Tackling Corruption in Revolutionary Egypt

A couple of days after Hosni Mubarak's fall from grace, one notable event took place in the Egyptian capital: several thousand members of the much-demonized police force were seen demonstrating in front of the Interior Ministry. What for, many wondered? While claims that they sought to reestablish their legitimacy by promoting a new image-that of being ordinary citizens-contain a grain of truth, these police officers were mostly interested in demanding a livable minimum wage. "Do you know how much I make? 570 pounds per month, and I'm not the unluckiest one. If I skip two days of work, for any reason, I lose the 70 pound premium, and find myself with 500 pounds," confided an angry policeman.

Clearly, the officers were surviving primarily on an additional source of income, rashawy, or small bribes, which they were now, in post-revolution Egypt, unable to extract from the population, for fear of mob reprisals. In pre-revolution Egypt, they would obtain these bribes by voiding a ticket for speeding or for not wearing a belt while driving; in less innocuous cases, they would extort a rashwa in exchange for turning a blind eye to drug trafficking or prostitution, or they would resell the drugs they confiscated from uncooperative traffickers to more docile ones; in even worse cases, they would physically or psychologically abuse prostitutes, pimps, or regularly harass and arrest innocent citizens, particularly youths, who refused to pay bribes. While there are no direct estimates of what impact these practices might have on police officers' salaries, from the cases I've personally researched, it would seem that they could yield, on average, an extra 1000 EGP per month, at the very least.

Whereas the rottenness of the Interior Ministry has attracted great public attention, it is by far not the only instance of corruption ravaging the country. The word fasad, corruption, has been chanted like a mantra in Egypt for the past month and a half. Ever since Hosni Mubarak "stepped aside" as head of the Egyptian state, "mini-Mubaraks" have been discovered to pop up in every corner of the administrative apparatus and private sector with surprisingly constancy. Whether it is the plutocrat who's been put on trial with assets frozen or the one who's suspected to have embezzled many more state assets, the head of a syndicate or a state-controlled newspaper, the high-ranking military officer and the rank and file security guard, the construction ministry bureaucrat or the sayes-the self-styled car hustler on Cairene streets-the outraged rediscovery of Egypt's generally corrupt morale fiber poses a question nagging with defeatism: chto dielat? What do we do? Where do we start with our spring-cleaning?

The moral outrage evident in such generalized talk of corruption leads to more than a healthy dose of confusion: can one so easily equate the corruption of a multi-billionaire steel tycoon with that of a lowly postal office employee? Besides the sheer discrepancy in the volume of their crime, are there no other qualitative differences discernable to the naked eye? Can both so dismissively be lumped under the same unproblematic label, corruption? Answering this question without recourse to some definitions will prove an unnecessary exercise in mental torture. So what is corruption?

Corruption, to paraphrase German sociologist Max Weber is the (mis-)use of public office for private gain. For instance, if a police officer, a delegate of the executive force of the state, were to use his or her handgun to go camel-hunting while stationed in some god-forsaken part of the western desert, he would be liable under charges of corruption on two counts. First, he would have used public money-a couple of bullets and the amortization of the usage of the gun-in order to acquire some private gain, namely, camel meat and, debatably, some social prestige at having killed the animal. Second, in this particular case, he would have defected during hours of duty, for which officers are paid public money, in order to perform acts that have little relation with his contractually-defined functions.

This traditional definition of corruption contains a number of unstated assumptions. Looming highest amongst them, perhaps, the assumption of a functioning state bureaucracy that guarantees the reproduction costs of its labor force, which means, at a minimum, wages hovering around, or preferably slightly above, the survival rate of the bureaucrat and their immediate dependents. To go back to our example above, it is hard to imagine our police officer not using his gun to indulge in camel-hunting when he has run out of any legal, i.e. on the basis of his wage, way of feeding himself and his family by the first week of the month. Camel-hunting, in this instance, then must be labeled, for the sake of accuracy, not corruption-a moral category-but necessity-an economic one.

The distinction is neither a trivial theoretical one nor one devoid of practical implications. Under this light, our steel magnate, for instance, would be liable to charges of bribery of a public official in order to obtain national resources at preferential rates-a public official who in turn would be liable to charges of corruption-while our police officer's camel-hunting or asking for some "gift" in exchange for not sticking you a ticket for speeding up, thereby adding a measly extra 10 pounds to their already saddening salary, would be liable to a good slap on the wrist. In fact, the state should avoid prosecuting the latter's "crime", not only because of its pervasiveness given an underpaid bureaucracy, or the trivial sums involved, but mostly because of the profoundly non-moral nature of this act.

