Egypt – Land of Chaos and Untapped Opportunity

by John Brian Shannon

Baltimore Sun
Protesters on Egypt want a better life and a corruption free government. Image courtesy: darkroom.baltimore.sun.com

If ever a country had the gift of being placed in the best geographical position on the world map, it is Egypt.

There they are, with the Mediterranean to the north, the Suez Canal and the Red Sea to the north and east, and all of Africa to the south and west of them. It is literally, the crossroads between Asia, Europe and Africa.

Not to mention Egypt’s priceless Nile River and the still largely untapped resources such as its hydro-electric power opportunities, the fertile agricultural land of its Nile Valley, and the country’s unimaginable solar and wind power potential.

Egypt has somewhat more than 84 million people to help bring all those opportunities to fruition, who live on only 3 percent of the total land area of the country, which is the fertile Nile Valley.

Some 96 percent of the country is desert with nothing in sight except the blasting Sun and sand dunes. One tiny corner of Egypt covered with solar photovoltaic panels (or thermal solar power) could power all of Europe!

Some of that unused land could be used for wind farms, as there is plenty of untapped potential there too.

Egypt should be the richest nation (per capita) on the planet.

But it’s not. Which can only mean one thing. Bad management.

Of course in previous centuries, excessive looting by some colonial powers and Egypt’s ill-advised military adventures in recent decades didn’t help. Nor did the Cold War, an evil, but seemingly necessary step in our civilizations progress.

All those things are now far removed from the scene, so why isn’t Egypt rich?

There is no reason good enough, that Egypt’s people shouldn’t be enjoying their lives to the same per capita income levels, or better, than the fortunate citizens of Norway or Sweden who have an excellent standard of living, even without Egypt’s advantageous geological placement!

If Egypt’s people are demonstrating against anything at all, they are demonstrating against poverty and inequality — in what should obviously be one of the richest per capita nations on the planet.

There is no reason for them to live in poverty, nor should they feel like second-class citizens in the world.

It’s their country!

A country, belongs to it’s citizens – not to a military junta, not to elected politicians and not to foreign interests! Egypt, belongs to the Egyptian people and they have the right to make the most of their resources — and they sense something is wrong, because, so far, only the least has been made with that nations great resources and geopolitical placement. The political cycle that we have seen over the past months attests to the depth of those sentiments.

Expect the present cycle that we have seen to repeat endlessly until the Egyptian people are satisfied that the wealth of their country is being utilized properly, (for now) and to its maximum potential, (eventually). Not just that, but shared equally with a minimum of inequality between citizens.

The present demonstrations are not to be confused with political advantage, or politics at all. These demonstrations are fundamentally about ‘bread and butter’ issues.

Some foreign powers are trying to paint the Egyptian protests which led to the downfall of President Mubarak, the rise of Mohamed Morsi, and the removal of Morsi by coup d’état, as part of ‘the great transition to democracy’ and that is what it is all about. Which is an utter crock.

It’s about what politicians can do to make the lives of everyday Egyptians better. What Egyptians want is jobs, stable food prices and personal safety and security and a whole lot of chatter about democracy is great – IF that gets them closer to their goals.

The people want bread!

People will say and agree to almost anything on the path to full stomachs and disposable income. They want to have a share in the country’s great (and so far, largely wasted) wealth, and its unimaginable future wealth. Egyptians want to feel proud of their nation and their accomplishments instead of being referred to as ‘that backward, poverty-stricken nation between Israel and Libya’.

When a government arrives in power that can attract the necessary FDI (Foreign Direct Investment) to build the country’s infrastructure — especially, the agriculture and (renewable) energy sectors and a massive electrical transmission network to the north to service Europe, south and west to distribute electrical power to the rest of Africa, then and only then, will we see an end to the present downward spiral of politics, democracy, and faith in government institutions in Egypt.

It’s the economy, stupid.

