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‘It’s the economy, stupid!’ – EU neoliberal reforms and democracy promotion in Egypt

Disclaimer: This article was first submitted in 2018 in a slightly amended form as an essay during a Master’s programme.

The economic triggers of the Arab Uprisings

Regarding the developments since the popular uprisings, which started in 2011 in Tunisia and spread across the MENA region, up until now, one can see that the protest led to different outcomes in various countries and the region remains marked by unrest and instability. Whereas Tunisia managed a quasi-transition to democracy or, rather, a kind of ‘cosmetic democracy’, other countries could not reach the same results. Some, for example, Egypt, experienced a return to a repressive regime that is far from democracy. Others, such as Syria, experienced even further suppression and civil war.

Various authors have engaged in a debate on the causes and triggers of the uprisings as well as the reasons for the resilience of authoritarianism in the region (See, for example: Kandil, 2012; Volpi, 2013; Pace 2014). While there is a broad consent on the fact that the EU’s approach to the region and its democracy promotion was rather driven by self-interest and even supporting authoritarian regimes (See: Pace 2014; Durac & Cavatorta, 2009; Youngs, 2002), scholars seem to differ about the triggers for the sudden upheavals.

Whereas most agree that initially, the protesters demanded basic human rights – justice, freedom and democracy – some scholars (See: Bogaert, 2013; Joya, 2011; Joya 2017) also analyse the uprisings from a socio-economic perspective and argue that, by looking at the demands that have driven the people to the streets to protest, it becomes clear that the uprisings were not only directed against the authoritarian regimes. Rater, they were an expression of the people’s despair over their own economic situation, which came as a result of the neoliberal reforms, promoted and imposed by international financial institutions and the EU.1  Thus, besides the longing for democracy, it was also a call for greater social and economic justice (Bogaert, 2013: 214).

While over the last decades, actors such as the European Union saw economic and especially neoliberal reforms as the solution, which would lead to a so-called ‘spillover effect’ resulting in good governance and democratisation (Günay, 2016: 12), the uprisings indicated that neoliberal globalisation in the MENA region rather exacerbated the situation (Ibid.: 7). Nonetheless, after the uprisings, neoliberal policies that have initially deteriorated the socio-economic situation in the region continued to be implemented (Joya, 2017: 344). Moreover, looking specifically at the EU’s approach to the region within the ENP framework, we can see that it has a long tradition of promoting democracy while supporting neoliberal reforms in the MENA countries, drawing on the same assumption that economic reforms are inherently linked to democratisation.

The aim of this analysis is, therefore, to shed light on the EU’s approach to the MENA region after the Arab Uprisings, focusing on the case of Egypt.2 However, instead of looking on EU democracy promotion or neoliberal policies in isolation, these two elements will be combined, and the analysis will draw on the argumentation by, amongst others, Bogaert, Joya, and Günay: Namely, that there is a bias in the EU’s promotion of democracy by linking neoliberal reforms to democratisation.

The article will critically analyse whether the EU continued to focus on the economy after the uprisings and promotes economic, neoliberal reforms in combination with democratisation – thereby regarding economic development as a precondition for democracy.

This article’s main argument is that despite the negative impact neoliberalism has had in the region over the past decades, the EU seems to have neither learned anything from the uprisings nor reviewed its approach. Instead, it continues to focus on the economy and economic reforms, presenting it as a ‘conditio sine qua non’ for democratisation.

As the main source for the analysis, an official EU document, the Single Support Framework for European Union Support to Egypt for the period of 2017-2020, will be used.

In the following, I will first shortly explain the history of neoliberalism promoted by the EU and other international organisations in Egypt. Here, I will also draw upon the proclaimed link between neoliberal reforms and democracy. Then, the analysis of the Single Support Framework for 2017-2020 follows. Finally, I draw conclusions to this analysis.

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A short history of neoliberal reforms in Egypt  

The political concept of neoliberal ideology advocates liberalisation, privatisation, competitiveness, and laissez-faire, meaning as little intervention from the state as possible. Additionally, it aims at price stability, a balanced state budget, and austerity (Joya, 2017: 342).

Neoliberalism has a long tradition in the history of governance in the MENA region. Already since the 1970s, in the course of the global economic crisis, the former Egyptian president Sadat started to integrate Egypt into the global economy, which was predominantly Western-oriented (De Smet & Bogaert, 2017: 214). Also, international actors, such as the US, the World Bank, the IMF, the UN as well as the EU, granted Egypt debt relief and initiated the neoliberal restructuring of the MENA countries’ economies according to free-market principles as a sort of development strategy (Joya 2011: 370; İşleyen, 2015: 674; De Smet & Bogaert, 2017: 213). Neoliberalism was assumed to counteract corruption and the waste of public funds and that a free market would automatically lead to rational allocation of resources (Joya, 2017: 343).

