Sand dance

Alasdair Macleod – 14 February 2010

The resignation of Hosni Mubarak was inevitable: the old man tried to hold things together, failed, and so resigned. Not only did he face growing dissent from the young, educated and English-speaking middle class, but he lost the support of his American backers. He left his post with as much dignity as possible, not fleeing abroad like Ben Ali of Tunisia, but to his residence in Sharm el-Sheikh.

In all the excitement the quality of reporting by the Western media has been unbalanced beyond description. Sensing a great historical moment the press corps surged into Cairo and interviewed the small minority of English-speaking Egyptians, presenting their views as representative. This folly was exposed in one amusing BBC television report when John Simpson, the BBC’s veteran world affairs editor ventured out of Cairo to talk to some real fellahin. He and the camera crew ended up being arrested, because the locals became increasingly offended by his line of questioning.

Simpson had ventured into the real Egypt: an Egypt the culturally-ignorant West now thinks should have Western-style democracy. But before we can consider the future, we need to reflect on the past, and what it has actually meant for the Egyptian people.

Mubarak may not be flavour of the month in the foreign press and the Cairo intellectuals, but he was actually a wise dictator. In the years of his presidency he encouraged the private sector to grow independently from government and has generally reduced the level of state involvement in the economy. That is a wisdom notably lacking in Western leaders. By sticking to Anwar Sadat’s peace agreement with the Israelis, he got the army paid for by the Americans, ensuring it was not a burden on the state. Consequently income taxes have been kept very low by Western standards, with the subsistence farmers (fellahin) paying nothing, and the highest rate of 20% only kicking in at the equivalent of US$7,000, considerably higher than the average income. There are no other significant taxes. Above all, he provided thirty years of stability.

While there is much to criticise, such as police brutality, in the Muslim world the faults of the Mubarak regime are normal statist behaviour and generally accepted. Stay out of trouble, and you are left alone to go about your business. Mubarak was aware that the overwhelming majority of Egyptians is not bred to democracy and only respects strong leaders. Not to recognise these cultural differences has been a fundamental mistake made by both President Obama and David Cameron, the two leaders who feel they have to comment on these issues. It would have been far better if they had made no public comment and allowed their officials to work behind the scenes in the interest of stability. Instead, their public statements have been crucial for the success of the demonstrators, and at the same time have probably alienated the silent, impoverished Muslim majority who value loyalty over democracy, as John Simpson so rudely discovered.

That is a brief summary of the factual background, so we can now turn to the prospects for Egypt and therefore the region. In doing so, we must dismiss comparisons with the fall of the Berlin Wall and other “peaceful revolutions”. For a peaceful revolution the majority of the newly-enfranchised electorate has to support it, which is not the case in Egypt. Instead, there are disturbing similarities with the fall of the Shah of Iran in 1979. The then British Foreign Secretary, David Owen, casually remarked in a BBC television interview in December 1978, that the Shah had lost all credibility and it was only a matter of time before he was deposed. The effect of this careless talk was the Shah was indeed deposed within a month, and Iran rapidly descended into its black theocracy.

Owen’s public statement and the circumstances surrounding it have a striking similarity to the way Mubarak has been undermined thirty-two years later, and so is a strong pointer to the eventual outcome.

For the moment, the Egyptian army is in charge, and with the Americans as their paymasters, there is little doubt they will arrange a transfer of power from an interim government through democratically-held elections as they have promised. But there is no way of knowing who will arise to fill the considerable political vacuum. The Muslim Brotherhood is listed as a potential favourite, but the political power-balance within that party is also certain to shift before an election can be held, now that there is the prospect of real power. But as was the case following the Shah’s downfall, Egypt represents a golden opportunity for extremists to turn the nation into a Muslim state that completely rejects western values, and fights the Muslim crusades against the Capitalist West and Israel. And we can be certain that the Iranian secret services are hotly pursuing the opportunity.

If Iran succeeds in turning Egypt into a puppet state, she will have surrounded the Arabian peninsular, which has been her strategic objective for some time. Then the West is in real trouble. Saudi Arabia would be well advised to reconsider her foreign relations as a matter of urgency, particularly if her own intelligence confirms Iranian activity in Egypt. It will be a difficult choice: does she stick with the Western nations, who have proved to be such treacherous allies to Mubarak, or do they seek appeasement, Chamberlain-style, from Ahmadinejad? It will be a finely-balanced decision. A third, and better option, may be to talk to China, and join the Shanghai Cooperation Organisation, thereby gaining the security protection of both China and Russia. China and Russia could be the future, America and Europe the past. And at least SCO members do not clumsily interfere with your internal politics.

The implications for the West are extremely worrying, and it has unwittingly boxed itself into a corner. It is beyond the scope of an article of a thousand words to propose a solution or predict an outcome. Instead, it is sufficient to point out that the removal of Mubarak has been a very dangerous development for both Egypt and the West and it is to be much feared, not celebrated.

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Alasdair started his career as a stockbroker in 1970 on the London Stock Exchange. In those days, trainees learned everything: from making the tea, to corporate finance, to evaluating and dealing in equities and bonds. They learned rapidly through experience about things as diverse as mining shares and general economics. It was excellent training, and within nine years Alasdair had risen to become senior partner of his firm. Subsequently, Alasdair held positions at director level in investment management, and worked as a mutual fund manager. He also worked at a bank in Guernsey as an executive director. For most of his 40 years in the finance industry, Alasdair has been de-mystifying macro-economic events for his investing clients. The accumulation of this experience has convinced him that unsound monetary policies are the most destructive weapon governments use against the common man. Accordingly, his mission is to educate and inform the public in layman’s terms what governments do with money and how to protect themselves from the consequences.

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