The visible hand that hinders Egypt’s economy

A little over two centuries ago, Adam Smith introduced the invisible hand theory explaining that demand and supply of goods will reach equilibrium in a free market scenario where everyone works to their own advantage. We Egyptians have invented a ‘visible hand’ that works on serving the interests of government employees and the private sector at the expense of our national economy. The Egyptian government sincerely believes in a free market economy, but it is attempting to realize this principle through peculiar means.

The famous economic concept whereby the Egyptian private sector is meant to maximize its profitability while the government regulates the economy has led to a handshake deal between the two parties. The private sector shares some of its revenues with the government through a mechanism that is initiated officially (through requests for excessive administration fees) and settled unofficially (by prompting the private sector to pay lesser amounts directly to government employees); in return, regulations are softened – a mechanism that is known as corruption, but that is widely practiced in Egypt.

The Egyptian economic dilemma is that the very same people who hinder the progress of our economy are responsible for designing economic growth policies! The State considers that its duty is to protect its assets and uses its bureaucratic system to do so, which ends up constraining any kind of substantial growth for those assets. Obviously, it has never occurred to the State that, if it were to apply the right mindset, even its liabilities could be used to generate revenues! Of course, creating wealth from liabilities will be quite a challenge as long as the Egyptian State continues to confront problems solely by managing its existent wealth.

The Egyptian government works on enhancing the knowledge and skills of its employees, but it does so in parallel with maintaining the overall old-fashioned government mentality and obsolete governing mechanism. This results in having a few more knowledgeable and skilled employees, who are constrained by government bureaucracy and corruption. Egyptians’ minds are dominated by a number of economic beliefs that urgently need to be called into question.

The Egyptian workforce perceives privatization as an economic method that will require them to work substantially more with the constant risk of being fired, while generating more cash to private owners. The concept of privatization is therefore often resisted by our government employees, who believe that the masses are the sole rightful beneficiaries of their country’s assets, even if the debts of these assets exceed their value.

Our government is doing its utmost to reduce explicit corruption; nevertheless, in a nation with seven million State employees and a high level of bureaucracy, reducing bureaucratic red tape is a formidable challenge – unless innovative approaches to the issue are considered. Meanwhile, the implicit corruption that is rife in Egypt is reflected in the way in which the government has structured its national economy to help a few business entities to increment their wealth while making it difficult for others to step in.

Although our government is trying to reduce the frequency of the handshake, the Egyptian bureaucracy often manages to find a way to reach out to the private sector with new obligations that must be met.  Applying a crisscross economic scheme that assigns to the government the task of thinking up the best methods for creating wealth and encourages the private sector to offer policies that sustain the State’s equities may lead to broadening both parties’ horizons, which could help us to achieve better economic growth.

Offering government premises, their unproductive employees and the energy that they consume, completely free of charge, to entrepreneurs to manage might bring better returns on investments and at least shake government employees’ mindsets, something that we desperately need. Egypt’s economic challenges will not be solved simply by operating a single-window to serve investors; we must adjust our thinking patterns and incentivize employees according to their actual productivity.

 

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