The time has come for thinkers, academics and policymakers to revisit views that are considered “given facts” on many basic issues relating to development. No matter how strongly established, our views about development must be revised, as poverty and inequality are increasing in almost all societies. There are many who still think that achieving higher growth rates or attracting more foreign capital inflows is the solution. They are wrong. Higher growth rates and other aspects of macroeconomic improvement are no guarantee that living conditions for the majority of the people will improve. Recently, some economists argued that aspects of inequality accelerate hand in hand with increased rates of growth. Thomas Piketty, the author of Capital in the 21st Century), writes that wealth grows faster than income. In perfect market conditions, Piketty found that wealth might grow at a rate twice that of income, making rich people richer and poor people poorer. This outcome proves that tight regulations and state intervention are required to correct and streamline the relationship between income and private wealth growth. Meanwhile, the World Bank and the International Monetary Fund have both agreed in recent studies that inequality retards growth and reduces the welfare of people. Reform can't succeed without reducing inequality and rooting out its origins. The World Bank, in a 2014 report on Egypt was heard to be shouting “Jobs, jobs, jobs!” The title of the report itself is “More Jobs, Better Jobs: A Priority for Egypt.” No one should then expect real improvement, with the number of young graduates failing to find “proper” jobs on the increase, along with poverty rates. Capital-intensive industries will not do the trick! FACING INEQUALITY: Inequality will become one of the main issues related to development in the 21st century. There are many paths that can be followed to eradicate inequality and poverty. I believe that no one is able to claim that his view is the absolute right one. Likewise, no one should make a claim against any opposite view on the grounds that it represents the absolute wrong. This is a great phenomenon created by the advancement of technology and knowledge. As we may have unlimited numbers of solutions to any one specific problem, the final choice on how to achieve equality and sail away from social and economic injustice will be the responsibility of societies, institutions and politicians and here comes the importance of freedom, participation and transparency. REGRESSIVE ECONOMICS: In Egypt, the issue of inequality is high on the agenda. However, it doesn't seem that any major breakthrough has been made to establish a new system based on equal opportunity for all. On the contrary, the state's withdrawal from providing social goods is adding more pain to the majority of the people who feel they are not included in growth. Housing, education, healthcare and transportation services have become secondary responsibilities for the state. Since the 1990s, they were assigned primarily to the private sector, and they are now gradually been assigned to foreign invertors. Most Egyptians are paying for education from their pockets, while the World Bank estimates that 72 per cent of all Egyptians are responsible for their own healthcare and are paying for it privately. Big family businesses Statistics of wealth distribution in Egypt are horrifying. According to Forbes magazine, two Egyptian families, Sawiris and Mansour, have assets that were valued at more than $20.1 billion in 2014. The wealth of these two families amounts to almost 13 per cent of the gross national income of Egypt in the same year. Between 2011 and 2014, the total registered wealth of eight billionaires from the Sawiris and Mansour families grew by 21.1 per cent, while economic growth in Egypt was moving within the 1 to 2 per cent range. Listed companies owned by these two families are the driving force in the Egyptian Stock Exchange. They simply control the market. The Sawiris and Mansour families are on the top of about a dozen business groups (including Al-Sweedy, Ghabbour, Talaat Mustafa, Amer Group, Ezz and Hermes) that control large parts of the Egyptian economy in construction, industry, finance, telecoms, housing, media and tourism. The owners of business empires in Egypt have great social responsibilities, and they should fulfil them. Charities are only one way to pay society back for some of the good that has been offered to these business empires. Progressive taxation not a low flat rate must be accepted by the government and the business community as the way to make business empires take part in ridding society of inequality. It is laughable to say that tax revenues paid by business sectors account for about eight per cent of public revenues in Egypt while the average share in the world is more than three times that. Income inequality is also expressed in expenditure and consumption indicators. More than 76 per cent of all Egyptians spend about $2 or less daily. Aspects of deep social divides are visible everywhere: in housing, education, healthcare and transportation. Moreover, poverty is on the increase. Latest official figures show that those who live below the national poverty line (at LE8.5 daily) constitute about 26.3 per cent of the population. Most of these Egyptians live in the countryside and are mainly concentrated in Upper Egypt. In fact, figures also illustrate what I describe as the “3Gs” of inequality: generation, gender and geography. The rate of poverty among youth is almost double the national poverty rate (52 per cent), creating a generational divide. Also, the poverty rate among women compared to men creates a gender divide. And finally, the concentration of poverty in Upper Egypt, where more than half of those who live in rural areas are poor, illustrates a deep geographic divide between the north and the south. The number of poor Egyptians more than doubled in the first decade of the 21st century, reaching more than 22 million in 2013, compared to 10.6 million at the beginning of the last decade. If we measure poverty at the international poverty rate ($2 a day), the number of poor people would even go higher, to as much as 40 million Egyptians. The elimination of this serious social divide, resulting from inequality and poverty, is not just a moral necessity: it is also an urgent economic must. Furthermore, the serious lack of social and economic equal opportunities will produce a generation of citizens that feels neglected and denied proper means of social protection and social evolution. As the youth and young graduates are the main victims of inequality, the generation gap will widen day upon day, producing dissatisfaction and spurring unrest and instability. The cycle of deterioration will carry such results through to the production and economic cycle, making the situation even worse. THE POWER OF BELONGING: The main trouble that Egypt's economy is facing is the lack of savings, which in turn is the result of tax concessions, lack of strong compulsory savings policies (such as social and health contributions paid by private corporations), and low productivity. Labour productivity is not only a function of education, training and levels of technology; it is more importantly and mainly a function of the “power of belonging and togetherness.” If people feel they don't belong, they will only produce just enough to survive not to strive. The power of innovation, advancement in technology application and creation is embedded originally in the feeling and power of belonging and togetherness. Just make people feel that they really belong. Help them to have the power of belonging and togetherness! You will see the power of these people in all aspects of life. Deny your people that feeling and you will see a free fall and deterioration. No matter what politicians or media persons sing, including songs of achievements and success, the real person in the street will laugh at them and reject their songs of glory, calling them thieves and liars. The best result that one can expect out of such a situation is a deep divide that makes people feel both the wealthy and the poor that they exist in separate countries. The main engine of growth in Egypt's economy is consumption, not production: imports not exports, and foreign direct investment rather than national saving and investment. Economic policymakers know that very well, but they have done very little or nothing at all to make the economy run on the right tracks. This economy will not achieve healthy growth as long as it relies heavily on natural resources and foreign capital. FUTURE WARNINGS: Make no mistake, people will never again be impressed by high growth figures or by an improved balance in the budget. People have simply been there before, in the 1990s and the first decade of the 21st century. On 25 January 2011 they rose up against such a situation. Those who try to ignore the real problems resulting from the deep social divide in Egypt may pay a hefty price. Businessmen who enjoyed a long and happy marriage with Mubarak's regime are regrouping in order to protect their interests and becoming more involved in two serious spheres: the media and politics. Private media, satellite channels, newspapers and online news outlets owned by individual businessmen or business groups are now controlling the media industry in Egypt. Similarly, political parties have become the business leaders' favourite toys. Sadly, the reaction to this may be more extremism. Those who feel powerless in the fight against the new oligarchy may resort to desperate measures to stop injustice. Desperate people do not calculate losses and gains, but only how to make their enemy bleed. The writer is chairman of the Arab Organisation for Freedom of the Press.
