World Bank economists are easy to criticize for wearing narrow economic blinders that block vision of the broader political context; they can obscure the most obvious point by wrapping it in layers of needlessly complex mathematical models. But to see the strong points of World Bank training, pick up The Egyptian Economy, 1952-2000. Ikram is (as is this reviewer) a former World Bank economist; he has written a clear, well-documented account of the fifty years since the 1952 Nasserist overthrow of the monarchy.
The first chapters provide an excellent thumbnail sketch of how the economy was buffeted over those years by sharp shifts in government policy and profound external shocks, such as the 1967 defeat by Israel, which put the country on a war footing for the next decade. The story is not pretty even though Ikram presents developments in as positive a light as possible. Income per person grew perhaps 2 percent per year over the period, which was, as Ikram writes, mediocre but not catastrophic. However, he does not highlight how favorable were the circumstances in which Egypt found itself: the sustained global economic prosperity of the 1950s and 1960s, which should have made possible much more rapid growth had the country not been veering off in a socialist direction, followed by the massive influx of foreign resources from aid and workers’ remittances in the 1970s and 1980s, which would have fueled rapid growth had Egypt not been caught in a bureaucratic maze.
The middle chapters examine developments over the fifty years in foreign trade and investment, public finances, financial and monetary developments, employment, and poverty and income distribution. These details bring out the bad news. Even setting aside a dependence on foreign aid, Egypt’s foreign exchange earnings have come overwhelmingly from its location and its resources—Suez Canal tolls, oil exports, tourism, and workers’ remittances—rather than from local industry and agriculture, which have stagnated. Employment growth has been disproportionately in the civilian government bureaucracy, which mushroomed from 350,000 workers in 1952 to 5,000,000 in 2000. Population growth was not the main reason: Bureaucrats per hundred of population rose from two to eight, even excluding a vast army of workers in public enterprises.
The last chapter, “Toward Sustainable Growth,” is a tour de force chronicling the problems holding back Egyptian growth. Suffice it to say that the problems are homegrown rather than being imposed by a cruel world. Government paperwork strangles entrepreneurs. Public policy discourages exports, particularly holding back the growth of manufacturing for which Egypt is well suited. The legal system is cumbersome and repetitive. Tax rates are too high and the system so complex that enforcing it consumes much of what the taxes raise. As Ikram concludes, Egypt has had mediocre growth despite all these burdens, and it could have excellent prospects if policies were improved.
