Egypt under Mubarak was a tightly-controlled kleptocracy, and Egypt since Mubarak has been an uncontrolled kleptocracy, in which public officials steal whatever isn’t tied down. Shiploads of rice, diesel fuel, and other tradables are leaving Egyptian ports for hard-currency markets, while the country–which imports half its caloric consumption–runs out of money. Mubarak’s elite has helicopters revving on their roofs. It’s no surprise Islamists swept this week’s parliamentary elections. Whom do we expect Egyptians to vote for?
A new book by an economics reporter at Egypt’s al-Wafd party’s newspaper alleges massive corruption at the country’s central bank. Reviewed in al-Wafd newspaper today, the book by Mohamed Adel Ajmi claims that central bank chief Farouk Abd El Baky El Okdah exercises one man rule over the country’s banking system through cronies in all the central bank’s major departments. The central bank’s reserves, Ajmi claims, are unaudited and subject to the personal control of the central bank governor, who abused his position to enrich political allies of deposed Egyptian president Hosni Mubarak.
Theft on the grand scale from central banks is nothing new in the Muslim world. Last September, “Mahmoud Bahmani, the head of Iran’s Central Bank, denied rumours that $2-billion has already been transferred out of the country as part of a $3-billion embezzlement,” for example. The al-Wafd report has some credibility, considering that the Egyptian military dismissed all the central bank’s outside directors in October, leaving no-one but political appointees.
The central bank has financed perhaps $7 billion of flight capital out of its reserves, according to Raza Agha of Royal Bank of Scotland, as the Financial Times reported Nov. 4. Egypt’s spendable liquid reserves are well below the $22 billion figure mentioned in most news accounts–probably $13 billion, according to Agha, or less than three months’ import coverage.
The old Mubarak elite is getting out, and the generals are preparing for retirement on yachts in Monte Carlo and townhouses in Chelsea. Stripped of a thin Western veneer, what remains of Egypt is one of the world’s most backward societies, despite the veneer of sophistication that beguiled reporters who parachuted into Cairo for the Tahrir Square theatrics in February. Nearly a third of Egyptians marry cousins (because they count on their clan to protect them). And 45% are illiterate, while 90% of adult women suffered genital mutilation.
What ordinary Egyptians see is that they barely can fill their stomachs on the 5-piaster (less than 1 cent) pita loaves subsidized by the government. They are looking for someone to blame, and there is plenty of blame to go around: the new book from al-Wafd on Egypt’s central bank puts a narrative in place to explain the impending collapse of the Egyptian currency and the food shortages that will come with it. In fact, the surge in corruption is an effect rather than a cause of Egypt’s financial collapse. Once Asian demand pushed grain prices to a permanently higher plateau, the old regime was finished. And once the instability killed Egypt’s tourism, financial collapse became a matter of “when” rather than “if.” Rather than stay and try to get richer, the kleptocrats are salvaging what they can and getting out.
Nasser, Sadat and Mubarak left Egypt without a single untainted institution. As in Iran in 1979, the Westernized elite, who speak foreign languages and keep bank accounts abroad, will decamp for the fleshpots of London. The Islamists are left by default.
The difference between Egypt and a banana republic is the bananas: the collapse of Latin American currencies during the 1980s never led to starvation, because it occurred in countries that exported food. The difference between Egypt and Iran is oil. An Islamist Egypt will resemble not Iran, but Somalia.
What should America’s response be? Cut our losses. It would be an obscenity to provide military (or any other aid) to an Islamist government. Nothing to see here, folks. Keep moving. Non ragioniam da lor, ma guarda e pasa.