Instead of lumping these two very distinct phenomena under the moral label corruption, one would benefit greatly by qualifying the police officer's actions as "informal taxation." Stripped from moral undertones, this lies at the heart of charges of petty corruption, to wit, the abusive, arbitrary and unregulated extortion of variable sums from citizens' and state coffers from a position of state-conferred power. As the Egyptian case suggests-and the experiences of many other poor or middle-income countries confirm-informal taxation becomes systemically embedded in bureaucratic practice once real wages start falling below the line of survival, destroying in the wake of its tentacular expansion the hopes of any real revolution, reform or change.

Take a now notorious case of Egyptian failed reform, the example of the education system. Western, NGO- or IGO-sponsored programs led by talented and qualified technocrats have systematically failed at producing any real improvement of the public education sector, despite the amounts that have been poured into it. One of the main reasons has been the proliferation of extra-curricular "private lessons" with school or university professors as a means of ensuring students' passing their grade: without paying that informal tax, students would often fail the class, independently of their capacity since professors would stop teaching much useful material during class time to ensure maximal recruitment for their "extra-curricular" teaching hours.

The rise of this compulsory "private tutoring" trend surfaced as the percentage of GDP spending on the education system by the Egyptian state decreased dramatically due to austerity measures included in the 1990s IMF Structural Adjustment Policy package, declining from 5.2 to 3.6 percent over eighteen years (1990 to 2008, World Bank figures). As classrooms got increasingly more crowded, from an average of 23 pupils per teacher in 1991 to 27 in 2007, and professors were paid diminishing real wages, parents had to bear a growing part of the cost of the educational bureaucracy, via a massively inefficient under-the-counter resource distribution mechanism. In effect, then, the informal bureaucratic taxation mentioned earlier corresponds to a semi-privatization of the state bureaucracy, whereby the state, on the one hand, and private citizens, on the other, share the costs of bureaucratic maintenance, in varying ratios of responsibility.

That being said, the presence of middle-executive abuses of bureaucratic power, between the ideal-types of corruption and semi-privatization, cannot be denied. Clearly, greed exists, as well as other less glamorous incentives than mere survival, as motivators of bureaucratic action. In one extreme case, a street hustler for cars that I've known for twenty years came up to me and asked, for the first time in our long relation, whether I could do him a favor. "You see, my daughter is now in her second year of college, but I'm afraid she won't pass her year unless I give her professor some gift for all the private help he's given her…He said he really liked whiskey, but when I got him a bottle, he refused to take it explaining he only drank foreign brands. The problem is I don't know where to get foreign liquor here, so I thought you being a well-traveled man could perhaps have access to such information."

That a university professor would be willing to humiliate a relatively poor student's parent to such an extent, by refusing a gift and asking for a much more expensive one, denotes a mandarin bureaucratic context where officials in power treat their immediate subordinates as disposable commodities while displaying utter servility towards their superiors. Beyond informal taxation as a simple survival mechanisms described earlier, this example reveals one of the more disturbing and far-reaching consequences of bureaucratic semi-privatization, namely, the institutionalization of bureaucratic class-privilege. The repeated and habitual process of informal taxation, once institutionalized, leads to a mindset where the state officer's de facto role changes from serving the citizen to preventing the citizen from accessing state services-a restriction out of which the bureaucrat derives a great portion of their income. In time, this gatekeeper's role to state services grows into a form of bureaucratic privilege, subject to more than slight abuse.

In the context of bureaucratic semi-privatization, the implementation of a wisely-devised minimum wage appears as the most cost effective antidote to the ills of "corruption". By allowing public officials to survive decently, minimum wages also take away the most compelling reasons for engaging in petty bureaucratic privilege and informal taxation of the population. Beyond the minimum wage security line, adopting competitive remuneration for public service on the basis of skill and private sector benchmarks, in the way that Singapore or Switzerland have, appears as the only plausible way to counter the lack of bureaucratic professionalism rampant through the Egyptian state apparatus, and develop a committed bureaucratic ethos.

