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March 02, 2013 12:31 PM Kerry takes first trip abroad, invites unrest in Egypt with austerity promotion

By Samuel Knight

John Kerry is in Egypt - his first trip abroad as America’s top envoy - and he wasted no time pushing policies that are likely to send the unstable country hurling toward turmoil, if Egyptian elites agree to them.

Ironically - or not, depending on your level of cynicism - the advice is part of an effort to stave off an economic crisis. Kerry urged opposition and Muslim Brotherhood officials to collaborate in order to pass reforms that are a prerequisite to the country receiving $4.8 billion in IMF aid.

According to the AP, the reforms include austerity measures “like increasing tax collections and curbing energy subsidies.”

But if the worsening situation at home is any indication, the medicine could be worse than the illness.

Just yesterday, new Commerce Department data showed that, in spite of Fiscal Cliff evasion, austerity caused personal income to fall by 3.6 percent in January. Part of that can be explained by the fact that the measure grew by 2.6 percent in December, in anticipation of tax increases. But January’s payroll tax cut expiration helped make the drop-off become the largest decline in two decades. And in another ominous sign, falling income appears to have caused the saving rate to fall to 2.4 percent - the lowest it has been since November 2007. With sequestration causing a whole new set of cuts, economic contraction - or slowed growth, at the very best - is bound to follow suit.

As commentators have repeated ad nauseum, this fiscal “discipline” will actually cause tax revenues to contract and do harm to government balance sheets - the very thing about which proponents of austerity claim to be so serious. Yet not only are these policies failing at home, the President has dispatched Kerry to push them on a country where 40 percent of the population lives on $2 a day.

Have we learned nothing from recent history?

According to the Middle East Online, the IMF was full of nothing but praise for Egypt in 2010, for much of the same belt-tightening:

The IMF in April praised Egypt’s wide-ranging structural reform programme, launched in 2004 to open up the economy to foreign investment and boost growth.
The resilience of domestic consumption, and production in the construction, communications and trade sectors have helped sustain strong growth … in the first half of 2009-2010,” the IMF said in its April report on Egypt.
“Egypt weathered the global financial crisis relatively well,” the report said.

Months later, fueled by anger over corruption and deprivation, Egyptians poured into the streets, forcing the ouster of Hosni Mubarak.

According to Egypt scholar Saba Mahmood writing for The Nation, the IMF played no small role in setting the stage for revolt. For over three decades, “the Egyptian economy has been increasingly subject to neoliberal economic reforms by the World Bank, the IMF and USAID at the behest of the United States government.”

Egyptian elites have been beneficiaries of, and partners in, these American-driven reforms. Will this sector of Egyptian society accommodate the demands of the poor, the unemployed and the workers who have so far been equal partners in their struggle against political corruption and autocracy? Will the protestors in Tahrir Square continue to fight for economic justice even as they gain political and civil rights in the months to come

And after Mubarak’s abdication, prominent demonstrator and Google executive Wael Ghonim, speaking at IMF headquarters, called international institutions “partners in crime” with Mubarak.

He said that he “welcomed outside expertise and support from the international community,” but warned against outside coercion and interference.

“Let the Egyptians sort out their own problems,” he said.

Yet here we are. John Kerry’s first act of business is a snake-oil sales pitch - dangling aid in exchange for policies that are sure to send Egyptians out into the streets, again.

At least we, as a nation, are practicing what we preach by simultaneously inflicting misery upon ourselves.

Samuel Knight is a freelance journalist living in DC and a former intern at the Washington Monthly.

Comments

  • PTate in MN on March 02, 2013 1:27 PM:

    "As commentators have repeated ad nauseum, this fiscal "discipline" will actually cause tax revenues to contract and do harm to government balance sheets - the very thing about which proponents of austerity claim to be so serious. Yet not only are these policies failing at home, the President has dispatched Kerry to push them on a country where 40 percent of the population lives on $2 a day. "

    It isn't "commentators" who have noted the hazards of austerity during a recession ad nauseum, it is the good economists, the ones who actually pay attention to evidence and learn from experience. The commentariat and what Krugman calls the VSP--the Very Serious People--are big on austerity despite all evidence.

