From national bourgeois development to Infitah: Egypt 1952-1992.

INTRODUCTION

THIS ESSAY WILL ARGUE THAT EGYPT has been developing along capitalist lines throughout its republican years. The Nasser regime, which overthrew the monarchy and declared Egypt a republic, was anti-colonial and gradually developed a state form of capitalism that was characteristically nationalist. Integrally linked with this development was the formation of new class fractions that eventually dominated the Egyptian social formation including the state apparatus. Further, this development of the political economy had no commitment to democratic mass mobilization. Consequently, the material gains that the masses of peasants and workers had gained during the Nasser regime proved to be ephemeral.

Nasser's defeat in the 1967 war and the subsequent structural changes in the international situation gave an impetus to seemingly dormant class fractions which pushed for the integration of Egypt into the global economy. The national capitalist development in the form of state capitalism was perceived by these capitalist class fractions to be an albatross that needed to be done away with.

The Sadat period saw the reversal of national capitalist development and the integration of Egypt into the international capitalist market primarily through the policy of Infitah (opening). The Sadat regime was essentially a continuation of capitalist development under new conditions. Since Sadat's assassination, the succeeding Mubarak regime has intensified Egypt's integration into the international capitalist system. Finally, changes in the regional and international environment allowed the Mubarak regime to return Egypt to the Arab fold while completing the process of Egypt's integration in the international political economy.

FREE OFFICERS AND FREE ENTERPRISE

Three agricultural crises in the 1920s and '30s and the onset of World War II gave the national bourgeoisie the impetus for industrial development. This so-called import substitution stage of the economy lasted into the 1950s and allowed the bourgeoisie to gain in strength. A tradition of free enterprise was well entrenched in Egypt on the eve of the July 1952 revolution.

The new Free Officer's regime was not at all against private property. Private enterprise, which had been operating in a more or less free environment, was left undisturbed during the Free Officers' first few years in power. At the beginning of the revolution the role of the state in the economy was basically restricted to the development of infrastructure. The public sector was responsible for only 13% of the GDP (Gross Domestic Product) while the private sector contributed the remainder of the GDP. The new regime made a point of emphasizing the centrality of private enterprise to the economy. Industry, agriculture, domestic and foreign trade, transport, banking, electricity and water were all part of the private sector. The regime stressed that it was a partner with the private sector and would restrict itself to heavy industry. It also reduced taxes "on profits and undistributed dividends," and allowed foreign investors to hold majority shares in domestic companies.(1)

While the Free Officers did not threaten private property, they, however, were intent on destroying feudalism. The agrarian reform of September 1952 was a direct attack on the landed aristocracy. It limited personal ownership to 200 feddans (1 feddan is approximately 1 acre).(2) The law was not radical except to the extent that it weakened the landed aristocracy. The effect of this law was to create a new agrarian class sector of rich peasants and bolster the small peasant sector.(3)

The 1952 agrarian reform law helped to restructure the economy by favoring the industrial and commercial bourgeoisie. It also tried to persuade the landed aristocracy to invest in the other economic sectors.

Despite all the regime's efforts to encourage private enterprise, "most capitalists were panic-stricken. Many emigrated abroad. Most did not abide by the state's plans; instead, they continued to do business and to accumulate and consolidate their own wealth and economic power."(4)

Zaalouk argues that the Free Officers made "a false distinction between the large landowners -- the holders of political power -- and the bourgeois capitalists, who were thought to hold only economic power." Due to this false assessment, the Free Officers allowed the bourgeois capitalists to "penetrate the various political and economic organisms set up by the state." Zaalouk seems to assume that the Free Officers did not need any help in making sure that the economy moved forward. Further, this assumption is based on the unsupported and unspoken premise that the regime had not sought to integrate many of those capitalists in the state machinery. Those capitalists had skills and know how that the regime needed to run the economy. The regime's commitment to private property made it relatively easy for many of those tied to the old regime to serve the new one. In fact, Zaalouk points out that the Free Officers were "a nationalist military group of petty bourgeois origin." As such, their ideology was capitalist. They, as well as the old industrial bourgeoisie, wanted to industrialize. This bourgeoisie was concentrated primarily in two groupings: the Misr (Egypt) group and the Federation of Egyptian Industries which "continued to make its voice heard, and its advice was indeed fully heeded by the new regime."(5)

However, two main differences existed between the industrial bourgeoisie and the new regime. The first was over the role of foreign investment in industrialization. The regime did not want to accord a major role, as the industrialists desired, to foreign investment. The second, which is a partial explanation of the first difference, was that the state wanted to maintain control of national development and have the industrialists serve that purpose.

Both the regime and the industrialists, however, were in effect allied against those who wanted to go back to a purely free enterprise system. The regime had the wherewithal to intervene in disputes between the industrialists and the purely free enterprisers. It appeared to be neutral, since most economic sectors were held privately, and was definitely capitalist.

FREE OFFICERS' DICTATORSHIP

The U.S. Embassy had been in touch with the Free Officers for some time before the coup,(6) and asked the Free Officers what they exactly stood for. They were against British occupation of the Canal Zone, the Monarchy, and for modernization along capitalist lines. Those goals were congruent with U.S. global interests. Colonialism was on the wane in both Asia and Africa, and the U.S. was in support of independence movements in those areas. It sought to establish political, economic and military ties with the newly independent countries. It was not difficult, therefore, for U.S. Ambassador Jefferson Caffery to support the coup.

On 26 July 1952, three days after the coup, the Free Officers sent King Farouk into exile. On 12 and 13 August 1952, 10,000 workers staged a strike at the Misr Company textile factories in Kafr al-Dawwar in the Delta. The army intervened, several workers were killed and many were injured. The following day two workers were summarily executed and many others were jailed by the regime. Directly after, the Free Officers jailed thirty others who were alleged to belong to the Communist Party.(7)

Having dealt a major blow to the workers' movement and the Communist Party, the ruling junta moved quickly against the monarchy.

