Introduction
Egypt’s revolution was dubbed a failure in 2013, when a military coup, backed by mass uprisings, brought the military to power and ended the presidency of the country’s first democratically elected leader, merely a year after his ascension to power. The subsequent election of the former Minister of Defense, and the popular face of the coup, Abdelfattah El-Sisi, to the presidency in mid 2014 has marked the epitome of this failure (De Smet 2016). Commentators have since described the current military regime as a force of counter-revolution (Selim 2015) insofar as the military has ‘forge[d] alliances in order to restore the equilibrium and ensure the survival of its own apparatus’ (De Smet 2016, 97). It has not only halted the reforms demanded during and initiated following the 2011 protests but also, ironically, continued the same discordant policies that catalysed the revolution in the first place. Rather than choose between a command economy and neoliberalism, the military regime appears like its predecessors to be making a ‘schizophrenic attempt to maintain both systems at once’ (Stacher 2016). Describing the current regime’s rule as ‘schizophrenic’, however, undermines the ways this rule is intentional and strategic.
In this article, we argue that the political economy under the military is reproduced in post-revolutionary Egypt through a strategic wedding of seemingly contradictory state types, to create a hybrid we call ‘statist neoliberalism’. Our purpose in this article is to explain how and why the Egyptian military continues to pursue seemingly contradictory economic and social policies. As previous observers have clearly detailed, the post-2011 Egyptian state under military rule has maintained key features of the Hosni Mubarak regime, including a large bulk of its elite class, policies, partnerships and authoritarianism (Brown and El-Shimy 2016). But merely describing the continuing trends of governance and policy-making falls short of explaining how these trends have continued despite the change of rulers, and the ground-shaking regime changes that have taken place since 2011. This article therefore uses a particular field of policy as a lens to interrogate how such continuity has been reproduced: tax and fiscal policy. Following a brief overview of Egypt’s statist regime since the Nasser regime in the 1950s, and the introduction of neoliberal policies since the 1970s, this article examines the attempts to negotiate statist neoliberalism before the outbreak of the revolution in 2011, and how this blend has been reproduced against popular resistance in the years following 2011. In doing so, we attempt to understand how the current military-backed regime and its economy mark a different kind of political and economic regime, albeit continuing Mubarak’s deployment of statist and neoliberal policies.
Taxation and the reproduction of the state
Taxation has long been viewed as an essential condition of statehood. In her landmark book on the resource constraints faced by rulers, Levi (1988, 2) argues that tax revenues underwrite the capacity of states to implement their political decisions and thereby extend control throughout their territory. Regardless of whether a state’s primary orientation is neoliberal or statist, the stability and predictability of tax revenues enables governments to provide security, meet basic needs, and plan ahead with greater certainty. Unfortunately, most states in the developing world exhibit great difficulty in mobilising domestic revenue. Burdened with tax authorities of limited capacity and large informal economies, some governments barely manage to collect sufficient taxes to cover more than a fraction of their annual budgets. Although Egypt’s tax-to-GDP ratio has been low compared to other countries with similar economies, it fell to just 12.5% in 2015. The consequences of this limited revenue collection and subsequent fiscal powerlessness have been enormous. States lacking the capacity to extract consistent and sufficient revenues from their citizens and private sector actors have found themselves trapped in ‘punishing cycles of unserviceable national debt’ (Slater 2010, 35). As a consequence, they have often failed to provide basic essential services, such as potable water, sanitation, and basic protections against hunger and disease.
The political importance of taxation, however, has more to do with the source of the revenue collected than its quantity; in other words, it has to do with the class base of tax policy. Tax policies lie at the core of fiscal and economic policies, because the decision of who to tax and how to tax them reflects policy priorities and the class interests of the policies. Efforts to generate revenue from corporate taxes, for example, may help to ensure that corporations, which make large net profits every year, pay their share towards the state budget. Taxing consumption, on the other hand, signals a policy that views meeting food and basic survival needs as an activity to be taxed. State policies have long strategically targeted economic goals through their tax policies: cutting taxes on specific activities in order to encourage investment in them, taxing imports heavily to protect local production, and exempting low-income workers from income taxes to protect their living standards. Tax policy, therefore, can reflect the class interests of the economic policies, and whether the regime is working to advance the interests of the working classes, or the business elite.
From statism to neoliberalism in Egypt
Understanding the continuity and changes of the political and economic regimes in Egypt requires that we interrogate the state as it relates to the capitalist system and society. In doing so, we understand the state not as an abstract or monolithic realm or set of institutions, separate from society and the capitalist system, but as ‘the set of institutional forms through which a ruling class relates to the rest of society’ (Ollman, cited in Hanieh 2013, 12). It is the class structure that generates the state’s character, and it is the state that reinforces the class structure. State and class therefore do not exist outside of one another and are mutually constitutive (Hanieh 2013, 13). In light of this, we follow the continuities and ruptures of the state, from its statist to its neoliberal arrangements, and the ways it related to both the masses and the business class, and to the capitalist economy.
