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International Socialism, June 1976


Phil Marfleet

Egypt’s Deepening Crisis


From International Socialism (1st series), No.89, June 1976, pp.14-15.
Transcribed & marked up by Einde O’Callaghan for ETOL.


Last year it was reported that in central areas of Cairo the population density now exceeds by three times that of the most crowded slum districts of Calcutta. (153,000 per square kilometre). Since that estimate was made the population of the city will have increased by a third of a million. And Egypt’s long term debts will have increased to a staggering 14 billion dollars.

The trends we described in IS 84 have developed further. Sadat’s Western patrons are not at present able or willing to provide the necessary help. Egypt provides the classic example that the imperialist system readily destroys ‘friends’ and enemies alike.

In 1973 Sadat worked hard to take Egypt to war and then enforce an American intervention and ‘peace’ formula. His reward was the promise of unlimited Western investment.

This promise was not pure diplomacy from the US point of view. Though Egypt’s strategic position – its control of the Suez Canal, proximity to the Arab oilfields, and to Israel – make it an important factor in imperialist planning, Egypt also holds potentially huge material rewards for the West.

In the relatively underpopulated Middle East, Egypt is a giant. Its 40 million population, growing by one million each year, make it by far the biggest market and source of labour in the whole region. (Israel, for example, is one-tenth the size). It is for this reason that a Swiss business magazine recently claimed that Egypt will have the highest growth potential in the world over the next decade. With this population at a per capita income of 249 dollars Egypt has a lot of ‘growing capacity’.

Egypt is ready to soak up investment like a sponge. The infitah (’open door’) policy still beckons the multinationals to wade in and exploit the Egyptian labour force. But the trend reported six months ago continues – very little investment has arrived. The figures for the first year of the infitah show that just £2 million of foreign capital was invested in productive industry. Long-term debts total 14 billion dollars.

Not surprisingly all the indicators show a terrible economic crisis. The 30 per cent inflation of 1975 is predicted to be 50 per cent in 1976. The national deficit will soon run at 25 per cent of the Gross Dometic Product. (Compare with the 5 per cent of GDP of crisis-stricken Britain). Egypt is so short of foreign currency that the major airlines have complained that they are unable to change Egyptian pounds at the international airport.

Infitah has had only one tangible result. With the relaxing of import controls, a flood of luxury goods has swept onto the market. The rick have had a field day.

Infitah proved largely a charter for oil-rich Arab property tycoons and Egyptian speculators.’ (Sunday Times 29.2.76)

The relative internal stability of the alternative Middle Eastern investment centres (Iran, the Gulf), has been preferred over Egypt’s cheap labour. In addition of course the constant military threat from Israel has deterred investors. Such fear has grown as the Lebanese crisis has deepened. This is perfectly illustrated by Wall Street’s reaction to the events one day in April. The Dow Jones index fell nine points:

‘Investors are worried that the Syrian involvement in the Lebanese Civil War could bring in Israel and might lead to a new Arab-Israeli war and a new Arab oil boycott against the war.’ (Financial Times 10.4.76)

Sadat has begun to look to more desperate solutions. He has talked about ‘free-zoning’ – developing sites along the Suez Canal as freeports with open development areas. His concern here must be that the much celebrated revenues to be collected from the reopened Canal, and the restored oilfields – estimated at 750 million dollars for the first year – have already been mortgaged four times over.

The Financial Times has noted:

‘Tempted by its crossroads position between West and East, Egypt could become sidetracked down the road to a service economy, serving in effect as a giant entrepot and warehouse ... what Egypt needs is to expand production in general and manufacturing in particular.’ (27.11.75)

Faced with the fact that the West cannot fulfil its promises, Sadat has again turned to the Arab oil states. His trip to Saudi Arabia and the Gulf in February was intended to produce at least 5 billion dollars – the start of an Arab ‘Marshall Plan’ to reconstruct Egypt. He obtained 700-750 million dollars, half what had been secured in the previous year. Saudi-Arabia’s 300 million dollars was described as ‘a diplomatic blow to Egypt’. In Abu Dhabi, Sadat was told that

‘the days of the blank cheque are over ... unless Egypt could offer the same return, then the funds would continue to be channelled to the West.’ (Financial Times 27.2.76)

Since then plans have been announced for a vast 11 billion dollar IMF/private banking fund which Egypt may draw on and repay to over 20 years. Whether this will actually materialise, or like Nixon’s promise of 2,500 million dollars investment – remain an idea – has yet to be seen. Little has been heard since the first news in early March.

