Nasser, Sadat, and ECON-100

I was sitting in my Egyptian Government class the other day and we got into a conversation about whether or not Sadat or Nasser's economic policies made more sense. Just as a bit of background, when Nasser came to power, his focus was on endogenous growth with a heavy emphasis on developing native industry, raising tariffs to protect said infant industries, socializing education and healthcare, subsidizing basics such as bread, and capping wealth at 15,000 LE per year. Sadat removed much of this in his infitah (Open Door) policies, in which he sought to attract western and Gulf investment by removing many of Nasser's socialized policies. Anyway, we established that the two were equally tyrannical and both failed to establish crucial institutions that would depersonalize their rule, so the only real difference became their economies and foreign policies. Much of my class as well as my professor came down on Nasser's side, and I found myself as one of the few Sadat warriors.

Sadat is an incredibly touchy subject here. On the one hand, he restored Arab honor in initiating the 1973 Yom Kippur War, in which Egypt regained Sinai from the Israelis and, while they lost militarily, they dispelled the myth of Israeli invincibility and forced the Israelis to the bargaining table, making it a strategic victory for Arab nations. The day the war started, October 6th, has its own holiday over here. On the other hand, Sadat repealed many of the policies that made Nasser popular. Furthermore, the gap between rich and poor grew exponentially under his rule. But most controversial is his peace agreement with Israel. Most Egyptians were incredibly excited about the beginning of negotiations. Most Egyptian families had lost a son to one of the myriad wars the two nations had engaged in over the previous twenty years. They were tired of war. But most had high expectations of a more equal settlement with Israel that would more thoroughly address the Palestinian question and would include other Arab states. Instead, the agreement came off as a waste on Nasser's part in which he normalized relations with Israel and sacrificed the Arab cause in the name of getting back Sinai. As a result, the Camp David Accords aren't a terribly popular subject here, and they ultimately cost Sadat his life in 1981 when takfiri extremists assassinated him. So taking all of these emotions into account, my defense of a touchy subject reminded me of the fact that while in America I can be pretty far left, when I'm here discussing foreign policy or economics, I'm a full-on neocon relatively speaking.

I felt as though I could have summarized the debate in a statement made by one girl, an American, regarding Sadat's liberalization policies: "It's been proven that the free market works well in the short term, but isn't good for long-term growth." Besides flying in the face of high school-level economic theory and the course of history itself, I was awed by the fact that most people seemed to agree with this blatant fallacy. At least in the development of European industrial economies, the typical plan has been rampant protectionism in the short term that defends infant industries (much as Nasser did), followed by a long-term liberalization plan that opens the industry up to market forces, though allows for more outside consumption and investment, so in other words, the complete opposite of what this girl said. What it ultimately came down to in the end was a clash of values. I argued that Sadat did not liberalize enough, as evidenced by how complicated it is to start a business in the country, how much of the economy here is underground, and how hard it is for foreigners to invest and make money here. Many people responded in arguing that well, this didn't happen, so we can't judge him based on that. Duh. But where we disagree is whether or not liberalization ought to have been pursued in the first place. I'm of the school of thought where I would argue Nasser did the right thing in protecting his industries in the early going, but was wrong to restrict investment and capital gains. His redistributive policies made Egypt far less attractive to investors, who would fear that their wealth could simply be co-opted by the government for its own ends. Sadat did little to correct the institutional failures of Nasser's regime, though opening the door to outside investment was necessary. Egypt could not sustain itself with the sorts of subsidies it was implementing, and subsidized housing still affects the way Cairo has developed. There is no reason for landowners to renovate properties simply because it will cost more to do that than they can make off of rent, so the city just constantly sprawls outward as older sections of the city fall into disrepair.

By no means to I consider myself a disciple of the free market. I think it has plenty of shortcomings that aren't acknowledged enough in American economic discourse, namely in regards to how the economy interacts with the state and when it ought to take into account higher moral issues. I find the notion that the market is an end in itself is beyond silly. But the other end of the spectrum is absurd, and in the end, both ends are devoted more to the ideology itself than to serving the broader system of which they are a part.