Egypt The Economy
Senwosret (Kheperkare) and god Min; sunken relief on
limestone with hieroglyphs
FROM THE 1850S UNTIL the 1930s, Egypt's economy exhibited a
classic Third World dependency syndrome, the essence of which was
reliance on the export of a single, usually primary, commodity. In
the case of Egypt, the commodity was long-staple cotton, introduced
in the mid-1820s during the reign of Muhammad Ali (1805-49), and
made possible by the switch from basin to perennial, modern
irrigation. Cotton cultivation was a key ingredient in an ambitious
program that the Egyptian ruler undertook to diversify and develop
the economy.
Another such ingredient was industrialization.
Industrialization, however, proved for various domestic and
external reasons to be less than successful, and until the 1930s,
virtually no industrial build-up occurred. The failure of
industrialization resulted largely from tariff restrictions that
Britain imposed on Egypt through the 1838 commercial treaty, which
allowed only minuscule tariffs, if any. The isolated industrial
ventures initiated by members of Egypt's landed aristocracy, who
otherwise channeled their investment into land acquisition and
speculation, were nipped in the bud by foreign competition. The few
surviving enterprises were owned by the foreign community. These
enterprises either enjoyed natural protection as in the case of
sugar and cotton processing, or benefited from the special skills
that the foreign owners had acquired, as in the case of cigarette
making by Greeks and Turks.
The beginnings of industrialization awaited the depression of
the late 1920s and 1930s and World War II. The depression sent
cotton prices tumbling, and Britain acceded to Egyptian demands to
raise tariffs. Moreover, World War II, by substantially reducing
the flow of foreign goods into the country, gave further impetus to
the establishment of import-substitution industries. A
distinguishing feature of the factories built at this time was that
they were owned by Egyptian entrepreneurs.
In spite of the lack of industrialization, the economy grew
rapidly throughout the nineteenth century. Growth, however, was
confined to the cotton sector and the supporting transportation,
financial, and other facilities. Little of the cotton revenues was
invested in economic development. The revenues were largely drained
out of the country as repatriated profits or repayments of debts
that the state had incurred to pay for irrigation works and the
extravagance of the khedives.
Rapid economic growth ended in the early 1900s. The supply of
readily available land had been largely exhausted and multiple
cropping, concentration on cotton, and perennial irrigation had
lessened the fertility of the soil. Cotton yields dropped in the
early 1900s and recovered to their former level only in the 1940s,
through investments in modern inputs such as fertilizers and
drainage.
The fall in agricultural productivity and terms of trade led to
a stagnation in the per capita gross national product
(GNP--see Glossary) between the
end of World War I and the 1952 Revolution:
the GNP averaged ŁE43.0 (for value of the
Egyptian pound--see Glossary), in 1954
prices, at both ends of the period. By 1952
Egypt was in the throes of both economic and political crises,
which culminated in the assumption of power by the Free Officers.
Data as of December 1990
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