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Saturday, February 5, 2011

Egypt 2011: A Repeat of the Iranian revolution?

Do you like monologues?  We will attempt one.  We think it will go well.

Yours, twin-analysts,

AA & AA'

AA’: Did you see it coming?

AA: You mean the events in Egypt?

AA’: Yes.

AA: No. A bolt from the blue.

AA’: Indeed.  Just like the Iranian revolution.

AA: Insofar as the element of surprise is concerned, yes.

AA’: And more.  You yourself argued that true democracy in Egypt would allow Islamists to gain a significant share of power.

AA: And your point is?

AA': Just look at the Iranian revolution.  The desire for economic freedom brought pro-democracy protesters and the Islamists together against the Shah of Iran and his power apparatus.  The same has happened in Egypt now.  The world was taken by surprise then just as it has been now. 

And if I may get a tad ahead of myself here, why would Egypt not end up walking the same journey that Iran did?  An uprising is a terrible waste if it cannot survive its own victory.

AA: Indeed.

AA’: So well, in Iran once the Shah was deposed the next phase was the rapid pursuit of Islamist democracy - liberal democrats and the Islamists joined hands to build a new system, ground up.  A theocratic constitution was voted in through a national referendum.  It was not something the democrats could protest as it merely reflected the will of an overwhelming majority of the Iranian peoples.  For reasons I wouldn't want to go into now, many amongst those who willingly risked their own lives in the cause of liberty (from the Shah's repressive apparatus) appeared willing to sacrifice their newly earned freedom at the altar of another repressive system that was in the works.  Within just two years the last vestiges of democratic pretences were discarded -Abulhassan Banisadr, a prominent face of the pro-democracy faction in anti-Shah movement who was later elected the President of Iran was impeached as he fell out with the Grand Ayatollah.

The Islamists co-opted the democratic voices early on.  It was necessary.  Without that there was not a chance that the West would have stood down while an unfamiliar group with an unclear agenda and lethal methods got busy dismantling the entire power structure built by ,and around, the unequivocally pro-Western, Shah of Iran.

AA: Democracy has a high mortality rate at birth, doesn’t it?

AA’: Yes indeed. In light of your earlier post then I am sure you would agree that as Egypt 2011 unfolds it will increasingly look like an Iran 1979 repeat.

AA: Perhaps.  However, you overlook the dissimilarities, of which there are many.  I will be surprised, very surprised, if the Egyptian Muslim Brotherhood (EMB) ends up walking the Iran 1979-path.  The Adalet ve Kalkınma Partisi-path appears more likely.

AA’: Why?

AA: Well, let us examine the differences between the Iran then and the Egypt today.

Power Structure The government’s power in both countries rested not on pillars of internal acceptability but on the fact that both governments (prior to the uprising) were eminently acceptable to the Western political and business elites.
In Iran the Shah was an absolute monarch.  Not only was he the face of the government but also he was the regime itself.  He ensured that in no arm of the government would independent chains on command develop or sustain over sufficiently long periods of time so as to acquire their own independent dynamics.

In Egypt Mubarak was the public face of the government.  However ever since 1952 when Nasser (who was then, just a lieutenant-colonel) overthrew the Monarch of Egypt in a coup d'état, the armed forces have been the final guarantors of the stability of the regime’s structure, and thus constitute a formidable second pillar of the regime.

KEY POINT: Iran 1979 uprooted an entire regime.  Egypt 2011 has shaken one pillar of governance but the other pillar remains strong as ever.

Fulcrum of Revolution The fulcrum of the Iranian revolution, particularly, that of violent demonstrations that began in October 1977, was the clerics.

The EMB, despite its status as a banned organization enjoys widespread popularity in Egypt.  The initial group of protesters however appear to have spontaneously taken to the streets - taking cue from the successful deposition of Zine ElAbidine Ben Ali in neighbouring Tunisia following (largely) bloodless protests.  The EMB has so far maintained a low profile and it appears that while the armed forces did not plan for the its tussle with Mubarak on the issue of the latter's succession to pay out in the manner it did, they are likely to have had channelized (and calibrated) the spontaneous outpouring of anger against Mubarak to defeat his plans for dynastic succession.

KEY POINT: Islamists played a crucial role throughout various stages of the Iranian revolution.  In Egypt 2011 the Islamists have never been at the center stage.  Instead, the armed forces appear to have been successful in calibrating the protests.    

Opposition to the Islamist Agenda In Iran the only force that opposed the Islamists was the widely disliked Shah.  The masses, including those that were secular, saw in the Ayatollah a moral authority that stood in sharp contrast with what they considered was the decadent authority of the Shah.
In Egypt the armed forces are the ultimate guardians of regime stability and are held in high esteem by a broad cross-section of the protesters.  The top echelons of the armed forces are sharply critical of EMB’s agenda and have been in sync with Mubarak and the Egyptian General Intelligence Directorate’s views and methods to suppress its activities.  EMB thus not only faces a formidable and yet, untarnished force, any attempt to strike at this pillar of regime stability would split the protest movement - pitting those who protested only in the cause of democracy or merely out of a dislike for Mubarak (of which, there appear to be plenty) against those whose goal is to establish a theocracy and, confusing those who want both.  In the process what EMB runs high risk of losing is the closure of an opportunity [1] that has opened up for the first time in 30 years. These facts, the high probability of failure and the high cost of failure impose a natural limit on how much EMB can co-opt the protests to its own agenda.