DICTATORSHIP AND MASS MOBILIZATION

In early 1953, Nasser hastily created a mass organization, "The Liberation Rally," which he headed and used to suppress the political opposition. He also executed six Muslim Brothers and tried over 1,000 of them after the 26 October 1954 failed assassination attempt on his life. Nasser then moved quickly to consolidate his power: He dismissed President Naguib on 14 November and had himself elected President of the Republic in accordance with the Constitution of 16 January 1956. Article 192 of the Constitution also allowed a National Union (NU) to replace the Liberation Rally.(8)

Nasser's dictatorship expressed a major political trend among the masses: A majority fraction of the rural and urban petty bourgeoisie was anti-colonial, anti-communist and opposed to political Islam. Equally fundamental to the ideology of this fraction was its idolization of their leader.

In describing this period, Vatikiotis is of the opinion that ". . . internal consolidation of power by Nasser was by no means complete with his triumph over Naguib and the Muslim Brothers."(9) But by then Nasser was secure in his position, especially after more arrests and purges in 1955 and 1956, primarily of leftist elements. The most that could be said is what Zaalouk points out: "Although the old bourgeois capitalists and businessmen had indeed penetrated the Liberation Rally and become influential, they were not in direct control of the state apparatus, nor were they able to directly obstruct nationalist development policies."(10) Two points need to be made in this connection: 1) By the end of 1956 Nasser's popularity soared and he became a figure larger than life not only in Egypt but in the entire Arab World. No one was capable of effectively challenging him after the failure of the Tripartite invasion of Egypt; and 2) Zaalouk's argument does not mean that Nasser had not consolidated his power. On the contrary, it may be argued that Nasser had succeeded in integrating sections of the bourgeoisie into the regime and thus consolidating, rather than endangering, his power base. It must be remembered that the regime was not inimical to capitalist development and it needed to marshal all natural and human resources for that goal. These bourgeois forces were not a threat to the regime's existence. Vatikiotis does not mention what he means by his assertion; nor does he offer any proof to back it up.

COLONIALISM VERSUS ARAB NATIONALISM 

Nasser's stature in the non-aligned movement was in conflict with British and U.S. interests in "containing" the Soviet Union.(11) In addition, Israeli attacks on Gaza and al-Auja, and the U.S. refusal to sell arms to Egypt with no strings attached, prompted Nasser to accept the Soviet (so-called Czech) arms offer on 24 September 1955.(12) The Czech arms deal did not deter the U.S. in December 1955 from promising Egypt a $56 million loan to build the Aswan High Dam. Britain and the World Bank also agreed to loan Egypt $14 million and $200 million respectively. However, due to pressure from the Zionist lobby, the U.S. withdrew the loan offer on 19 July 1956. Britain and the World Bank followed suit. Nasser's response to the loan withdrawals was swift. On 26 July 1956 he declared the nationalization of the Suez Canal.

The Tripartite (Israeli, French and British) invasion of Egypt that followed on 29 October 1956 was a disaster for the invaders. The U.N., the U.S. and the U.S.S.R. all condemned it and Britain, France and Israel were forced to withdraw.(13)

The invasion was an attempt to restore these two old colonial countries to their former glory after the several reversals they had suffered since World War II. The war against Hitler had weakened the old colonial powers, and the independence movements took their toll as well. These events were propitious for the U.S. that had been blocked from expansion by colonialism. The U.S., therefore, had encouraged the anti-colonial struggles and had hoped to gain influence with the then newly independent states. The Tripartite invasion was, therefore, inimical to U.S. foreign policy interests.

Nasser was willing and had sought to cultivate relations with the U.S. based on mutual respect. The U.S., however, had another agenda. Firstly, it wanted to modernize the Third World so that the latter would become dependent upon U.S. investment and trade. Secondly, the U.S. was obsessed with the "containment" of the U.S.S.R. It tried to orchestrate anti-Soviet policy world-wide. Consequently, it did not tolerate maverick regimes. Nasser, though capitalist, was not particularly concerned about "Soviet expansionism." He was a modernizer who wanted to build a firm national capitalist economy. Further, he perceived Israel as a sticking point with the U.S. because of its unwavering support of the Zionist entity. Nasser reasoned that a national capitalist economy was impossible to build while the threat of Israeli expansionism persisted. U.S. foreign policy imperatives, however, militated against rapprochement with Nasser. Arab nationalism, the ideology of the national and petty bourgeoisie, was symbolized by Nasser. He had been placed at the center stage of Arab politics as an anti-imperialist due to the irreconcilable contradictions with the U.S.

Egypt was still an underdeveloped country. The order of the day for Nasser was the rapid development of the Egyptian economy. This task was further complicated by regional events.

CAPITALISM: NATIONALIST STYLE

When the Free Officers took over in 1952, industry's share of GNP was 10%; the balance of trade was in deficit (72 million Egyptian pounds); cotton, the major cash export, earned most of the foreign exchange; much of the financial power was in foreign hands; and state intervention was limited to irrigation and railways.(14) In addition, the gap between rich and poor was extremely wide as evidenced by severe inequalities of income distribution and wealth. This was exacerbated by low levels of direct and high levels of indirect taxes.(15)

There was organic integration of the wealthy bourgeoisie with foreign capitalist monopolies. Misr Bank's motto, "to build Egyptian industry with Egyptian capital" was forsaken. The wealthy bourgeoisie was also organically linked to the large land owners since they had purchased large tracts of agricultural lands. Many land owners, in turn, had invested heavily in finance and industry. The bourgeoisie had created and developed monopolies in the national market.(16)

The new regime instituted laws that favored industry over agriculture.(17) To encourage national capital to direct its savings toward industrial development, the authorities increased duties paid on imported industrial commodities that competed with domestic industrial products. The regime also canceled or lowered duties on imported material inputs including equipment necessary for the development of Egyptian industry. New companies were also exempted from paying taxes on profits for a seven-year period. Existing companies that increased their capital were exempted from tax payments for a five-year period. In addition, taxes paid on undistributed profits were lowered by 50%.(18) Finally, tariffs on luxury imports were raised.(19)

