Archives for posts with tag: economics

Sto leggendo un libro parecchio interessante, intitolato “Chissà come chiameremo questi anni” edito da Sellerio. Il libro (postumo) raccoglie le grandi indagini realizzate da Giuliana Saladino, una giornalista de “L’Ora” – quotidiano progressista pubblicato a Palermo fino all’inizio degli anni Novanta e che annoverò tra le sue firme Sciascia, Guttuso e Quasimodo (giusto per citare i nomi più famosi).

Il libro raccoglie una serie d’indagini sociali e reportage che raccontano con una voce estremamente limpida i cambiamenti sociali della Sicilia e dell’Italia tra gli anni Settanta e Novanta. Dalla speculazione edilizia, alle sperequazioni sociali e i delitti di mafia, il libro raccoglie quelle pagine di giornale che il giorno dopo sarebbero finite per incartare il pesce (come scritto nella prefazione) e che oggi sono conservate per riproporci uno spaccato di quello che eravamo in altri tempi. E come forse siamo anche oggi.

Da “Quanto spende, Signora?” (p.91)

Rivolgo la domanda alla moglie di un bigliettaio […]

Al primo del mese lei ha dunque in casa tutto il necessario [dopo la spesa allo spaccio aziendale n.d.r.] e 83 mila lire [dopo trattenute dalla busta paga n.d.r.]. Come le spende?  35 mila di casa, 30 mila la cambiale della macchina, 3.000 la rata della macchina da cucire, 10 mila di acqua luce gas, e ogni tre mesi il telefono. Faccia il conto… fanno 78 mila lire … mi restano 5 mila lire e ce ne devo aggiungere altre dieci per pagare il prestito di 100 mila che ci ha fatto una di queste casse per impiegati: su centomila se ne tengono 30 mila. Ladri. E’ stato l’anno scorso, che ho avuto un aborto: 40 mila lire. La cassa soccorso dell’azienda di mio marito mi paga solo la visita ostetrica più 5 mila lire, e abbiamo dovuto fare questo prestito a interesse.

Che fate la domenica? Ce ne andiamo al mare, dalle parti di Terrasini. Ci divertiamo moltissimo, arrostiamo la carne là stesso, abbiamo l’ombrellone e la tendina per spogliarsi, i bambini impazziscono di felicità.

I bambini chiedono soldi?  Sanno che non ce ne sono e non ne chiedono. Quando usciamo li avverto: non si compra niente. E il piccolo fa tutta la strada dicendomi “mammina io sono bravo, ciliegie non ne domando” poi vede le fragole: “mammina io sono bravo, non ne voglio fragole” E così per il cono, per le banane, per le noccioline.

Forse perché mi ricorda molto mia madre, il modo in cui faceva (e adesso, a quattro anni dalla pensione continua a fare) la spesa e quello che lei ci diceva prima che uscissimo di casa, però credo che questa storia di giugno 1969 rimanga anche oggi la storia di molte famiglie italiane, come si puo’ evincere dai dati Istat rilasciati qualche giorno fa.

Da “L’imprenditore diffidente” (p.132)

I nostri interessi – dice [S.M. piccolo imprenditore n.d.r.] – sono completamente diversi da quelli della Confindustria. Noi cerchiamo alleati, certi alleati, e a noi non può stare bene il discorso di Agnelli, presidente appunto della Confindustria, oltre che della Fiat, il quale porta avanti un discorso che secondo me è molto pericoloso. Cosa dice Agnelli? Partendo dal parassitismo, dagli sprechi, dalla disamministrazione imperante, finisce per sparare a zero sulle partecipazioni statali, mira a privilegiare il privato sul pubblico e a quei livelli il privato significa soltanto monopolio”.

“Che alleanze cercate? Intanto da un po’ di tempo a questa parte, fatto abbastanza recente, cerchiamo un dialogo col movimento operaio. Anche qui troviamo delle difficoltà. Non perché non ci sia una reale volontà d’intesa, ma direi che è un’intesa su basi sbagliate. Secondo me è da respingere il discorso totalmente paternalistico del movimento operaio nei confronti della piccola e media impresa. Vengono a parlarci di “momento privilegiato” della piccola e media impresa da parte del sindacato. E che vuol dire? Che pago di meno l’operaio? Che non mi faranno le lotte sindacali? È paternalistico nei nostri confronti, è rinunciatario da parte loro. I tempi cambiano, la società cambia, oggi il discorso serio e alternativo sarebbe quello di porre l’operaio come protagonista della piccola e media impresa, di coinvolgerlo in prima persona nella partecipazione alla programmazione. Questa oggi è la via nuova, il resto è demagogia di chi si accorge solo adesso della nostra esistenza e vuole “salvarci”.

