السبت، يوليو 24، 2010

The Monstrous State

Egypt's Autocracy

Time to Make a U-Turn

The Oldest Centralized State

For over 5000 years, Egypt has known one of the oldest Centralized States since the "second" unification under King Mene, Unifier of the Two Lands, around 3,150 B.C. Since then, Egypt's borders, administrative structure and probably public services did not change much! Unity seems to fateful due to the hydro-geography of the land and the need for a stable irrigation system which is centrally controlled. But does that mean we have to live with the same administrative problems forever?

Modern State

Egypt witnessed its first modern reforms on the hands of Mohamed Aly, installed as ruler by the people in 1805 AD. After Napoleon's short adventure in Egypt, Egyptians realized how bad things have become under the Ottoman rule and were eager for modernization. Egypt saw its golden liberal era between 1922 and 1952. Egyptian economy, culture and arts thrived with private initiative in a liberal society.

Re-distribution of … Poverty?

In 1952, the "Free Officers" movement led a coup d'état or a "Revolution" which took Egypt in a totally different path. Under the banners of "Social Justice" and "Re-distribution of Wealth", every business was soon "Nationalized", i.e., put under controlling hands of the "revolutionaries" and their accomplices who quickly formed a new ruling elite which controlled every aspect of Egyptian life. Industry, Trade, Banking, Insurance, Contracting, Transportation and other services all came under the "State's" control but so did the media, education, healthcare, theater, cinema, book publishing, the arts and culture. Nothing seemed to escape the grips of the tight control-obsessed administration. The government would nationalize for instance a successful factory and install an army officer as Chairman and CEO then kick the business owners out. A large and perhaps at one time briefly productive and socially popular Public Sector was the backbone of the Egyptian State for several decades following 1952 and specially after the July Socialist Decrees of 1960 and 1961. But Egypt's back was suffering and near collapse. Over time this system has become expensive and unsustainable, creating a passive citizenry, encouraging relationships of inequity and dependency and allowing room for mismanagement, corruption and waste of national resources. Near-criminalization of private initiative led to the death of entrepreneurship and the decay of the process of generating wealth which came to a standstill. With the annulment of wealth-making activities, "Redistribution of Wealth" would become "Re-distribution of Poverty".

Obsession with Control

Obsession with control soon turned Egypt into a Police State where the ruling elite felt that "their" state needed protection from "enemies of the revolution". Random arrests and voluntary detentions became the norm in dealing with anyone suspected of voicing out opposition. A wide citizen-based network was installed where people would spy on each other and report suspicious activities, "objectionable" material or speech to security authorities which reigned supreme with unchecked powers. We argue that this obsession with control was behind Egypt's uniquely designed administrative apparatus, modeled with one concern or rather a phobia in mind: state security and control and therefore, without major political paradigm shift, no administrative reforms can be effective.

Faulty Administrative Structures

All administrative structures in Egypt were built with this phobia in mind. Everyone and every entity, public or private, in the State should be a part of the hierarchy and ultimately report to one person at the top of that hierarchy, the president. According to the constitution (!), the President appoints the prime minister and the ministers who make the "technocratic government". The President also appoints the "governors" who in turn appoint mayors of their cities. Minister of Interiors appoints mayors of villages. The President also appoints chief judges. Minister of justice appoints judges at all levels and decides on their benefits. The president is the chairman of the NDP ruling party which one way or another controls the parliament either through NDP members or through independent MPs who join the NDP after they win elections as independent candidates. The president also appoints minister of defense, head of the army. The President is Commander in Chief of the Army, Head of the Supreme Judiciary Council, head of the Supreme Police Council, and so on. So, at the end of the day, the President is meant to control the country through this tight hierarchy.

An Expensive Machine

The size of the government which has to fill this monstrous hierarchy is staggering. It is estimated that around 7 million Egyptians are employed by the government while several more millions work for the government one way or another. The government therefore controls between 30-50% of the work force which has been seen essential to maintain political grip of the regime over its people. Come election time, these millions are shipped in government-owned buses to vote for government candidates. The cost of Egypt's bureaucracy is over LE 200 billion ($35 Billion) while the national debt approaches LE700 billion ($120 billion).