    My biggest disappointment with Obama is that he has continued to accept bad conventional wisdom over the advice of economists who know what they are doing. There are going to be political consequences to this bad judgment (witness Italy) and, given the forces of meanness, greed, divisiveness and delusion at work in politics, it's hard not to worry about where this is headed. I'm really disappointed that Kerry is promoting austerity.

  • jjm on March 02, 2013 1:29 PM:

    Austerity brings out the fascists, too. Look at the rise of Golden Dawn in Greece, and the semi-victory of the far-right Independence party in a by-election in Britain this week. They didn't top the Liberal Democrats, but they did top the Conservatives.

  • FlipYrWhig on March 02, 2013 1:38 PM:

    Wait -- how is "increasing tax collections" an "austerity measure"? Doesn't austerity refer to cutting services? How can bringing in more money accomplish that?

  • Neildsmith on March 02, 2013 1:46 PM:

    We have no business giving the Egyptian government a penny no matter what they do. How much longer are we going to pretend they are our friends?

  • martin on March 02, 2013 1:47 PM:

    FlipYrWhig on March 02, 2013 1:38 PM:

    Wait -- how is "increasing tax collections" an "austerity measure"? Doesn't austerity refer to cutting services? How can bringing in more money accomplish that?

    Austerity is inflicted on the people, not the government. If the Egyptian government collects more taxes from the people (as opposed to,say, international corporations) then the people have to tighten their belts. The money is unlikely to go to services, but instead to interest payments on IMF and other international loans.

  • oldswede on March 02, 2013 1:56 PM:

    The IMF protects the banks, not the people. They have no concern for the political stability of a nation or the suffering of its citizens.

  • c u n d gulag on March 02, 2013 1:58 PM:

    The Austrian and Chicago School of Economics grifters want another country to taste "The Shock Doctrine," before they bring it home to the USA as an official programs.

    Everything we've had before, has been 'Shock Doctrine Lite.'

    Get ready for the real deal.

  • FlipYrWhig on March 02, 2013 2:03 PM:

    @martin: I've never heard anyone characterize an effort to collect taxes that are owed as "austerity." If that qualifies as austerity, then wouldn't eliminating a loophole like "carried interest" also be "austerity"? Is getting Mitt Romney to pay a fair tax rate "austerity"? Increasing tax collection might be punitive, or just bad policy, but if it's "austerity," then "austerity" has no meaning beyond "things I don't like." But it does have a meaning, and that meaning is "deep cuts in public services."

  • Andrew J. Lazarus on March 02, 2013 3:30 PM:

    Tax evasion in these countries is probably focused at the top and the supertop, and it isn't "austerity". The poor aren't even in the cash economy enough.

  • schtick on March 02, 2013 4:10 PM:

    This is exactly why the mideast hates us so much. We can't keep our nose out of their business. We tell them how to run their country, who we want running their country and then we give them arms and WMDs and attack them when they use what we gave them.

    Obama needs to come out of his closet and admit he's a teapub. He doesn't "cave" to the teapubs. He actually likes their ideas and makes the excuse he's compromising.

  • Doug on March 02, 2013 5:16 PM:

    I agree with those that collecting taxes, in and of itself, is most definitely NOT "austerity". Those avoiding taxes in a country such as Egypt would most likely be in the 1% here.
    I'm not certain what "energy subsidies" entail. If they include subsidies to provide energy; ie, helping to pay the costs of fuel to produce electricity, then, yes, THAT would be austerity.
    Last I heard, Egypt was an indpendent country. SoS Kerry can "urge" all he wants. If the Egyptian leaders wish to listen, the final decision is theirs.