July 8, 2013 | by Nouh El-Harmouzi and Ali Masoud Print

What has brought 17 million Egyptians into public squares throughout the country and prompted 22 million to sign a denunciation of President Mohammed Morsi? Why does the website of the Egyptian grassroots protest movement, Tamarrod (rebel), "demand that President Morsi leave office by Tuesday, July 2, at 5 p.m." and allow early elections, or else face "complete civil disobedience."

And why has the Egyptian military given Morsi an ultimatum: Resolve the crisis in 48 hours or it will.

This turmoil has its roots in the economic and political failings of the Morsi administration—failings that stem from a lack of appreciation for individual freedom, including economic freedom, the indispensable source of prosperity.

Fifty-five Egyptians were killed and 700 were injured during the protests in violence perhaps exacerbated by the lack of gasoline and other basic goods, creating long lines of angry consumers. The shortages and lines are evidence that Morsi's policies conflict with the pro-freedom, pro-market approach that raises living standards.

The economy is deteriorating. Economic growth declined to 2.2 percent in fiscal year 2012, down from 5.1 percent in 2009/2010, after the revolution that ousted President Hosni Mubarak took place. Growth had been expected to drop to 2 percent by the end of June. Moreover, the Egyptian pound has lost 12.5 percent of its value against the U.S. dollar.

The fall in economic growth has aggravated unemployment and poverty in this nation of 82.5 million people. More than 3.3 million people—13 percent and rising–are unemployed, and 46.4 percent of the population 20-24 can't find jobs. Forty-three percent of Egyptians live under the poverty line of $2 a day. To make things worse, the government's budget deficit is growing, surging to 10.8 percent of GDP. The shortfall makes it more difficult for the Egyptian government to assist the poorest during these hard times. The slowing economy is exacerbated by the decline in foreign investment, a reduction in tourism, and general political instability.

The reasons for this economic calamity are easily explained by an accumulation of bad economic policies, not to mention outright corruption and lack of competitiveness. The Global Competitiveness Report ranks Egypt 94 out of 142 countries. Heavy subsidies, for example, have created an inefficient system for moving bread and gasoline around the country, creating shortages in both products and increasing public anger against the government. President Morsi promised he would solve the problem within 100 days of taking office – but he did not.

It's not all economics, however. The political failings of Morsi's government is another reason for Egypt's precarious situation. Almost all the people Morsi has appointed as ministers, governors, and other high-ranking officials have been drawn from the Muslim Brotherhood, alienating those who are leery of Islamic rule. He has also unilaterally expanded his powers by, for example, restricting free speech and press.

These and other economic and political offenses have caused the Morsi administration to lose faith with the Egyptian people. What will happen next is hard to say. But if the next administration doesn't remove the limits on individual freedom and free enterprise—if it doesn't deregulate and de-subsidize—it too will fail.

Nouh El-Harmouzi portrait
Dr Nouh El Harmouzi is editor of the Arabic-language news and analysis site MinbarAlHurriyya.org, sponsored by the Atlas Network and a professor of economics at Ibn Toufail University in Kenitra, Morocco. Learn More about Nouh El-Harmouzi >
Dr. Ali Masoud is a professor of economics at Sohag University in Egypt. Learn More about Ali Masoud >