, Guillen said, “even if they have the right to vote, as the US case illustrates. Having said that, opening the political process to popular participation is a good thing.

Experts agree that one of the central premises of economic reform in the political sphere is not political reform unto itself, but rather popular participation in the political arena by the nation’s poor.

In an open political system where everyone votes – and everyone votes for their own self-interest – the poor would have much to gain economically.

As a corollary, there is an ongoing chicken-and-egg debate in the academic world about the cause and effect relationship between democracy and national affluence.

“There is a very clear statistical association between economic affluence and democracy, argued Guillen. “There is a big debate as to which comes first, and whether one is the cause of the other.

“In reality, he added, “each country goes its own way. The link between economics and politics is tenuous at best.

“What is clear, though, is that the societies that have managed to put in place a solid market system and a free political system are the most developed and affluent.

Topics: Aboul Fotouh

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