The regime had intended to complement, not compete with the private sector. This economic policy was being implemented by the Permanent Council for the Development of National Production, created in October 1952, and other similar institutions.(20)

The state also tried to encourage foreign capital investments through the 30 March 1953 law which reversed the 1947 law enacted by the Wafd government.(21) Despite all these incentives, foreign and local capitalists failed to invest in industry as the government had hoped.(22)

Increased economic intervention by the state occurred when it was clear to the regime that the behavior of both national and foreign capital had exacerbated the economic crisis. From 1952-56 economic policy was mainly concerned with holding down both expenditures and inflation.(23) Ikram contends that the transition to the public sector took place between 1954 and the early 1960s. It started with the state taking "equity in two or three new industrial companies established in 1954."(24) Despite increased state intervention, the period 1957-60 "was aptly described by Nasser as 'controlled capitalistic economy'."(25)

Ikram further contends that state intervention in economic activity assumed four paths: 1) "the 1956 Constitution adumbrated the ideological framework within which such activity was expected to be conducted;" 2) sequestration of British and French financial institutions; 3) Egyptianization of main arteries of the economy; and 4) economic planning. A measure of the increased importance of the public sector may be discerned in the area of capital formation. In 1952 the public sector's share of GDP was 13% and 28% of gross capital formation; while in 1959-60 the figures were 18% and about 74% respectively.(26)

Despite the growth of the public sector, main economic sectors such as construction and transport were still being held privately. More importantly, the state kept encouraging the economic activities of the bourgeoisie. Through Egyptianization, the bourgeoisie had larger assets. Misr Bank's capital, for instance, had increased from one to two million Egyptian pounds and its profits from 135,000 to 788,000 Egyptian pounds from 1950-60.

The power of the bourgeoisie grew after pressuring Nasser to unite with Syria in 1958. The union "resulted in a widening of the market for Egyptian products, since the Egyptian business community exported more manufacturing goods to Syria than it imported."(27) It is instructive to show at this point the structural changes in state intervention from 1961 till the end of the Nasser era.

SOCIALISM: NATIONALIST STYLE

The regime had no alternative but to radically change economic policy in order to maintain its existence, since it had become convinced that its first five-year plan (1960-65) was going to fail.

Just as the Suez war and the earlier economic crisis had pushed the regime to nationalize and sequester foreign holdings in 1957, so did the new economic crisis propel the regime to nationalize major sectors of the economy.

In addition, between 1957-1960, the regime had helped the national bourgeoisie by "Egyptianizing" foreign interests, imposing restrictions on foreign capital, supporting and encouraging import substitution and developing infrastructure. However, the bourgeoisie was unwilling to cooperate and demanded that the state implement its program. The regime was opposed to handing over economic development to the bourgeoisie who wanted to cooperate with foreign capital.(28)

The 1960 and 1961 major nationalizations were in effect attacks on the national bourgeoisie, many of whose members had been conspiring to overthrow the regime. The regime wanted to save capitalism in Egypt by pursuing capitalist development independent of the major capitalist countries. The only available way to doing so was the building of a genuine public sector.

On the ninth anniversary of the revolution (1961), the state announced Nationalization Laws 117 and 118 which were instrumental in creating a public sector that made the state an integral part of production.(29)

The implementation of the 1962 National Charter gave the state the power to nationalize any company that was owned jointly with the private sector. This process was completed by the end of 1964. At the same time all large companies held by private individuals were nationalized.

The National Charter further defined the roles of the private and public sectors. It kept internal trade in the hands of the private sector with the stipulation that 25% of it would go to the public sector within eight years. In addition, the Charter limited private ownership to land, buildings, construction and light industry. Further, exploitation was to be limited through land reform, rent controls and taxation policies. Finally, the Charter recognized citizens' rights to social welfare such as education, health care, employment, minimum wage, and social insurance for the elderly.(30)

By then Egypt's state capitalism consisted of the public sector; joint projects between the state and the private sector; the cooperative sector; and institutions to organize production in agriculture, trade and crafts.(31)

The 1960 nationalization of the Misr Group, which controlled 40% of all bank deposits, 227 industrial and commercial companies, and the National Bank was considered the foundation of the new capitalist road to development. The 1961 nationalizations further consolidated state capitalism. It was the function of central planning, however, to guide Egyptian capitalism in the development process.

Ikram informs us that by the end of the first five-year plan "the public sector accounted for some 90 percent of total (monetized) investment throughout the 1960s and until 1973."(32) State capitalism had eliminated the main centers of bourgeois monopolistic control tied to imperialism.(33)

The first five-year plan may be regarded as the period of economic stability and the economic apex of the Nasser regime. Growth rates averaged 7.2%; unemployment was virtually eliminated among workers and intellectuals; and per capita income increased by 19.1% by the end of the plan's period.(34)

The first five-year plan failed, however, in major respects: Both the balance of trade and balance of payment deficits increased which in turn resulted in decreased output. Savings also experienced a marked decrease which resulted in a budget deficit during 1965-66. The state made up for it by increasing taxes, which were largely borne by the working classes.(35)

THE DEMISE OF THE NASSER REGIME

The 5 June 1967 Israeli strike against Egypt effectively destroyed its air force within three hours. Israeli ground forces struck in a blitzkrieg fashion and reached the Suez Canal on 8 June. Israel also moved against Syria to occupy the Golan Heights and against Jordan to occupy the West Bank including East Jerusalem. The 1967 war demonstrated unequivocally that the Egyptian nationalist bourgeoisie and the radical petty bourgeois nationalists had not only failed in their state capitalist development but also in protecting the country from attack by their arch enemy.