Following the overthrow of the monarchy in 1952, the guiding ideology of the regime of Gamal Abdel Nasser was ‘a sweeping view of statism that created a vast and pervasive state apparatus’ (Rutherford 2008, 131). As an ideal type, statism is defined as an ‘accumulation regime’ characterised by the state control over the economy. State intervention encompasses all economic activity: incentive-setting and planning through to production. Statism also relies on the state for managing ‘the antagonistic character of capitalist social relations’ – in other words, it is the task of the state to contain social and class conflicts (Ayubi 1995, cited in Roccu 2012, 72).
Egypt’s highly centralised statist regime controlled the economy, the polity and the society at large. The state took control of all channels of production, employment, participation and expression, by replacing political parties with a single mass party controlled by the government and by subordinating all workers’ associations to a single network of state-controlled unions and professional associations, as well as by taking control over television, radio, newspapers, universities and corporations. Statism operated through the state’s complete control of three crucial arenas. First, the public sector was increased via the nationalisation of private firms to include virtually all productive enterprises under its control, thus making the state the employer of a large proportion of the Egyptian labour force (Rutherford 2008, 133). Second, statism operated through a comprehensive subsidy system. In the aftermath of the popular coup of 1952, the military followed through on its pledge to improve the social conditions of the majority of Egyptians through an extensive subsidy system that provided gasoline, electricity, food, transportation and medical care to all citizens (Ibid.). The statist regime not only granted large subsidies to the population, but also provided subsidised housing, free public education, free access to hospitals and medical care, and various other benefits. Finally, statism operated through a bureaucracy that not only made all plans and decisions centrally and unilaterally but was also capable of implementing them as the owner of all labour and productive assets in the country. Statism was thus more than a practice of authoritarian governance; it was a method of delivering welfare services and ensuring a rise in the standard of living to newly formed middle classes and a dignified working class (Roccu 2012, 103; Rutherford 2008, 134). Thus, the legitimacy of the regime relied upon sustaining this welfare component of statism.
This approach to statism was soon to face a series of crises, beginning with the defeat in the 1967 war against Israel, which resulted in both a crisis of legitimacy to Nasser’s ideological pan-Arabism, but also a fiscal deficit, as military spending doubled in response to the war (World Bank 1971, Statistical Appendix 5.1). Economic constraints were exacerbated by the drop in global oil prices and the adoption of various neoliberal policies starting in the 1980s. This led to the beginning of the end of Egyptian statism, and its slow replacement by the neoliberal state. The neoliberal state is often considered the anti-statist model: it defies heavy regulation, state involvement in production and organisation of labour and the economy, and advocates for minimal state intervention. The decline of statism however, also witnessed the gradual decline of the role of the military institution in direct governance, and its rising role as the sponsor of low-income citizens, building social housing and providing low-price food markets (El-Houdaiby 2018). But, as one analyst describes it, the transition to neoliberalism from statism has set the stage for Egypt’s failure; ‘It was not cutting fast enough to please the international financial institutions, but it was cutting more than enough to spark popular discontent’ (Stacher 2016).
No neoliberalism without policing
Since the 1980s, neoliberalism has been widely debated as a concept and has figured critically in the policy agendas of globalists. In our application of the concept of neoliberalism, we are referring to the national and transnational political project of deregulation, privatisation, financialisation, austerity and commodification, in which the neoliberal state is biased towards the business class, and is expected to intervene minimally, and to do so only to ensure the attractiveness of the investment climate. Although some of the literature on neoliberalism has suggested the demise of the state, the state has certainly not disappeared; rather, it has redirected its activism and intervention on behalf of new interests and goals (Levy 2006). This is not to suggest that any single state has fully committed to the project of neoliberalisation; rather, states can adopt neoliberal reforms, while also being forced to commit to some version of the welfare state, in order to appease the population (Levy 2006, 7).
In light of this, there are two key assertions about neoliberalism that are crucial to this article: first, neoliberalism is neither monolithic nor necessarily a comprehensive project. Even though most countries have witnessed the neoliberal turn in the past few decades, they have done so differently and only partially (Harvey 2005, 87). In this way, speaking of a neoliberal state is not sufficient to understand the type and degree of neoliberalisation. In addition, neoliberalism is firmly rooted in contradictions – contradictions between its theory, and practice, and its view on businesses versus individuals. More importantly, neoliberalism is inherently contradictory about the role of the state. States should, in theory, practise a minimal role in the economy and move towards deregulation and privatisation. In practice, however, states are meant to crush protests, intervene to ensure an enabling investment climate, save businesses when in crisis, and reform the legislative, social and economic systems in ways that advance the interests of the business class (Harvey 2005, 64).
This brings us to the second assertion about neoliberalism: the convergence between neoliberalism and authoritarianism, where neoliberalism necessitates measures such as restricting dissent and crushing movements. In the case of Egypt, state coercion and police repression are not ‘coincidental’ or a mere outcome of an authoritarian political system but are an ‘integral part of the capitalist state irrespective of the prevailing political system’ (Abdelrahman 2017, 187). This includes the military regime’s ideological ‘permanent state of emergency’, which Abdelrahman asserts is not coincidental, but is a strategy that is historically ‘integral’ to the capitalist state (Ibid.). She therefore traces the rise of the ‘securocratic state’, a neoliberal state working for the interests of the elite classes and utilising policing strategically to reproduce capitalist relations and the neoliberal global order as a whole (Ibid.). In the same way, we suggest looking at the statism of post-2011 Egypt as not coincidental to the capitalist military regime, but as a strategy that simultaneously manages the antagonistic aspects of capitalism and maintains a regime that by default impoverishes and dispossess its populations.
