Anwar El Sadat became the President of Egypt on October 15, 1970 (Thomas and Youssef 115). From the beginning of his presidency, Sadat pursued a different approach in policy than the previous head of the state, Gamal Abdel Nasser, both in domestic and foreign spheres. Due to the fact that Sadat pledged to build peace in regions of the Middle East, certain positive transformations occured in economic, political, and social life of Egypt. He introduced vast economic reforms aimed at terminating the socialistic control imposed by Nasser (King 80). As a result, the new economic policy enjoyed political freedom and included the principles of openness, also known as “infitah.” These initiatives facilitated private investment and foreign aid to the country. During the presidency of Sadat, the Egyptians also received an opportunity to travel to other countries, including the states of the Persian Gulf, and, therefore, enriched Egyptian economy with their money transfers (Osman 122). At the same time, these economic policies had some negative effects, as they mainly benefited the upper and middle class. The majority of the Egyptians did not experience prosperity and wellbeing. Moreover, Sadat’s reforms led to massive riots in Egypt. Nonetheless, economic, social, and political conditions of Egypt when Sadat came to power were not favorable for further development and prosperity of the country. Despite the fact that some economic initiatives of the Sadat’s regime were not popular among the population, the President made attempts to promote economic advancements of the country and improve social standards of the Egyptians.
Social and economic conditions of Egypt when Anwar El Sadat came to power after Gamal Abdel Nasser and loss of 1967 war
Sadat ascended to the presidency in politically and economically broken Egypt. His forerunner, Nasser, had introduced many economic and social policies that benefitted the population, such as a wide network of social services, agrarian reforms, and improving the position of the lower class (Hibbard and Layton 199). However, many factors contributed to deterioration of the economy of Egypt at the end of the 1960s. First, the country suffered from the Six-Day War of 1967 (Thomas and Youssef 115). During the war, Israel easily destroyed a substantial part of the army of Egypt, Syria, and Jordan. As a result, economy of these countries, Egyptian in particular, suffered from military burdens due to the necessity to rebuild the national army. Egypt’s Sinai was under the control of Israel (Baker 22). Due to the fact that the peninsula was an important tourist destination, its loss led to considerable reduction of revenues from tourism. Second, the decades of nationalization in economic sphere resulted in economic collapse. Egyptian private enterprise did not have opportunities to develop and was higly limited; as a result, the country’s economy experienced stagnation. Third, Sadat presided over the country impeded by the Soviet Union. Egypt significantly depended on Soviet support, both economic and military.
According to Egyptian politicians, at the beginning of Sadat’s presidency, the country was “engaged in clearing the debris left by that era, especially the bleeding of all Egypt’s resources, in order to overcome the catastrophe it left” (Baker 23). In fact, as soon as Sadat came to power, he introduced a “revolution of rectification,” which included new political, economic, and foreign policy directions (Shillington 474). The new president was convinced that it was necessary to correct the mistakes of the previous government and improve the image of Egypt in the world. Sadat believed that his reforms would reverse the economic decline that had lasted for decades. The basis of his reforms was removal of Egypt from the socialist camp and introduction of free market system (Shillington 474).
Nevertheless, Nasser’s economic program had many impressive achievements. For instance, income was substantially distributed between Egyptian population. If previously Egypt was characterized by significant disparities in wealth between the upper class of business elite and the middle class, Nasser has changed the situation. To be more specific, Egypt provided educational and employment opportunities for people regardless of their social position. However, the economy of the country was based on state-run industries that were highly insufficient (Shillington 473). Consequently, the industries could not enter the international markets. These resulted in the fact that the country did not experience sustained economic development. Moreover, a considerable part of peasantry still lived below poverty line. Thus, the new regime had to introduce reforms that would improve the country’s position in the world and ensure wellbeing of the population.
Economic and military improvements made by Anwar El Sadat before the October War
The peculiarities of international environment and the loss of 1967 war required the Egyptian leader to manage the postwar economy. As a result, the country had to introduce new taxes and increase public revenues to meet public spending necessary in preparation for the next war. Sadat’s government increased tax revenues from 442 Egyptian pounds in 1970 to 574 Egyptian pounds in 1973 (Shillington 743). The share of direct taxes was approximately 33 percent. Thus, the economy was mainly based on indirect taxes collected from the population. The country’s inflation rate between 1970 and 1973 was controlled by compulsory pricing policies imposed on basic commodities. Military industries received the majority of investments, as it was a strategic sphere. Expenditures on weapon reached 21 percent of gross domestic product in 1971. In 1973, the figure slightly decreased to 20 percent (Shillington 743). However, decrease of military expenses was an important factor that could ensure investing in other spheres of economy and achieving high development rates.
