Let me try this on you: America may have dodged a bullet a
while back when a handful of Asian and Arab Gulf states bought treasury
securities to aid in propping up the country's flagging economy, which has been
battling deflation while running dangerously high on borrowed foreign funds.
Well, you think I would be crazy if I wrote like this.
Right? And yes, I agree that if I wrote like that, I would deserve being called
crazy. This is because borrowed money is not considered aid. It is a loan, and
you are expected to pay it back, most of the time with interest – though at
times you might receive an amount with a grace period before you start paying
back. At other times, you may even have a portion of the loan designated at
zero interest.
And so, if it is true that what is good for the goose is
good for the gander, it means that America's goose is cooked already according
to Adeel Malik and Ty McCormick who wrote: “Egypt's Economy of Dependence,” an
article that was published in the New York Times on August 6, 2013. They
started it this way: “Egypt may have dodged a bullet last month when a handful
of Gulf states pledged $ 12 billion in emergency aid to prop up the country's
flagging economy, which has been battling inflation while running dangerously
low on foreign currency reserves.”
If this sounds familiar, it's because that's what I
paraphrased at the start of my article. If it does not sound right for America,
it should not sound right for Egypt either. This would be true unless you
consider that America's goose has been cooked already ... a long time ago. Do
you know why this would be the case? Because Egypt's foreign debt amounts to 14
percent of its GDP while America's debt has surpassed the 100 percent level.
But do not be discouraged, my friend, because there is worse elsewhere. If you
look at the other G -7 nations, only Japan and Canada are below the 100 percent
level. The other countries rank as follows: Italy at 108 percent, Germany at
142 percent, France at 182 percent, and the UK at a whopping 390 percent.
But that's how our two authors, Malik and McCormick, started
their article, and when you start on that note you are bound to end up writing
the sort of article they wrote – a pathetic piece. Reading it, however, you get
the sense they are trying to participate in a useful debate to provide the
government of Egypt with insight that can help it achieve a better economic
result. But then you trip on a sentence like the one that follows, and you are
turned off: “As long as the country can count on foreign revenue streams, its
leaders will continue to put off much-needed economic reforms – a dangerous
dynamic that sets Egypt on the path to financial ruin.”
Either the two authors are not following the current
internal debate that the talking heads, the columnists and the bloggers are
having inside Egypt, or they are ignoring that debate to write the sensational
article they wrote; perhaps seeking to please some sort of nutty crowd that may
be hiding inside the NY Times pool of readers. They may even be ignoring the
debate that is raised in America these days which points to the brinkmanship
that is practiced over there by two parties at loggerhead and a nation in
gridlock
And yet, Adeel and McCormick seem to be well versed in the
false stereotypes that have been peddled about the Egyptian economy since time
immemorial. These stereotypes were designed and circulated by people whose
interest has been to attack the Egyptian economy and its military. These people
have pretended to offer advice they said should improve the performance of the
economy when in fact, the advice would have accomplished the opposite.
One of those stereotypes pertains to the role that the
Egyptian military plays in the economy. They begin this portion of the
discussion on a negative note, talking about an “equally destructive revenue
stream: $1.3 billion dollars in annual military assistance from the United
States – hardware with little strategic value, but important to the military's
prestige.” So you expect to see them explain how diminishing the prestige of
the military could help improve the economy but they fail to give any such
explanation.
What they do instead is rattle off another false stereotype
that has been discredited many times before. Not only that, but what seemed to
be a mystery to those not familiar with the Egyptian economy, has been
explained. Here is the false stereotype: “the military's economic empire
estimated to be as high as 40 percent of the GDP.) And here is the explanation:
Yes, it is true that as much as 40 percent of the Egyptian economy is
unaccounted for, judging by the money supply and the velocity of money, but the
phenomenon has little to do with the military.
It has everything to do with the informal economy; what is
sometimes referred to as the underground economy. In fact, a huge effort is
ongoing at this time to bring that economy into the mainstream, and get the
operators to pay their share of taxes. As to the truth about the role of the
Egyptian military in the economy, it is alluded to in the Malik and McCormick
article. But before we get to that, we need to understand an important point.
When there is a big project to be undertaken in a developed nation, the private
sector has the finances and the know-how to pull it off. Such is not the case
in the developing countries, however. What happens there is that the government
would build a power plant, an oil refinery, a steel mill or an aluminum complex
upon which the private sector depends to run small businesses producing plastics
or kitchen utensils or aluminum doors.
Eventually, the private sector accumulates enough finances
and enough know-how to undertake bigger and bigger projects, thus relieve the
government from having to do so. And you know what? The same thing happens
where technology is involved. Normally, a civilian authority would be
established to manage the transfer of technology from the developed world to
the developing one. What happened in Egypt, however, was the fact that it had
an enemy next door that was constantly being supplied by the United States with
advanced weapons. To respond to the threat, the Egyptian military found itself
in charge of the technology transfer.
Anyone familiar with how an industrial plant works, would
know that when you have a maintenance department and laboratories which are
staffed with technicians, engineers and scientists, new ideas and new products
start to develop. And given that the military is made of recruits who do not
spend all their time exercising when they are not at war, someone got the
bright idea of expanding the Core of Engineers, taking into it recruits that
want to learn a new trade. They got them to learn by helping to produce home
appliances, electronics and yes, even “commercial construction vehicles that
are sold on the domestic market.” This is what Malik and McCormick seem to
complain about, but the truth is that Egypt benefits from the practice, and the
young recruits are better off when the time comes to be discharged.
The two authors began their article on a pathetic note, and
they ended on an equally pathetic note: “Ironically, the Egyptian economy has
been picking up … But Egypt's leaders should not mistake these developments for
indicators of long term economic health.”
And so I lament: When will they grow up in North America and
write an article – just one article. Yes, just one – about the Egyptian economy
that will be positive without the ugly – the very ugly BUT inserted in it. Just
one article to show the world that you are capable of being professional when
you want to. Just one.