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GROWING PAINS
When Egyptian president Gamal Abdel
Nasser embarked on his nationalization campaign in the late 1950s,
he made the government the sole provider of just about everything:
education, food security, services and even employment. As part
of this policy he promised a job to every graduate. It seemed an
impossible task, but Nasser had a plan. Simply take every job and
divide it in two and, voilà, the unemployment rate is halved
overnight. When unemployment creeps up again – simply divide
these jobs again.
It was a brilliant formula, or at least until the realities of economics
set in.
Today, policy-makers are struggling to overcome the legacy of Nasser’s
socialist policies. Certainly there is much more at stake. Egypt’s
population has grown from 20 million in the 1950s to well over 72
million today, and continues to grow at 1.75 percent per year. The
government needs to create half a million jobs a year just to keep
pace.
An estimated 5 million Egyptians – nearly a quarter of the
work force – are employed by the government, and another 2
million work in public sector companies. Economists describe the
surplus labor of Egypt’s bloated public sector as “disguised
unemployment,” yet even this has done little to conceal real
unemployment, which now stands at around 10 percent – though
independent figures suggest it is closer to 20.
After years of fumbling with misguided employment initiatives and
fizzled-out privatization drives, the government appeared to stumble
onto a viable working model shortly after the Nazif administration
took office. The premise is that the public sector, no matter how
hard it is squeezed, cannot attain the productivity and efficiency
needed to fuel and sustain economic growth. Instead, the private
sector must be given the lead to rapidly develop the nation’s
obsolete industries into modern competitive production units. The
government creates the playing field; the private players carry
the ball.
But this model is not without challenges. Economic reforms aimed
at encouraging economic growth and nurturing industrial competitiveness
are transforming disguised unemployment into real unemployment.
And this is what we are seeing today. As strikes rippled across
the country last month, it became clear just how delicate the balance
is: reform too fast and the country implodes, too slow and it stagnates.
CAM MCGRATH
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