The unemployment rate remained almost at the same level as during the previous years. In the first half of the 1960s, it amounted to almost 7 percent, whereas at the beginning of the 1970s it reached 8 percent (Shillington 743). The government also suspended import of luxury goods, including clothes, fabrics, cigarettes, and electronics. However, the country suffered from reduction of tourism due to seizure of Sinai Peninsula, loss of Suez Canal revenues, and decrease in oil production. Eventually, these tendencies negatively influenced Egypt’s foreign trade balance.
As a result, Egyptian economy before the October War can be characterized by high public spending, mainly in military sphere. At the same time, the population did not express any concerns about increased taxes, as the Egyptians realized the necessity to prepare for a new war and recover national dignity.
The October War
Sadat rejected foreign policy of the previous president. On the contrary, he introduced new initiatives aimed at ending confrontation with Israel, weakening relations with the Soviet Union, and rejecting intensification of the revolution (Baker 23). In order to demonstrate the willingness of Egypt to establish peace in the region, Sadat made a peace offer (Baker 23). Sadat also terminated the presence of the Soviet Union in the country. However, Western countries and Israel were not interested in Egyptian initiatives. As a result, Sadat concluded that the best way to attract the attention of international community would be a change of power balance (Baker 23). As a consequence, in 1973, Sadat began the October War, which was a political move to create diplomatic conditions necessary to pursue peace strategy (Baker 23). The war was supposed to arouse the interest of Israel in negotiations with Egypt and demonstrate Western countries that their position in the region was vulnerable.
In October 1973, Egyptian forces crossed the Suez Canal and penetrated through Israeli defense into the Sinai (Shillington 747). Meanwhile, Syrian forces attacked the peninsula from the east. Despite heavy casualties on both sides, as well as Israeli regrouping on the territory involved in warfare, Sadat demonstrated that the West, Israel in particular, was not invincible. For the Egyptians, the war of 1973 was a way to remind the international community that the problem in the Middle East still existed and required urgent attention. The war was supposed to change political perceptions in the region. The Egyptians also restored their honor and national dignity, as they not only defeated Israeli army but also regained some of their territories. The victory provided Sadat with an opportunity to enter into peace negotiations with Israel and reduce the threat of a new conflict. Thus, Sadat became the leading advocate of peace in Egypt and Arab world during the next six years.
The social and economic conditions of Egypt. “Infitah”
In 1974, Sadat introduced new policies for postwar economic recovery, known as “infitah” (King 81). The initiatives marked a shift towards Western capitalist way of development. International context of “infitah” included weakening economic relations with the Soviet Union, Egypt’s main economic partner. At the same time, in domestic sphere, the reforms were aimed at expanding technological advancements in industrial sphere and addressing foreign-exchange shortages (King 81).
In fact, economic openness of the country represented the first steps in introducing market economy into Egypt. “Infitah” enacted legislation that provided incentives for domestic and foreign private investments. Thereby private companies received an opportunity to access foreign trade. In addition, the government removed the limitations imposed on public sector and small private sector in construction, finance, and tourism. Therefore, government expenditures increased and contributed to employment of the population (Shillington 475).
Moreover, the majority of regulations imposed on worker emigration were canceled. As a result, the Egyptians moved to the countries of the Persian Gulf, which solved the unemployment problem and increased Egypt’s remittances from foreign workers. In 1974 about 5 percent of the population worked abroad (Shillington 476). At the same time, the flow of labor force from Egypt had negative consequences, such as wage inflations, shortages of skilled workers, and increased dependency on imported goods. The positive aspect of labor migration, however, was improving wellbeing of the population that worked abroad. In 1974, the share of labor remittances, oil exports, and tourism amounted to almost a third part of Egypt’s foreign income. In 1980, this share increased to 75 percent (Shillington 476). Thus, besides introducing open economy, Egypt moved from relying merely on productive sources of income to introducing different forms of unproductive income as a supplementary part of national budget. These forms included tourism, rent from the usage of the Suez Canal, and remittance of workers. Despite the fact that “infitah” did not bring free market to Egypt, it certainly prepared the country for such an eventuality. For instance, later the US made an attempt to integrate Egyptian economy with Israeli one (King 82). The plan foresaw the usage of Egyptian agricultural production and Israeli packaging and transportation facilities. This strategy provided Egypt with an opportunity to access the markets of European countries.
