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From: wolda002@umn.edu
Date: Thu Feb 10 2011 - 23:12:15 EST
The Egyptian Uprising Is a Direct Response to Ruthless Global Capitalism By
Nomi Prins, AlterNet
Posted on February 4, 2011, Printed on February 10, 2011
http://www.alternet.org/story/149793/
The revolution in Egypt is as much a rebellion against the painful
deterioration of economic conditions as it is about opposing a dictator,
though they are linked. That's why President Hosni Mubarak's announcement
that he intends to stick around until September was met with an outpouring
of rage.
When people are facing a dim future, in a country hijacked by a corrupt
regime that destabilized its economy through what the CIA termed,
"aggressively pursuing economic reforms to attract foreign investment” (in
other words, the privatization and sale of its country’s financial system to
international sharks), waiting doesn’t cut it.
Mohamed Bouazizi, the 26-year-old Tunisian who catalyzed this revolution,
didn’t set himself on fire in protest of his inability to vote, but because
of anguish over his job status in a country with 15.7 percent unemployment.
The six other men in Algeria, Egypt and Mauritania who followed suit were
also unemployed.
Tunisia’s dismal economic environment was a direct result of its
increasingly “liberal” policy toward foreign speculators. Of the five
countries covered by the World Bank’s, Investment Across Sectors Indicator,
Tunisia had the fewest limits on foreign investment. It had opened all areas
of its economy to foreign equity ownership, except the electricity sector.
Egypt adopted a similar come-and-get-it policy, on steroids. From 2004 to
2008, as the world economic crisis was being stoked by the U.S. banking
system and its rapacious toxic asset machine, Mubarak’s regime was
participating in a different way. Mubarak wasn’t pushing subprime loans onto
Egyptians; instead, he was embarking on an economic strategy that entailed
selling large pieces of Egypt’s banks to the highest international bidder.
The result was a veritable grab-fest of foreign bank takeovers in the heart
of Cairo. The raid began with Greek bank, Piraeus, taking a 70 percent stake
in the Egyptian Commercial Bank in 2005, and included the sale of Bank of
Alexandria, one of the four largest state-run banks, to the Italian bank,
Gruppo Sanpaolo IMI in 2006. For the next two years, "hot" money poured into
Egypt, as international banks muscled into Egypt and its financial system,
before the intensity leveled off in 2008.
While foreign banks were setting up shop, Egypt also eliminated the red tape
that came with foreign property investment, through decree number 583. This
transformed the country, already a tourist hotspot, into a magnet for global
real estate speculation. (Something that worked out really well for
Ireland.) Even one of Goldman Sachs’ funds got in on the game, buying a $70
million chunk of Palm Hills Development SAE, a luxury real estate developer.
Other countries in the region, such as Jordan, where the unemployment rate
is 13.4 percent, and the poverty rate 14.2 percent (as in the U.S.), tried
to mimic Egypt’s “open” policies, in varying degrees. That’s why eight of
the 21 banks operating in Jordan are now foreign-owned, and its insurance
market is dominated by U.S.-based, MetLife American Life Insurance Company.
But it was Egypt that did it best.
>From 2004 to 2009, Egypt attracted $42 billion worth of foreign capital into
its borders, as one of the top investment “destinations” in the Middle East
and Africa. “Hot” money entry was made easy, with no restrictions on foreign
investment or repatriation of profits, and no taxes on dividends, capital
gains or corporate bond interest. As a result, volume on the Egyptian stock
market swelled more than twelve-fold between 2004 and the first half of
2009.
Egypt and the United Arab Emirates even eliminated minimum capital
requirements for investment, meaning that speculators could buy whatever
they wanted, with no money down, a practice that didn’t exactly impel them
to stick around for long.