Additionally, in the 1990s, Egypt implemented a so-called Economic Restructuring and Adjustment Program, ERSAP, by the IMF in order to reduce foreign debt and inflation (Kandil, 2012: 208; De Smet & Bogaert, 2017: 221). The ERSAP aimed at ‘the privatisation of public sector enterprises, the liberalisation of trade and prices, the introduction of flexible labour legislation and the removal of progressive social policies’ (Joya, 2011: 370)

Privatisation counted as one of the most important neoliberal strategies for development. It was assumed to decrease corruption, clientelism, as well as to undercut the inefficiency of state-owned enterprises. Yet, privatisation leads to so-called ‘crony capitalism’ (Gelvin, 2012: 18), meaning the transfer of corporations from the public sector into private possession. This created a new economic elite or ‘crony capitalists’ in Egypt (De Smet & Bogaert, 2017: 221; Joya, 2017: 343).

Another feature of the neoliberal reforms was economic liberalisation, which was presumed to spill over to political liberalisation (De Smet & Bogaert, 2017: 213-14). However, it came as a benefit for domestic as well as foreign investors and resulted in increasing the wealth and power of landlords and businessmen, also the ‘crony capitalists’ (Joya, 2011: 371).

In short, Egypt’s economic crisis could not be solved by neoliberal reforms. On the contrary, the crisis of capital accumulation was worsened (De Smet & Bogaert, 2017: 222).

The European Union, in line with the other international institutions, also promoted neoliberal programmes. As noted by Günay, especially trade liberalisation ‘constituted the core of the EU’s policies towards developing countries in its periphery’ (Günay, 2016: 15). Liberalisation of trade and the market itself was regarded as necessary to be able to participate in the global market, which would result in democratisation, more personal liberties and ‘good governance’ (Ibid.) 3. In exchange for liberalisation of service and investment, the EU would grant access to its single market (Günay, 2016: 17).

Now, looking at the impact neoliberal reforms had on the political landscape and the developments in the region, one can see that there is no link between neoliberalism and democracy. According to Günay:

‘Developments in Tunisia and Egypt showed that there is no correlation between economic liberalisation, economic growth, the reduction of poverty and democratisation.’
(Günay, 2016: 17)

Rather, economic liberalisation led to the strengthening of authoritarian ruling as the regimes were provided with further powers for the distribution of resources (Ibid.: 18).

Joya (2011) sums up that:

‘After more than two decades of neoliberalism, Egyptian society has become more unequal in terms of social power and wealth while levels of social conflict have increased every year along with a rise in the cost of living (rent, health care, education and food), a stagnation of wages and a rise in unemployment.’
(Joya, 2011: 371)

According to some scholars and experts of the MENA region, the Arab uprisings came as a response to the decades of promotion of neoliberal policies (See for example: Bogaert, 2013; Joya, 2017). However, examining the responses of the international financial institutions and the international community, it becomes clear that the promotion of neoliberal policies nonetheless persists (Joya, 2017: 344).

‘Assessments of reforms in Tunisia, Egypt and Morocco five years after the revolutions, however, indicate that neoliberalism has remained intact (Hanieh, 2015; Isleyen, 2015). States in the region continue to adopt policies that reproduce the same socioeconomic problems that increased poverty, unemployment and public frustrations with political elites.’
(Joya, 2017: 344)

The next part of this article scrutinises the EU’s approach to Egypt after the Arab uprisings within the Single Support Framework for Egypt between 2017-2020. It aims to draw attention to the EU’s remaining focus on economic development and growth as well as on the way it links the economy to democracy, making it a precondition for democratisation.


‘It’s the economy, stupid!’: The EU’s support to Egypt within the Single Support Framework

The European Union’s Single Support Framework for Egypt for the period of 2017-2020 is a bilateral assistance programme by the European Union in line with the European Neighbourhood Policy (ENP) and shall ‘review progress made, set out objectives and priorities for Union support, indicate expected results and set out indicative level of funding (…)’ (European Commission, 2017: 2). The financial allocations for the support framework amount to between EUR 432,000,000 and 528,000,000 for the period of 2017-2020 (Ibid: 6).

As mentioned above, the aim of this section is to draw upon the European Union’s continuing focus on the economy and on economic development with regard to democratisation, and the assumption that democracy can be generated by a spillover from development.

