Kerry takes first trip abroad, invites unrest in Egypt with austerity promotion

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

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