Pains of the Ruled

Egyptians have to put up with the arrogance, inefficiency and control phobias of this torturing machine. One week ago, in a closely controlled meeting between the prime minister and some university students, one of the carefully screened students just could not stay quiet, he stood up and faced the prime minister with the horrors of dealing with government corruption. The prime minister responded, "if the government is corrupt, then we are all corrupt, those in this hall with no relatives or family members working for the government, raise your hands." This was the plan, implicate everyone, then we will have no one to blame. The biggest problem with this failing administrative system is not its cost, although it is pretty expensive. It is not funds lost to corruption, although corruption in Egypt goes beyond belief or comprehension. The biggest problem with this monstrous machine in Egypt is corruption of values and lost time. Time lost in dealing with unrealistic requirements and procedures mandated by the government make Egyptian economy no longer compatible with the rest of the world. So, if you wish to engage in the global economy as a part of the supply chain of an international manufacturer or distribution network, you fail to do so because of two main reasons, cost and tempo. Business tempo in Egypt is many times far slower than most other countries. So, working with a company in Egypt will soon cause a bottle neck in the system and the Egyptian company will eventually be eliminated from the chain as its weakest link. The failing administrative and political systems put their curse on Egyptian business competitiveness.

Hernando de Soto, in his book, Mystery of Capital observed that an Egyptian citizen wishing to obtain a permit for building a house and registering the deed for such a house in his name must go through some staggering 76 different procedures to complete that task which would take many years to complete. Since people must live and will usually require houses for this purpose, the reality today in Egypt is that millions of homes are built in what is called "Random Housing" clusters. Slums invaded Egypt's landscape where no urban planning or design standards are followed.

At the end, the government had always had to bow its head and connect those millions of people with necessary utilities and we have to live for decades or centuries to come with an ugly, random, impoverished and utility deprived slum-based Egyptian landscape. The same goes for business licenses, car licenses, and all possible interactions with the government.

Egypt is not ruled by politicians. Egypt is ruled by security officers who dictate their terms on the technocrats cabinet, governors (usually ex-army officers), over the legislative and judiciary branches, the media and even the academia! So, when security people said GPS is bad and dangerous to Egypt's security, what they meant is that it posed an additional risk for them in protecting heads of the regime and they did not see it necessary to put any effort to deal with that risk. Never mind that car navigation systems or fleet management systems may need it. Never mind that many new mobile phone set models came pre-equipped with GPS. Just ban GPS import and enjoy peace of mind. Until one powerful agent of a major auto manufacturer or a major mobile phone manufacturer made a deal with the security, which then agreed to allow GPS into Egypt or rather formally allow it since it has been informally and illegally in the market for years!

Rise of the Parallel State

For years, private businesses and ordinary people used to suffer the pain of dealing with the government with all the time lost, the humiliation, money lost in bribes, deteriorating service quality in education, healthcare, utilities, and so on, but the people gradually found out that they did not really "need" to do so. In a functional sense, a State is basically a number of administrative systems, structures and institutions which provide an organized solution to such social needs as collective decision-making, justice, security, education, healthcare, infrastructure, etc. If the "formal state", however fails to provide a reasonable level of security, justice and quality life, or if laws issued are detached from the reality of things or contradicting with socially negotiated norms, or if laws are unenforceable, etc., individuals and private entities will seek to fulfill these essential services elsewhere, independent from the state. A Parallel State emerges gradually.

When a government employee who is supposed to deliver public services to citizens, services which should be provided by the state, when this public servant comes to the conclusion that his salary can hardly suffice to meet the essential needs of his family, he will be encouraged to establish a mini state of his own or a benefice for himself to provide such services against an additional cost in the form of tips, bribes or informal fees. The informal state is thus randomly formed as an ad hoc virtual collection of unrelated entities that collectively provide some or most of the functions and services which the formal state was supposed to provide. For instance, in education, poor quality of the state-run education system leads to the emergence of a parallel market for private tuition and after-hours education centers where the same lowly paid teachers working for the government would exert more effort in providing a better service for a reasonable fee! This was also manifested in a parallel market for books which claim to explain gibberish government-published books and so on. In the Healthcare sector, care providers and nurses working in government-operated hospitals independently charge informal fees that would ultimately determine the quality of the healthcare, or the lack of which. In transportation, when the government froze the taxi tariffs for over 25 years despite inflation and rise of fuel prices, government-controlled meters became irrelevant as passengers and service providers would use their own rates independent from the state. I wrote extensively and published several articles and studies about this phenomenon and the list encompasses every possible aspect of state services, from licensing, permits, security, justice, political associations, credit, media, foreign currency market and even social structures.

