Social Justice: Lessons of Experience for Egypt

Gouda Abdel-Khalek

ERF 20th Annual Conference

Social Justice and Economic Development

Cairo, 22-24 January 2014

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Main Points

• Introduction

• Chronology of events

• Meaning of social justice

• Indicators of Social Justice; How socially unjust was the Egyptian society?

• Factors behind rising social injustice

• Measures taken: Lessons of experience:

a break with the past? 2

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1- INTRODUCTION

• The foremost slogan of the January 25 revolution in Egypt was

"bread… freedom … social justice".

• Other slogans were raised in Egypt and other Arab Spring countries, expressing the same demands in various ways.

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1- INTRODUCTION

The impact of both internal and external shocks: revolution and the global financial crisis and the world food crisis.

Growth of the Egyptian economy plunged to an average of less than 2% for 2011-2013, compared to an average of 6.2% 2005-2008.

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1- INTRODUCTION

Simultaneously with drastically slowing growth, the country has to grapple with conflicting approaches to addressing pressures for inclusive economies and demands for social justice.

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1- INTRODUCTION

In Egypt in the lead up to January 25, public protests escalated- mostly wage related.

After January 25, protests escalated:On a monthly average basis:

500 in the second half of 2012, and 1200 in 2013

This compares with 176 in 2010,

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2- Chronology of Events

• 25 Jan, 2011. Youth protest against celebrating Police Day began the first wave of revolution in Egypt.

• 11 Feb, 2011. Mubarak steps down, and SCAF takes over.

• 19 Mar, 2011. Referendum on constitutional change and roadmap for transitional period: elections then constitution

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2- Chronology of Events

• Nov-Dec, 2011. Parliamentary elections.

Islamists led by FJP won a clear majority.

• June 14, 2012. Supreme Constitutional Court annuls People’s Assembly.

• July 1, 2012. FJP candidate Mohamed Morsi sworn in as President of Egypt

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2- Chronology of Events

• Dec 2012. New constitution passed in referendum by 62% majority

• June 30, 2013. Second wave of Egypt’s Revolution, triggered by Tamarrod Movement (a youth movement). Some 20-30 millions demonstrated, calling for ousting of Morsi

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2- Chronology of Events

• July 3, 2013. Upon popular demand Morsi was ousted, a temporary president was sworn in, and a new roadmap for a transitional period was announced.

• Dec 2013, a new constitution was drafted.

• Jan 2014, the new constitution was approved by overwhelming majority in a public referendum.

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3-The Meaning of Social Justice

The essence of social justice is equality, solidarity, respect of human rights and dignity.

Social justice is a 3- dimensional concept:

Horizontal, Vertical, Spatial

3-The Meaning of Social Justice

1- The horizontal dimension refers to the intra-generational aspect of justice; ie. among various groups, strata, or classes.

2- The vertical dimension refers to the inter-generational aspect of justice; ie. between the current generation and future generations.

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3-The Meaning of Social Justice

3- The spatial dimension refers to the inter-regional aspect of justice; ie. among various regions (Upper Egypt/Lower Egypt/Frontier Governorates; Rural/ Urban).

The vertical and spatial dimensions are often overlooked and focus on horizontal.

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3- The Meaning of Social Justice

The three dimensions are inter-related.

The inter-generational dimension is often neglected in public discourse.

It is especially relevant in societies where natural resources are an important source of income, such as Egypt.

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3-The Meaning of Social Justice

Social justice in this sense is the cornerstone of equitable development.

Other related concepts:

Inclusive development

Social and Solidarity economy

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4- INDICATORS OF SOCIAL INJUSTICE

• Wage share in GDP went down from about 70% in late 60s-early 70s to about 30% in the new millennium.

• Unemployment kept rising. Overall unemployment was 9 per cent, rising to 12.5 per cent in 2012 and about 13% in 2013.

• Youth unemployment is more than 30 per cent.

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4- INDICATORS OF SOCIAL INJUSTICE

• The poverty rate (WB 1$/day) rose from 42% in 2009 to about 50% now.

• About two-thirds of the poor live in rural areas, especially Upper Egypt. Assiut governorate has the highest poverty rate for all of Egypt, at 58%.

• This underscores the spatial dimension of social justice.