As the situation becomes more desperate, Egypt has moved closer to, its American patrons. More arms deals have been signed, and a 1.8 billion dollar aid programme agreed. The bulk of this money will go to food subsidies (estimated £511 million this year) and payment for previous loans. At the same time relations with Russia have reached an all-time low. In mid-March trade and diplomatic agreements were torn up, and Russia denied any military facilities in Egypt. Aimed at disciplining Moscow for its failure to produce more arms, or to reschedule the enormous Egyptian debt, the move was seen by many as an irrevocable step towards the West. Sadat kept his Moscow line just open, however, by signing a new agreement on trade in early May.

Simultaneous with the break with Russia Sadat ordered Prime Minister Salem to introduce a full programme of ‘austerity measures’. This must be a bitter joke for the millions of Egyptians whose lives are already unbearably austere, especially in view of the wave of luxury consumption which followed the lifting of import restrictions. ‘Conspicuous consumption and corruption provokes anger and invites retribution’. (Sunday Times 29.3.76) Within two weeks Egyptian workers had responded with strikes and demonstrations. As reported in Socialist Worker (3.4.76) seventeen thousand textile workers at Damietta struck in protest at the withholding of bonus payments. Salem’s police attacked them with batons and teargas. In Cairo several hundred workers marched to demand wage increases to keep up with price rises, and for better living conditions. Sadat commented that ‘strikes, disturbances and pressure from any element against the government are strictly forbidden.’

The huge standing army, 800,000 strong, is an obvious target for capital savings. The military budget consumes one-third of the GDP. There are two dangers. Sadat cannot cut corners by paying less for the ever more sophisticated weaponry his advisors demand. But to make cuts in manpower means releasing numbers of young conscript workers and peasants into the already massive pool of unemployed – to invite the possibility of more organised anti-regime agitation. Second, any transfer of capital away from the military will antagonise the professional soldiers who have been Sadat’s guarantee of support over the last few years. And Sadat knows only too well that opposition inside the military can brush him aside, as it has done other civilian and military rulers throughout the Middle East regularly since Nasser lead the ‘Free Officers’ coup of 1952.

It is not possible to comment on events anywhere in the region without reference to the situation in Lebanon and on the West Bank.

In Lebanon the Syrian intervention has above all presented a serious threat to the forces of the Left. The unprecedented US support for President Assad may be traced to their desire to see the removal of the left wing and the Popular Front, for example. Thjs would mean, it is argued, that PLO control of areas of Lebanon might cease, and the threat of Israeli intervention lessen. But there is more to the argument. It has been the alliance between the PLO and the Lebanese Left which has threatened the near-destruction of the Phalangist Right, representing the most privileged sections of Lebanese society. Any move which weakens this alliance is a step forward in the imperialist strategy. Sadat, of course, will go along with any anti-left interventions. For him the PLO and left success in Lebanon has been an embarrassment. Any united action against an Arab ruling class and their imperialist backers contains the seeds of a similar movement in Egypt.

On the West Bank the wave of demonstrations and strikes has transformed the political position of the Arab population in Israel, and polarised attitudes amongst Jews – those in favour of more Jewish settlement, those arguing for a return to pre-1967 boundaries. The recent election results confirmed the worst Israeli fears, with the majority of successful candidates supporters of the National Front (an informal grouping of Communists, PLO supporters and Ba’athists). The voting confirmed a strong feeling against King Hussein’s plans to re-annexe the West Bank under a compromise agreement with Israel. His traditionalist candidates were badly beaten.

What must have frightened Sadat most was the success of the General Strike of 30 March. He cannot ignore Palestine, or withhold some support from the PLO, however much he would like to. Support for Palestine has always drawn masses out onto the streets of Egyptian cities. Sadat therefore says little, but caHsfora Palestinian state on the West Bank and Gaza, to be negotiated at the Geneva Conference. War ‘for Palestine’ is very well when the Palestinian Movement is at low ebb, and a deal can be done with the United States. When Palestinians themselves begin to organise however, an international conference is much safer.

Though they give him some opportunity to present Egypt as a relatively stable respectable state, these struggles do nothing to build the real commercial confidence in Egypt that Sadat craves. This is his obsession. Without Western commitment and expertise (he can always get some Arab money) Egypt will slide out of his control. Massive borrowing has failed, Russian aid and American promises have failed, infitah has failed. Sadat’s time is running out, he has little left to try but increased repression and desperate pleas to the multinationals.

Only Egyptian workers can have a real answer. But will the military try first?

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