Egypt’s next ten leaders should take a page out of former President Bill Clinton’s book, and place a sign on their desk, saying; “It’s the economy, stupid!

If they ever get that right, the rest will fall into place…

JOHN BRIAN SHANNON

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A Rising Tide, Floats All Boats

Globalization means countries are working together for mutual success
Globalization means interdependence between countries and regions, opening up Foreign Direct Investment flows between participating countries. Image courtesy of: www.wittenborg.eu

by John Brian Shannon

As the world economy improves, national economies are being lifted up by a rising tide of success in other countries.

Now that we are living in an evermore globalized world, nations are no longer entities unto themselves. While they were once insulated from the economic successes or failures of other nations, that is profoundly no longer the case.

A recent example is the United States financial crisis of 2008 which was at first confined within the U.S., but later spread to Europe, Japan and China, with those countries experiencing varying degrees of economic malaise directly attributable to the original fall of the U.S. sub-prime mortgage segment.

Had a financial crisis of this sort taken place within the 1950-1980 timeframe, it would have been seen as an ‘America only’ affair as the (then) economic islands of Europe and Asia had little interest in the internal workings of the American economy.

How the world has changed in the 21st century

Recently, ‘America sneezed’ and most of Europe along with Canada ‘caught the cold’ – and while Asia felt unwell, it didn’t miss a day of work.

Globalization is a process. Every year, countries are harmonizing their diplomatic relations, international trade and laws, walking through the remaining issues towards true interdependence between nation-states.

Along the way, we have seen dramatically lower prices for consumers within the participating nations and a strong downward pull on inflation within the globalized community. Foreign Direct Investment (FDI) flows toward nations with lower land, factory and labour costs, while competition ensures that prices reflect those newfound cost savings.

One of the unfortunate effects of globalization from the Western perspective are the jobs that have fled the West to Asia. Over the span of (almost exactly) four decades, millions of manufacturing jobs have gone to the nations which feature low cost land, factory, and labour rates.

The transition of trillions of dollars from the West to the Emerging Market economies and Frontier Market Economies has spawned a rising economic tide in the Middle East, much of Asia, and in India. In fact, the rise of the BRICS nations are easily traced by the FDI inputs into their nations, as a welcome effect of, (but certainly not the primary cause of) their success.

Since 1998 China and India have been described as the two economic engines of Asia, and during recent recessionary times were noted as the economic engines of the entire world. Even as some nations were falling away from their traditional economic rankings, the unprecedented demand for raw resources and high-tech originating from the ‘rising tiger’ economies, slowed the fall of the Western economies and have even spurred their quicker recovery.

Historically, it was axiomatic that when the United States was doing well, Europe, Japan, Canada, Australia and New Zealand were doing well — as the U.S. economy had the power to float those economies no matter the ‘local’ economic conditions.

America is no longer alone with this power

Now, not only can American demand float the economies of countries or entire regions — the combined demand of the BRICS nations can float national economies and regions.

The U.S. population seems ‘torn’ at this juncture, with some in that country lamenting the loss of the unipolar world which was theirs since the end of the Cold War, whilst others welcome the strengthening and broadening-out of the world economy into a truly interdependent and open economic model.

For those Americans who believe in the open economic model (which is the name given to the ‘free enterprise’ system by economists) the strengthening and broadening-out of the world economy is exactly in line with their beliefs and is seen as an adjunct to American economic and political clout.

“We told you the open economic model was the way to prosperity, and now you are ‘our firm converts’ to that, and to the democracy which necessarily accompanies successful free enterprise systems.”

For those Americans who secretly or publicly wish for a closed economic model (known as the ‘communist’ or ‘statist’ economic model by economists) globalization is the root cause of all American economic woes — when in fact, America’s recent economic problems were caused by a perilously-lacking regulatory environment in but one segment of the U.S. economy and poor decision-making by a handful of individuals.

As nations advance towards interdependence they will see rising demand in their own countries from other partner nations (as at any given time, certain of them will be experiencing growth) thereby helping to balance-off the occasional lack of demand in their own country.

