Egypt, Economic Freedom and Prosperity

Taxi @ the Pyramids

As I was listening to the radio this morning, a topic that came up was economic freedom and prosperity in Egypt. I went to Egypt not too long ago, and it was a fun place to visit. Steve Landsburg did a blog post about it called: Freedom, Prosperity, and the Future of Egypt.

Here’s one thing I remember about Egypt being really backwards. Car tariffs. Egypt has really old cars that are typically made locally. Some argument for “buy local” through government decree! In 2004, Egypt slashed tariffs — sort of.

Seriously, who doesn’t love a 40% tariff on cars? Local producers, that’s who. Oh wait! We almost forgot the value added tax (VAT). Talk about expensive cars. No wonder people tend to keep them for a very long time. Of course, also, they pollute like nobody’s business. I rode in a couple taxis that were about as old as my parents. It was interesting, and also scary. It sounded like a lawn mower.

Well, Egypt has lowered tariffs even a bit more, which is good. And according to this enlightening article, in 2019 there will be no tariffs at all.

With many raising the protectionist banner, pushing for government mandates of “buy American” and “buy local,” I wonder — could Egypt’s lack of economic freedom be part of the reason they’re protesting? Maybe.

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2 Thoughts on “Egypt, Economic Freedom and Prosperity

  1. “Could Egypt’s lack of economic freedom be part of the reason they’re protesting?”

    I followed an interesting discussion last weekend that suggested the opposite (the age-old China argument, revivified) and am inclined to believe it.

    Egypt has had a lack of economic freedom for the last 30, 60, 2000 years. So arguing that the lack of economic freedom is causing the protests is obviously flawed. The more persuasive argument is that the tariff reductions and other economic reforms instituted by the recently deposed cabinet led to something like 7% annual growth over the last five years (seriously, the reforms were apparently drastic enough to buck the trends afflicting the global economy over the past few years). The economic good times led to Egyptians having more contact with the outside world – more regional travel, more televisions, more facebook accounts – which creates even greater aspirations and even greater dissatisfaction with the inept bureaucracy that’s been responsible for stifling the country for so many decades. The young and entrepreneurial classes are most likely to be exposed to the economic disconnects as well as to be receptive to the call of modernity/modernization.

    The counterfactual posed is that had Egypt remained economically stagnant, the population would likely have continued to simmer in their ineffective political lethargy, willing to be bought off with periodic stimulus spending and the scapegoating of the U.S. and Israel.

    Again, this issue once used to be a fascinating aspect of IR theory that’s by and large died since the big terrorism fascination of the last decade. How has the PRC alone managed to introduce massive economic liberalization without the presumably inseparable political and social liberalization that has accompanied it in virtually every other example?

  2. On Friday Planet Money had an interesting podcast about the Egyptian military that has control over a large part of the economy.

    http://goo.gl/0V0Pi

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