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4- INDICATORS OF SOCIAL INJUSTICE

• Wide differences in opportunities for health care, education and employment.

• Stunting affects 25% of children 0-4 yrs, with higher incidence in Upper Egypt and Frontier Governorates.

• 20% of people in Frontier governorates have on access to improved water.

• Social mobility almost grinded to a halt.18

5- Factors behind Rising Injustice

• Most important factors:

(i) Economic policy objectives: Growth now … distribution later. Popular joke.

Blind faith in the trickle down theory, which never worked

(ii) Biased spatial and sectorial allocation of investment: neglect of Upper Egypt and agriculture. Share of agriculture down to 3% of total investments.

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5- Factors behind Rising Injustice

(iii) Crony capitalism:

NDP clique heavily involved in dubious business dealings led to vast corruption

Putting businessmen in charge of cabinet portfolios, resulting in glaring conflict of interest and profiteering.

(iv) Inflation: 2-digit rate. As regressive tax.

(v) Corruption-induced Privatization

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6-Measures TO BE taken to Address Social Justice

Not much has been actually done to achieve the revolutionary slogan of "bread … freedom … social justice". More than 3 years on, the nearly daily protests and other expressions of social grievance are testimony to the continued absence of social justice.

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6- Measures TO BE taken to Address Social Justice

We address three fundamental questions:

● How best to address the issue of social justice?

● What options are available in the short run to expand a tight fiscal space?

● What distributional instruments are possible and what trade-offs are necessary?

6- Measures TO BE taken to Adress Social Justice

Our approach to address social justice is to target increasing aggregate supply.

That can best be done through expanding food production.

Focusing on curbing aggregate demand a la the IMF leads to a zero-sum game.

Social justice is only partly about redistribution, but it takes much more.

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6- Measures TO BE Taken to Address Social Justice

In Egypt, giving priority to agriculture is the way to go.

Investing in rehab of the covered rainage system and national grain storage system.

Agr. share of investments fell from 13% during 1988/89-2002/03 to 3% in 2009/10.

Subsidizing producers is more effective than subsidizing consumers.

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6- Measures TO BE Taken to Address Social Justice

• Improving the incentive scheme available to farmers is also key. Farmers, price response is really strong.

• Institutional change is another element. Ex., changing the landlord-tenant relation in agr. Law 96 for 1992 effectively eliminated security of tenancy.

• In Egypt, market for land is a seller’s one.

Farmers are subjected to exploitation.25

6- Measures TO BE Taken to Address Social Justice

• Introducing a genuine progressive tax system

• Subjecting certain econ activities to taxes. For ex. Imposing a tax on profits made through dealings in the stock exchange, tax on capital gains and speculative activities.

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6- Measures TAKEN after 25 January, 2011

Some specific examples:

(a) setting a minimum and cap on maximum wage

(b) Progressive Taxation

(c) Equality of Opportunity (access to basic services, healthcare and education)

(d) Some Sectorial policy measures

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6- Measures TAKEN after 25 January, 2011

(a) Minimum Wage

• Initially, a minimum wage of LE 700 was set. The post-June 30 gov announced a min wage of LE 1200 for public sector workers. But it is yet to implemented.

• A proportional maximum/minimum of 30:1 has been set, but only within government departments- not a universal Cap.

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6- Measures TAKEN after 25 January, 2011

(b) Progressive Taxation All the post-revolution governments in

Egypt have deliberately avoided instituting progressive taxes. Only very recently, a new income tax rate of 25% has been introduced on income above LE 1 million annually.

New gov. is studying introducing a tax on the rich (LE 1 Million income) at 5%.

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Measures TAKEN after 25 January, 2011

(c ) Equality of Opportunity Two-thirds of the poor are in rural

areas, especially Upper Egypt. People living in rural Upper Egypt are suffering the most due to the lack of opportunities for basic services, health

care, education and employment. Nothing was done to improve their lot.

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6- Measures TAKEN after 25 January, 2011

(d) Sectoral Policy Measures

Offering local producers of wheat an incentive price 20-30% above the world price for 2011/12 and 2012/13. As a result, the contribution of locally produced wheat to the production of subsidized baladi bread rose from 27% in 2010/11 to 33% in 2011/12 and 38% in 2012/13- raising food security.

6- Measures taken after 25 January, 2011

• Advantages of this policy:

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Thank You

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