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The economic roots of Egypt’s revolt

Zachary Karabell analyzes the economic roots of the revolt, and compares it with China's experience:

The mass movement engulfing Egypt exposes a fact that has been hiding in plain sight: In a decade during which China has brought more people out of poverty at a faster rate than ever in human history, in a period of time where economic reform has been sweeping the world from Brazil to Indonesia, Egypt has missed out.

The country ranks 137 in the world in per-capita income (just behind Tonga and ahead of Kirbati), with a population in the top 20. And while GDP growth for the past few years has been respectable, averaging 4%-5% save for 2009 (when all countries suffered), even that is at best middle of the pack in a period where the more competitive dynamic nations have been surging ahead.

Egypt has long been famous for crony inefficiency. Yet Hosni Mubarak was graced with nearly $2 billion in annual U.S. aid, another $5 billion from dues from the Suez Canal, and $10 billion in tourism, so he could buy off a considerable portion of the 80 million Egyptians.

In recent years, Mr. Mubarak seemed to realize that the complete absence of economic reform wasn't tenable. He watched as China surged ahead without loosening the control of the state over political life. He made overtures to regional trade blocs. In fact, a few days before the protests erupted, Mr. Mubarak hosted the second Arab Economic, Development and Social Summit in the resort of Sharm al-Shaikh, calling for more Arab economic integration, regional transportation infrastructure and trade.

What allows China to thrive for now (and Brazil and India and Indonesia, among many others) is that its citizens believe they have some control over their material lives and a chance to turn their dreams and ambitions into reality. They have an outlet for their passions that is not determined for them, and an increasing degree of economic freedom.

The young in Egypt—two-thirds of the population is under the age of 30—believe that they have no future, and in many ways they are correct. Under Mr. Mubarak, their food and housing is subsidized and they are placed in jobs or left in unemployed limbo, not starving but without any hope of anything but years of numbing sameness.

Meanwhile, China ignored the dialectic in the West—which placed political opening at the top of societal imperatives—and plunged into an experiment of hypercharged economic development without political change. Its phenomenal success to date is impossible to refute, just as its future course is impossible to predict.

But Egypt managed to forestall both paths, and its lesson is simple: You can have economic reform, or you can have political reform. You cannot have neither.

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