Egypt’s Economic Reform and Structural Adjustment Program (ERSAP) with the World Bank and the International Monetary Fund (IMF) in 1991 marked the peak of neoliberal statehood in Egypt, profoundly transforming the country’s economy and further integrating it into the global economic system (Rutherford 2008, 138). This structural transformation had three main components: cutting government services in order to reduce the budget deficit, liberalising exchange rates and interest rates, and implementing a privatisation programme that focused on public sector service and industrial enterprises (Ibid.). Although the transition from statism to neoliberalism clearly accelerated in the 1990s, one could argue that liberalisation had been under way since Sadat’s attempts in 1977 to remove bread subsidies and overturn the land confiscation and redistribution policies of the 1950s. For example, the liberalisation of agriculture had started in the late 1980s with the help of USAID and the World Bank, with attempts to liberalise the agricultural market and to strategise its output towards exports to Europe rather than meeting domestic needs (Bush 2011, 396). However, the 1991 agreement with the IMF and the World Bank certainly marked a new era of structural neoliberal reforms across all sectors. In particular, the goal of controlling the budget deficit, while attracting foreign direct investments, was a characteristic feature of more than two decades of neoliberalisation in Egypt (Soliman 2011, 112). In this way, key budgetary and tax reforms were implemented, with the goal of collecting more tax revenues, while providing tax cuts for investors; the state had to cut subsidy and welfare spending, while providing attractive incentives to investors in various sectors. In tax policy, this resulted in the cutting of taxes on corporate profits by more than half (from 42% to 20%), while taxing state-owned enterprises at 40%, and removing various exemptions on consumption taxes (Joya 2011, 371). Taxing state-owned enterprises at such a high rate facilitated their bankruptcy, the only legal avenue that justifies their privatisation under a constitution that still provides for socialist era protections of public ownership (Ibid.).
The regressive neoliberal reforms that mandated the deregulation of labour (Hanieh 2013, 55) and the dispossession of citizens and farmers were made possible by the repressive nature of the Egyptian regime. Banning protests, restricting associations, closely monitoring and controlling unions, and attacking and occasionally killing protestors were all necessary for the successful implementation of ERSAP in Egypt (Joya 2011, 374). Ironically, the increasing violence, torture and intensive policing practices, which were aimed at protecting the pace of neoliberal reforms and the interests of the business class, became themselves the focus of mobilisation for the 2011 uprisings, which were planned on National Police Day to protest against torture and ill-treatment (Abdelrahman 2018, 186).
From Mubarak to the Muslim Brotherhood to the military regime
The transition from statism to the neoliberal state reflected a restructuring of the state and the economy vis-à-vis the class structure. This transformation arguably reached its peak with the liberalisation zeal of the Ahmed Nazif cabinet (2004–2011), which witnessed the creation of the Ministry of Investment: the new ministry was tasked with speeding up the privatisation programme and major transformation in tax laws (2005), as well as a business capture of the key cabinet positions unprecedented since 1952 (Joya 2011, 370). Between 2004 and 2006, the Nazif government under Mubarak managed to sell off 80% of Egypt’s state-owned enterprises (Joya 2011, 371). The privatisation deals not only resulted in grand losses of public funds, but also in large-scale lay-offs and permanently high unemployment rates. In fact, the proliferation of the informal sector is often associated with the dismantling of the state’s role as an employer (African Development Bank 2016, 10). In order to appease foreign investors, the government offered 5- to 10-year tax breaks, and created a multiplicity of free zones, which exempted investors permanently from any taxes, duties or customs charges (Joya 2011, 371). Thus, the implementation of the ERSAP was ‘in essence subsidising the private sector at the expense of the nation as a whole’ (Ibid.). The restructuring was, in other words, restructuring the relationships between the bourgeoisie and the working classes, and restructuring the relationships of society at large to national resources and income. The tax policy was therefore a major site of this restructuring. It is not surprising then that the same decade that witnessed the aforementioned cutting of corporate taxes and the raising of consumption and payroll taxes on workers and ordinary citizens also witnessed the rise of a new political class, which brought the business class to key ranks in both government and parliament, allowing them to control legislation and policy-making to further serve their class interests, against those of the masses (Abdelrahman 2016, 186). One illustration of the restructuring of the state along the lines of class was the 2004/2005 ‘business cabinet’ (Ibid.), when the number of businesspeople elected to parliament increased from eight in 1995 to 150 by the 2005 elections, making up a quarter of the parliament (Joya 2011, 370).