Ora, questo articolo venne pubblicato il 7 giugno 1975. Non aggiungo altro, solo un link ad un articolo del Sole 24Ore sulle diatribe recenti sull’Articolo 18.

Piccolo bonus: una foto della chiesa di San Giovanni agli Eremiti a Palermo, giusto per ricordare che a volte nel nostro paese abbiamo la bellezza sotto gli occhi ma non ce ne accorgiamo.

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I am still battling with jet-lag and catching up on the sleep that grad school has deprived me of for the past 5 months. It’s good to be home. Good-ish. After dealing with reading depressing news about Italy’s imminent implosion for months, now I get to be immersed in national hysteria 24/7. Awesome!

The other day some CEO from a big supermarket chain was on TV saying how sales in supermarkets have gone down by 6% from last year, marking the worst decline in 50 years (really? I did not know our nonexistent supermarkets collected statistics back in the 1960). In particular, sales of red meat have gone down while sales of eggs and beans have gone up, or so he claimed, suggesting that either Italy is on the cusp of a vegetarian revolution or Italians are buckling up for a very lean Christmas. His voice adds to the chorus line of customers in taped in shops while lamenting the pitiful state of the nation, entrepreneurs whining that the government is not doing enough, our trade unions that are living in some Dickensian parallel industrial universe when our factories are all shutting down by the minute, homeowners impoverished by having to pay 150 euros in yearly property taxes on their first house (the horror!) and on top of all, our beloved politicians from the left and right doing what they do best: crying “Social Butchery” (Italian for “We don’t know what to do or say and would rather not do anything about this”) from the travelling shit show that is the Italian Parliament.

It appears to me that Italians firmly believe that if we are deep in the shit it is either none’s fault or someone else’s fault. Some enlightened citizens have been all too quick to blame the political class for the mess we’re in, as if those got where they are by self-appointment. None seems to have voted for these politicians (although, truth be told, we actually did not pick candidates but had to vote for a list in the last election thanks to our new electoral law, called ‘the pigsty‘ by the same MP that sponsored it). Some other enlightened citizens like to say Berlusconi is the cause of all of this, and while I tend to agree to some extent, I cannot ignore that Mr B. is the toxic by-product of our dis-functional politics (this in and of itself could be the subject of a longer post, some background). I am also not deluded enough to think that if our left-wing politicians could not win an election and keep a government together for more than 15 months when the alternative was a philandering clown marred in sexual and corruption scandals, it must be that they are also not very capable. Everyone seems to agree, however, that the Euro must be the cause of all this, to which I like to point out that if we still had our own currency it would probably be worth less than toilet paper right now. In fact, we had a major speculative crisis in 1992. Let me fish out some news article from those days (11/09/1992):

Global recession apart, Italy has two major problems: a massive public debt (much higher than that allowed by the Maastricht treaty) and uncompetitive labour costs. Source: here

It seems that twenty years have passed and nothing has changed. Our political class supposedly went through some major regeneration (on paper) but still nothing has changed.

I was slightly irked by all of this. It seems that a large portion of the Italian population is engaging in a national competition to stick their head into the sand while also waxing lyrical about how someone else is the cause of their misfortune. If this crisis has done anything is to hold a mirror to our faces and revealed us for what we have become: a nation that is morally and financially bankrupt.

To have a proof that we are morally bankrupt, it is enough to watch this video shot the day after some model citizens torched a whole Roma camp, after a rumor (later revealed to be false) was spread that a local teenager was raped by two Roma men. Pogrom,  Italian style. Condemnation flew in from all sides (minus those scumbags that sit on the right-hand side of our Parliament and their sycophants) and this was archived as an anomalous episode. Until a couple of days later a neo-nazi shot two Senegalese street vendors dead in Florence. Clearly we seem to have found that someone else who is the cause for our problems.

