Egypt is becoming a ‘failed state’
Timur Kuran talks to Giancarlo Bosetti 26 July 2013

Is it not striking to see a return of theological as a key element in Erdogan’s speeches? He has given religious justifications for restrictive measures applied to alcohol consumption. Is this a return to the past for the Turkish “exception”?

During his first two terms as premier, Erdoğan rarely made references to religion in his policy speeches. This is because he was trying to avoid giving the secularist-dominated judiciary or the military an easy excuse for moving against the AKP. Now that the military has been defanged and the judiciary has become markedly more conservative through replacements, he feels free to invoke Islam at every turn. Now he routinely justifies policies with reference to Islam; in the case of the alcohol restrictions he repeatedly told audiences that “religion is never wrong.” His attacks on the Western-based “interest lobby,” which he blames for conspiring against Turkey because of its Muslim identity, conveys to voters that they would be better off in an interest-free Islamic economy. By the same token, his rants against the “interest lobby” are also expressions of populism. Credit card use has exploded during the AKP years, and a substantial segment of the rising middle class suffers from credit card debt. By attacking the “interest lobby” and treating both domestic and foreign banks as their instruments, he appears as a defender of the people against a vicious global conspiracy.

And yet among countries with a Muslim majority, Turkey seems to be an exception. Its banks are permitted to merge with European ones.

Turkey, which is officially secular, has had a conventional banking system, one composed of banks that give and take interests as a matter of course, openly, and without apology. Although Islamic banks have been allowed for the past quarter-century, 94% of the bank assets are under the control of conventional banks, which resemble European banks. So it’s not surprising. I might point out that with all the troubles in Europe, with many banks failing and many needing to be recapitalized, Turkish banks have weathered the crisis extremely well. The reason is that Turkey had its own crisis back in 2001. Many Turkish banks failed in that year; they had to be folded into other banks. At the time, the failures were pinned on various risks that they had taken. Banking regulations were revised. That is why Turkish banks are much healthier today than Greek banks—I’m not sure about Italian banks. Ten years ago, Greek banks were buying troubled Turkish banks, because they found them cheap and mendable. Today the tables have turned. Turkish banks are buying troubled Greek banks.

So, with respect to the “long divergence” between the East and the West, Turkey stands out as a country that has tried to close the gap through radical modernisation policies. For this reason it has been viewed as amodel for the Arab world. Have Erdoğan’s recent initiatives compromised Turkey’s status as a model?

Erdoğan started his tenure as prime minister, in 2003, as an economic liberal. By and large, he also respected pluralist democracy. But as he consolidated power, he abandoned his commitment to pluralist democracy. Now he supports a much narrower version of democracy, which is about being accountable from election to election. In between elections, he essentially says, if you have the majority you can do what you want. This has been the source of the recent political problems. He has become an authoritarian ruler who is trying to redefine, according to his own conservative Islamist principles, what it means to be a good Turk, what it means to have a good morality, what it means to live decently. This is a huge transformation.

How did this happen?

The root reason is the restrictions on Erdoğan’s power have weakened. Two factors have been critical. One is that the military has been pushed out of politics. Several hundred generals are behind bars, allegedly for coup-plotting. In the past, the military might have stepped in when secular principles were being violated. Now it is now powerless to do so. The second factor is that most Turks no longer consider joining the European community as a full member a realistic possibility. Some of them, seeing the troubles in Greece, Italy, Spain, Portugal and elsewhere, and Turkey’s greater economic dynamism, don’t consider it worthwhile. For that reason, the AKP government and prime minister Erdoğan no longer feel that it’s important to keep European public opinion on their side. What we’re witnessing in Turkey today is the consequence of giving one person too much power. Erdoğan is able to push his own social and political agendas, because he can. It may end up destabilizing Turkey politically.

Is the Turkish model experiencing a crisis?

The Turkish model to which you referred is one that involved checks and balances coming from both Europe and within the Turkish system. They are now gone. This calls into question the usefulness of the current Turkish political model as an example for democratizing Arab countries.

The Egyptian political disaster has sparked a heated political debate about its protest movement that lacks guidelines, the role played by the army and the Muslim Brotherhood’s failure. Does all this conceal the drama of an economy that seems without a future, with millions of young people unemployed?

The politics and economics of the Middle East are not really separable. Political instability is aggravating the economic problems, and the economic problems are making it very difficult to stabilize the politics. Where the economy is stagnant, as in Egypt, people tend to see conflict as a zero-sum game, which is not conducive to bargaining or compromise. So both politics and economics are sources of Egypt’s current problems.

