The Political Economy of Reforms in Egypt: Issues and Policymaking since 1952 by Khalid Ikram (review)

The Political Economy of Reforms in Egypt presents a fresh perspective on the trajectory of the country's development efforts. Written from the perspective of a senior economist at the World Bank and consultant with more than 40 years' experience, this book brings a wealth of insights on the economic policy-making process, drawing on backstage discussions with decision-makers, politicians, experts, and activists in addition to unpublished primary sources. This unique contribution to the literature is a follow-up to author Khalid Ikram's earlier, more technical account in The Egyptian Economy, 1952–2000: Performance Policies and Issues (Routledge, 2006). The new book's easily accessible style extends its appeal beyond economists and policy-makers to Middle East scholars, public policy specialists, and nonacademic audiences.

This study is an ambitious attempt to analyze durable structural challenges that Egypt's policy-makers have confronted since 1952, such as accelerating productivity growth, creating an adequate number of jobs for new labor market entrants, generating a sustainably high gross domestic product growth rate to meet the needs of a growing population, and increasing savings in order to have manageable deficits in foreign accounts. According to Ikram's analysis, Egypt's economy needs to grow at 7% annually in real terms for the next two decades, and its savings rate should be around 25–35% of GDP in order to create 700,000 jobs annually for new labor market entrants. The author traces interactions between politics and economics in addressing these policy challenges, illustrating that concerns about regime survival have consistently trumped considerations of economic vulnerability in policy-makers' calculus.

Ikram's even-handed analysis is based on the underlying assumption that governments essentially have dual responsibilities: the first, to pursue sustainable economic development policies, whose fruits are equitably shared among the citizenry, and the second, to maintain the country's freedom from foreign domination. The tension between pursuing these goals is a recurring theme throughout the book, especially given Egypt's involvement in regional conflicts and ambitious foreign policy goals on the one hand and its fragile domestic legitimacy and reliance on expanding public consumption expenditure to win citizens' acquiescence on the other. Indeed, the author argues that the anti-export bias in the economy's incentive structure as well as the state's inability to mobilize domestic resources contributed to expanding foreign influence over its economic policy-making through donor assistance and technical advice. While acknowledging significant constraints on decision-makers in negotiating reform packages, the author concludes that the "state should have been more proactive in deciding which elements of the economic advice to act upon and which parts to decline" (p. 6).

Chapter One presents a review of the literature on the political economy of reforms with reference to Egypt, highlighting themes like the role of crises in instigating reform processes, the design of reform packages, and the insider/outsider conundrum, in addition to the political-economic dynamics shaping foreign assistance. Based on the country's track record, the author makes several interesting theoretical claims, including that the traditional distinction between democracies and authoritarian regimes as far as their capacity to initiate difficult reform measures is overstated. Despite significant state autonomy, Egypt's reforms have been markedly slow and were generally attempted only when the economy was in significant crisis. Another finding the author presents is that there are serious limits to the political economy of foreign aid since conditionality targeted instruments rather than outcomes, and decision-makers seldom believed that this assistance would be cut off.

Chapter Two presents stylized facts regarding the Egyptian economy's performance between 1952 and 2016. On average GDP grew at 4.7%, but that growth was generated by low valued-added outputs consumed internally. Per capita income has increased from $406 in 1965 to $1,630 in 2016 (based on 2005 rates). Next, the author develops the analytical framework for the rest...