It seems to me that we have become a society where none is ever at fault for things that go wrong, none is ever responsible, none ever wants to pick up the tab for fixing things, because our country is, in the end, not ours: it is some bottomless pit we can keep taking without putting things in. Suffice to say that Italy has the highest tax evasion rate in all of Western Europe, after Greece (YAY for Greece, for not making us look bad!):

Tax fraud is estimated to equal more than 20 percent of Italy’s annual economic output. From more than 41 million tax returns filed in 2010, fewer than 1 percent of Italians reported income greater than $135,000 (Washington Post)

According to the book “Soldi Rubati” taxes have gone up by 12.5 % in the past 30 years. If everyone paid taxes and we could cut payroll taxes, each salaried worker would get 275 euros per month (3300 euros in a year approx). Meanwhile:

There are 200,000 Italians who own luxury cars, but they’re telling the taxman that they have an annual income of between €20,000 and €50,000. One Italian claimed to have an income of €500 a year, but managed to run five Ferraris (source)

So where am I going with this? This debt crisis is not only a problem of economics and fiscal rigor, but a chance to turn ourselves around. We are either at the lowest point but looking up, or we are on an irreversible path towards global irrelevance and moral and financial impoverishment. Italian debt exploded in the 80s partly because of high global interest rates because of the various oil and global economic crises, partly because our political machine kept banking on macroeconomic tricks (currency devaluations etc…) to keep us going and beautify our deficit problems without having to come up with political solutions (for a more in-depth analysis, you can read here).

This crisis can be our way out of this vicious circle. If we got everyone to pay taxes (and apparently they have a game plan to do this) we might have a GDP that is 20% higher.  There is clearly a way out. Now that we are done with the economic austerity, we need moral austerity. The economic and moral case is clear and the solutions are all there, all it takes is responsible politics.

(Bonus track: advert on tax evasion currently running on national TV. Hint if you do not speak Italian: it shows different kind of animal/plant parasites and ends with a social parasite.)

I have enrolled in a graduate programme in public administration and, as a reward for having made the cut, I was invited (with the remaining 70 other admitted students) to a pre-course, also known as Math Camp, much to the amusement of my friends who now consider me irredeemably lost in the twilight zone between New Jersey and Nerd-land.

By day two of math camp, the daunting fear that the overachiever within me had made me pick too hard a math pre-course finally evolved into a fully fledged epiphany. Twenty minutes into the class the only intelligible thing on the blackboard was the acronym WLOG. Now, the fact that the acronym for the phrase ‘without loss of generality’ has already become part of my vocabulary should let you imagine what was on the rest of the board (it was a class on ‘real numbers’ yet there wasn’t a single figure on the board, just greek letters and other doodles).

The remaining two and half hours of the class had become a futile exercise of copying notation, as I had resolved to cut my losses and ask to be moved to the intermediate course the next day. In a sense it could have been a class on Urdu calligraphy in that what I was copying was totally unintelligible to me. My pride was not particularly hurt, as the PhD candidate (with an engineering degree) sitting next to me had the same facial expression as me, i.e. that of mild physical and mental discomfort just like a child with food poisoning sitting on a dentist chair.

My mind started wandering and flash backs of moments in my work life appeared. My work life usually revolved around managing personalities of colleagues, bosses and counterparts and the hardest conceptual part of my workday was keeping up with the ever-growing editing requests for my boss’ power point presentation.

I tried to think about the role of cartesian geometry and its elegant rationality in public policy, and struggled to find a real-life example.

I thought about the current US budget problem and how it could be (relatively) easily solved in an econ class, but how it has become a messy, byzantine turf war. Congress has access to the best economists in the world, yet the tone of discussion about the budget would fit right in an episode of Housewives of New Jersey.

And then I thought about how putting myself through the pain of math and econ course will make me a better professional bureaucrat at the service of the nation one day. I remembered a classmate from my undergrad days who made the most out of her uni degree and had a visible and sizeable impact on the welfare of the Italian population. After graduation, she became the poster girl for a famous lingerie company (see below – I am not making this up), thus doing more for the nation (oh well, at least half of the nation) than the whole of our Parliament’s Economic Commission put together.