Having a closer look at the Support Framework, one can see that already in the introduction of the document, when explaining the current environment in Egypt, it is first referred to the socio-economic situation. It thereby grants it a central role and makes it appear highly important:

‘Egypt is struggling to make headway, admittedly in a very challenging environment marked by deteriorating socio-economic situation (…)’.
(European Commission, 2017: 2)

‘The economic situation remains difficult, because of structural challenges to the economy exacerbated by the events since January 2011.’
(European Commission, 2017: 2)

This focus on the economy is also reflected in the revised ENP, that was launched prior to the Single Support Framework in 2015. The revised ENP claims that ‘The new ENP will make a determined effort to support economies and improve prospects for the local population’ (European Commission, 2015: 4). Also, the joint priorities within the ENP of 2015 grants’ economic development for stabilisation’ (European Commission, 2015: 7) prevailing importance, which shall be achieved, among others through ‘macroeconomic stability and economic reform’ (European Commission, 2015: 7) – typical neoliberal approaches. Moreover, prosperity shall be achieved by granting access to the EU market (European Commission, 2015: 8). This renders it questionable whether the EU’s intentions are indeed as “normative” as they claim to be, or if they are rather selfishly chosen.4

Now, turning particularly to the EU’s response to the ‘challenging situation’ and its ‘strategic objectives’ for the relations with Egypt, the main priority remains stabilisation and resilience-building. This should be achieved ‘particularly by boosting the economic development’ (European Commission, 2017: 3, emphasis added), which has already been outlined in the ENP review of 2015 and the EU’s Global Strategy of 2016 (Cf. European Commission, 2017: 3). According to the document, in the period of 2017-2020, the focus shall be increasingly placed on, among others, economic and social development (Cf. Ibid., emphasis added).

‘In this context, the main strategic objective for the EU’s relationship with Egypt is to contribute to the stability and prosperity of the country (…). This will be pursued through a well-calibrated engagement combining dialogue and support to political, economic and social reforms.’
(European Commission, 2017: 3)

Thus, economic growth and prosperity are considered the solution to combat instability, resulting in overall development and an improved situation on the ground.

However, further below, the EU nonetheless also mentions its objective to address political challenges:

‘Apart from addressing economic and social challenges in Egypt, important work remains to be done also on the political track and on the path towards democracy, which are key to sustainable and economic development. Accordingly, the aim is to support the country’s democratic consolidation as well as sustainable and inclusive development’
(European Commission, 2017: 3)

Here, it becomes clear that apart from granting economic development paramount importance, the EU nevertheless continues to link development and democratisation with each other5.

Additionally, the document refers to the EU-Egypt partnership priorities of the revised ENP of 2015 which also ‘(…) include support to Egypt’s sustainable economic and social development (…)’ yet, ‘They also include important commitments and references to democracy, rule of law, respect for human rights (…)’ (European Commission, 2017: 3, emphasis added).

Moreover, from these partnership priorities, so-called ‘sectors of intervention’ are defined that aim to address common interests and provide stability in the long term. (European Commission, 2017: 6).

With a full of 40% of the total budget, the first sector is devoted to the economy by focusing on the need for economic modernisation, energy sustainability, and the environment (Ibid). The second sector, also constituting 40% of the total budget, refers to social development and social protection (Ibid). However, surprising that, whereas the EU claims democratic governance to be a priority area, ‘Governance, enhancing stability and modern democratic state’ is only found in the third sector with solely 10% of the total allocations (European Commission, 2017: 5; 6). Even more interesting, that, albeit this specific sector should address the issue of democracy, yet again the socio-economic challenges are mentioned (Ibid).

‘While Egypt’s political “roadmap” towards democracy has been formally implemented, a number of socioeconomic challenges, regarding governance, poverty, social and economic inequality, and lack of opportunity for the young, remain to be addressed (…)’
(European Commission, 2017: 6)

The last 10% of the total allocations are for ‘Complementary support for capacity development and civil society’ (European Commission, 2017: 6).

Scrutinising the EU support per sector, one can see that each sector provides overall and specific objectives that are aimed to be achieved (European Commission, 2017: 7ff.). Here, it becomes clear that major emphasis is put on the first sector with the overall objective of ‘inclusive economic growth’ (European Commission, 2017: 7), being provided with 40% of the budget. Specifically, the EU aims to

‘(…) promote inclusive economic development and create decent job opportunities that respond to market demands in support of Egypt’s Economic Reform Programme (…) support sustainable development and a better quality of life (…)’
(European Commission, 2017: 7)

The second sector, also endowed with 40% of the total allocations, aims to address the social and demographic challenges as an overall objective and the protection of marginalised groups that may be negatively impacted by the reforms as a strategic objective (European Commission, 2017: 10).

The third sector, which engages with the issue of democratisation, puts forward the overall objective of supporting a ‘process towards increased democratic governance, structural reform and political, social and economic stabilisation’ (European Commission, 2017: 12, emphasis added). Specifically, the objectives are to support participatory governance that acts effectively and accountably. Moreover, values such as democracy, the rule of law and human rights shall be promoted and protected. And lastly, transparency in terms of fiscal affairs and public finance should be promoted (European Commission, 2017: 12).

Hence, regarding this very sector on democracy, the EU once again addresses democratisation issues in combination with emphasising the importance of ‘economic stability’.

