Power, Class, and Foreign Capital in Egypt: The Rise of the New Bourgeoisie

186 Pages·1989·3.204 MB·English

by  Malak Zaalouk

POWER, CLASS
AND
FOREIGN CAPITAL
EGYPT

POWER, CLASS
A N D
FOREIGN CAPITAL
EGY PT
The Rise of the New Bourgeoisie
Malak Zaakouk
Zed Books Ltd.
London and New Jersey
Power, Class and Foreign Capital in Egypt:
The Rise of the New Bourgeoisie was first published by
Zed Books Ltd., 57 Caledonian Road, London NI 9BU, UK and
171 First Avenue, Atlantic Highlands, New Jersey 07716, USA,
in 1989
Copyright €> M. Zaalouk, 1989
Cover designed by Andrew Corbett
Typeset by EMS Photosetters, Rochford, Essex
Printed and bound in the United Kingdom at
The Bath Press, Avon
All rights reserved
British Library Cataloguing In Publication Data
Zaalouk. Malak
Power, class and foreign capital in Egypt:
the rise of the new bourgeoisie.
1. Middle classes — Egypt — History
I. Title
305.5*5*0962 HT690.E3
ISBN 0-86232-222-7
ISBN 0-86232-223-5 Pbk
Library of Congress Cataloging-in-
Publication Data
Zaalouk. Malak
Power, class and foreign capital in Egypt: the
rise of the new bourgeoisie/Malak Zaalouk.
p. cm.
Bibliography: p.
Includes index.
ISBN 0-86232-222-7.
ISBN 0-86232-223-5 (pbk.)
1. Businessmen-Egypt. 2. Entrepreneurship-
Egypt. 3. Commercial agents-Egypt. 4.
Corporations. Foreign-Egypt. 5. Middle
dass-Egypt. 6. Power (Social sciences)
I. Title
HC830.Z23 1989.
305.5*54-dcl9.
Contents
Acknowledgements vii
Introduction 1
Egypt’s development: patterns of continuity and change 1
Egypt’s current political economy 4
Egypt’s new social classes 6
The political struggle 6
PART 1: A HISTORICAL SKETCH OF SOCIO-ECONOMIC
CHANGES 15
1. The Egyptianization of the Economy: The Emergence of a Local
Bourgeoisie from the World War Two Period to the Early Nasser
Phase (1937-65) 17
Economic developments 20
The Egyptian bourgeoisie: its origins, nature, pattern of development
and relationship to the power structure 22
The relationship of the bourgeoisie to the power structure 23
2. Dominant State Sector ’Socialism*: From the Suez Crisis to the Suez
War (1956-67) 30
International developments, 30
Internal political and economic developments 33
The creation of the state sector (1961-1967) 36
The plan 37
3. The Aftermath of the Sinai War: From Liberalization to the ‘open
door’ Policy (1968-73) 50
Ideology, politics and the economy after the Six-Day War 50
The ‘open door’ policy (infitah) 55
4. ' The Commercial Agents: A Historical Background 62
PART 2: THE CONTEMPORARY SITUATION 75
5. Policy Changes 77
First: Egypt within the international context 77
Second: legal and political changes under infitah 82
6. The Avenues of Investment for Businessmen and Opportunity for
Commercial Agency Activity in the New Economy 95
Industry, agriculture, petrol, services and foreign trade: joint
venture ownership 95
Industry, agriculture, petrol, services and foreign trade under
national ownership, both private and public 96
7. Commercial Agents within the New Socio-economic
Structure 118
Egypt as a peripheral economy 118
A model of commercial agency activity 119
8. The Commercial Agents* Socio-economic Characteristics and
Internal Class Position 129
The social origins of the commercial agent business group 131
Kinship and marriage within the group 134
The group's broader class membership 136
The business group’s relationship to the representatives of the
dominant classes in Western capitalism and their culture 140
Commercial agents and political power under infitah 144
'Covert* political participation of commercial agents as an indication
of power 147
9. Conclusion 158
Postscript 161
Bibliography 163
Index 173
Tables
6.1 Comparison of Gross Domestic Product Figures 103
9.1 The Social Origins of the Commercial Agents 131
Acknowledgements
This book has come into being as a result of research for a doctoral dissertation
at the University of Hull. I would, therefore, like to thank the University for
giving me this opportunity. I would also like to thank greatly Talal Asad from
the University of Hull, for supervising the original work, encouraging me, and
giving me a lot of valuable advice. Many thanks also to his wife, Tanya Baker,
for moral support.
I would like to single out two people for special thanks for having given me
confidence, encouragement and advice and shown interest in my work: David
Booth at the University of Hull, Department of Sociology and Social
Anthropology, who also read parts of the preliminary draft; Mahmoud Abdel
Fadil, Cairo University, who read parts of the later draft and who has been a
constant source of encouragement and support at all stages of the present
work. His contribution and concern have indeed been invaluable.
I can never thank enough all friends from many parts of the world who have
given me so much moral support, encouragement and practical help, and who have
made themselves available for discussion, all of which greatly enhanced my
work. It would be impossible to mention all their names. I would, however, like
to thank Enid Hill and Nader Fergany in this respect for reading and
commenting upon parts of the finished thesis during the final rewrite. I would
also like to thank Susan Edwards for practical help and encouragement.
Finally, I would like to thank Michael Pallis and Robert Molteno from Zed
Books, for taking an interest in the work and giving valuable advice for the final
rewrite and ways of making the original work more readable. Working with
them has been a pleasure.
Last, but not least, I would like to thank my husband for putting up with my
ups and downs and tolerating my moods during the final rewrite.
The imperfections of the work will remain my own responsibility.
Malak Zaalouk