I accidentally booked a seat on the 6 sleeper part of the train, instead of the more tourist friendly 4 sleeper part. It would have not been so much of a problem if it weren’t for the fact that I am claustrophobic and once you lay on the top bed your nose is only 30 cm away from the cieling. As I was contemplating survival strategies for the 17 hour long journey, a boisterous Vietnamese family of 4 arrived.
They were better prepared for their 33 hour journey to Ha Noi, the kids playing on their I phone and portable Play Station, the father on his I Pad and the mother administering a seemingly endless supply of snacks and food.
They were cleary wondering what sort of scam I must have gotten into that sold me over priced second class tickets en lieu of first class. Nonetheless, they were as gracious as only the Vietnamese can be and while we chatted away in broken English, they made sure I partook in the food fest. All of a sudden I remembered long overnight train journeys as a child  with my family in Italy. A continuous supply of rice cakes, spicy dry meat, pickles, cured pork, pop corn, sandwiches, rice porridge, bananas and even wine was offered (I volunteered my cookies).
In the end the journey wasn’t as painful as it could have been, I got the opportunity to spend 17 hours with a boisterous and lovely upper middle class Vietnamese family, got my heart warmed to see their interaction and left with a great memory of the people that are projecting the country head-first into the 21st century.

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I am writing this post on the topic of the minimum wage at the request of a friend (not sure what this says about my personal life :)).

The Egyptian government recently announced a plan to increase the minimum wage first to 700 Egyptian pounds and then to 1,200 EGP (200 USD) for some 1.9 million public sector workers. The plan was detailed in the economic programme released by the Egyptian government which was the subject of a previous blog post:

The government is committed to provide a fairer wage structure. To honor this commitment, we will introduce lump sum wage increases in entities with low levels of remuneration, to achieve a minimum gross wage of LE 700 per month for all workers in the public sector in 2011/12. It is our objective to increase this wage level gradually in the coming years to reach LE 1,200 by mid-2015. The partial wage increase in 2011/12 is expected to benefit some 1.9 million employees (about one third of the total public sector work force), mostly municipal workers. It will increase the effective wage bill by around 6 percent and cost the budget about LE 7 billion. Workers earning wages above this minimum in non-targeted entities will receive their standard annual increases to contain the growth in the wage bill while maintaining incentives for progression and skill differentiation.

So this is overall good news: 1.9 million people (and their families) will supposedly received a better salary soon.

However, like in many other countries including developed ones, the issue of minimum wage becomes a highly political one (for a good overview, check this). While public sector employment is a life-time guarantee (although this has proven not to be true for those workers in publicly owned manufacturing industries that have been privatised in the past decade), a large number of  workers are employed in the private sector where the minimum wage does not apply. Actually, make it the private sector where hardly any labour law is really applied. In my personal experience, with the exception of few friends who work for large Egyptian or foreign companies (e.g. companies that are listed on the stock exchange, multinationals etc…), most Egyptians do not have a work contract. And the few who do, are often asked to sign a dateless resignation letter in case their employer decides to lay them off at some point in the future. So, it’s clear that even if a minimum wage became mandatory for private sector employees, it will probably not be applied.

So how could the Egyptian government improve the wages of the million workers in the private sector? The labour market situation requires overall restructuring in Egypt, if nothing because the informal sector, while providing employment for a large share of the workforce, is also the sector where abuses such as withholding of wages, lay offs without compensation, lack of insurance and pension rights are hardly ever addressed.

My argument is going to be that trade unions could be part of the solution (but not the only solution) to the problem of low wages in Egypt. This paper details the impact of trade unions on wage of workers. The subject is at the centre of a long and complex debate but in a nutshell, the more unionised workers are there, the more unions have bargaining power over wages and benefits. This creates a ‘Trade Union Wage Premium‘ (for more info check here). The paper mentioned above shows that the difference in wages between (similar) unionised and non-unionised workers averages around 15-20% with peaks of 34% in places like Brazil.

There are also a lot of other issues when unions come into play, including creating a situation where those who are not unionised basically represent a pool of workers that can be employed informally to avoid paying higher wages to unionised workers etc… The paper linked above does a good job of explaining the various caveats.

The point I am making here is that the discussion around the minimum wage should not only be centred around public sector wages or declaring a minimum wage also for the private sector that will not be enforced just like most of labour laws in Egypt.

Giving workers the right of assembly, the right to be a part of independent unions (with different political affiliations) could do a lot more for Egypt’s workers by increasing their bargaining power, somehow going against the patronising idea that the state gives its citizens rights as concessions as opposed to empowering them to demand, campaign and hopefully obtain what they think is best for them. Of course empowering trade unions will also require an industrial policy that is based on consultation and dialogue between employers, workers and the state – perhaps an even harder cultural shift from the current dynamics.