Espousing a moral approach to the problem, and failing to distinguish between classical corruption and the semi-privatization of the state that followed IMF policy hegemony, reduces all the corruption issues plaguing the Egyptian political landscape to cultural and psychological problems whose solution can only be found in educational campaigns and legal fetishism. To talk of semi-privatization shifts the frame to a political-economic perspective, which intrinsically links bureaucratic inefficiency and informal-taxation with issues of wage levels. From this vantage point, discussions of national corruption cannot, and should not, be separated from debates on the minimal wage.

Many economic commentators argue that implementing the 300% increase in the average wage necessary to abide by the demands of the workers' representatives who won the 2010 Egyptian Administrative Court ruling on minimum wage in the wake of an economic recession amounts to little else than fiscal suicide. According to their premonitions, Egypt could not survive a massive economic meltdown, a large-scale collapse of its tourist industry and of FDI, while sustaining drastically increased spending on bureaucratic overheads, and neither could the private sector, considering its already rapidly diminishing profit margins. "Where would we get the money from?", we hear on an ominous and regular basis.

It is surprising to hear this question so often when the solutions seem to abound. First, the Egyptian state could easily lift law 91 of 2005, which, as part of the "tax reforms" of the state, "simplified" taxation to only three brackets. As a result, anyone making above 40'000 EGP-including people who earn multiple millions-pays 20% of their income in taxes, as opposed to the more justifiable 35% or 48% paid by the highest tax bracket in the US or France. One easy solution, particularly at a moment where one recognizes that a lot of the wealth rapidly acquired by the richest Egyptians has dubious origins, would consist in introducing additional tax brackets for the rich, proportional to their wealth.

Another solution involving a bit more external politicking, implicates international lending bodies. If the IMF, the WB, and governments were willing to provide the Mubarak regime with massive loans and development aid that came dangerously close to looking exactly like collaboration with an autocratic regime, would they not, just as easily, want to lend to a new, democratic and representative Egyptian government? If a newly-born democracy asked for short-term loans, would the international community not owe it to the Egyptian people to support it in this easiest of manners, maybe not out of guilt or obtaining forgiveness, but simply to maintain their legitimacy?

The question is all the more surprising considering this indebtedness would only constitute a short-term phenomenon. The process of informal taxation of private citizens and state resources depleted the coffers of the state in more ways than one. First, it eroded confidence in the state, for who in their right mind would want to transfer hard-earned money to cronyistic, petty bureaucrats devoid of management skills? Second, it promoted tax evasion by the citizens, who could opt out of paying taxes by instead making smaller informal payments to state officials. Further, by semi-criminalizing bureaucratic activity-since half or more of one's income originated from gray, informal taxation, activities-semi-privatization also led to people investing in real estate or luxury items instead of depositing capital in the financial sector, thereby driving the price of money upwards, and contributing to low re-investment of national surplus in productive activities.

Although a bit depressing, the multiplicity of way in which the state and the Egyptian economy lost important sources of income through bureaucratic semi-privatized inefficiency is also encouraging for it points out that investing in the implementation of minimum wages constitutes a short-term investment with very high returns in the medium-term. Harnessing the political momentum imparted on the country by this revolution is crucial to passing strictly enforced and realistic minimum wages. It is hard to imagine a more strategic time to overhaul a fundamental bureaucratic and social institution in such dire need of reform. To do so requires the shedding of our moralistic vocabulary around the issue of corruption, and the adoption of a political-economic analysis to grasp the roots of the problem.

A couple of days after Hosni Mubarak’s fall from grace, one notable event took place in the Egyptian capital: several thousand members of the much-demonized police force were seen demonstrating in front of the Interior Ministry. What for, many wondered? While claims that they sought to reestablish their legitimacy by promoting a new image—that of being ordinary citizens—contain a grain of truth, these police officers were mostly interested in demanding a livable minimum wage. “Do you know how much I make? 570 pounds per month, and I’m not the unluckiest one. If I skip two days of work, for any reason, I lose the 70 pound premium, and find myself with 500 pounds,” confided an angry policeman.  

Clearly, the officers were surviving primarily on an additional source of income, rashawy, or small bribes, which they were now, in post-revolution Egypt, unable to extract from the population, for fear of mob reprisals. In pre-revolution Egypt, they would obtain these bribes by voiding a ticket for speeding or for not wearing a belt while driving; in less innocuous cases, they would extort a rashwa in exchange for turning a blind eye to drug trafficking or prostitution, or they would resell the drugs they confiscated from uncooperative traffickers to more docile ones; in even worse cases, they would physically or psychologically abuse prostitutes, pimps, or regularly harass and arrest innocent citizens, particularly youths, who refused to pay bribes. While there are no direct estimates of what impact these practices might have on police officers’ salaries, from the cases I’ve personally researched, it would seem that they could yield, on average, an extra 1000 EGP per month, at the very least.