Introduction
Egypt’s development: patterns of continuity and change
Egypt’s history, like that of many of the Third World countries, has been a long
struggle for independent development. The struggle has been an arduous one
with many obstacles to overcome. Despite its own specific development Egypt
has manifested patterns of continuity within a framework of change. There
have been many changes of direction in its internal development and its
relations with the outside world, yet a number of trends have persisted since
ancient times, and each historical stage of Egypt’s political economy has borne
the seeds of the following stage.
The struggle for independence has for the most part been a national
bourgeois one, with the state taking the leading role. This struggle has not
always been completely secular; frequently it has had religious overtones, with
certain Islamic groups taking quite an active part.
Some date the beginnings of the national bourgeois movement in Egypt to
the late 18th Century at the time of Ali Bey Kebir. Several industries had
developed by then and an articulate guild system existed, along with a group of
merchant capitalists. However, the influx of large numbers of foreign
entrepreneurs and merchants gradually created a new foreign-run sector which
pushed the traditional merchant capitalists to the background.1
This very embryonic bourgeois development was aborted by internal
political instabilities in the period immediately preceding the reign of
Mohamed Ali. These instabilities had made savings vulnerable and investment
highly hazardous. Thus, when Mohamed Ali came to power, private enterprise
could hardly be depended upon. For any economic progress to take place the
state would have to take charge of productive activity. This it attempted to do,
creating both a landed aristocracy and a bourgeois entrepreneurial class.
Unlike its European counterpart, the bourgeoisie of 19th-Century Egypt was
created by the state. Its members consisted of state technocrats, administrators,
clerks and army officers. It was mainly a bureaucratic bourgeoisie, state-
dominated, largely dependent upon education rather than property, and to
some extent patronized by foreign technicians, bankers and merchants.
Mohamed Ali had embarked on a nationalist bourgeois movement with the
state as its leader. He had aimed to prove to the world that Egypt was not
2 Introduction
necessarily predestined to remain an agrarian economy providing Western
industry with raw materials. He had hoped to turn Egypt into a state-based
industrial economy, and he had almost succeeded.2 A small private sector still
existed, run and financed by foreigners, but the major entrepreneur and
employer of the nascent working class was the state public sector.
The relative success of the experiment and the promising industrial boom
had greatly alarmed the West, while the Ottoman East had felt politically
threatened by Mohamed Ali’s expanding army. Thus in 1838 England
managed to sign an economic treaty with Turkey which established an ^pen-
door economy* in all its empire, Egypt included. Mohamed Ali’s new industries
could no longer be protected. This national bourgeois phase finally came to an
end when Mohamed Ali’s armies were destroyed by the West and Turkey in
1840. The state had become weak and industry was on the decline. Thereafter,
foreign technicians, banks and debts were the main features of the new
dependent economy.2
< From the middle of the 19th Century the West succeeded in maintaining
Egypt as a dependent export economy. It is only with the 1919 revolution that a
nationalist bourgeoisie once again emerged. Through state help, industry was
once again protected and some capital was accumulated. The experience
culminated in the Nasser regime, which appeared as the natural conclusion to
the nationalist bourgeois movement aiming at Egyptianization of the
economy.
Nasser’s industrial and military ambitions, like those of Mohamed Ali,
alarmed the West. His defeat came about militarily, and an open-door policy
was internally and externally imposed. His regime was very definitely
bourgeois-oriented. Capitalist development was state-directed and the
entrepreneurial class was bureaucratic in nature. The regime, like its
predecessors, was charismatic rather than democratic, and therefore it lacked a
strong basis of popular support. Its working class was co-opted by the state;
thus its source of internal political and social support was not sufficiently solid.
Remnants of the old bourgeoisie still shared power, a bourgeoisie that had
emerged out of the womb of the landed aristocracy and which grew through
foreign capital and in very close connection to it.
Although Egypt has shared a number of objective structural conditions with
the rest of the Third World, its historical development has maintained its
specific character. Like many of the Third World peripheral countries, Egypt
was historically an export-based economy which had been enmeshed quite
early on in the capitalist world economy. The country was highly dependent
upon cotton as a cash crop and the centrality of the state has played an
enormous role in creating the various economic phases and interlinks with
foreign capital. Egypt moreover is a country with a history of 5.000 years of
state centralization. The overdevelopment of the state is thus possibly more
pronounced than in most other Third World peripheral countries.4
The truly exclusive and specific nature of Egypt’s historical development lies
in the geopolitics of the country. Egypt is geographically highly strategic.
During the traditional colonial phase Egypt was situated at the crossroads of