At stake was not just Egyptian and Syrian territory. The rest of Palestine was gobbled up by the Zionist entity. Nasser, who had built much of his stature in the Arab World as a fighter against Zionism, colonialism and imperialism, was a broken man after 1967. His resignation speech on 9 June triggered massive demonstrations all over Egypt and the Arab World in rejection of his resignation. He was forced to stay. That spontaneous mass action had reflected the will of the masses to resist and recover from the catastrophe. The Egyptian masses simply said that they accepted no other leader but him. In his resignation speech, Nasser appointed a pro-American right-wing Free Officer, Zakariyya Muhyeddin, to the Presidency of the Republic. This choice, were it to stand, would have had the effect of rolling back the gains that the toiling masses had achieved under Nasser despite the bourgeois nature of the regime.

Already the bourgeoisie, inside and outside of the regime had been gaining political ground. Zaalouk mentions that "four ideological currents prevailed within the ruling class." These were: 1) the science and technology group which had no faith in the masses; 2) the bureaucratic state capitalist group; 3) the scientific socialism group; and 4) the traditional bourgeoisie and the conservative bureaucracy group which did not care for friendship with the Eastern Bloc. A general aversion to democracy had existed in all these groups except for the third one.(36) This ruling class, Zaalouk further contends, had been tied to the traditional bourgeoisie in various ways.(37) In forcing Nasser to remain President, the masses were simply defending the gains they had achieved under the regime.

The war resulted in both financial and human losses. In addition, Egypt decided to conduct a war of attrition against Israel that lasted from March 1969 till August 1970. Finally, revenues from the Suez Canal stopped as well as half of the oil production which was denied Egypt due to Israel's occupation of the Sinai.

After the war, Nasser had made Zakariyya Muhyeddin his representative to the West. Zakariyya Muhyeddin, however, was more than that. He was the representative of that fraction of the bourgeoisie inside and outside the state that wanted to effect an opening to the West and suppress the masses who were opposed to such an eventuality. Egypt, therefore, began to move toward the West despite its dependency on Soviet weaponry to rearm and to conduct the war of attrition. The acceptance of the Rogers' Plan in 1970 was a clear indication of the move to accommodate the pro-Western bourgeoisie.

Nasser's conduct after the 1967 defeat demonstrated his capitalist credentials and his distrust of both the masses and their democratic option. The die for the Infitah was cast before Nasser suffered a heart attack that ended his life on 28 September 1970.

It will be useful at this juncture to examine Nasser's relationship to the masses and how he mobilized them for his own ends in the era of state capitalism.

SPURIOUS MASS MOBILIZATION AND THE FAILURE OF STATE CAPITALISM

Nasser was no democrat. He had consolidated his dictatorship fairly early on. He also detested political parties. And yet, he had recognized the need to create a mass base to use against General Naguib and the Muslim Brothers. As we have seen earlier, these goals were achieved through the Liberation Rally. In 1957 the Rally was superseded by the National Union that served Nasser well till March 1958. The National Union was extended to Syria upon the founding of the United Arab Republic (the union of Egypt and Syria) in February 1958.

Those two organizations were in effect instruments for implementing regime policies. Nasser had been skillful enough to adapt the form of the mass organization to changing circumstances. The secession of Syria from the UAR on 28 September 1961 prompted him to convene a Preparatory Committee of the National Congress of Popular Forces in Cairo in October of the same year. The Committee was charged with establishing a National Congress whose task was to create a Charter for National Action.(38)

Under the articles of the Charter, the Arab Socialist Union (ASU) was formed. It was a mass organization different from the National Union in two respects: 1) it introduced occupational representation in which fifty seats in "all elected ASU structures at all levels be filled by 'farmers and workers';" and 2) it established elected ASU units in factories, agricultural cooperatives, business firms, professional associations, ministries, and so forth.(39)

Despite this seeming "democratization," Nasser continued to repress members of the bourgeoisie whom he felt were not in tune with his policies. He also moved against the Muslim Brothers in 1965 and executed their main propagandist, Sayyid Qutb, in 1966.(40)

The ASU espoused what passed for "Arab socialism" and later for "scientific socialism." As is well known, however, what is termed "scientific socialism" is an integral part of Marxism. Nasser was anti-Marxist. He had cracked down against the Communist Party on numerous occasions. The ASU which he created was no communist organization in ideology or internal organizational life. It simply carried out state orders in the various sectors of society. In addition, the ASU was the organizational form needed by Nasser to consolidate the 1960-61 nationalizations, which, as has been demonstrated earlier, were necessary due to the failures of the bourgeoisie to develop the economy and rid it of economic crises. The ASU gave Nasser a mass base to safeguard state capitalism. That mass base numbered about five million members. It certainly was a bulwark against the old bourgeoisie whose property had been confiscated. However, the ASU still had self-seeking opportunist individuals who saw in state capitalism nothing more than a way of advancing the interests of the new bureaucratic capitalist fraction to which they had belonged. The state had become a field of operations and a power base for this fraction vis-a-vis the other bourgeois fractions outside the state.

The "scientific socialist" grouping in the state, which Zaalouk discusses, had been the one responsible for the more radical aspects of the ASU. Shaker, however, disputes any claims to any "scientific socialist" group or trend within the Nasserist state. He simply maintains that this was a capitalist trend just like the others. Neither Zaalouk nor Shaker attempts to identify this grouping in terms of proving or disproving that it was "scientific socialist." If such a group existed, however, it would have been led by Ali Sabri, Sami Sharaf and Sharawi Goma. Those individuals were anti-communist yet consistently dedicated to the building of a radical, independent state capitalist system. They were firm believers in the use of the state secret police to quell the opposition instead of unleashing the masses to organize and fight in their own interests. A "scientific socialist" grouping had it existed, would have been open to dealing with its ideological counterpart -- the communists. Ali Sabri and the rest were on Nasser's side in suppressing the communists on various occasions.

After Nasser's death, it was extremely difficult to maintain the state capitalist system in the face of attacks on it from inside and outside the state. By the early Seventies major changes had occurred on the global scene which, coupled with domestic and regional events, made it imperative on the bourgeoisie to work for the dismantling of the state capitalist system which they no longer regarded to be in their best interests. But this takes us directly into the Sadat period.

