Despite all the heated public debates that we have been witnessing in Egypt since the January 2011 Revolution, very little attention has been given to the root causes of the country's deepest economic problems. Understandably, as a country moves towards democracy, it must address all the concerns about freedom of expression, religious rights, women's rights, security, anti-corruption laws, political pluralism, elections, and constitutional reform. However, it is equally important to recognise that regardless of the political affiliation of the new government (Muslim Brotherhood, secular, or military), it must craft a long-term policy agenda to address the root causes of Egypt's economic problems. Failure to do so will be catastrophic not only for the economy, but also for the creation of a secure and stable democratic society. Egypt suffers from a structural trade deficit problem. In other words, Egypt's exports cannot generate enough foreign currency earnings to cover the country's imports and its foreign debt commitments (Egypt's external debt is more than $45 billion, not counting the recent $12 billion in loans and grants from Saudi Arabia, Kuwait and the UAE). Addressing the root causes of this structural trade deficit is Egypt's most important economic challenge. Neo-liberals argue that the only solution to this “currency crisis” is to boost free market reforms through export-led development, the privatisation of government-owned companies, promoting tourism, and attracting foreign direct investment and to introduce drastic austerity policies aimed primarily at food and fuel subsidy cuts. But this cannot be the way out. First, the neo-liberal reforms that were implemented by former president Hosni Mubarak, and later continued by former president Mohamed Morsi, have actually exacerbated economic inequality, unemployment, trade deficits, external debt, socio-economic dislocation, and the concentration of wealth and power in the hands of the elite. Second, food and fuel subsidies have been used to buy support for the government and at the same time to shove serious economic problems under the carpet. Food and fuel are the two main gaping holes in Egypt's structural trade deficit. Egypt is the world's top wheat importer (9,000,000 metric tons) and the fifth largest corn importer in the world (4,900,000 metric tons). Furthermore, despite its vast natural gas reserves, Egypt's growing energy consumption has pushed the country to become a net importer of natural gas and refined oil products. Egypt could certainly continue to muddle through neo-liberal reforms, austerity measures, and more external indebtedness, but this can only contribute to extending economic misery for its people, increasing dependence on foreign aid, and intensifying social and political conflict. Instead, Egypt needs a comprehensive long-term strategy for policy reforms in agriculture, alternative energy, trade, the environment, nutrition, education, health, and public infrastructure. Unfortunately, all of the economic reform debates during the last period were sticking to Mubarak's neo-liberal economic agenda and focussing on “Band-Aid” loan solutions to shore up currency reserves and stop the devaluation of the Egyptian pound. It is urgent to put this alternative economic policy framework at the centre of the country's burgeoning political debates; otherwise whatever progress may be made on the democratic transformation front could quickly be undone by the collapsing economic fundamentals. The good news for Egypt is that a social and political movement is slowly beginning to clearly articulate its economic grievances, reject neo-liberal reforms, and demand alternative economic plans. The pro-democracy youth movement and the independent labour unions are starting to mature as political forces after being overwhelmed by the Muslim Brotherhood and the pro-business establishment forces. The challenge for Egyptians today, however, is to convince the military leaders that the path towards stability and prosperity is possible if they reject neo-liberal policies and address the root causes of the country's structural economic problems. Egypt's leaders understand the concept of “national sovereignty” (political and territorial sovereignty), but unfortunately they are unaware of the critical role played by financial sovereignty, which Egypt lacks because of its massive external debt (not to be confused with domestic debt denominated in Egyptian pounds). This is an open invitation to all the progressives who care about Egypt's future to focus on restoring financial sovereignty by developing a series of five-year plans that are based on leveraging domestic labour resources as the engines of sustainable growth and development. This means adopting a Job Guarantee Programme, rather than welfare and subsidies programmes, together with focussing on youth employment and university-sponsored Research and Development (R&D). Second on the list is renegotiating dollar-denominated debt, converting foreign loans into bonds and allowing investors to use bonds to pay taxes and fees owed to the government (to convert foreign debt into domestic debt). This would be in addition to cancelling Egypt's toxic debt. Third would be to make good use of the Suez Canal's importance in global trade to negotiate debt cancellation and technology transfers. Investing in renewable energy (both in rural and urban areas), together with focussing on sustainable agriculture, sustainable public transportation, and sustainable urban development, is the fourth item that should be included in the plans. Furthermore, the government should use export revenues to fund import priorities that will maximise domestic production rather than consumption. I have intentionally left out “food and nutrition policies” from this five-year plan because these would require an entire generational and cultural shift. This would be more of a 50-year plan to introduce a popular gastronomy and nutrition culture that is less dependent on imported wheat products (bread and pasta), corn, sugar, and other imported carbohydrates of lower nutritional value and to promote domestically produced food products with higher nutritional value. The resulting health benefits would also translate into lower healthcare costs and higher productivity in the long run. The Job Guarantee Programme could be adopted through the democratic process as an overarching plan to restore financial sovereignty, promote full employment, sustainability, higher quality of life, and long-term prosperity. All of this is desirable, feasible and affordable. Those who think otherwise and yet still aspire for a democratic society in Egypt will by sorely disappointed to know that there cannot be true democracy without full financial sovereignty to deliver social and economic justice for its people. The writer is an assistant professor of economics at Denison University in the United States and a research associate at the Levy Economics Institute and the Centre for Full Employment and Price Stability.