Do the historical and structural mechanisms that you uncover in The Long Divergence carry relevance for the current crisis?

I think they do, for a number of reasons. Democracy is very new to the region, and this has historical causes. Civil society was chronically weak in the Middle East, while in Europe, in the second millennium, it gradually strengthened through various corporations, including urban, ecclesiastical, and educational corporations. There was no equivalent development in the Middle East, and that is because the functions served by Europe’s corporations were served by waqfs, which resemble European trusts or foundations. waqfs are much more rigid than corporations; they cannot adapt easily to changing technologies and prices. Most important, they don’t take part in politics. The result was, over many centuries, that the Middle East had fewer and weaker private organizations than in Europe. Merchants did not check the power of the sovereign as they did in Europe. The upshot is that the modern Middle East does not have a tradition of checks and balances to draw on. This is a source of political instability and a huge economic handicap. It is a basic reason why the Middle East—Egypt is a prime example—cannot draw in foreign capital the way East Asia does, and the way Europe did for so long.

You have referred to a crucial institution in the history of Islamic countries, the waqf. What is it precisely? And why is this charitable institution still a problem for Muslim countries?

A waqf is a trust or foundation that is established by an individual property owner to provide a particular service in perpetuity. The property owner sets aside income-producing assets to finance a particular service. The income provided by these assets is expected to suffice to fund that service forever. The service is set in stone; the founder decides for many generations to come the nature of the service. The intended recipients of the service do not have any say in the matter. So as conditions change over time if they may want the service to be modified, change will not be possible. This is a key reason why civil society remained stunted in the Middle East and why civil society is weak today. The beneficiaries of a European corporation are able to communicate their changing needs, and they also have some say over the service providing officials. This was not the case with Middle Eastern waqfs. Even though the Islamic waqf that I described is not very common in the Middle East today—in the 19th century most were dismantled and their capital moved largely to government agencies—there isn’t a tradition of groups getting together to discuss what collective goods to provide themselves and the most efficient means of doing so.

Does the waqf’s legacy influence Egyptian politics nowadays?

This history is a huge problem for the people of the Middle East. Take Egypt today. When Egyptians are frustrated with their president, they gather in Tahrir Square and other squares. Over the past few years they have come out by the millions three times. In contrast to this success in protesting, they are not good at forming committees locally, within cities across the country, and within professions to debate and solve their problems in a democratic manner. They are having difficulty bringing various constituencies together to agree on a constitution in a spirit of compromise. They have trouble forming a government that will represent various groups, with everybody compromising. The art of compromise and of negotiation is something we often take for granted in countries that have a tradition of solving economic problems through negotiation. This is where the history of the waqf matters. The fact that it played such an important role in the Middle East for about twelve centuries kept Egyptians from developing the skills of democratic citizenship.

In the West too we are well aware that whereas the time frame for democratic bodies is short, resolving current problems will require a significant amount of time. Over the coming years, the economies of Muslim countries need reforms that will overcome structural restrictions rooted in the waqf, the aversion to interest on capital and the small size of companies. that the required changes will take time, and in the meantime?

You have put your finger on an immense difficulty. If I can rephrase your question, if relatively advanced like Italy and Spain, stable countries with a history of corporations and democracy have difficulty reaching the compromises necessary to solve their problems, how can we expect Egypt, which has much far more serious problems, to solve them within a democratic framework? I myself am skeptical, and for this reason I am afraid that there is no quick fix. I’m not hopeful that Egypt can solve its problems within a democracy because the institutions of a democracy have to be created first, and that takes time. The development of Europe’s democratic institutions spanned hundreds of years, and they involved struggles between various groups and lots of setbacks along the way. The only way that Egypt might get out of its mess through democratic or semi-democratic means is through extraordinary leadership by a very charismatic person. Such a leader could level with the people and convince them to endure the costs of various resource reallocations and subsidy reductions for the promise of distant benefits. Of course, this is exactly what Egypt’s new interim president and prime minister have said that they want to do. I’m afraid that they don’t have the charisma, or the political credibility, to follow through. The minute the people find out what it will mean—higher fuel and food prices—many people will go back to the streets. I wish that I had a short-term solution. The best that we can do as outsiders in Egypt is to begin the task of explaining to Egyptians, and to try to convince them, that many sacrifices are going to be needed to get out of the present quagmire.