De-facto; Interdependence between nations means facilitation of effort, FDI, and countless other forms of assistance towards whatever is the weakest link of the chain.

This contrasts with the decades of ruthless competition which played itself out (even between allies) and ruled every diplomatic and national economic decision. De-facto, that was a ‘sink all the other boats first, before we get sunk’ game, played out in the global economy.

Wherever interdependent nations are working together to improve upon an open economic model, they are in effect working to create a rising tide for all of the participants within that interdependency, because it is simply and profoundly in their best interests to do so.

Interdependency is creating the incoming tide that will float our boats.

From Wikipedia, the free encyclopedia

“The aphorism “a rising tide lifts all boats” is associated with the idea that improvements in the general economy will benefit all participants in that economy, and that economic policy, particularly government economic policy, should therefore focus on the general macroeconomic environment first and foremost. The phrase is commonly attributed to John F Kennedy,[1] who used it in a 1963 speech…”

JOHN BRIAN SHANNON

To follow John Brian Shannon on social media – place a check-mark beside your choice of Facebook, Twitter or LinkedIn: FullyFollowMe/johnbrianshannon

Why African Resource Exporting Nations Need Tariffs

by John Brian Shannon

Many nations in Africa are presently experiencing a boom in resource exports. And that is truly wonderful news as exports of any kind contribute handsomely to national GDP and balance-of-trade figures. Not only that, millions of dollars of Foreign Direct Investment (FDI) often accompany resource exports.

For workers involved in the resource sector of a nation, it is unquestionably a positive development. Many other businesses and citizens at the periphery of the resource sector benefit too.

But does resource extraction benefit the rest of the society? It is heartening when one sector experiences strong growth – but when that rapid economic growth is limited to a small proportion of the population, tensions can become inflamed.

Joseph E. Stiglitz, Nobel laureate in economics and Professor at Columbia University has noted the problems inherent to resource-based economies in his recent and excellent article; “From Resource Curse to Blessing” which I urge you to read. Early into his piece, he says;

“On average, resource-rich countries have done even more poorly than countries without resources. They have grown more slowly, and with greater inequality – just the opposite of what one would expect.” — Stiglitz

Rather than develop the resource sector to the exclusion of all else and hope the rest of the society holds itself together — it would be prudent to tax all raw resources which are leaving the country.

In that case, comparatively few people will still make a good living directly from the oil (or other resource) company, while the rest of the country benefits in other ways from additional government spending on programs like improvements to national infrastructure, such as airports, highway systems, rail transportation and hospitals and schools on account of the tariff revenue.

When governments take in additional multi-millions of dollars from raw resource tariffs they will have additional money to improve services across the country.

The one thing governments shouldn’t do is add a tariff when resource prices are high! The major powers in the world will not let that happen as prices begin to skyrocket because that will add to uncertainty in the stock market and huge pressure will be brought to bear against any government attempting such a thing.

The time to add a small tariff is now, when prices are comparatively low and therefore, complaints will be few. Prices won’t drop much anytime soon. Due to the supply and demand equation they will be more often rising in the coming decades.

As we know, many African nations export significant amounts of unrefined oil, raw metals (ore and ingots), minerals or uncut and un-mounted gemstones. When African nations implement a 5% tariff on every exported tonne of resource — or barrel of oil — their economies will fire on all cylinders and with little complaint from rapidly growing and resource-hungry nations.

John Brian Shannon

ABOUT JOHN BRIAN SHANNON

I write about green energy, sustainable development and economics. My blogs appear in the Arabian Gazette, EcoPoint, EnergyBoom, Huffington Post, United Nations Development Programme, WACSI — and other quality publications.

“It is important to assist all levels of government and the business community to find sustainable ways forward for industry and consumers.”

Green Energy blog: http://johnbrianshannon.com
Economics blog: https://jbsnews.wordpress.com
Twitter: @JBSCanada