Monday, January 31, 2011

Revolution Until Bankruptcy!

Despite of its large size, Egypt is not a very wealthy country. Israel, its next door neighbor possesses an economy of comparable size while having about 10% of Egypt's population. Additionally, much of the rest of its income comes either due to its ties with Israel and the West or due to its Faux democratic moderate autocracy.

About 10% of Egypt's incomes comes from direct trade with the states. A lot more is due to various free trade agreements with the West, which Egypt has access to due its peace agreement with Israel. And then there is the big elephant in the room: tourism!

If an anti-American regime takes hold in Egypt, you can be sure that the Americans will cease selling the Egyptians modern weapons and cut military aid, which is second only to Israel (though the Obama administration has been rather unpredictable with things like that). The powerful Egyptian army will not like that. Whomever takes over in Egypt is going to have a tough time maintaining a modern army.

Additionally, you can assume that trade between Egypt and the states is going to diminish immensely. Egypt might be able to find alternative markets, but they will probably be compelled to use more competitive prices. That's before we consider the number of foreign companies with production facilities in Egypt that will pull out. The very successful Israeli underwear manufacturer, 'Delta', has already ceased production in Egypt, temporarily. If things do not become stable, temporary is sure to become permanent.

Then there is the issue of foreign and local investment. Foreign investors have been fleeing the Middle East in the last few days. Egypt's bond rating has already been cut. It has also been reported that some Egypt's uber rich have been fleeing the country with their cash. This is not good for the economy.

And then there is the little issue of tourism, one of Egypt's most powerful sectors. Nobody is crazy about going to a country where mass riots can break any minute, accompanied by waves of looting pillaging and raping. Not to mention highway robbery. Things are bad... There has already been a break-in to Egypt's treasured national museum and some ancient artifacts have been stolen. This must be a big blow to Egypt's national pride and dignity.

So are we looking at a democratic transformation, or a big disintegration of a great nation, with its history, national treasure, dignity and wealth all being wasted away. It's international prestige and strategic interests collapsing and its food supplies running out?

Does that mean that the situation in Egypt must stabilize soon as a corrective step? Of some compromise being reached in order to return Egypt to where it was? 

Most likely not... that's what happened in Russian in 1917, or Iran in 1979. More chaos, less democracy and less freedom.


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