Looking at the state under Mubarak from the lens of taxation illustrates a similar relationship vis-à-vis the business class on one hand, and the large class of workers and the working poor on the other hand. The Mubarak regime depended on two sources to mobilise tax revenue for the state budget: consumption taxes (general sales tax, later replaced by the value-added tax [VAT] under the military regime), making up about 40% of tax revenues, and the rent taxes (taxes on the Petroleum Authority, the Central Bank of Egypt and the Suez Canal profits, all of these state-owned bodies), which made up roughly 25–30% of Egypt’s tax revenues. The rest of the taxes were collected from personal income taxes (14%), corporate income taxes (10–12%) and other taxes such as tariffs and property taxes (MoF 2012, 28). Taken together, these two sources of taxation – consumption taxes and rent taxes – represent the conflicting statist neoliberalism reproduced by the Egyptian state, under Mubarak and, later on, under the post-revolution military regime. Consumption taxes are the popular recipe of neoliberal international financial institutions for more efficient and speedy resource mobilisation, and also are meant to make up for revenue lost from tax incentives granted to corporations (Hanieh 2015, 125). On the other hand, dependence on rents, generated through taxing state-controlled industrial and financial enterprises, such as the Suez Canal and the Petroleum Authority, as well as remittances from Egyptians working in the Gulf, reflect the continued centralised state control over the economy.
The failure to tax corporate income, widen the tax base, and move towards progressive forms of taxing profits, capital gains and higher incomes, is remarkably characteristic of the different regimes that Egypt passed through in the past six years and is emblematic of its continued neoliberalisation. Compared to other countries with similar economies, Egypt’s tax-to-GDP ratio has remained significantly low, having fallen from 15% in 2009 to 12.5% in 2015 (World Bank n.d.). Not only have successive administrations failed to capture the tax revenue required for a well-functioning government, but they have also focused on regressive consumption taxes1 that continued to make up the largest share of tax revenue. In 2010/2011, sales taxes already made up 40% of Egypt’s tax revenue; with the introduction of the VAT in late 2016, the state budget projected a 30% increase in consumption tax revenue in 2016/2017, meaning that VAT made up 50% of total tax revenues in the same year (MoF 2017, 24).
What is intriguing is that despite the seeming change in the nature of the ruling class, the tax policy post-2011 has advanced the Mubarak-era economic plans, as if Mubarak’s National Democratic Party (NDP) was in charge of implementing them. In particular, it is important to highlight that the Muslim Brotherhood viewed the 2011 uprisings as an opportunity for a minor reconfiguration of the neoliberal system, namely, the addition of the Brotherhood’s own capitalist leaders, such as Khayrat Al-Shater, to the dominating ruling class (De Smet 2016, 211). When Al-Shater was disqualified from running in the presidential elections, the Brotherhood put forward Mohamed Morsi as a presidential candidate, and he became president in July 2012. As a president, Morsi cooperated with both the Brotherhood’s and Mubarak’s business class on continuing the same neoliberal reforms that aggravated the social problems that brought the protestors to the streets against Mubarak in the first place, including by signing a contested IMF loan in 2012 (Ibid. 214).
Increasing the dependence on consumption taxes has come in parallel with a policy of tax cuts on corporate profits. Because of these policies, taxes on corporate profits have witnessed a sharp decrease in their contribution to tax revenues. In 2010/2011, taxes on corporate profits made up 36% of total tax income. This category also includes taxes on profits incurred on state-owned enterprises and rent: the Petroleum Authority, the Central Bank of Egypt, and the Suez Canal Authority. Taxes on the profits of these three largely rent-based enterprises made up 67% of Egypt’s tax revenue from corporate profits. In other words, taxes on other companies’ profits made up a mere 13% of total tax revenue in 2010/2011, a number which decreased to 9% by 2016/2017 (MoF 2017, 28). It is noteworthy that the current economic plan of the El-Sisi administration included a decrease of corporate profit tax, and a guarantee of no further increases in the tax rate for 10 years (till 2025) (Egypt Economic Development Conference 2015, 11). This model of domestic resource mobilisation is representative of the continued hybrid of ‘neoliberal statism’ that the military has reproduced in Egypt after the 2011 uprisings: a heavy dependence on rent from highly taxed, state-owned sectors, combined with a swift move to decrease the tax burdens on corporations and a dependence on taxing consumption.
Overall, the state has continued to fail in efficiently carrying out the basic act of statehood – capturing enough tax revenues to cover its budgetary spending. As a result, the ratio of tax revenues to total state revenue remained consistently low, making up 71% of total state revenue in 2015/2016 and, 64% in 2016/2017 despite the implementation of VAT. The rest of the budget is financed through international loans (MoF 2017, 29).
Egypt’s budget expenditure on interest repayments risen considerably since 2010/2011, reflecting the increasing dependence on international loans. In 2012/2013, under the Muslim Brotherhood, interest repayment had increased by 40% compared to 2010/2011, while in 2016/2017, under El-Sisi, interest repayment floated to mark a 70% increase from interest repayment in 2010/2011 (MoF 2017, 24). While spending on welfare and social benefits made up 30% of total state expenditures in 2010/2011, this decreased to 20% in the 2016/2017 budget. During the same period, interest payment increased from 20% of total expenditures in 2010/2011 to 30% in 2016/2017 (Ibid.).
Tax policy as a site of class struggle
These rapid changes to taxation structures throughout the past decades were not without contention. Ongoing calls for tax justice, starting in the last decade of the Mubarak era (2004–2011) reflected the struggles of workers and farmers, in particular in the face of inequitable tax and fiscal policies that shifted the burden of revenue mobilisation from tariffs and corporate income onto the shoulders of workers and farmers, targeting their low incomes and consumption.
