Egypt’s Brothers need an economic policy

This very lack of economic sophistication gives the west a way to engage with the Brotherhood, writes Dalibor Rohac

For weeks now, western visitors have been trooping in and out of the offices of the Freedom and Justice party (FJP), the Muslim Brotherhood’s newly licensed political arm in Cairo. They conduct earnest conversations on the fake leather sofas, contemplate the Koran quotations framed on the office walls and try to figure out what, exactly, Egypt’s most powerful independent political grouping really wants. Most questions concern sharia, the rights of women or Egypt’s policy towards Israel. But the Egyptian revolution was also an economic revolution. If the Freedom and Justice party took power, what are the Muslim Brotherhood’s economic plans?

If outsiders aren’t asking this question, it may be because the Muslim Brotherhood isn’t asking it either. Saad al-Katatni, the FJP’s head, cheerfully admitted to a group of economists: “I don’t know much about the economy” – though he assured us that others in the FJP do.

The Brotherhood leadership’s lack of interest in the economy should worry us at least as much as its ideological and religious posturing. Egypt’s democratic transition may well depend upon whether a new government can salvage ailing public finances and set the country on a trajectory for growth. Creative thinking about economic reforms – and the courage to pursue them – is essential if life is to improve.

Unlike many other Egyptian political groupings, the Brotherhood has some economic experience. Its appeal rests largely on its successful provision of services to the urban and rural poor. The organisation runs schools, care centres for widows and orphans, and dozens of hospitals throughout the country. In past parliamentary elections, it wooed voters with welfare handouts, including the mass distribution of Ramadan “gift boxes”. The FJP has now expanded on that experience, crafting a moderate, almost social democratic programme that seems designed to offend nobody.

In fact, like almost every other Egyptian party aiming to compete in the post-revolutionary political mainstream, the FJP wants to straddle the philosophical gap between a market economy and old-fashioned, Nasser-style socialism. “We support a free-market economy but are sensitive to our Islamic background,” Mr al-Katatni says. In practice, this means that although the party makes a nod to Islamic charities and the principles of Islamic finance, its programme is indistinguishable from those of others. It explicitly supports the “pivotal role” of the private sector and “fair competition”, while backing community-based development initiatives and a strong regulatory role for the state. Unsurprisingly, it rejects any conditional foreign aid.

This is inadequate: Egypt faces a serious economic challenge, requiring its politicians to do more than just regurgite conventional wisdom. The budget deficit is 8.6 per cent of gross domestic product and the debt-to-GDP ratio is over 80 per cent. Any future government must urgently cut a bloated bureaucracy and phase out regressive fuel and food subsidies that largely benefit the wealthiest Egyptians. Yet in next year’s budget, fuel subsidies account for $16.6bn, almost 8 per cent of the economy.

“We need to find a solution to the problem of subsidies,” Mr al-Katatni also assured us – but he could not explain what that solution might be. In fact, many subsidies can be phased out quite easily and the reform, if accompanied by cash transfers to poorer households, need not hurt the most vulnerable. It is disheartening to learn that the Muslim Brotherhood has not even thought through this question at the heart of Egypt’s economic problems.

The FJP leadership is only vaguely aware of the causes of corruption, and has given no thought at all to improving the business environment. They know Egypt’s new government must win back investors’ confidence, but are not at all sure how to do it.

There is a silver lining: the Muslim Brotherhood’s very lack of economic sophistication gives the west a way to engage with an organisation we barely know. Within months, the FJP may be running Egypt: now is the time to send economists and past experts in economic reform to meet with its leadership. Here is an area where the Muslim Brotherhood might welcome advice, and we should begin to offer it.

The writer is a research fellow at the Legatum Institute in London

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