The various forms of aid are also a problem. To American aid one must add the equally important financial aid provided by Qatar and Saudi Arabia, which do not encourage reform. Then there is the lack of European initiatives…

Outside help can delay essential reforms. When Morsi was in power, he received eight billion dollars from Qatar, and two billion dollars from Turkey, two countries whose governments are sympathetic to the Muslim Brotherhood. They provided funds to assist the transition, but the effect was to give Morsi time to delay the necessary adjustments while he consolidated political power. Right now it’s the countries that disliked Morsi and supported the military, mainly Saudi Arabia and the United Arab Emirates, who have rushed in with billions of dollars to prop up the current regime. One effect will be to delay the reforms again, to allow the new government to kick the can down the road, hoping that a post-election government will address the acute problems, while the ranks of the unemployed just continue to swell. Meanwhile, Egypt’s challenge of creating jobs grows in magnitude. I have not even mentioned the environmental problems it is facing. These are aggravating the economic problems. They require immediate attention.

Education is another serious problem for Egypt. There is a very high level of illiteracy.

Education is indeed an added problem. The literacy rate and educational attainment are much higher in Tunisia than that in Egypt. As long as we are comparing countries, we might as well add Turkey, one of the larger countries in the region, with a literacy rate well above 90%, as compared to around 70% in Egypt. In view of these discrepancies in educational statistics, it is not surprising that Tunisia and Turkey have per capita incomes several times that in Egypt. I strongly believe that aid to the region should be earmarked for education and for strengthening civil society organizations genuinely autonomous from the state. Yet such investments do not yield fruit immediately. It could take a decade for the results to be reflected in the functioning of society. But remember that there is no quick fix. If anything is going to work, it is this. We have to recognize that Egypt is on its way to becoming a failed state. It lacks the institutions and capabilities of more prosperous countries at peace with themselves. Many preconditions for political stability and economic growth are lacking.

The idea that a country such as Egypt can become a “failed state” is disquieting. This poses a danger especially because of its demographic boom. Soon it will have 100 million citizens. It is a country too big to fail, as they now say about banks!

Unfortunately we are at a stage in history where, because of aging populations, Europe, North America, and even Japan are not in a position to provide massive aid on the scale of the Marshall Plan. Their publics would not accept the diversion of huge amounts of resources to a country like Egypt, when they have so many unmet needs at home. So where can the necessary capital come from? It can come from the Arab world itself. It contains capital-rich countries; we have already mentioned Saudi Arabia, Qatar, and the United Arab Emirates. Unfortunately, these countries are ruled by families that are doing everything possible to undermine reforms in the Arab world. They do not want to see democracy succeed. Two of them undermined Morsi’s government, not because he was an Islamist per se—that should have been a plus in their eyes—but because they did not want to see a democracy succeed, and particularly an Islamist democracy, because this could plant the seed of revolt in the minds of their own people. So we are facing a tragedy. People who have the resources to help want to undermine democratic reforms, not to promote them. Of course Europe and the United States have leverage over the resource-rich Arab states. If they were serious about helping Egypt, they would put pressure on Saudi Arabia, the United Arab Emirates, Kuwait and others to start allocating resources to genuine reforms. But this would require NATO to get involved in inter-Arab affairs closely, and there are huge political risks to doing that.

In the Gulf region there are successful companies that deal with the West without theological scruples. The Emirates have a very competitive airline. Qatar buys property and football teams in Europe. If the emirs are attracted by the West, why do they reject its analytical models? Do you hold conferences in Qatar or in Riyadh?

I have not lectured either place. In recent years I have spoken in Abu Dhabi, Morocco, and Tunisia. I’ve also been invited to some of other Arab countries, then had the invitations rescinded on security grounds because somebody vetoed the invitation after it was issued, finding my views are controversial. Yet when I speak to Arab audiences, including conservative audiences, I find them receptive. They see that I am not a sloganeering activist but a scholar. They find that the arguments are based on facts and plain logic, and that they are easily understood once laid out systematically. It also strikes them as original. But there are people who do not want me to be heard. There is little open discussion or analysis in the Arab world about its traditional institutions, particularly those connected to Islam in one way or another. The reason is that people who make arguments about the possibility of something having gone wrong risk being accused of animosity towards Islam itself. People living in the Middle East, and in the Arab world in particular, are generally afraid to take the risks involved. In Western academic circles there is now a vibrant discussion on the issues we have been discussing. But the arguments we develop and post online generally don’t get discussed within the Arab world, and they don’t promote Arab responses.

Have your books been translated into Arabic?

I might point out that onw of my earlier books, Islam and Mammon, was just recently translated into Arabic by a foundation in Morocco. The same foundation is in the process of translating the Long Divergence. These are welcome developments. I hope that they will stimulate debates.



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