Perhaps an ironic consequence of the bias of the tax policy towards the interests of the business class was that the tax authority itself became a site for this contestation. Not only did tax authority workers wage an unprecedented national strike in 2007, in which they occupied downtown Cairo and occasionally Tahrir Square, but they were also responsible for the establishment of the first, and largest, independent union in 2009, which served as a model for thousands of others that followed in the aftermath of the 2011 uprisings (Beinin 2012).
This contestation has continued in the aftermath of 2011, where the country has witnessed an upsurge in nationwide protests, with diverse groups demanding tax and fiscal justice. Perhaps one of the most striking examples in Egypt has been the ‘no taxation without representation’ movements, where various groups organised campaigns and direct action that called for systematic boycotts of tax payments, as a protest against the lack of state services. In 2012/2013, with continuous electricity and water cuts nationwide, activists have called for a boycott campaign called mesh daf’een (Egyptian Arabic: we’re not paying), calling on citizens not to pay their electricity and water bills and state taxes that accompany them. The state continues to be the sole provider of water and electricity to households, and thus refusal to pay fees and tax has become a form of direct action against the state. While there are no data on the extent of participation in the campaign, it showed its incredible impact when in May 2013 the Ministry of Energy threatened a complete blackout in response to the low revenue they received in fees and taxes due to the campaign.2
In addition to prominent urban or activist-led campaigns, a number of rural villages have taken extreme measures, such as declaring civil disobedience, to articulate their disenchantment with the government, which collects taxes and fees, and provides no services in return. The village of Tahseen in Daqahliya, for example, has declared civil disobedience, which included a refusal to pay fees and taxes, including land tax, electricity, water and gas charges (Khalil 2013).
Because more than 50% of Egyptians do not work in formal jobs (Wahba 2009), they do not pay income tax. Even according to the conservative government estimates, only 46% of all workers have formal contracts (CAPMAS 2017b, 8). They are, however, burdened by increasing consumption taxes, which raise the cost of various services and products. Consumption taxes, which are the recipe for revenue mobilisation recommended by the international financial institutions (Hanieh 2015, 125), have continuously triggered popular discontent, especially when they have resulted in high inflation rates. Farmers have been at the forefront of protests against VAT, which increased the prices of agricultural equipment and inputs, such as fertilisers, seeds and gasoline.3
In addition to objecting to taxes when services are deficient, farmers and rural populations across Egypt have protested against the land and property tax laws. Unprecedented increases in land taxes and obligations to pay property taxes on poorly constructed homes, many of which are built from clay, have pushed many Egyptian farmers into debt. The privatisation of public assets and state redistributions in favour of higher classes are arguably the hallmark of neoliberalisation (Roccu 2012, 72), and thus privatising public enterprises and redistributing property to the higher classes away from the landless and smallholders was a milestone in the development of the neoliberal state in the last decade of the Mubarak regime. Private property laws were very class-based in nature, and aimed to politicise land and property to overturn the 1952 statist social order. While the business class could own endless property with very little restriction, including lands that saw the returning control of landlords, large segments of farmers were simultaneously dispossessed and impoverished. The accumulation by dispossession represented by the enactment of Law 96/1992 actively enriched the class of landlords by dispossessing smallholders and landless farmers of lands they have been entitled to and have been cultivating for decades under the land reclamation laws, thus paving the way for their impoverishment, and for the outbreak of violent rural conflicts (Bush 2011, 394). Even when farmers took out loans to work towards paying off their lands, they ended up being forced to pay property taxes on the small lands they cultivate, and the simple houses they live in, which exacerbated the indebtedness of farmers to banks and government agencies. The Property Tax Law was frozen after the 2011 revolution for a few months, until successive administrations drafted a new, more regressive law that was then passed by the military-backed government in 2014.
2011: the military, the masses and the uprisings
The political dominance of the military in Egypt since 2013 has raised possibilities at the beginning of the transitional period as to which model of development Egypt was going to undertake. The nationalist military elite had previously collided with the private investors and the capitalist class of the Mubarak regime, especially when waves of privatisation since the 1990s created a business class in direct competition with the military elites (Joya 2011, 372). The military institution has enjoyed a special position in Egypt’s political and economic spheres since the 1952 coup. But despite the continuity of what commentators have referred to as the ‘military exceptionalism’ (El-Houdaiby 2018) before and after 2011, it would be misleading to equate the state with the military or equate the military class interests with those of the Mubarak elites. The exceptionalism of the military institution has expressed itself in its ability to act as private and public at the same time: that is to maintain institutions that are not owned by the state, and not transparent, but make use of conscript labour to work in their economic enterprises. The existence of a parallel military economy largely ‘off the books’ has meant that the neoliberal project in Egypt could not be holistic and was constantly missing an invisible bulk of the economy (Roccu 2012, 15). This, in turn, explains why the military class’s interests did not align with those of the oligarchy that crystallised under Mubarak’s Nazif government in the 2000s (Ibid.). The military, while it maintained its privileges, including the unrestricted access to lands and conscript labour, lost the newly privatised public sector and policy-making (and legislature) to a new business class under Mubarak.
