How Egypt’s Dictatorship is Bad for Business

When I woke up on Saturday morning, I noticed I’d received an invitation to join a group on Facebook called “Mubarak passed away.”

“Holy shit!” I thought. The president of Egypt, in power for 28 years and with no vice president is dead!? The biggest news in Egypt–and I learn about it from a Facebook group? (I started to feel guilty for sleeping until afternoon.) But with a little bit of quick research I realized that reports Mubarak’s death were premature In fact, it’s almost definitely not true and its viability as a rumor is due–unsurprisingly–to shoddy Internet journalism. (The Egyptian president has been in a German hospital for over a week after having his gallbladder and some “benign tissue” removed.)

The whole experience, even if it only lasted about four minutes, got me thinking: What if Mubarak really had died? The implications would be tremendous in ways that I can’t even imagine–soldiers in the streets, riots, an internal power struggle, a quiet military coup, who knows?

But one very obvious (and serious) effect of Mubarak’s death would be seen on the Egyptian economy.

This reminded me an article I’d read in Reuters a few days prior. “Egypt’s political stability turning into liability?” the headline asked.

The Reuters story, being for a business audience, naturally focused on the economic implications of Mubarak’s 28-year-long dictatorship. But these-not human rights violations-are perhaps the most likely to affect change in the international politics that help keep Mubarak in power.

“The stable political outlook has obviously long been something that has been identified as an advantage for Egypt,” Reuters quotes some financial wonk saying. “Now, as the presidential succession is approaching, there has been obviously more uncertainty, and this uncertain political outlook has turned into somewhat of a disadvantage.”

Egypt is often heralded as a great place for international business. The International Monetary Fund consistently champions Egypt’s liberal economic reforms and its friendliness to foreign investment. GDP growth has been consistently high in recent years. (Of course very little of this reaches the majority of Egyptians, who have gotten poorer over the past 20 years, but that’s a topic for another day.)

It is not just Mubarak’s economic policies that make the country attractive, it is that under this dictatorship there is confidence among foreign capitalists that Mubarak’s policies will continue to drive Egypt. With Mubarak, investors have a government they can trust will stay the same way for a long time. In Italy, Berlusconi’s pro-business government could fall at any time and the left coalition could take over. In Egypt? Not gonna happen.

But with the president a few months past his 81st birthday and in the hospital for a week with a gallbladder removal (is that a normal thing for old people?), things are starting to look a little more risky. Sure there are most likely plans in place to install Hosni’s even more pro-business son Gamal on the presidential throne, but what if it doesn’t work? What if the Muslim Brotherhood takes power and imposes Islamic financial restrictions on the country? That’s unlikely, but it’s worth keeping in mind back on Wall Street and in Dubai.

The financial situation, of course, mirrors the political one. A number of countries, in particular the United States and Israel, are deeply invested in the Mubarak regime for regional political stability. They, perhaps more so than investors who can move money around relatively quickly, have committed themselves to the continuing “success” of the Mubarak regime.

Right now Mubarak is only dead on Facebook and Twitter. Investors can stay confident in their money that is being plowed into luxury housing on the Mediterranean Coast or natural gas exploration in the desert. For now, at least.

Photo courtesy of the World Economic Forum on Flickr.