Completing the Revolution

Four Keys to a More Prosperous Future.

Most Egyptians are impatient, and understandably so. They are eager to see their revolution achieve its goals of social justice, democracy, and a better livelihood for all their countrymen and women. They are suspicious of forces seeking to hijack it. They are tired of waiting for security to be restored to their streets and neighborhoods. And they are looking for an immediate lifting of the other impediments to growth, jobs, and financial stability.

I too wish to see all this happen and happen very quickly in the context of a vibrant and inclusive post-revolutionary Egypt. And, like many others, I worry that the longer it takes to materialize, the higher the risk that the revolution may fall victim to narrow vested interests, thus undermining one of the most inspirational and impressive popular uprisings in history.

The challenge for Egyptian society is to reconcile these genuine feelings and legitimate aspirations with the post-revolutionary realities on the ground and, more broadly, in the global economy. This requires four conditions to be met: a better all-around understanding of Egypt’s transition and the historic pivots facing the country; a clearer vision of the country’s medium-term economic destination; immediate steps to restore the country’s growth and employment engines and to stabilize its finances; and steady progress in the multi-year efforts to establish strong, more transparent, and highly accountable institutions.

After an impressive popular uprising and the remarkable overthrow of President Mubarak, Egypt has faced difficulties in transitioning to the next phase of historic revolutionary change—namely, pivoting from dismantling the past to the even more challenging phase of putting in place sustainable drivers of a better future.

While both disappointing and frustrating, these difficulties should not come as a great surprise, judging from the experience of many other major revolutionary movements. Indeed, history reminds us that the process of positive change takes time and effort, especially as countries and societies emerge from repressive regimes that co-opted both public and private institutions, distorted resource allocation, and removed accountability and transparency.

It is not easy to instantaneously set up institutions that are both credible and effective—especially if the effort de facto starts from scratch. Strong political leadership is required, one that is able and willing to secure legitimate broad-based support. And the population must buy into a medium-term vision that, preferably, also includes some early and visible wins.

In the immediate aftermath of overthrowing President Mubarak, Egypt faced these challenges in droves. Years of repressive governance sucked awareness, responsiveness, and inclusiveness out of the country’s key institutions. Post-revolutionary political leaderships—on a standalone manner and in what was feasible collaboratively—did not have the organization and standing to, using the famous South African example of Nelson Mandela, urge citizens to move forward by “forgiving but not forgetting the past.” And the population experienced few early gains beyond the greater ability for self-expression and freer organization—a critical step, but one that does not feed stomachs or provide greater assurances about future wellbeing.

Post-revolutionary Egypt was also encumbered by the circumstances of entities looking to fill new political vacuums. For example, aspirants started with very different initial conditions with respect to networks and coordination—from the grassroots organization of the Muslim Brotherhood and the traditional dominance of the armed forces to the scramble among new youth and secular movements to organize into effective political parties. Many also questioned the extent to which, after having served an important transitional role, the armed forces would go back to the barracks—and under what conditions.

Egypt’s relatively peaceful revolution would not have materialized without the decisions taken by the armed forces in the initial phases. These decisions earned them respect and admiration among citizens from all socio-economic backgrounds, religions, and ages—and rightly so. Yet the longer the bumpy and uncertain transition persisted under the rule of the Supreme Council of the Armed Forces, the greater the questions that arose about the armed forces’ ultimate objectives and political aspirations.

All these differences in “initial conditions” inevitably contributed to an uneven playing field—in both reality and perception—for the range of political forces competing for influence in the new Egypt. As such, the format and timing of every important political step involved distinct winners and losers. And with that, suspicions inescapably arise. And all this made the critical historic transition and pivots even more challenging

Then, there are the everyday realities of the economic and financial dislocations. Many months after the overthrow of President Mubarak, Egypt still lacked a properly functioning economy and strong finances. Production and income generation remained well below the nation’s potential—let alone what is required to address the acute problems of poverty and unemployment. Domestic and foreign investments slumped thus withdrawing even more oxygen from the economy, the recovery of tourism was painfully slow, and the risk of disruptive capital flight remained uncomfortably high.

With high income and wealth inequality, Egypt’s poor economic conditions quickly translated into worrisome social problems—and this at a time when already millions of citizens were poor and had no financial cushions to speak of (of their own or through government-supplied safety nets).