This complex relationship that the military had to the Mubarak regime explains why the military elites viewed the uprisings as an ‘opportunity to reconfigure the relations of power within the state to their advantage’ (De Smet 2016, 206), and why, on the eve of the uprisings, the army stood by passively while the protestors burnt down the NDP building (Ibid.). It is important to recall that the military declared the end of the Mubarak regime to the masses on 11 February and immediately presented itself as the ‘head of the revolution’, in a move that De Smet described as ‘lead it, in order to defeat it’ (205). Ironically, the military could only emulate the rescue of the masses in 2011, because of its forced retreat from the politics since the 1980s. Unlike the NDP, or the police, the military could distance itself from the Mubarak regime (Ibid.). Arguably, to distance itself from the Mubarak regime, the military has transformed the state’s relationship to Mubarak’s business elites, by excluding them from the political sphere (see below) (Adly 2017).
Despite this seeming support to the revolution, De Smet (2016) argues that the current military regime is necessarily unable to delink itself from the global hegemonic neoliberal order. The military in Egypt has become part and parcel of ‘the global neoliberal offensive’ which has strengthened the power of the capital and elite classes against that of labour and working classes, through the ‘reconfiguration of the economic base’ (219). Therefore, even if El-Sisi wanted to move ‘left’ under the pressures from the masses, all he could do was to be more equitable in the distribution of rent (Ibid.). This perhaps explains best the continued reproduction of neoliberalism at the level of a state that represents the class interests of military and business elites.
However, at the same time, the military coup in 2013 was carried out with the help of mass protests, thus creating a ‘historical debt’ to these forces (De Smet 2016, 219). Therefore, arguably, El-Sisi’s regime could neither abandon the global capitalist order, nor avoid trying to repay the debt to subaltern groups that legitimised the transfer of power to the military. It is therefore important to think of how these pressures, both from the masses and from the economic base of neoliberalism, have shaped the hybrid regime that the military adopted since 2013, as a strategic manoeuvre, to maintain its class interest, while maintaining a revolutionary and progressive façade of development and statism.
The neoliberal turn under the military should not be viewed as a natural or automatic continuity of the Mubarak era, but rather as a policy choice that has been negotiated, amended and espoused by the military as it took control of the state. El-Sisi’s administration had initially started with some progressive measures that could have achieved more justice and progressivity in the tax system. El-Sisi passed a law that imposed an additional 5% tax on higher incomes, both from corporations and individuals, which increased the tax rate for the highest income bracket to 30%. In addition, El-Sisi passed a capital gains tax law that taxed profits at the stock market with a 10% tax rate (Marshall 2015). These initial measures won El-Sisi and his government a lot of public praise and were often described as reminiscent of the welfare statism of Nasser. But they did not last long. Soon, El-Sisi’s administration started reversing its progressive decisions, and partially following a neoliberal path, slashing taxes on higher incomes and corporate profits to 22%, nullifying the capital gains tax after various objections and protests by stock market investors, and asserting the liberalisation of the energy sector and the subsequent shrinking of the subsidy system, including the energy subsidy.
The military’s attempt to appease the masses that supported its ascension to power clashed with its economic interests: the Egyptian budget was in deep deficit on the eve of the military coup in 2013, foreign reserves had reached an all-time low following the economic crisis that had accompanied the 2011 uprisings, and the military–industrial and business complex was not willing to provide services to citizens for free. In this way, El-Sisi very soon accepted the inevitability of pursuing the path of neoliberal reforms, to appease not only the neighbouring countries of the Arabian Gulf, who had funded almost a third of Egypt’s state budget in 2013/2014, and continued to aid El-Sisi’s regime to ensure its stability,4 but also the IMF and the World Bank, whose assistance was required once the Gulf neighbours decreased their support due to the decline of global oil prices and the ensuing tightening of their economies.
El-Sisi’s realisation regarding the state’s need for its neoliberal partners crystallised in the organisation of the 2015 Sharm El-Sheikh Investment Conference, advertised to foreign investors and international financial institutions as the launch of Egypt’s new Economic Policy Program, and to the Egyptian public as Egypt’s opportunity to attract foreign direct investment and regain the trust of global investors. Interestingly, El-Sisi’s administration passed its neoliberal tax and deregulatory investment reforms at the dawn of the first day of the conference (Corkery and Khalil 2015). The new tax reforms sliced taxes on higher income earners from 30% to 22.5% overnight, including corporate profits and personal incomes, advertised several tax exemptions in new special economic zones, ended the judicial oversight over state contracts with private businesses and thus ensured ‘investor protection’ even from the judicial system in Egypt (Ibid.). These neoliberal reforms were accompanied by a new reform that privileged the military exclusively: the new reforms dismantled the tender and bids law, enabling the military to gain full control over state business contracts, privatisation decisions, procurement processes and all sales concerning public enterprises (Marshall 2015). This centralisation of state power in the hands of the military both produces state-controlled neoliberalism (assuming we view the military as capturing the state) and fulfils the conditions of United Arab Emirates (UAE) loans, which demanded the deregulation of procurement processes, and the dismantling of the tender and bids system in Egypt.
