Go to Admin » Appearance » Widgets » and move Gabfire Widget: Social into that MastheadOverlay zone
Due to its length, this article has been split into three pieces. Watch for the second piece, which discusses the author’s own struggle to link public administration to political science, economic development and comparative politics resulting in his subsequent Political Elasticity Theory, to be posted this Thursday, April 12, 2012.
Herbert H. Werlin
In The Washington Post (March 18, 2011), Secretary of State Hillary Clinton is reported to have pledged to the new government of Egypt tens of millions of dollars of financial aid and business incentives in addition to the more than $1 billion already available to Egypt by the Overseas Private Investment Corporation to fund small and medium size businesses and stimulate job growth. The trouble with this is that, unless there is fundamental administrative reform, not much good can be expected of this financial aid. This is a point generally overlooked by scholars and journalists.
Just how bad things have become since the overthrow of Mubarak is indicated in an article by Niall Ferguson in the June 13 and 20, 2011 issue of Newsweek. Egypt’s economy is predicted to contract this year by 4 percent; inflation is now above 12 percent; the Egyptian stock market is currently trading at 23 percent below its pre-crisis peak; $30 billion has left Egypt since the onset of the Arab Spring; and the country’s foreign-exchange reserves fell by as much as a third in the first three months of the year. The reason for this situation, according to Ferguson, has to do with “soaring crime in the cities, the difficulty of carrying out normal transactions, and, above all, nerve-racking political uncertainty.”
I became aware of the administrative troubles of Egypt during the l970s when I was partly responsible for preparing a USAID-funded rural-development project which attempted to get government-employed medical doctors to work in rural areas where medical conditions were very bad. I soon discovered that medical doctors were being paid so poorly by their government that they were reluctant to leave their private patients in urban areas. The project eventually had to be abandoned.
In the l980s, while a researcher, writer, and editor at the World Bank, I encountered an education project that attempted to evaluate innovations in Egypt before and after examinations. The project went ahead despite the opposition of the Education Minister to examinations because it was USAID-funded. The Minister’s opposition, it turned out, was based upon the fact that, inasmuch as teachers are paid very little, exam results are determined by bribery rather than anything else.
Costa Rica, with just five million population, exports more than Egypt, with a population of about 80 million. The jobless rate among youth is between 30 and 40 percent, and 44 percent of the population subsists on less than $2 a day. To halve this figure by 2015, GDP must grow by 8 to 10 percent a year, but the growth rate has been only about 3 percent a year. Over the past decade, the Egyptian pound has lost almost half its value against the U.S. dollar.
Organizations associated with Hernando de Soto and Mo Ibrahim have identified some of the reasons for this misery: More than 90 percent of Egyptians hold their property without legal title. While the value of this property is estimated to be 30-times greater than the market value of registered companies, it can be called “dead capital” (without access to financial and governmental assistance). To open a small bakery requires more than 500 days, including 56 government agencies and repetitive government inspections. To get legal title to a vacant piece of land requires more than 10 years of dealing with red tape. Because the informal sector (unauthorized business) does not adhere to any financial requirements having to do with social security, taxes, or labor laws, it can undermine or unfairly compete with enterprises that are officially registered.
About 35 percent (altogether, nearly 7 million) of the working population (i.e., officially employed) work for the public sector. No effective government employs such a high percentage of the population. Germany, for example, with a similar population size, employs fewer than one million. Civil servants are hired, assigned, supervised, and promoted haphazardly, usually in offices without proper equipment or facilities. Most are so poorly paid (ranging from $35 to $70 a month) that they are extremely impoverished unless they hold additional jobs and rely upon various forms of corruption. Between 1999 and 2004, the amount allocated to state salaries declined by 14 percent, using prices linked to the U.S. dollar. The saying among Egyptian civil servants is similar to that of their counterparts in Eastern Europe under communism: “The government pretends to pay us, and we pretend to work.”
About 20 percent of Egyptians own nearly 80 percent of the country’s wealth. Their children go to private schools and eventually to highly subsidized universities. The most motivated and qualified graduates seek employment in the Arab gulf states. Much of the wealth of upper income groups is derived from undocumented sources, making a progressive income tax system extremely difficult. Until governance (especially the legal system) improves in Egypt, including the capacity to properly collect taxes and then to use these taxes effectively to improve public services, ordinary Egyptians will remain frustrated by the lack of socio-economic progress in their country. So, while we can be happy at the overthrow of Mubarak, we have to remember the French saying: “The more things change, the more they remain the same.”
Watch for the second piece, which
discusses the author’s own struggle to link public administration to
political science, economic development and comparative politics
resulting in his subsequent Political Elasticity Theory, to be posted
this Thursday, April 12, 2012.
Herbert Werlin is a retired University of Maryland professor and was for many years a researcher, writer, and editor for the World Bank. He is the author of a 1998/2001 (with a 2001 addendum) University Press of America book, The Mysteries of Development: Studies Using Political Elasticity Theory. He is the winner of the 2010 Fred Riggs Award given by ASPA’s Section on International and Comparative Administration. Those interested in PE Theory may wish to look at the most recent (January/February 2012) issue of Challenge. Email: [email protected]