A recent broadcast by Mosaic News discusses the effect of the U.S. credit crisis on the Middle East, especially Egypt. This is the first time I’d seen Mosaic News, which is produced by Link TV (intended for educational use only) and posted on YouTube. The news broadcast reports:
“The credit crunch has hit the US economy hard. From Wall Street to Main Street, investors’ confidence has been shaken, prompting unusual interest rate cuts by the Federal Reserve. The US dollar has fallen against world currencies and oil prices are touching record highs. Although some Arab economies are booming, proceeds from these skyrocketing oil prices are not filtering down to the poorer Arab countries.
To travel through the Arab world right now is to experience a mood of disgruntlement and doubt especially amongst those under 30. One of the countries hit the hardest is Egypt where, according to the World Bank, twenty percent of the population of 78 million lives under the poverty line of two dollars a day. Rising food and oil costs have prompted a wave of discontent across Egypt in recent weeks. Textile workers, teachers, doctors and accountants have all threatened to strike as many foods, such as meat, have become too expensive for ordinary Egyptians. To make matters worse, there’s bread shortage in the Land of the Nile River.”
The current situation reflects a growing resentment between those that benefit from rising oil prices and an investment boom, and the rest of the population that is left behind. Many Egyptians blame this situation on corruption and mismanagement. While some are getting wealthier, basic necessities like bread, cooking oil and gas have become an unattainable resource.
Although Egypt has made positive steps towards economic reform and has empowered influential reformers within the government, there is clearly more that needs to be done. In 2007, Egypt was named as the top reformer by World Bank in its “Doing Business” report, which measures improvements in the ease of doing business in countries around the world. And yet, the average Egyptian would be surprised to hear this news. Such changes on the macro-economic level have not trickled down to benefit families that are struggling to meet their basic needs.
The most powerful—and urgent—incentive for economic reform is exactly the population bulge to which Mosaic News refers: the largest age group in countries throughout the Middle East are those who are 30 and younger. Hundreds of thousands of young people from Morocco to Egypt to Yemen enter the job market each year, and unemployment continues to be worryingly high. Whereas in decades past, the government Egypt and elsewhere guaranteed jobs to university graduates, now the public sector is overextended and can no longer ingest the ongoing stream of job-seekers. Job creation is the most pressing issue and only a vibrant private sector will be able to fill that niche. In order to assuage this wave of discontent – which will not dissipate with empty promises or shallow rhetoric – governments in the region will have to encourage entrepreneurship, improve the investment climate, and facilitate the growth and expansion of new businesses. Without that, protests about bread shortages and oil prices will not be merely a distraction, but will threaten the very stability of these regimes.
Published Date: March 24, 2008