This dual capture of the political and economic spheres by the military marked a new era, where the military, instead of business elites, captures both spheres. Business tycoons, like Naguib Sawiris and Ahmed Ezz, who captured state-level politics under Mubarak, were excluded from the political sphere by the El-Sisi regime (Adly 2017). The prevention of steel magnate Ahmed Ezz from running for the 2015 parliamentary elections is perhaps an illustration of the transformation of the relationship between the El-Sisi regime and the Mubarak business class (Ibid.). This transformation in the political sphere has not affected economic cooperation, especially with the local tycoons. The Sawiris family, despite all tensions with the El-Sisi regime, continues to implement public works projects, while Ahmed Ezz was released from prison and continues to manage his economic empire (Ibid.).
The military has taken on the role of choosing which projects to implement on its own (largely infrastructure projects), and which to leave to the private sector, and has taken charge of procurements and land allocations, thus controlling the very practice of business in Egypt, and who gets to participate in it. In addition, the military economy has expanded in recent years since 2011 to include various new industries that enjoyed the regular tax breaks and cheap labour through military conscripts who fill the military factories and gas stations (Hauslohner 2014). In doing so, the military has found an ally in Gulf countries, especially the UAE, Saudi Arabia and Kuwait, which have acted as financial saviours of the military-backed regime and as business partners in various projects since 2013 (Adly 2015). That being said, the expansion of the military agencies and companies, and their progressive diversion of public works and projects to their own enterprises, has sidelined local businesses, albeit not the large specialised ones, which continue to be indispensable to military investments. For example, the Sawiris-owned Orascom Construction Industries was contracted for the building of the New Administrative Capital (a planned new capital city, as yet unnamed), and for several projects related to the new Suez Canal (Ibid.)
The ongoing construction of the New Administrative Capital showcases this dynamic, where the military takes the lead in procurement, planning and execution, marginalising the majority of local businesses, but including large business tycoons. The New Administrative Capital for Urban Development (NCUD) is the holding company in charge of planning and executing the vision of a new capital. The holding company is co-owned by the state’s New Urban Development Communities Authority (49% of shares) and the military’s National Service Projects Organization and the Armed Forces National Lands Projects Agency (51% of shares) (State Information Service, n.d.). While the military is taking the lead in land distribution and procurements, it opens the space for large local private businesses, such as Hassan Allam, Orascom Construction Industries, Concord, Talaat Mostafa Group, Arab Contractors and Petrojet to execute particular plans in the new capital, including residential neighbourhoods, which remain unaffordable to the majority of Egyptians (Vio 2018). The New Administrative Capital is one of many mega projects launched by El-Sisi, which continue to derail public funds from much-needed social and welfare spending, by investing heavily in infrastructure that benefits a narrow segment of society and creates only short-term employment (Ibid.).
These mega projects have also resulted in soaring levels of external debt. With the oil crisis hitting Arab neighbours, El-Sisi turned to the IMF and the World Bank for continued support. At the end of 2015, the World Bank signed a US$3 billion development policy-financing loan to Egypt, which was conditioned on deep neoliberal reforms, most notably on Egypt finally implementing the VAT legislation, which was passed after parliamentary approval in August 2016 with a rate of 14%. The VAT brought most of the previously exempt, or low-tax-rate food products under the umbrella of the 14% tax rate, a move that increased food prices by 40% within a few months (CAPMAS 2017a). Shortly after, in November 2016, the executive board of the IMF approved an agreement with Egypt for a three-year US$12 billion loan to support long-term ‘structural adjustment’. The IMF has joined the World Bank in requiring the implementation of the VAT and further dismantling the energy subsidies. It has also pushed for the liberalisation of Egypt’s currency (IMF 2016). These measures led immediately to a 30% increase in gasoline prices and a 30–40% increase in prices of household electricity (Esterman 2016), while the Egyptian pound lost nearly 50% of its value, slashing with it people’s savings and already stagnant salaries (Hadid 2016).
Post-2011: neoliberalism with a statist flavour?
Despite the aforementioned regressive neoliberal reforms, the military regime’s neoliberalism was not only more aggressive, but also differently blended with a centralised statism that sought to appease the masses who supported the transition of power in 2013. Arguably, the military regime strategically combined its neoliberal reforms with centralised welfare initiatives, many of which took the form of charity, and quasi-state welfare plans.
Within a few weeks of assuming office, El-Sisi held a meeting with Egyptian businesspeople, and demanded they ‘donate’ money to Egypt (Samir 2015). Shortly after, the president launched the Long Live Egypt Fund, tahya misr, a national fund to collect donations, which had collected about 5 billion Egyptian pounds by 2016. The fundraising was meant to build Egypt, provide services to poor Egyptians, build roads, and to contribute to development projects not clearly spelled out to the public. El-Sisi’s discourse articulated the responsibilities of the rich towards the poor, and towards the nation, a sentiment that he reiterated during his fundraising meeting with the business class. What is certain is that the fund is run by the president himself, and is not subject to accountability of any form, including to regular audits.5 But more importantly, these caretaker roles of the head of the state speak to a reproduction of statism in a neoliberal era. While the state is officially cutting welfare spending to meet IMF standards on the budget deficit (Hanieh 2015), it is creating alternative avenues for resource mobilisation, through charity and business donations, to provide welfare services and ensure the continuation of subsidies, housing projects, development of slum areas, and other statist interventions. In doing so, the state is no longer depending solely on the official budget, but rather shifting the burden of social spending to all Egyptians, of all classes, who are all now encouraged to donate every penny to tahya misr for the betterment of the nation. Perhaps the iconic advertisement of poor 90-year-old Zeinab donating her gold earring to the fund is a case in point (Rabie 2014).
