Why Egypt Should Worry China

BERKELEY – A strictly economic interpretation of events in Tunisia and Egypt would be too simplistic – however tempting such an exercise is for an economist. That said, there is no question that the upheavals in both countries – and elsewhere in the Arab world – largely reflect their governments’ failure to share the wealth.

The problem is not an inability to deliver economic growth. In both Tunisia and Egypt, the authorities have strengthened macroeconomic policy and moved to open the economy. Their reforms have produced strong results. Annual growth since 1999 has averaged 5.1% in Egypt, and 4.6% in Tunisia – not Chinese-style growth rates, to be sure, but comparable nonetheless to emerging-market countries like Brazil and Indonesia, which are now widely viewed as economic successes.

Rather, the problem is that the benefits of growth have failed to trickle down to disaffected youth. The share of workers under the age of 30 is higher in North Africa and the Middle East than in any other part of the world. Their economic prospects are correspondingly more limited. University graduates find few opportunities outside of banking and finance. Anyone who has traveled to the region will have had an experience with a highly literate, overeducated tour guide.

With modern manufacturing underdeveloped, many young workers with fewer skills and less education are consigned to the informal sector. Corruption is widespread. Getting ahead depends on personal connections of the sort enjoyed by the sons of military officers and political officials, but few others.