On the subject of labour rights, a little bonus track material on corporations and interns:
The Corporate Social Irresponsibility of the Internship Phenomenon
– aka “the highly competitive race to the bottom of the corporate ladder”

I have been reading a lot of articles and posts about the IMF deal and Egypt. And while these articles/posts were almost universally well researched and well written, I felt a certain unease while reading them. I felt they were masterpieces of criticism of the IMF discourse that would only preach to the converted.

When I was doing my BA in International Economics, I often felt like an alien. I often felt that I was one of the few in my class who questioned the models we were given. When you have someone present you with an equation that proves that some theory is the ultimate truth, and that is done on repeat for 20 hours per week for three years, then you do think that economics holds the ultimate truth and right answers to everything. Once in a practice test we were given this question to answer “Prove, with the help of the models we have studies, that liberalisation is not necessarily bad for child labourers in developing countries”. Out of the five people in my study group, I was the only one who seemed to have some moral qualms about the way the question was phrased.

Back to the initial point, this well-written article on Jadaliya presents this salient argument:

“Egypt is, in many ways, shaping up as the perfect laboratory of the so-called post-Washington Consensus, in which a liberal-sounding ‘pro poor’ rhetoric – principally linked to the discourse of democratization – is used to deepen the neoliberal trajectory of the Mubarak-era. If successful, the likely outcome of this – particularly in the face of heightened political mobilization and the unfulfilled expectations of the Egyptian people – is a society that at a superficial level takes some limited appearances of the form of liberal democracy but, in actuality, remains a highly authoritarian neoliberal state dominated by an alliance of the military and business elites. “

I agree with a lot of the points raised. Except, I disagree with the way it is presented because it is the same anti IMF rhetoric every politics/sociology student/scholar reads about and is satisfied with. But guess what? the IMF people ain’t going to be worried about the same criticism they have been hearing since the 70s. And, whether I like it or not, the IMF is not going away any time soon and yes, it is a massive post-colonialist, capitalist archetype of an organization, but unfortunately this is the world we live in and these are the people that call the shots.

So if you want to win the debate, you have to ask questions in their own language. Personally, if Egypt were my country, I would want to ask the following questions:

  • Until after the announcement of the IMF and other loans were made, there was no publicly-available economic policy document that would outline how the loans were going to serve the broader objectives of Egypt’s economic policy. In a sense it is like an entrepreneur going to ask for a loan from the bank without a proper business plan. This document was released by the Ministry of Finance around the 5 June, while first news of the IMF deals were circulating as early as 17 May.
  • Why is a non-elected, transition government signing big loans with a long-term repayment plan? One reason could be that the budget year begins in the summer in Egypt, so the government has to make sure it has enough cash lined up to cover the expected 9-10% debt as proportion of GDP. However, reading the seemingly author-less policy document that appeared on the Ministry of Finance’s website on 5 June (link here) the following emerge:
    • “The budget includes a temporary allocation of LE 15 billion for additional spending—mainly investment–in education and housing. The housing investment is part of a broader initiative to fund the construction of one million low-cost, environmentally friendly housing units for the poor and young families over the next five years.” (P. 3)  So couldn’t this expenditure be delayed until an elected government can put in place checks and balances to make sure low-cost housing is not subject to the speculations some may make on the real estate market?
    • “We are also putting in place a program of 6-month training stipends to provide support for unemployed workers and new graduates, at a cost of LE 2 billion” (p.3) Again a very noble reason to take out loans, but investment in training only yields results in the medium to long-term – so why the rush?
    • “The budget includes a total allocation of LE 124 billion to finance food and fuel subsidies […] The budget includes policy funding of LE 13.5 billion to the Egypt General Petroleum Company and other
      4 economic authorities, as part of a longer-term process to restructure their balance sheets. This funding is conditioned upon improvements in operational performance, including clearing outstanding balances among public sector entities” so on one hand they increased the subsidy for petrol, on the other hand they pour 13.5 billion into an inefficient machinery whose end product they subsidise.

There are more points in the document that raise some questions, but in general, the way this policy document reads (in conjunction with the various media statements made by MOF so far) may push the semi-engaged reader like myself to wonder to what extent this outpour of money on spending right before the election is an opportunity to project an image of a transition government that is trying to fix in 6 months things that have not worked in 30 years, and on credit. I am not so much doubting the intentions of the policy, but rather the fact that an unelected cabinet is going to saddles the country with long-term debt to cover the current projected deficit and increase spending – when one may assume the IMF loans bankrolling the process to be contingent on budget cuts in the future.

