Egypt’s army too big to fail

The scenes coming out of Egypt serve to reflect the state of chaos and loss of security there, where a football match can turn into a bloody battle for purely illogical reasons. The events did not stop there but rather confrontations between demonstrators on the one hand, and the police and military forces on the other, also broke out later that night in the main squares of the Egyptian capital. One year on from the departure of former President Hosni Mubarak, Egypt should have passed beyond the transitional phase. The Egyptian Supreme Council of the Armed Forces [SCAF] first took the reins, and governments were formed several times in accordance with the mood of the street. After this we saw the elections of the Egyptian parliament and Shura Council, whilst the presidential race has now begun. So why does this absurd state of chaos continue on the street? There are multiple answers to this question. The army blames foreign elements - and internal elements financed from abroad - and threatens to pursue them in every speech. However, it seems there is no point in this, as attempts to prosecute a number of Egyptian and foreign activists for collaborating with foreign institutions and bodies have been met with American and European pressure, warning the Egyptian army against the use of military courts to convict the accused. The Egyptian media on the other hand provides answers closer to the world of fantasy and superstition, in an attempt to portray the crisis as being created by the remnants of the former regime, even though the senior symbols of the former regime are powerless and in prison. As for those former regime members who are less important, they have changed their allegiance to the revolution, as has the Egyptian media itself. Indeed, a large section of the media is still dependent, in one way or another, on the ruling regime, whoever it might be. The fact is that SCAF, with all its good intentions, is unable to restore order and recover the prestige of the rule of law, and that is why it is now unable to rein in the anger and frustration of the Egyptian street. Of course, we must acknowledge that SCAF played a substantial and dignified role during the past stage, and has made earnest efforts to restore economic activity and reactivate state institutions. However nobody can deny that some of those in the street, which is filled by noisy demonstrations every week, are seeking to overthrow the military. They consider SCAF to be an extension of an Egyptian regime that has effectively been in power since the 1952 revolution, and therefore the revolution will only be complete when power is transferred from the military to the civilians. There is no doubt that the scenario of the military handing over power to the civilians – as demanded by some of the protestors – is not logical or practical at the current stage. The country’s constitution is still pending, and the transitional plan is well underway, having received broad consensus among political parties and forces. However, the protestors who continue to go down to Tahrir Square do not care much for power-transfer mechanisms, or the legislative, economic and even security related difficulties that accompany the transfer of power. Even if we assume that the military are ready to transfer power immediately to the citizens, who exactly would they grant power to? What legitimate means is there to surrender responsibility for 82 million people? Those who are demonstrating against SCAF want the military to relinquish power, or at the very least, they want to prevent the military from being able to ensure privileges and legal immunity with the consent of new rulers such as the Muslim Brotherhood. This is a legitimate demand; armies are supposed to defend the sovereignty of the state from external threats, not get involved in government administration, the operation of factories, determining the currency exchange and so on. However, what some fail to realize is that this is a complicated issue; indeed one could say that it would be easier to dislodge the military from Egypt than it would be to dislodge them from the country’s rule. For more than six decades the military ruled Egypt and became entrenched in all its institutions. It could even be argued that the military was behind the creation of most modern government institutions, companies and projects, as part of a central productive system that has been in place since the 1950s. Even when the era of political and economic openness arrived with Sadat at the helm, the army had ensured that it obtained the lion’s share of the economic pie, alongside the private sector. In other words, the economy of the army, and the institutions and projects associated with it, represents a large share of Egypt’s gross domestic product (GDP), and economic activity in general. Perhaps this explains the country’s poor tax revenues, because the armed forces are not obliged to pay, and their budget is not subject to scrutiny and review. In terms of numbers, according to IHS Jane’s Defense Weekly magazine, the Egyptian army budget is estimated at nearly US $5 billion, in addition to US $1.3 billion in the form of US military aid. This ranks Egypt tenth globally, in terms of the size of its active armed forces. If we compare the defense budget to the state budget, Egypt spends on defense – in terms of percentages – the equivalent of China’s spending [on defense], although the latter has advanced weapons factories and large nuclear facilities. Some estimates indicate that Egypt’s actual military budget may in fact exceed US $10 to 14 billion per year, if we take into account the size of the army’s economic cycle itself, according to Professor Paul Sullivan of Georgetown University. This is to say that the volume of production from the military establishment ranges from 10 to 30 percent of Egypt’s GDP (Time Magazine, 9th February 2011). In an article published by The Majalla on 19 January 1988, about “the military industry in Egypt”, it was reported that Egyptian military spending had doubled since the early 1970s, and that by 1986 Egypt was the seventh largest exporter of cheap weaponry in the world. However, after signing the Camp David Accords, Egypt began to import higher quality US-made arms. Military economic activity transformed over time to incorporate civilian industrial sectors, in order to ensure that revenue for the military budget was not entirely linked to the state. Over time the Egyptian armed forces began to own factories producing food, cooking oil and fruit juices, alongside giant construction firms, and other institutions producing textiles or electrical appliances. Since the 1980s, military factories even embarked on joint ventures with foreign manufacturers to produce automobiles, whilst the military’s investment portfolio also included gas plants, cement factories and so on. If you want further evidence of the proportion of the economy that is run by the military in Egypt, last December the military offered to lend the Egyptian government nearly a billion US dollars, which means that this institution has large reserves of undeclared foreign currency (New York Times, 28 December, 2011). In his famous book "Too Big to Fail: Inside the Battle to Save Wall Street" (2010), Andrew Sorkin explains that over time some economic firms became extremely large and deeply rooted within the economic market. As a result, they become closely related to the daily income of millions of citizens, to the extent that an economic corporation's failure, or any attempt to dismantle it to salvage profits, could significantly impact upon a country’s economy. In a situation such as this a government would find itself at a real impasse: it could either leave the corporation to collapse as a result of its failures, which may inflict heavy losses on the economy, or support it with tax payers’ money. This latter solution would aggravate many low-income citizens, who would see the directors of failing companies reaping astronomical profits whilst they lost their jobs. In Egypt, the military establishment, with regards to all its industrial and military forms, is akin to Wall Street. If the Egyptian people decided to punish it, they will be gambling on Egypt's economic and security future, but if they leave it as it is, it will remain like a caged elephant inside a tiny enclosure, namely the Egyptian economy. There is no easy option, yet it is certain that what was built over the past 60 years cannot be destroyed in a single moment. Economic reform, like political reform, must be carried out gradually and according to a specific and clear program. If the Tahrir Square revolutionaries seek to overthrow the military, they could do so by simply boycotting its products, from bread to cars. But even if they succeeded in dismantling the military establishment with all its companies, projects, and even commercial properties and foreign currency reserves, this would take decades to happen. The revolutionaries accepted that "the army and the people are one hand", so why is the situation different when it comes to footing the bill?