The next and last part of this essay sums up the main points and draws a conclusion of the analysis.

Conclusion and Outlook

To conclude this essay, one needs to stress the fact that there is a vast amount of EU policy documents accessible, yet, the Single Support Framework for 2017-2020 represents a particularly interesting document, as it specifically focuses on Egypt. Others, such as the ENP of 2015, address the whole neighbourhood region more generally, from the countries included in the Eastern Partnership to those in the Union for the Mediterranean.

In general, one also needs to acknowledge that scrutinising EU documents, as with other policy documents, leaves a great leeway for interpretation. One can never be completely sure of the drafter’s or, in this case, even the EU’s, intention. That is to say that the documents also leave space for making assumptions, as their wording mostly remains rather vague.

Nevertheless, all things considered, the analysis of the Single Support Framework above shows that the EU’s focus still remains considerably on economic issues. The Union grants it a central role in its approach to Egypt and most likely to the whole MENA region.

A considerable amount of the framework’s budget, in total 40%, is provided to the sector that engages with economic development. In contrast, the framework endows the sector that supports democracy with a mere 10% of the allocations. All in all, the general emphasis remains on economic growth, which the EU equates to development.

In addition, the economy and socio-economic development are often linked to the aim of democratisation, assuming economic progress to be inherently connected or even a precondition for democracy. This may be based on neofunctionalist assumptions, that integration and from it resulting development in one sector spills over to other areas (See, Niemann & Schmitter, 2009). Hence, integration of economic affairs generates similar positive effects in other areas, in this case leading to further democratisation.

As also shown above, even in sections where the document explicitly refers to democracy, the overall objective, nevertheless, mentions the importance of economic stabilisation. It thus, clearly combines the two issues, assuming the one being conditional upon the other.

All in all, the EU may at some point have to reconsider its approach to the region and review its policies. Granting economic development major importance may eventually address the people’s demands of better living conditions, but this does not automatically set the path for sustainable democratisation. Also, reviving previous neoliberal policies and repeating the same mistakes that exacerbated the situation in the MENA region may even deteriorate the situation. Instead, the focus should lie on addressing the people’s demands and enhancing social and economic justice and improving the living conditions.

 

Sources

Bogaert, K. (2013): Contextualizing the Arab revolts: The politics behind three decades of neoliberalism in the Arab world. In: Middle East Critique, 22(3), 213-234.

De Smet, B. and Bogaert, K. (2017): Resistance and Passive Revolution in Egypt and Morocco. In: States of Discipline. Authoritarian Neoliberalism and the Contested Reproduction of Capitalist Order, p. 211-233, Rowman & Littlefield International.

European Commission (2015): JOINT COMMUNICATION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS

Review of the European Neighbourhood Policy, JOIN(2015) 50 final.

European Commission (2017): Commission implementing decision of 30.10.2017 adopting a Single Support Framework for European Union Support to Egypt for the period of 2017-2020, C(2017) 7175 final.

Gelvin, J. L. (2012): The Arab uprisings: what everyone needs to know. Oxford University Press, USA.

Günay, C (2016): Reality check: Why the EU needs to rethink its neighbourhood policy. In: Euromesco Paper 29, European Institute of the Mediterranean.

İşleyen, B. (2015): The European Union and neoliberal governmentality: Twinning in Tunisia and Egypt. In: European Journal of International Relations, 21(3), 672–690.

Joya, A. (2011): The Egyptian revolution: crisis of neoliberalism and the potential for democratic politics. In: Review of African Political Economy, 38:129, 367-386.

Joya, A. (2017): Neoliberalism, the State and Economic Policy Outcomes in the Post-Arab Uprisings: The Case of Egypt. In: Mediterranean Politics, 22:3, 339-361.

Kandil, H. (2012): Why did the Egyptian middle class march to Tahrir Square?. In: Mediterranean Politics, 17(2), 197-215.

Mikdashi, M. (2011): Neoliberalism’s Forked Tongue, URL: http://www.jadaliyya.com/Details/23999/Neoliberalism%60s-Forked-Tongue, last access: 6th Januar, 2018.

Niemann, A. and Schmitter, P. C. (2009): Neofunctionalism. In: European integration theory, 45-66. Oxford Univ. Press.

Pace, M. (2011): Liberal or social democracy? Aspect dawning in the EU’s democracy promotion agenda in the Middle East. In: The International Journal of Human Rights, 15:6, 801-812.


Footnotes

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How Fair is Fairtrade?

Fairtrade International has had an enormous contribution in putting ethical consumption on the agenda, becoming an instantly recognisable label of fairness. However, with an increasingly complicated supply chain and intensified globalisation, trade that is fair is becoming harder to ensure, despite a consumer force that is more conscious than ever. So how fair does Fairtrade continue to be?

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