SADAT, THE DESTROYER

The war of attrition which Nasser launched against Israel in March 1969, and his success in convincing the Soviets to install a SAM-3 missile air defense system for Egypt in January 1970, demonstrated his resolve to liberate occupied Egyptian territory. But that route had taken its toll on Egypt as well -- more Israeli air raids deep inside Egyptian territory. Later in 1970, Nasser accepted the Roger's cease-fire plan which indicated his willingness to yield to pressure from inside the state apparatus and from outside Egypt.

When Vice President Sadat took over after Nasser's death, he quickly moved to consolidate his hold on power. On 14 May 1971, Sadat arrested the majority of the ASU executive committee and a number of ministers and ASU cadres. In mounting his coup, Sadat took advantage of the powers that Nasser had consolidated in the office of the presidency. Sadat further increased presidential powers in the new constitution of 9 September 1971. The Nasserist left became isolated and could not appeal to the masses in its power struggle with Sadat. Already the Nasserist left had squandered an opportunity to move toward democratization through the mass movement of February 1968. Instead, the Nasserists had crushed that movement since they did not believe in genuine democracy. The coup allowed Sadat to pursue a rapprochement with the West, especially the U.S., and to weaken the public sector. He also moved to open the domestic economy to foreign monopoly capital.(41)

Consequently, the development of free areas for trade, industry and finance began in earnest. Negotiations were also held with foreign companies to invest in oil, housing, tourism and other projects. Talks were even held so that Egypt could join the European Common Market. In addition, domestic capital was allowed to have joint ventures with foreign capital. A number of Arab-French and Arab-European banks were established. The regime also moved quickly to consolidate these measures by satisfying its social base. Consequently, salaries of high level employees in the public and government sectors, especially the judiciary, police and armed forces, were increased. In effect, the "new class" which the Sadat regime represented received more privileges.(42)

On the Arab-Israeli front, Sadat launched his failed February 1971 peace initiative: a peace treaty if Israel agreed to a partial withdrawal and allowed Egyptian troops to cross over to the Sinai. Then in a quick reversal of his position, he declared 1971 the year of decision to end the occupation. In July 1972, he expelled the 15,000 Soviet advisers.(43)

The Egyptian population was getting tired of the state of "no war-no peace." Sadat was also unable to shake off the Israeli occupation so he could concentrate on opening the economy further to the West. On 6 October 1973, in a surprise attack, Egyptian forces were able to cross the Suez Canal and destroy the Bar-Lev line and move six miles into the Sinai desert where they stopped. For their part, the Israelis were thoroughly confused and took some time before they could regain the initiative and counter attack. Their efforts were successful in laying siege to the Third Egyptian Army on the East bank of the Canal and crossing over to the West bank. It soon became clear that what Sadat intended was to break the state of "no war-no peace" and push for negotiations with the Israelis. Henry Kissinger obliged Sadat and a disengagement of troops on the Suez Canal took place in January 1974. On 21 February, the Israelis moved back across the Canal. Canal clearance began in earnest as well as relations with the U.S. A second disengagement took place in September 1975 and Israel agreed to pull back farther into the Sinai and return the oil fields.(44)

Meanwhile, in April 1974, Sadat issued "The October Paper" on which basis Law No. 43/1974 was promulgated and decreed. The main purpose of this law was to attract Arab and foreign investment capital. An Investment and Free Zones Authority was created to deal with foreign investment.(45)

A second paper, presented to the National Assembly in September, discussed the role of the ASU. On that basis, four million members re-registered in the ASU in May 1975. Sadat also wanted a controlled parliamentary system; one in which the social forces he represented would be dominant. Should things get out of hand, he always had the presidential powers at his disposal to quell any threatening move toward genuine democratic participation.(46)

Sadat lifted censorship, instituted court reform, moved to have selective desequestration of property and assets, and used the security police in a more sophisticated way than did Nasser. He also moved to establish a controlled multi-party system out of the ASU thus creating the facade of pluralism. Yet the Egyptian elite remained unchanged in its characteristics.(47)

Sadat was elected President in September 1976. This was followed by National Assembly ejections in October of the same year. 1,600 candidates ran for 350 seats. The ASU won 280 seats.(48)

Toward the end of 1976, Sadat applied for loans from the World Bank which in turn demanded the end of governmental food subsidies. In January 1977, the government suspended subsidies on such items as flour, sugar, rice and cooking oil. It also canceled bonuses and pay increases. The result was the uprising of 18 and 19 January in which the army was used to silence the masses. The uprising brought about some relief from these adverse governmental measures. By mid-1978 Sadat's attempts at transforming the economy had all but ceased.(49)

Sadat realized that it was not enough for him to cross the Canal in the hope of reaching his goals. He had to deliver on reversing the occupation in order to reinforce his position at home so he could move later on with his economic transformation. He needed "peace" badly and was willing to do almost anything to achieve it.

Sadat cracked down on the left which he blamed for the food riots. He further introduced emergency measures to restrict political action.(50) When the opposition was effectively silenced, he was able to implement his strategy to regain Egyptian territory. His trip to Jerusalem stunned the world and angered the Arabs, especially the Palestinians, the Syrians and the Egyptian Left opposition which thought that he gave up too much unnecessarily.