But, as we learned in the U.S., what goes up with artificial helium plummets
under real gravity. Starting in the second half of 2009, oil prices fell and
foreign banks slashed their capital holdings in Arabic nations. The hot
money was cooling off. Even in the oil-rich UAE, the speed of capital
outflow set foreign capital levels back to where they were in 2004,
demonstrating how temporal, deceptive, fickle and irresponsible
international speculative capital is. When hot money gets cold, it moves on,
leaving vast economic devastation in its wake.
Not surprisingly, those foreign speculation strategies didn’t bring less
poverty or more jobs either. Indeed, the insatiable hunt for great deals,
whether by banks, hedge funds, or private equity funds, as it inevitably
does, had the opposite effect.
Whenever hot money hones in on a geographical location or financial product,
it creates the appearance of economic enhancement (such as with our GDP
growth based on financial services, for instance). But, on its way out the
door, that mirage is replaced with harsh decline.
In March 2010, in an effort to keep foreign capital coming in, Egypt’s
Ministry of Investment presented the country's virtues to investors in a
glossy “Invest in Egypt” brochure. The document proudly cited Egypt as being
one of the world’s top 10 “Reformers,” as reported by the World Bank and
International Finance Corporation’s (IFC). The World Bank’s definition of
"reformer" has nothing to do with conditions for citizens, and everything to
do with the degree and speed to which “hot” international money can zoom in
and out of a country. Egypt had made the top 10 “Reformers” list for four
out of the past five years (a distinction shared with Colombia, where urban
unemployment has risen to over 13 percent).
Ironically, the Ministry’s brochure touted the large college graduate
population entering the job market each year -- 325,000. The same graduates
are the core of the current revolution. They failed to find adequate jobs
and are faced with an official unemployment rate of just below 10 percent
(though, similar to the U.S., that figure doesn’t account for
underemployment, poor job quality or long-term prospects). Meanwhile, 20
percent of Egypt lives in poverty (compared to 14 percent and growing in the
U.S.) and 10 percent of the population controls 28 percent of household
income (compared to 30 percent in the U.S.).
When a country relinquishes its financial system and population's economic
well-being to everyone else’s pursuit of "good deals," the fallout will be
substantial. Sub-prime lending may not have been one of Egypt's problems as
it was in the United States, but soured foreign real estate investment was.
Also, foreign banks persuaded Egypt to issue complex securities with crazy
derivatives in them (shades of Greece). Those securities plummeted in value
as foreign speculators shunned them. Today, credit default swap spreads on
Egyptian debt (and that of other Arabic countries) have substantially
dropped in value, as international speculators are betting on further
upheaval, targeting Egypt like just another number on a dartboard.
Citizens protesting in the streets from Greece to England, and more
demonstrably, from Tunisia to Egypt, may be revolting for national reasons
and against individual governments, but they share a common bond. They are
revolting against a world that lines the pockets of rich deal-makers while
sticking the tab to ordinary people. That bond is global. Related protests
could reach Colombia and Ghana -- and maybe someday, the United States.
For in the United States, economic statistics are no better. By certain
measures, like income inequality, they are worse than in Egypt. But we have
no evil dictator to be a common focus for, say, an American economic
revolution. Here, we freely elect the politicians who campaign with
corporate funds and deregulate our financial system, who bail out entire
banks instead of individual mortgage holders, and who keep corporate tax
receipts low while increasing audits on small businesses and struggling
individuals. Here, we elect the leaders who govern our growing income
inequality, and wonder how Wall Street can pay itself another round of
record bonuses.
In that respect, as difficult as conditions are in the Middle East, there
may be more hope for economic change to rise from those revolting
populations. It may not come from simply overthrowing the current regime,
given the entrenched “liberalization” strategies, but it is certainly an
excellent start.
* Nomi Prins is a senior fellow at the public policy center Demos and author
of It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from
Washington to Wall
Street<http://www.powells.com/partner/32513/biblio/9780470529591>
.*
© 2011 Independent Media Institute. All rights reserved.
View this story online at: http://www.alternet.org/story/149793/
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