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Paying Off the Egyptian Military
The key to democracy in a troubled nation


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Hosni Mubarak has fallen, but Egypt’s revolution is far from complete. Its military — the caretaker needed to oversee an orderly transition of power — may itself prove the greatest obstacle to meaningful change. It doesn’t take an expert to see that the military will be loath to give up the privileged economic position it has achieved during the last 30 years of autocratic rule. The important question now is what will happen if Egypt’s post-revolution government fails to dismantle the system of military patronage and nepotism that has such a stranglehold on the country’s economy.

As Larry Diamond, an expert on democratization, pointed out in a recent article, the hallmark of nearly all successful, peaceful transitions from autocratic military rule to civilian democracy is a bargain between the outgoing and incoming regimes whereby the military cedes power and allows the democratic process to proceed unimpeded in exchange for a package of guarantees from the newly elected government that resembles an ex-CEO’s golden parachute: Generally, it includes immunity from prosecution for the old regime’s crimes, a continuation of high military budgets, and the preservation of other ancillary perks.

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But in Egypt, the equation is complicated by the unusually high degree to which the military has entwined itself with the country’s economy. This would make the cost of any potential golden parachute prohibitively high. Since the Camp David accords, the military has basically been transformed from a war-fighting force to a self-serving corporate conglomerate. Its dealings are estimated to constitute anywhere from 10 to 40 percent of Egypt’s GDP. Not only does it consume a state budget of billions and happily reap the benefits of American largesse, but it also runs businesses and factories in every sector, from computers and cement to olive oil and bottled water. It owns huge swaths of land, which it leases to private industry and real-estate developers — particularly around the pricey Sinai coastal resorts. It places retired officers in cushy mid- and high-level executive jobs all across Egypt’s major industries, ensuring both preferential treatment for its loyal members and lasting influence over those parts of the economy it doesn’t directly own. And, of course, it operates tax-free. Disentangling this knot is no easy task. And for a nascent democratic regime struggling to stand on its own two feet, demanding that half a million men with guns turn over these perks may prove impossible.

The military’s leaders have already shown their intransigence in the face of reform. During Hosni Mubarak’s last few years in power, he and his son Gamal introduced limited elements of liberalization and privatization to the economy. Though successful in boosting growth, these reforms funneled most of the riches to a business elite closely connected with Gamal. It was in no small part because of these reforms that the military establishment, unhappy to see its revenue streams siphoned off, became increasingly hostile to the prospect of Gamal’s succession, and may well have grown more comfortable with the idea of his father’s eventual resignation.

Regardless of the obstacles in its way, however, any new government will find itself under extremely strong public pressure to push through economic reforms that will strike at the military’s perks. A major — perhaps even the primary — demand of Egypt’s revolutionary protesters was to address the stagnant state of Egypt’s economy, and particularly its lack of business and employment opportunities for the young. And for the millions of poor and illiterate Egyptians who didn’t join their more educated and cosmopolitan compatriots in Tahrir Square, such economic concerns are even more central. It was high bread prices in Tunisia that set off the chain of events that led to Mubarak’s fall, and the economic core of the protesters’ demands can be seen even now in the strikes and rallies being held across Egypt by police, bank, hospital, and tourism workers demanding higher pay.



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