The Camp David meeting between Menachem Begin, Jimmy Carter and Sadat in September 1978 produced an agreement between Egypt and Israel followed by a peace treaty in March 1979. In the treaty, Israel undertook to withdraw from the Sinai within three years. Normal trade and diplomatic relations; israeli ships to pass through the Suez Canal; the U.S. to monitor the Sinai; and Egypt would no longer act freely in the Sinai were all part of the treaty. In February 1980, Israel opened an embassy in Cairo and Egypt was ostracized by the rest of the Arabs.(51)

Meanwhile, Sadat continued to tighten his hold on the political process. He forced the Ward Party (the Party of the old regime) to disband after its reappearance in January 1978. He then formed the National Democratic Party (NDP) in July 1978. His motto was: "Food for every mouth, a house for every individual, and prosperity for all." The ASU then merged with the NDP. Finally, Sadat indirectly helped in founding a new opposition party: the Socialist Labor Party whose Vice-President was Sadat's brother-in-law.(52)

Sadat came under severe criticism after the April 1979 ratification of the peace treaty with Israel and the June National Assembly elections of the same year. He quickly introduced the aib (shame) law which forbade criticism of the regime. In May 1980, he marshalled his forces to amend the Constitution to give him unlimited terms as president. Sadat also established a "Shura Consultative Council" in October. The Constitution described Egypt as a democratic, socialist state with a mixed economy and an independent press.(53)

In October 1980, Sadat articulated a political philosophy which Hopwood described as Sadat's "vision of the ideal society." This vision had to do with "... correct behavior in every sphere, national loyalty before loyalty to any political faith, a liberal economy under socialist management and the preservation of Islamic guidance." In reality, however, Sadat used that "vision" to silence the opposition. He accused them of primary loyalty to a political faith, therefore, traitors to the nation. Hopwood went on to say, "Sadat was unable to put into practice what he preached." But that was not his plan. He used all these machinations to rid Egypt of Nasser's legacy in all spheres of life. In fact, Hopwood himself deals with Sadat's unraveling of the Nasser legacy.(54)

By the end of 1980, the effects of the Infitah to the West were simply to: establish a parallel market for foreign exchange; reduce exchange restrictions; reform banking laws; somewhat decentralize the making of economic decisions; and increase private sector participation in the economy in order to compete with the public sector.

ISLAMIC FUNDAMENTALISM AND SADAT

After the 1967 defeat, Nasser released numerous Muslim Brothers from prison.(55) When Sadat took over, he released the rest of them because he wanted to use the Muslim Brothers against the Left. In his haste to dismantle the Nasserist state, Sadat accused the era under Nasser of providing the climate in which Islam could prosper as a political force. The Sadat regime even went further. It encouraged political Islam in its pronouncements. His Vice President Hussein al-Shafei, for example, called for "building a society that could resist and confront Israeli society which claims that it is the Chosen People of God" and claimed that "the only society that could do so is: the society of there is no God but Allah" (Islam). He went further to describe Islamic society by the Quranic verse: "You were the best nation produced to the world." The regime also used the Sinai issue to minimize its troubles on the political and military front with Israel with such pronouncements as, "Better to lose the Sinai than lose our [Islamic] ideology."(56)

Sadat's decision to use political Islam backfired. The Muslim Brothers were able to claim more political space than Sadat had originally intended. By the late 1970s, the Muslim Brothers began to have an open presence in many of the mosques in Egypt and their propaganda was spread throughout the country. They were able to press (unsuccessfully) for the banning of alcohol and called for the implementing of Sharia (Islamic law) in the Egypt.(57)

Further, Sadat himself came under attack for his Infitah policies and the peace treaty with Israel. Political Islam also called for the banning of all leftist parties. The universities became strongholds of political Islam where it was able to openly conduct its propaganda and recruit disillusioned students. Political Islam also called for segregating classrooms by gender.(58) The Muslim Brothers did not resort to violence, though this had been their trademark in the past. As a result, more radical Islamic groups such as Takfir in 1973 and Jihad in 1979 took their place.(59)

Sadat was under pressure to amend the constitution to make the Sharia the main source of legislation, and was approved by a popular referendum. Sadat's accommodation of political Islam culminated in his assassination by the Jihad group on 6 October 1981.(60)

MUBARAK INHERITS THE OPENING

Husni Mubarak continued in Sadat's footsteps on the strategic level. He, too, was committed to the opening with the West and peace with Israel. However, he wanted to bring Egypt back into the Arab fold at a time when the Egyptian political economy was developing in the context of rapidly changing global and regional conditions. It was imperative, therefore, that Mubarak employ different tactics.

In Egypt proper Islamic fundamentalism was on the rise fueled by increasing poverty, the Egyptian-Israeli peace treaty and economic policies under Sadat. The state of emergency instituted by Mubarak after Sadat's assassination, which is still in effect today, added more fuel to the fire.

Although Egypt experienced high rates of economic growth after 1974/5, something IBRD attributed to Sadat's economic reform, there were problems of inequitable distribution.(61) The poor sectors of society have reeled under policies of economic reform. In addition, rapid rates of economic growth have been primarily dependent upon oil production which was a temporary respite. Finally, the fundamentals of economic growth, such as investment in productive capacity and human resources, have not been adequately developed.

When Mubarak assumed power, the entire Middle East was still unstable politically: the Iraq-Iran war was beginning; the Lebanese war was intense; and Egypt was divorced from the Arab World. The latter situation was unnatural and untenable.

Globally, the economy was in crisis and international debt had begun to rear its head as a major problem in global economic development. The global economy had by then achieved a high level of integration that spelled disaster for "independent" national bourgeois development of the Nasser type.

In Egypt, the main task that faced Mubarak was to widen the opening to the West. He could do so only by speeding up the dissolution of the public sector. While economic growth was maintained at high levels up to 1985, the Egyptian economy remained fundamentally weak. By the time the global recession/depression caught up with Egypt in 1986, debt burden and huge budget deficits made it virtually impossible for Egypt to recover. The World Bank attributed this deteriorating situation to, "... the reluctance of government to reduce its expenditures and the failure of non-oil exports to replace stagnating growth in foreign exchange that led to a rising budget deficit and an increase in external debt." A decline in worker remittances "and the levelling off of foreign aid" exacerbated the deteriorating economic situation. "The current account deficit grew to a peak of $5.3 billion in 1986, about 15% of GDP. External debt increased rapidly, reaching $47 billion by the end of 1989. The budget deficit has remained at about 15% of GDP and inflation is estimated at 20% a year."(62)