Reform Efforts

The past few years witnessed a realization that this deteriorating situation cannot go on. The focus of the reforms started with fixing the bad and often conflicting legislations. Reform are usually introduced by cabinet technocrats who despite being aware of the power of the security chiefs, sometimes manage to convince the president that Egypt was on the verge of collapse due to the control-freak policies of the past 6 decades. Egyptian Human Development Report (EHDR) issued in 2005, introduced the idea of a social contract which represents a paradigm shift to conceive a new Vision for the Future.

The message of the EHDR 2005 is that Egypt can no longer afford a 'business as usual' approach to the many daunting challenges we face over the next few years. The report argues that the time is indeed right to review our options and to implement new measures to enhance human security, growth and development. A perception that a new 'social contract' is needed, which better articulates the concepts of citizen rights and citizen obligations is becoming increasingly evident. It assumes that reform is a shared task that will succeed only if all citizens take part in the process, and if the state empowers its citizens in an increasingly competitive and rapidly globalizing world.

The government talks of decentralization, the President gave promises for updating the laws and fixing the dysfunctional government structures, but I believe that without addressing the political process and ending the Police-State, only minor reforms can be achieved. Two days ago, one of the Governors was called to a hearing in the People's Assembly, the lower house of the Egyptian parliament, to be questioned about a Typhoid epidemic spreading in his governorate as a result of sewage leaking and mixing with drinking water. The Governor publicly insisted that it was not his fault, because he had no power over such infrastructural civil works which are centrally managed by the Ministry of Housing. I wrote an article agreeing with the governor, but for different reasons. The Governor is indeed not responsible. People of his governorate have no say in electing him in or out of office. He is not accountable to the people. He is appointed by the president.

When there is a political will reform has shown itself to work for Egypt. When telecom market was partially privatized and deregulated it worked like magic. Instead of waiting for many years and paying a fortune to get a landline, Telecom Egypt is now advertising to promote its services. Mobile penetration reached 50% and a third operator was recently introduced into the market driving competition to work for the consumers. When a new tax law was issued lowering tax rates from an average of 48% to a flat rate of 20% tax revenues increased and people and businesses gradually are engaging in the system and the huge market for evading taxes is dying. The same happened with custom duties. Harmonization and reduction of tariffs reduced corruption and improved economic vitality. Partial reforms introduced to housing laws eliminated the need for complex "foot-hold" or "key-fee" for newly built apartments.

Conclusion: the Fallacy of Prioritizing Control

If we can learn anything from the Rise of the Parallel State, it would be that excessive controls actually lead to losing control. Control is surely an important element of any system design and as a result of modern management which often follows a system approach. Control, however, is only one element. Other elements are "effectiveness", i.e., can the system deliver desired objectives; and "efficiency", i.e., how efficient is the system when we compare outputs to inputs and "user-satisfaction / user-friendliness", i.e., how satisfied the users of the system are with its performance, among other things. Traditional public administration approach, however, emphasized "control" over any other element when designing and evaluating public administration systems. This surely came on the expense of effectiveness, efficiency and satisfaction of the users, citizens or the public, with regards to system performance.

Under authoritarian regimes specially, this emphasis on "control" had an additional political imperative, since authoritarian regimes rely for their survival on "control". However, the more procedures the government tries to install to ensure absolute control over the lives of the people, the weaker the government control in fact becomes, since people cannot and would not comply with these procedures, which renders the objective of absolute control as a self-defeating fallacy.

Egypt is a rich land with enormous resources, but its most precious resource is Egyptians themselves. If we shackle them in bondage, they, we cannot hope to reap the fruits of their creativity and hard work. Freeing the people is what makes wealth. And when we have a wealth-generating, value-adding economy, we can then have the resources to create and extend equal opportunity to Egyptians all over Egypt though a decentralized structure. This perhaps is the opposite of what autocratic, control-obsessed regimes have done for the past 6 decades and therefore I would say, time to make a U-Turn.

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