Egypt can achieve high growth in parallel with more social justice, says prominent economist Mahmoud Abdel-Fadil, professor of Economics at Cairo University, tells Ahram Online that good management during the coming period can help Egypt achieve healthy growth rates by 2013
Marwa Hussein, Saturday 2 Apr 2011
An international program to sustain the Egyptian economy and a fund to restore the stolen money; for Mahmoud Abdel-Fadil, Professor of Economics at Cairo University, these two measures are the immediate solution to helping the economy recover in the short-term.
"International organizations, plus the European Union and other countries, can help by organizing a financial package to sustain the balance of payments, while a fund to restore the stolen money can also include the price difference of the lands sold at a low price", said Abdel-Fadil, who believes that such a fund can be very useful and can serve different development projects.
In general, Mahmoud Abdel-Fadil thinks that Egypt's uprising will have a positive effect on the economy in the medium- and long-term but not in the immediate future. He describes the weakness of the economy - imports were severely hit and some ports stopped working for some time, and the current account suffers from a deficit.
In addition, the Federal Reserve is decreasing, which puts pressure on the exchange rate. The shortage in some raw materials and the attitude of some businessmen who left the country have led many factories to stop working or to work at a reduced capacity. All of this is in addition to the previously-existing high unemployment rate which could increase because of the fall in tourism and the return of Egyptians who had been working in Libya which puts a lot of pressure on the economy.
However, Abdel-Fadil believes that with good leadership, Egypt can witness a good growth rate by 2013: "We can also achieve high growth in parallel with more social justice." He argues that putting an end to corruption will encourage business and more social equality will help to raise productivity.
But to reach that stage, many crucial questions must be addressed. "We should start by determining the pattern of economic management we need - will it be an open market economy or will the social level be taken more into consideration?" asks Abdel-Fadil who apparently prefers the second option.
To have an answer on the economic and even political dilemmas that Egyptian society faces in the post-revolution era, Mahmoud Abdel-Fadil advises everybody concerned to take a look on the Latin American experience.
"Countries like Chile, Argentina and Brazil managed to apply a policy making a balance between growth and social justice after moving forward from dictatorships. The most successful example is the Brazilian one. Lula Da Silva and his party managed to promote investments and achieve high growth rates under a market economy, but at the same time they managed to achieve more social justice.”
In fact, a better distribution of national income could have a positive impact on growth as it increases the purchasing power of the poorest and thus local demand. "Demand will increase for many of the local products, not only the fancy products," explains Abdel-Fadil.
Dismantling monopolies, imposing taxes on capitalist benefits and making progressive tax revenue, as well as combating corruption, can be the first steps to be taken in this direction.
Regarding the economic demands which employees and workers have been raising since the ousting of Hosni Mubarak and which form an important piece of the economic picture right now, Abdel-Fadil estimates that some of the demands can be immediately fulfilled while others should be postponed. "The government can immediately remove the corrupted officials and recruit the temporary workers while restructuring the wages requires a few months," he concludes.