Economies, like relationships, require a good feeling. The best relationships draw you in, and you really enjoy the happiness and value you get from them. Less good ones can drive you away, and while you get something out of them, you are not very drawn into them. Economies are kind of like that. Some pull in investors, capital and labour with the returns and value that can be gained. Others are just less attractive and push resources away.
Right now, we eagerly await the new cabinet unveiling. But those ministers have already failed, at least regarding the key positions for the economy. If we judge them, as we have all those before them that have rotated in and out over the past 29 months, on the vague goal of fixing Egypt’s economy, they have already failed. They walk into the job with unrealistic expectations made of them and with even more ridiculous circumstances under which to work.
Success for this quick seven-month transition economic management team will be to work on the “push”; the “pull” will come later. They need to do what anyone needs to when things go sour in a relationship: to start to try to fix how people feel. That starts with addressing the challenges that have pushed away important resources from the economy, like investors, capital and labour. Before the economy becomes an attractive place again to pull in these resources, they need to change the many reasons resources have been pushed out of the market.
The tricky thing about those forces pushing resources away from the economy is that at this point some are not economic problems, like security, which is a high priority. The protection of people and property is a basic ingredient for economic growth.
Reduced security in post-revolutionary Egypt has had serious implications on the economy either through actual losses or changes in perceived risk. The ability of the economic managers to work with the Minister of Interior to reverse the trend will be key in reducing the push forces working against the economy.
Reviving investment levels will help reverse the forces that have pushed away large numbers of talented labour from the market, both Egyptian and foreign. Lower investment levels usually mean lower growth and less economic activity, which means less labour needed. Reversing the decline in investment should help in dealing with the push forces driving away labour, but not completely.
However, not all Egyptians that joined the already high numbers of labour migrants in the recent period were pushed out by the lack of opportunity. Others, like talented people before them, were pulled away by more attractive markets elsewhere. This is especially true of markets that offer more opportunity based on performance and merit compared to the local market, which far favours tenure in career progress.
Addressing some push forces for labour resources could never happen in a short transition period but ultimately are important for economic recovery and prosperity for the country. This is true for labour, as well as other resources.
Quick and effective ways for reducing push forces will be for the top economic managers to demonstrate a cooperative working relationship and to concentrate on communications. The best-case scenario is when the entire economic management team is guided by one unifying strategy that is clearly communicated. Former president Hosni Mubarak’s final cabinet was very good at this. Those that followed did less well, where cabinet-level economic managers would give conflicting statements on small and big matters or reversing decisions quickly after announcing them. These sorts of things seriously shake confidence and push resources away.
In the nature of addressing the push forces, slowly positive pull forces develop. Taking away the negatives helps in building up the positives. The big question for the Egyptian economy is whether the ‘pull’ will return to what it once was. Before, resources were drawn to the market for the potential high returns and gains relative to other markets. Since then life for business and for labour has become more expensive and less certain. Once the dust settles and things start to move to a more stable situation, we can start to judge the economic management team on fixing the economy. In their short tenure, this would exceed realistic expectations. For now, if they can start to fix how people feel about the economy, halting the pushing away of resources with the goal of starting to pull them in would be a great way to measure their success and to help start to get the economy back on track.
