An old joke popular among economists says when you have two cows, the state takes one of them and gives it to someone else. This is the socialist system. In a communist system, the state takes both cows from you and gives you milk. Finally, in the capitalist system, you keep one cow and sell the other to buy a bull.
But what would we say about a system governed by an Islamic fundamentalist group? In this system the regime seizes both cows from you, the first because it’s not compatible with their understanding of sharia law—and the other to sell, either because you do not have the money to feed it, or you can’t find anyone to buy it.
There is no doubt that the “revolutionary” Islamist governments that came to power in both of Tunisia and Egypt are not responsible for the financial losses resulting from the transitional phase, or for the volume of spending inherited from former regimes, or for the costly transitional government’s bill, but in the end they are responsible for leading their states out of economic crisis. Unfortunately, however, any neutral observer can see that they are more concerned with seizing all the organs of the state, or changing the rules of the political game in their favor, even if this means circumventing the electoral processes that brought them to power. What has happened in Egypt over the past two weeks, especially President Mohammed Mursi’s constitutional decrees, gives the impression that the Muslim Brotherhood intend to undermine their partners in the “revolution” one by one, until they are able to monopolize power in Egypt for decades to come.
Perhaps it is necessary here to consider the economic situation in the “Arab Spring” countries. According to a recent IMF report, the countries which witnessed popular uprisings leading to changes in their political systems are suffering from deadly economic crises that could disrupt their growth for decades and even lead to permanent damage.
Before 2011, the GDP growth of six of those countries exceeded 4.7 percent, while that percentage fell below zero last year. This year it will not exceed one or two percent, and the IMF is not expecting growth to exceed 3 percent next year even in the best case scenario. Faced with this major economic challenge, no government has announced a program to confront the crisis, but instead have been full of unrealistic promises such as increasing salaries, increasing foreign investment and introducing additional subsidies even though they cannot afford the existing ones. The Egyptian budget deficit has exceeded US$ 11 billion, whilst its foreign debt is approaching US$ 34 billion, and the domestic debt of local banks is US$ 197 billion, according to figures released by the Egyptian Ministry of Finance last month. In Tunisia, the budget deficit is US$ 6 billion, and so for it has only been able to negotiate a US$ 500 million loan from the IMF, while the Tunisian Central Bank says that it desperately needs US$ 4 billion.
As Alan Greenspan, former Chairman of the US Federal Reserve wrote: “Big deficits have an insidious effect. When the government overspends, it must borrow to balance its books. It borrows by selling treasury securities, which siphons away capital that could otherwise be invested in the private economy”. This is exactly what both Egypt and Tunisia have resorted to, yet it is not enough to solve the problem. For example, the Islamist government in Tunisia announced that for the first time the general state budget for the year 2013 will be financed by Islamic sukuk bonds. However, the state will still be forced to borrow from the World Bank and the African Development Bank. Meanwhile, an IMF report attributed Egypt’s economic crisis to high spending on government support programs for food and fuel, a sharp rise in inflation rates, a sharp drop in tourism revenues and declining production, an aversion to foreign investment, and finally an unemployment rate that doubled during the year of the revolution.
But what have the Islamists done to meet these challenges? So far nothing except make promises. They are counting on foreign donors, especially from the Gulf States, and an increase in foreign investment, assuming that the investment climate will improve. These are mere promises, and even out of the grants and loans that have been promised only a few have materialized because they are linked to political conditions and guarantees that these governments have so far been unable to give.
The new rulers of Egypt and Tunisia are unable to speak the truth to their citizens about the difficult road ahead. They will inevitably have to adopt austerity measures in the near future. The Islamists talk about economic solutions that are permissible within Islamic Sharia law, but those in power realize that theorizing over these issues won’t feed the hungry. Perhaps they should look to similar experiences in Latin America, where certain countries at the beginning of the 1980s faced political unrest in the wake of the infamous credit crisis. Some countries successfully lifted some subsidy programs, and restored the economy at the cost of social discontent and great suffering, but after a decade these countries emerged from the chasm of poverty and transformed into major productive economies.
The slogan “social justice” that the Islamists have borrowed from the left-wing lexicon is a deceptive and misleading one. The Islamists must realize that ideology alone is not enough. On the eve of the revolution in Iran, Ayatollah Khomeini argued that the Iranian popular revolution was launched for the sake of Islam, not to “limit the price of watermelons”, but after a decade of Islamist rule in Iran, the average per capita GNP had decreased from US$ 2,049 shortly before the revolution to US$ 1,640 when Khomeini died [in 1989]. In other words Iran became poorer than it was before the revolution. Revolutions are not undertaken for the sake of watermelons, or cows. Countries cannot survive on ideological slogans alone.