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In order to invite Western capitalists and oil sheikhs, Sadat offered various inducements. Owing to the fact that the Sadat’s regime expected positive response from international community and increased foreign investment in Egyptian economy, the government developed a 5-year plan of the country’s development (King 83). However, foreigners refused to invest in Egypt due to regional instability. Nevertheless, Sadat continued implementation of the plan and borrowed the necessary capital from the International Monetary Fund (IMF). In exchange, the IMF required dismantlement of the inflated private sector. Eventually, Sadat did not meet the requirements of the IMF.
Egyptian society also experienced a number of political changes under the rule of Sadat. In particular, in 1974, the President formed a committee to reform the Arab Socialist Union and establish a multiparty political system. Furthermore, the country experienced political liberalization. As a result, the press received partial freedom of speech, whereas opposition parties and interest groups could influence the policy-making process (King 81). The introduction of multiparty system and political openness represented a way of promoting Sadat’s image in Western countries. Support of the USA and its allies was crucial in continuing economic transformations in the country. Political liberalization also had to correspond to economic reforms and shift Egypt towards constitutional rule. It was also a way to reduce the influence of Nasserism that still prevailed in the society, win support of the bourgeoisie, and release political tension in Egypt.
In general, Sadat’s economic reforms benefited the country. For instance, the growth of economy reached almost 9 percent per year. The share of manufacturing in Egypt’s gross domestic product increased from 14 percent in the 1940s to 35 percent in 1970s (Thomas and Youssef 115). Another important factor that influenced the development of Egypt’s economy was vast increase in fuel prices in 1973 (King 81). As a result, the Egyptians migrated to the Gulf States, mainly Iraq and Jordan, that required a large amount of labor force. However, at the end of the 1970s, it became obvious that Sadat had practiced a deception. His presidency has resulted in making Egyptian economy extremely fragile. The country needed foreign support and investments. The International Monetary Fund was constantly demanding for economic reforms, implementation of which has been preconditioned by the loan. In 1977, Sadat tried to reduce subsidies on basic items, which resulted in mass riots. The Sadat’s regime never recovered from these riots. Despite the fact that he was the President till 1981, the conditions that the country experienced at the end of his term were very different from those at its beginning. Economic reforms ended, and the president relied more on security forces in governing the country. Sadat’s successor, Hosni Mubarak, had to improve the situation with the bureaucracy, debts to the IMF, and society that has unlearnt to produce.
From 1973 to 1976, Egyptian society lived in a dream world. The Egyptians remembered the victory in the October War and believed that economy was mending. They spend much money in rapid spread of consumerism and experienced freedom after years of deprivation under Nasser. As a result, the society did not experience any tensions for a certain period of time.
The successful war of 1973 allowed Sadat to introduce new economic reforms. “Infitah” provided all classes of Egyptian society with the equal opportunities. People had no restrictions in moving abroad and working in other countries of the region or staying in Egypt and contributing to building a new economy. Despite the fact that “infitah” did not attract any foreign capital, the initiative resulted in expansion of internal markets; these markets were mainly supported by expenditures of overseas workers. Another major achievement of “infitah” was introduction of a rentier system based on foreign aid, remittances from expatriates, tourism, and Suez Canal fees.
Consequently, president Anwar El Sadat made attempts to promote economic advancements of the country and improve social standards of the Egyptians. For a certain time, the economy was developing successfully, and the population received relative freedom of speech and ability to influence the political process. Egyptian economy began to transform according to the principles of free market and became open to foreign investment. The Sadat’s regime realized the necessity to refuse from the Soviet-style system that was insufficient, as well as to enter into an alliance with the United States of America. Sadat was also the first leader to refuse from confrontation with Israel and open peace negotiations. As a result, Egyptian economy did not have to support its military sphere.