KEY POINT: Islamists not only faced no opposition during the Iranian Revolution [2], but also had even the secularists mesmerized with their moral authority.  In Egypt 2011 the armed forces who continue to command the respect of a wide cross-section of Egyptians remain firmly opposed to EMB’s agenda.    

Economic Conditions The economic conditions in the Egypt of today are very different from those in the Iran of 1979.  Now that is hardly a useful statement.  Let us elaborate - with numbers.  

Table 1: Economic Comparison: Egypt 2011 and Iran 1979

The differences in economic conditions result in differences in international economic linkages and domestic patronage structures.  These in turn mean that unrest in Egypt cannot pave way for an Iran 1979-style revolution.  Let us see why.

A.   External Dependence

In the year following the Yom-Kippur war energy exports reached 88% of the total foreign exchange earnings, the sale of oil and natural gas accounted for 84% of government revenues and its production accounted for 51% of Iran's GDP.  Energy in its most fungible form - oil and natural gas - is perhaps the third most ideology neutral of any export [3] for which even the most isolated regimes in the world can get ready buyers.  The second fact that stands out about Iran is the near complete absence of the need for foreign financial capital throughout the 1970s.
Egypt in contrast is a net energy importer.  Tourism earnings, its largest single source of foreign exchange, will plummet (and stay down) should the world fear a repeat of Iran 1979.  (In comparative terms) Egypt has a significant and growing reliance on foreign sources of financial capital.  External economic dependence will have a moderating affect on EMB's agenda.  Moreover, given that frustration with economic hardships has been a significant force behind the Egyptian protests, if EMB does attain power, it will not be without the population having already defined the relationship between the ruler and ruled - this will include a significant economic component as well.  The Iranian revolutionaries could leave the economy on auto-pilot and focus on consolidating their relationship with the ruled on purely theological and moral grounds.  EMB cannot do that;  the different economic conditions in Egypt guarantee that.

KEY POINT: The economic structure in Iran allowed the revolutionaries to ignore the economic impact of potential diplomatic isolation.  Egypt is not a rentier state, its principal sources of foreign exchange will not weather diplomatic isolation, action by the credit ratings agencies will cause economic contraction, rise in cost of capital and significant food and fuel price inflation.  Economic hardship and not morality grounded in religious thought was the primary trigger of Egyptian protests.  Thus EMB cannot afford the economic consequences of full expression of its ideology.

B.   Patronage Structure
Oil allowed the Shah to rule without having to deal with his subjects.  Having been hardly taxed, people could not complain about the Shah's economic policies.  This removed the possibility of emergence of class-based groups opposed to the Shah.  It however had the unintended effect of the state losing its tax extraction capabilities.  Tax extraction mechanisms shed light on the relative productiveness of various sectors and regions.  Without such information connections and patronage earned through visible demonstration of loyalty and respect of the pecking order become the driving force of the economic system.  The Shah however, perhaps on account of his personal proclivity to micromanage kept the formal patronage system small.  The energy sector at its peak accounted for over 50% of Iran's GDP but involved only 0.6% of the labor force.  The white revolution in the 1960s disrupted the rural economy and de-emphasized the role of agriculture.  This, along with the Shah's economic vision caused rapid urbanization.  However these people could not find place in the formal system.  Instead, SMEs [4] rapidly grew in number (not in size).  Those that enjoyed the Shah's patronage preferred the opacity of this system as it allowed them to maximally extract the only capital they controlled - human labor.  All in all, Iran enjoyed spectacular economic growth for over a decade.  However the Shah's power base remained thin as ever.  If I might exaggerate a bit here - no one other than foreign firms had a stake in the Shah's success.  When matters came head-on, there were no counter-protests against the revolutionaries.  No one felt (s)he had anything to defend.
Egyptian economy is diverse - tourism, manufacturing, agriculture, mining, logistics, textile, telecommunications are all important sectors of the economy.  While nepotism has caused economic inefficiency and given rise to public frustration, those that have benefited from such a system form a large constituency - they belong to the many tens of millions of Egyptians who have not joined the protests.  I would not be surprised if this group that remains silent today rise in defense of the regime (not necessarily, Mubarak) if push comes to the shove.

KEY POINT: The Iranian revolutionaries did not have to face counter-protests as the Shah's thin patronage structure guaranteed the removal of ordinary Iranians from amongst those that had stake in the system.  In Egypt tens of millions of people have benefited from the system that Mubarak presided over.  EMB is well aware that an attempt at radical pursuit of its agenda will end up conveying the impression that it seeks to not only remove the now-despised public faces of the regime but seeks to overturn the regime itself.  In that event, it would have to face the ire of counter-protesters.

[1] the opportunity to translate widespread though latent support amongst the populace into a legitimate political force
[2] except from the Shah who they sought to depose
[3] the first two being WMDs and yellow cake
[4] small to medium enterprises that employ 5 - 50 people

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