Sunday, August 4, 2013

Egypt’s Coup

Egypt had a revolution in 2011 (which was covered here, here, and here, on SUU Macroblog). At the time, I remarked to the class that a population has to achieve a certain level of real GDP per capita before people start to care much about their government. Egypt was at the low end of the range for this.

They had elections in Egypt in 2012. An Islamist party won. In July they were overthrown by the military (which, I think, gave them pretty ample warning to start running things better).

The thing is, this isn’t really about politics. Instead, it’s macroeconomics:

… Egypt’s economy has been one of the major grievances propelling the masses into the streets. Although the economic structure Mursi inherited was dysfunctional, for many his inability to stabilize the situation was the last straw. As foreign reserves dwindled, the currency dropped, inflation rose, and shortages spread, the government was nowhere to be found. Mursi was the one person visible enough to blame.

Ahmed el-Hawary, a founding member of the Dostour Party, which collected signatures in a campaign that called for the June 30 protest, says the economy was all anyone talked about in the weeks preceding the demonstrations. “The substantial part [of conversations] was not revolutionary rhetoric. The substantial part was people are barely able to feed themselves, with how the currency is devalued every day and all the groceries are getting more and more expensive,” el-Hawary says. Blackouts and water shortages in the early summer “made everybody feel they’re going to go into hunger and strife and won’t even have water to drink.” A steady supply of electricity “was one of the things we really enjoyed in Egypt for 30 years. We didn’t have blackouts, especially in the cities.” Collecting signatures against Mursi was a breeze.

One thing to keep in mind is that less-developed countries (and Egypt is one of the least developed Arab countries) is that important parts of the economy must be imported, so exchange rates are a critical part of daily life for the masses. In particular, most Americans think all Arab countries have oil, but Egypt has almost none.

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