Lastly, we must not forget the current highly unsettled global environment. Europe’s deepening debt crisis, along with America’s sluggish economic growth, translates into even less trade and tourism for Egypt. Growth also slowed in systemically important emerging countries, such as Brazil, China, and India. All this makes it more difficult for Egypt to export, and to attract external aid and secure the debt forgiveness needed to provide the country with financial breathing space.

These are all legitimate reasons why the revolution had and is having difficulties moving from the overthrow of former President Mubarak to the creation of an inclusive future for the many. And, inescapably, this fuels concerns that the revolution could be hijacked and/or derailed.

Yet there are reasons to remain hopeful. And this starts with the recognition that Egypt has embarked on a multi-year process that less than two years ago was deemed improbable if not unthinkable.

It is not just a multi-year process. It is also a multi-staged and multi-faceted one that involves individual and collective learning and adaptation.

Judging from its important attributes and areas of agility, Egypt will continue to move forward. Yes, it will be bumpy, uneven, and at times even messy. But good governance will steadily increase. Better institutions will continue to emerge. New networks and organizations will form. Alliances will be established and re-established. And the economic and financial situation will improve.

All this takes us to the four major conditions that could facilitate the quicker emergence of a stable destination for the country, and help avoid some of the potholes in the journey.

First, it is critical for the political process to be more open with the population about the challenges of Egypt’s historic transition. Understandably, all political forces are eager to use the excesses of the past to legitimize their claim for influence and power in the new Egypt. They must also be open about the real challenges of the immediate future, through continuous and frank communication and a better assessment of the inevitable difficulties.

Second, political leaderships have an obligation to set out a concrete and realistic economic vision for the next three to five years. And this goes well beyond slogans that no reasonable person can disagree with. It is also about a detailed and coherent medium-term plan that specifically answers questions such as: How many jobs can and will be created? How quickly will the internal financial situation stabilize? How effectively can public spending be oriented to provide better services and support for the many (as opposed to the few)? What does subsidy reform look like? What is the role of external donors and creditors?

Third, Egypt must take immediate steps to stabilize its economic and financial situation. Key impediments to regaining pre-revolutionary production and employment levels must and can be removed. Legal and operational uncertainties, many of which have been associated with the abuse of existing procedures, should and can be minimized. Also, and notwithstanding the admirable and correct aspiration for self-reliance, the country needs to consider whether and how to quickly mobilize sufficient external financing on appropriate terms.

Finally, none of this will be fully effective without properly functioning institutions that are legitimate and accountable. This is the only way to create a durable counter against the corruption that, for so many years, has eaten away at the integrity and vibrancy of Egypt—as well as at its international standing and reputation.

After a bumpy start, the country has recorded some important gains in this respect, starting with the holding of relatively free and fair elections, including one for Egypt’s first civilian president. This must and can be used as a building block for reforming moribund institutions of state, as well as those that were co-opted by privileged minority interests.

This is not an easy list of tasks. Will it prove too demanding for an Egyptian society that was repressed for so long and functions in an increasingly unstable global economic environment?

It is certainly a risk, and one that must be managed carefully especially in light of the country’s initial economic, financial, political, and social conditions. I strongly believe that Egypt has both the ability and willingness to move forward and realize the objectives of the revolution.

I say this not in a naïve and idealistic fashion but as an individual who, through both personal experiences and a professional career, has been exposed to change in countries around the world. Observing closely the developments in Egypt, I cannot but be impressed by the multitude of people who feel—and strongly believe—that finally they now “own” their country.

We see this admirable trait in the robustness of political discourse, and in the willingness to get involved. We also see it in the sprouting of civic engagement and volunteerism all over this proud country.

Many Egyptians citizens, and the youth in particular, also feel that after many decades, they again have a legitimate and effective claim on the street. They have the organizational ability to maintain it and the inspirational drive to persevere.

That alone will provide a set of checks and balances that pre-revolutionary Egypt sorely lacked. And while it is not a guarantee of a specific outcome in a precise timeframe, it is an important pushback against the minority of vested interests that seeks to disrupt a revolution that has rightly earned the admiration and respect of millions around the world.

Mohamed A. El-Erian is Chief Executive Officer and co-Chief Investment Officer of PIMCO, the global investment management firm. He is author of When Markets Collide, a New York Times andWall Street Journal best seller that was named as the Financial Times Goldman Sachs best business book of 2008, a book of the year by the Economist, and one of the best business books of all time by the Independent.