The opening begun under Sadat essentially increased poverty, as the IBRD noted. For several years thereafter, economic growth slowed to less than 3%. Egyptian economic ills, as far as the majority of the population was concerned, were due to the policies of the Infitah. These policies continued with renewed vigor under Mubarak. "In 1987, the government responded to the deteriorating situation with a series of economic reforms to reduce the budget and external account deficit. The reforms included steps to reduce barriers to trade and price distortions in the economy." Further, the government took steps to reduce price subsidies:

In discussions with the World Bank, in 1989, the Government agreed in principle to broaden and accelerate economic reforms .... The package of reforms ... will include increased autonomy for public enterprises with the closing of some that are unprofitable and the privatizing of others. It will remove investment licensing controls as a barrier to entry in the private sector and it will reform financial markets to improve access to capital.(63)

Indeed, Mubarak has accelerated the pace of gutting the public sector and in doing so has exacerbated the economic crisis that started under Sadat. The various economic measures under Sadat weakened the public sector and transformed its intended function. In over 10 years since the beginning of the "Opening," the public sector has exhibited two basic characteristics: 1) an organic link to parasitic local capital and international capital; and 2) an arena for the formation and development of a capitalist bureaucratic sector that cooperates with local and international capital.(64)

The state has been facing a contradiction regarding the Privatization of the public sector. The main elements of this contradiction are: 1) The capitalist bureaucratic sector wants to maintain its economic power base, the public sector; 2) Private capital (local and international) has been reluctant to engage in production, essentially limiting itself to services or light industry and construction activities where profits are high and risks low; and 3) Privatization would wreak havoc on the economy that would quickly spill over to the political arena considering the large number of workers (13 million) in the public sector.(65)

As matters stand now, 20 to 25% of the Egyptian population is considered poor. This percentage includes the 10 to 13% that is considered ultra poor. As a measure of this poverty, malnutrition "increased between 1978 and 1986, particularly among school children." In addition, the richest 20% of landowners still control 70% of the agricultural land while the poorest 20% of farmers control 5%. This author believes that privatization of the public sector would exacerbate the poverty that already exists in Egypt.(66)

In fact, the World Bank itself, which has been pressuring the government to privatize, recognizes three types of social costs of "adjustment" associated with the "macro program." These costs are: 1) labor displacement in the governmental and public sectors; 2) price increases; and 3) a decrease in the delivery of social services.(67) All these costs would multiply should the government embark on a full-fledged privatization course. The majority of those working in those sectors being affected are the urban poor and the middle class.

THE ANTI-SYSTEM POLITICAL OPPOSITION

The rapidly deteriorating economy has revitalized the political opposition. This is especially true with regard to the anti-system opposition, both secular and religious. In Egypt some of the anti-system forces operate as part of, or within, the legal opposition. Two cases in point illustrate this phenomenon: 1) the Muslim Brothers entered into an alliance with the Socialist Action Party as early as 1987. They have subsequently moved quickly to dominate and essentially take over this legal party; 2) the National Progressive Unionist Party (NPUP) calls for the restoration of "socialism" [state capitalism?] and an end to the Infitah and the bourgeois fractions associated with it.(68)

The Mubarak regime has continued Sadat's tradition regarding the handling of the opposition in general and the anti-system opposition in particular. Sadat played a balancing game in the hope of keeping the opposition weak. Mubarak has used the same strategy.(69) However, the economy has not been working in Mubarak's favor. Consequently, the opposition has gained ground over the past few years; for example, the communists have been influential among textile and other industrial workers.(70)

The NPUP has its social base among the industrial workers, small peasants and white collar workers in the public sector. Its membership has shrunk from a high of 125,000 during the first years of its existence to roughly 25,000.(71) Nevertheless, the NPUP still is important as an opposition party. But the influence of the secular opposition pales in comparison with that of the Islamic fundamentalists.

Islamic fundamentalism steadily gained ground up to 1988 after a brief but significant setback following Sadat's assassination. The financial scandal of the Rayyan brothers, who were prominent Islamist figures, has further damaged the fundamentalists. The bankruptcies of the so-called Islamic financial institutions due to theft also has compelled people to reevaluate political Islam.(72) A senior official at the U.S. Embassy in Cairo agreed that the Islamic organizations, other than the Muslim Brothers, were fragmented and that the entire Islamic trend has subsided.(73) However, the Islamic trend in all its manifestations remains a significant force on the political scene. But it appears that the state is still in control of the situation.

Iraq's invasion of Kuwait and the subsequent Gulf war, however, changed the situation radically. Secular forces across the Arab World were incapable of effectively mobilizing the population against the war. Many sectors of the population gravitated toward the Islamic forces in view of the international coalition building against Iraq. It appeared to many in the Arab World that Islam was the only force capable of confronting the imperialist West. The overwhelming majority of the population perceived that the West was intent on fragmenting the Arab World, and that Islam alone could unite the Arabs. In fact, the secular Iraqi regime had to resort to Islam to ensure the broadest base of support for itself in Iraq and the region.

Islamic fundamentalists in Egypt were re-energized in that period. Egypt was a main actor in splitting the Arab League countries by favoring an international "solution" to the Gulf crisis. In this way the fundamentalists argued, Egypt was fulfilling the U.S. agenda for the region: the defeat of Iraq and U.S. economic and political preponderance in the region. "The great Satan" was the master of the Egyptian regime. Therefore, the regime had to be overthrown.

Until July 1992, Islamic forces controlled many villages and small towns in several governorates in Egypt. In some cases they had political power that paralleled the Egyptian state.(74) They fomented religious conflict through armed attacks against Christians, primarily in Upper Egypt. They assassinated their critics, as for an example in June 1992 when they assassinated a major liberal thinker, Dr. Farag Fudah. A few days later they assassinated several people in the town of Dayrut, most of whom were Christians.