Paraphrasing my previous post, it’s like when the state spends like a single man on a dinner date, putting everything on the credit card.

PS: Also on the previous post, this is what the economic policy document had to say about the inherent inequality of the current subsidy system

Subsidy reform: Reforming Egypt’s subsidies, in particular the inequitable and inefficient fuel subsidies, and replacing them gradually with better targeted income support and other social safety net measures will be critical to improve the effectiveness of public spending and support fiscal consolidation in the medium term. To get firmly on the way, we will prepare during 2011/12 a strategy to expand the social safety net, improve pro-poor and social programs, and undertake subsidy reform. One area that we plan to address early on is to improve the targeting of subsidized liquefied petroleum gas (LPG). The LPG subsidy has a very high cost and its benefits are largely captured by middlemen in the distribution chain, which has contributed to the emergence of a black market and shortages in the residential sector. Addressing subsidies will improve social justice (since benefits are mostly captured by the well-off), reduce waste, provide incentives for more rational use of the country’s natural resources, and create much-needed fiscal space.

Let me say that life has been rather hectic in the past three months, therefore I have not had enough time to write more econ-related posts, which was the original idea behind the blog.

Now that work life is a bit easier on me, I will start lecturing and pontificating about something most of you are not even interested in.

When I was working at a check out in a super market in Italy, I realised that there is a lot you can learn about a person’s life looking at how they spend their money on a daily basis. A single man going on a dinner date would buy wine, deodorant, a lot of food you cannot cook one single dish with and condoms. A working mother (with toddler) would rush through the supermarket on her way home and grab a disparate set of things such as baby food, comfort food, diapers, fruits, vegetable, staples, bottle of wine.

Because I do not have a life, I decided to apply the same approach to the Egyptian state so I went and downloaded the general budget final account data (available in Arabic for the year 2008/2009 here). The document looks at the budget commitments vs actual expenditures over the course of a fiscal year. So here’s some fun facts ( for comparison, 1 USD equals 5.9 EGP) :

On the revenue side:

  • Sales tax 64.5 million EGP (means on average every Egyptian pays less than 1 EGP per year in sales tax)
  • Taxes on employment 10.5 billion EGP (p.30) (on average 130 EGP p. capita p. year, but of course most of the people who pay employment taxes are those employed in the public sector and the few private sector companies that abide by labour laws).
  • Taxes on commercial and industrial activities 5.9 billion EGP (p.30)
  • Taxes on petrol agency and foreign partner (singular) 34 billion EGP (p.30)
  • Taxes on beer and alcohol: 330 million EGP  (p.59). This is higher than total sales tax (!) because places that sell alcohol are regulated as opposed to the rest of the economy.

On the expenditure side:

  • Subsidies to peasants committed 405 million EGP, spent 144.5 million (p.23). Maybe Egyptian peasants do not need subsidies – Meanwhile Egypt is reported to be the world’s largest importer of wheat. In 2010, the oil minister stated that Egypt imports 40% of its food, and 60% of its wheat (source: here).
  • Electricities subsidies 3 billion EGP committed, spent n/a ( considering it is one of the biggest line items one would expect a foot note but the document does not have an explanation as to why actual expenditure is not reported) (p.23)
  • Support to low-income housing 1 billion EGP committed and spent (p.23). (I wish I had the time to follow-up and see HOW these 1 billion EGP were spent).
  • Subsidies for Health and Drugs 399 million EGP (p.24)
  • Social security 1.2 billion EGP (p. 24) [compare with: expenditure on research and (feasibility?) studies for investment projects 1.5 billion EGP (p.27)]
  • Health insurance for the unemployed 14.4 million EGP (p24). With at least 2.3 million unemployed according to government sources, it’s an average expenditure of 7 EGP per person.
  • Subsidies for petrol resources 26 billion EGP (p. 24)
  • Subsidies for export promotion 3.2 billion EGP (p. 24)

This is of course a very superficial look at a complex issue such as expenditure allocation and social policy, however one could make a couple of observations:

  • Taxes revenues from sales are fairly low. This is partly because a lot of trade takes place in the informal economy. However, taxing sales (VAT style) means that does who consume more pay more – The same applies to tax revenues from employment which are much higher than tax revenues on industrial and commercial activities. At the same time, if you happen to be working in the formal economy or public sector, you will be paying a disproportionate amount of taxes on your income.
  • Expenditures seem to be geared towards subsidising consumption and the real estate market rather than, say, providing health insurance for the unemployed. Also electricity is subsidized – which is great, except these subsidies end up benefitting the ones that are better off .