Even before his election as president, El-Sisi had made a grand gesture when he promised that the military would build one million low-income housing units for Egyptians, with the help of the UAE. His promise as a military chief was soon put into practice after his election, when the military provided lands for the implementation of the project, while demanding that the UAE take over the execution and co-financing (Esterman 2014).
Perhaps El-Sisi’s most popular project is the Suez Canal Corridor Project, originally planned under Muslim Brotherhood to expand the size of Suez Canal. Interestingly, the project is framed as a developmentalist mega project to raise revenue for education, health and other social services. But the project really is the embodiment of what we are calling ‘statist neoliberalism’, and the contradictions inherent to the military-controlled state in Egypt. The army supervised the planning and execution of the mega project, after mobilising 400 private companies, 25,000 workers, and raising US$8 billion to fund the expansion, 80% of which was funded by Egyptians investing in state-issued bonds (Tasch 2015). In one year, the military showcased its efficiency, finishing a new 35-km channel – an extension of the original canal by 37 km, thus delivering on their nationalistic discourse of building a new canal for Egyptians. While the economic gains of this mega project are dubious, it served as a means of legitimating the military regime, and strengthening its image as delivering on its promises of development to the populace (Tasch 2015).
Similarly, El-Sisi has launched ‘the 1.5 million feddan project’, which seeks to ‘restore Egypt’s status as a major agricultural state and achieve self-sufficiency in crops’ (State Information Service 2016). The project seeks to develop local crop production, boost youth employment, and achieve a population shift beyond the River Nile basin. The military has provided the lands for the project, and continues to control its vision, implementation and procurement. The planning and implementation of this project come at the same time as the state is cutting subsidies from farmers and liberalising its food import tariffs, in order to ease the import of foods from exporters other than the European Union. The contradiction in policies is yet another witness to the reproduction of a hybridity, a purposeful and strategic negotiation of statist neoliberalism. Austerity measures are undertaken in parallel to major development and welfare projects – cuts on the one hand and increased spending towards the same welfare agenda on the other. This is the contradictory agenda of the current military economy. The sustainability of this contradiction suggests a strategic reproduction of neoliberalism through the adoption of some measures that resemble statism; i.e. a reassertion of regressive neoliberal policies through the amelioration of some of their negative impacts by a centralised, controlling regime.
Conclusion: on the strategic contradictions
El-Sisi’s relationship to the non-military business elites has not been stable. For example, his government has closed down several Muslim Brotherhood-owned enterprises, some on charges of tax evasion (Adly 2014). Yet, El-Sisi’s antagonism also extended to the Mubarak era, and non-military businesses, which have found themselves in constant competition with the military for undertaking large state projects, especially when the military industrial and service complex is at the same time in control of various branches of the government, including the very procurement policy that distributed projects amongst contractors (Marshall 2015).
This raises the question of the military’s complicated relationship, not only with the business sector, as part thereof, but also with the state, as a quasi-state actor. On the one hand, the military has extended its arms into the government agencies, by controlling their procurement and bidding processes, and by extending the military’s protection to all public lands, buildings and any government-owned assets (Marshall 2015). On the other hand, the military’s budget remains separate from that of the state – private and confidential. The military undertakes government projects, sometimes donating lands for the implementation of national projects, but all the time outsourcing government services to their own enterprises, and thus being theoretically contracted by the state. This being the case, the very positionality of the military institution, as both within and outside of the state, complicates the notion of neoliberal statism, and perhaps even offers some insights into the conglomeration of these two sets of policies: if the military is both a private actor (and contractor) and a state actor, then this is perhaps telling of the hybridity of the state under the military control. Arguably, the military elite represents such a hybrid of historically centralised statism, simultaneously holding state power and engaging in private business and class-based interest. The result is a seemingly conflicting model of statist neoliberalism, which partially seeks neoliberal reforms, while reinforcing the state’s centralised control over the economy.
This article has sought to challenge the discourse of political uncertainty, and mixed messages, often associated with the contradictory policies of the consecutive Egyptian regimes (Soliman 2011, 113), suggesting instead the need to examine supposedly contradictory policies as possibly coherent. We argue that Egypt’s current form of statist neoliberalism can be productively viewed as a tactic to ensure the survival of a neoliberal state, just as authoritarianism can be viewed as necessary for the maintenance of neoliberal reforms.
Despite rising repression, the mesh daf’een campaign returned in 2016, in response to the liberalisation of energy prices, and the implementation of VAT. These key reforms conditioned almost simultaneously by the IMF and World Bank loans have resulted in increased discontent and popular frustration with El-Sisi’s rule. The popular frustration and discontent, often resulting in arrests and detentions of protestors, reflect the embedded contradictions of neoliberalism, and invite us to analyse both statism and authoritarianism as two tactics cohesive and necessary for the survival of neoliberalism.