Until the current crackdown against the fundamentalists, security forces were known to turn the other way when Islamists broke the law and threatened members of local communities. Some members of the security forces and the police even encouraged the increasing influence of the Islamists.(75) The June 1992 attacks, however, were a major challenge to the state's authority. They threatened to destabilize the government through demands from the secular sectors of society to put an end to Islamist violence. The attacks also demonstrated that the state's monopoly over force was seriously challenged. The state, therefore, sent approximately 15,000 troops to occupy the governorate of Asyut and the town of Dayrut. It arrested scores of Islamists and in several instances had running gunfights with some of them.(76)

CONCLUSION

Unlike early 1990, when the regime did not fear popular mass movements, the Egyptian state today is concerned with the Islamic fundamentalist challenge to its authority. Slow economic growth and maldistribution of the social product have provided fertile grounds for the rise of Islamic fundamentalism. Government policies of appeasement have, on balance, worked against the strategic goals of the state. This circle was closed by Egypt's pro-U.S. position in the Gulf War.

In addition, secular forces have been unable to meet the Islamic challenge. Some of the salient reasons for this are:

1. In times of severe crisis, the deeply religious society has found solace in political Islam easier than secular alternatives;

2. The regimes' monopoly of the political process makes a mockery of "democracy" and ties the hands of the NPUP, the Nasserists and even pro-system secular forces such as the bourgeois Wafd Party in introducing legislation to counter political Islam;

3. The people still remember the authoritarian nature of the Nasser regime and the fact that it was supported by the Nasserist groupings and the NPUP -- despite the fact that the NPUP in actuality championed democratization and criticized the Nasser regime on that point;(77)

4. Members of anti-system political parties (both legal and illegal) have been subjected to arrests, harassment and other kinds of disruptions by the state which has substantially curtailed their effectiveness in the political arena and the organizing of a mass movement; and

5. The Communist Party (CP), Nasserists and NPUP have been unable thus far to devise strategies to counter both the state and the Islamic Fundamentalists.(78) The CP carries a considerable amount of baggage accumulated over the course of its political life that has made it unpopular among the population and it is now reevaluating tactics and strategy for the present period. For the past few years, the Nasserists have been engaged in internecine political fighting and are thoroughly incapacitated.(79)

6. Finally, the NPUP has experienced losses in membership and support that forced it to re-evaluate its work at its Third General Congress in February 1992.(80)

The entire Egyptian social structure is in crisis. Mubarak's policies, far from solving Egypt's ills as defined by the bourgeoisie, have in fact exacerbated the crisis. Under such conditions, the regime cannot withstand organized popular pressure. Unless the anti-system secular forces begin to mobilize a powerful mass base, the arena will be left to the Islamic Fundamentalists as the only effective anti-system force. This author believes that the only hope for the regime is to democratize the political process and abandon the opening to the West. But this is the raison d'etre of the regime and the social class it represents.

NOTES

1. Ikram, Egypt, Economic Management, 204-6.

2. Mabro, The Egyptian Economy, 65.

3. Zaalouk, Power, Class and Foreign Capital, 26.

4. Ibid., 25.

5. Ibid, 25-7.

6. Flower, From Napoleon to Nasser, 182.

7. Mabro, op. cit., 153, and Vatikiotis, The History of Egypt, 377.

8. Vatikiotis, op. cit., 383-5.

9. Ibid., 385.

10. Zaalouk, op. cit., 26.

11. Flower, op. cit., 195.

12. Ibid., 197-8.

13. See Hopwood, Egypt: Politics and Society.

14. Vatikiotis, op. cit., 390.

15. Ibid., 391.

16. Shaker, Issues of National Liberation, 88-9.

17. Ibid., 96.

18. Ibid., 96-7.

19. Vatikiotis, loc. cit.

20. Shaker, op. cit., 97, and Vatikiotis, op. cit., 392.

21. Shaker, op. cit., 98, and Vatikiotis, op. cit., 391.

22. Shaker, op. cit., 99, and Vatikiotis, op. cit., 392.

23. Shaker, loc. cit., and Vatikiotis, loc. cit.

24. Ikram, op. cit., 18.

25. Ibid.

26. Ikram, op. cit., 18-19.

27. Hosseinzadeh, Soviet Non-Capitalist Development, 117-8.

28. Ibid., 124

29. Zaalouk, op. cit., 36-7.

30. Ikram, op. cit., 33.

31. Shaker, op. cit., 107.

32. Ikram, op. cit., 22.

33. Shaker, op. cit., 106.

34. Ibid., 113-4.

35. Fadil, The Egyptian Economy, 196.

36. Zaalouk, op. cit., 42-3.

37. Ibid., 35-6.

38. Vatikiotis, op. cit., 399.

39. Ibid., 400.

40. Ibid., 402.

41. Shaker, op. cit., 65-78.

42. Ibid.

43. Hopwood, op. cit., 106-7.

44. Ibid., 108.

45. Zaalouk, op. cit., 55.

46. Ibid.

47. Vatikiotis, op. cit., 418.

48. Hopwood, op.cit., 114.

49. Ibid., 109.

50. Ibid., 114.

51. Ibid., 110-11.

52. Ibid., 115.

53. Ibid., 116.

54. Ibid.

55. Ibid.

56. Shaker, op. cit., 81-2.

57. Hopwood, op. cit., 117.

58. Ibid., 117-8.

59. Ibid., 118.

60. Ibid., 119.

61. World Bank, Egypt: Alleviating Poverty, xiii.

62. Ibid., 91.

63. Ibid.

64. See Mursi, Fate of the Public Sector.

65. Ibid., and interviews with workers, 1990.

66. World Bank, op. cit., xiv, xvi.

67. Ibid., xvii-xviii.

68. Interviews with opposition figures, 1989.

69. See Arab Strategic Report.

70. Interviews with Communist trade unionists.

71. Interviews with NPUP leaders, 1990.

72. Interviews with NPUP leaders, 1989.

73. Interview, 1989.

74. Interviews, 1992.

75. Interviews, 1992.

76. Egyptian newspaper accounts, 1992.

77. Interviews, 1990, 1991, 1992.

78. Interviews, 1992.

79. Interviews, 1992.

80. NPUP, Third General Congress Documents, 1992.

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Ibrahim G. Aoude is an Associate Professor of Ethnic Studies in the Ethnic Studies Program, University of Hawaii, Manoa.