For instance, let us look at petrol subsidies that absorb over 4.4 billion USD every year (incidentally you may wish to compare this to Obama’s offer of debt relief totaling roughly $1 billion “over a few years“). Let us imagine that on a given day a well-off expatriate (whom we shall call Mr Economic Revolution) fills his car with 30 litres of petrol. Now the price of each litre is 2 EGP half of which is subsidies (I am using a fictitious amount just to make the explanation simpler). Therefore the Egyptian state just paid 30 EGP towards the consumption of Mr Economic Revolution who happens to be a wealthy Italian expatriate working in Egypt. Ms Minimum Wage is an Egyptian mother who works as a public servant. She does not own a car so she uses public transportation to get around town. Because she shares the cost of a ride with many passengers her daily consumption of petrol is lower, say 1 litre per day (again, fictitious). Everyday, the Egyptian state spends 1 EGP ensuring that Ms Minimum Wage can get to work.

So basically, the morale of this blog post is that even a cursory look at the Egyptian budget reveals a regressive social policy (i.e. a policy that takes more in terms of percentage of income from the poor than the rich, check here). The expenditure pattern mirrors the one of the ficticious single man going on a date: i.e. one of instant gratification.

Of course the issue of subsidies and social policy is way too complex to be tackled here. However, one may only wish that the way public money is spent in Egypt is geared towards investment in public services (i.e. treating citizens as a resource) rather than towards subsidising consumption (i.e. treating citizens as consumers).

Of course I am not arguing for a blanket elimination of subsidies neo-liberal style, as some of them do play an important role in creating a safety net (especially food subsidies). What I am arguing for is a bolder vision of economic and social policy (an economic revolution, perhaps?). One way could be to eliminate some of the subsidies and redirect the savings towards better wages for public servants and conditional cash transfer programmes for the poor. I am including a link to a World Bank’s review of conditional cash transfer programmes to prove that I am not talking about sci-fi but mainstream public policy discourse spurred by socialist governments and embraced by the liberals as well.

I will conclude with two links. The first to a recent article on the Guardian on social policies and the second to the findings of a recent study of 750 Egyptian youth. Surprisingly (not), the youth interviewed viewed jobs and employment as their top priority. Corruption came second, followed by security with constitutional reform fifth and democracy/free elections at the bottom of the list (original link here)

Last night I was at a house party in Cairo. I believe the way house parties have changed after the revolution deserves a fully fledged ethnographic study. Suffice to say that the usual trite ice-breakers now feature a new acquaintance’s in-depth analysis of the scenarios for the military rule and/or the possible implication of this and that on the future of Egypt. Well, maybe it’s better than the usual ‘ohwhatdoyoudohere, howlonghaveyoubeenherefor, wheredoyoulive and sodoyouspeakarabic conversation combo.

Anyways, I am digressing. Since everyone is onto this revolution bandwagon I thought, what about me??! For sure I must have some half-arsed ideas I can share with the rest of humanity on this.

So here’s the thought process. I have no idea what is going to happen to the constitution, the military rule or the incumbent minister of water and irrigation. What I am really curious about is whether this revolution will eventually end up into decent-paying jobs, not having to struggle with double-digit inflation, not having to pay for private care because public hospitals are in shambles and why not, having the luxury of attending a protest where protesters are not out-numbered by police and/or harassed by misogynist fuckers.

A lot could be said about the dismal performance of the Egyptian economy. Let’s start with income inequality. According to the CIA factbook Egypt page, the poorest 10 % of Egyptian families hold 4% of the total income of the country, versus the top 10% who holds 28%. Of course there are worse cases.  In the US, the 10% of poorest families hold 2% of the total income, while the highest 10% hold 30%. What is interesting is to look at trends in the past 30 years. Data from the World Bank shows that in the past 30 years, despite economic progress on paper, the situation has not changed. If anything, the situation has marginally in terms of the wealthier becoming slightly more wealthy.

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