Whereas the rottenness of the Interior Ministry has attracted great public attention, it is by far not the only instance of corruption ravaging the country. The word fasad, corruption, has been chanted like a mantra in Egypt for the past month and a half. Ever since Hosni Mubarak “stepped aside” as head of the Egyptian state, “mini-Mubaraks” have been discovered to pop up in every corner of the administrative apparatus and private sector with surprisingly constancy. Whether it is the plutocrat who’s been put on trial with assets frozen or the one who’s suspected to have embezzled many more state assets, the head of a syndicate or a state-controlled newspaper, the high-ranking military officer and the rank and file security guard, the construction ministry bureaucrat or the sayes—the self-styled car hustler on Cairene streets—the outraged rediscovery of Egypt’s generally corrupt morale fiber poses a question nagging with defeatism: chto dielat? What do we do? Where do we start with our spring-cleaning?

The moral outrage evident in such generalized talk of corruption leads to more than a healthy dose of confusion: can one so easily equate the corruption of a multi-billionaire steel tycoon with that of a lowly postal office employee? Besides the sheer discrepancy in the volume of their crime, are there no other qualitative differences discernable to the naked eye? Can both so dismissively be lumped under the same unproblematic label, corruption? Answering this question without recourse to some definitions will prove an unnecessary exercise in mental torture. So what is corruption?

Corruption, to paraphrase German sociologist Max Weber is the (mis-)use of public office for private gain. For instance, if a police officer, a delegate of the executive force of the state, were to use his or her handgun to go camel-hunting while stationed in some god-forsaken part of the western desert, he would be liable under charges of corruption on two counts.  First, he would have used public money—a couple of bullets and the amortization of the usage of the gun—in order to acquire some private gain, namely, camel meat and, debatably, some social prestige at having killed the animal. Second, in this particular case, he would have defected during hours of duty, for which officers are paid public money, in order to perform acts that have little relation with his contractually-defined functions.

This traditional definition of corruption contains a number of unstated assumptions. Looming highest amongst them, perhaps, the assumption of a functioning state bureaucracy that guarantees the reproduction costs of its labor force, which means, at a minimum, wages hovering around, or preferably slightly above, the survival rate of the bureaucrat and their immediate dependents. To go back to our example above, it is hard to imagine our police officer not using his gun to indulge in camel-hunting when he has run out of any legal, i.e. on the basis of his wage, way of feeding himself and his family by the first week of the month. Camel-hunting, in this instance, then must be labeled, for the sake of accuracy, not corruption—a moral category—but necessity—an economic one.

The distinction is neither a trivial theoretical one nor one devoid of practical implications. Under this light, our steel magnate, for instance, would be liable to charges of bribery of a public official in order to obtain national resources at preferential rates—a public official who in turn would be liable to charges of corruption—while our police officer’s camel-hunting or asking for some “gift” in exchange for not sticking you a ticket for speeding up, thereby adding a measly extra 10 pounds to their already saddening salary, would be liable to a good slap on the wrist. In fact, the state should avoid prosecuting the latter’s “crime”, not only because of its pervasiveness given an underpaid bureaucracy, or the trivial sums involved, but mostly because of the profoundly non-moral nature of this act.

Instead of lumping these two very distinct phenomena under the moral label corruption, one would benefit greatly by qualifying the police officer’s actions as “informal taxation.” Stripped from moral undertones, this lies at the heart of charges of petty corruption, to wit, the abusive, arbitrary and unregulated extortion of variable sums from citizens’ and state coffers from a position of state-conferred power. As the Egyptian case suggests—and the experiences of many other poor or middle-income countries confirm—informal taxation becomes systemically embedded in bureaucratic practice once real wages start falling below the line of survival, destroying in the wake of its tentacular expansion the hopes of any real revolution, reform or change.

Take a now notorious case of Egyptian failed reform, the example of the education system. Western, NGO- or IGO-sponsored programs led by talented and qualified technocrats have systematically failed at producing any real improvement of the public education sector, despite the amounts that have been poured into it. One of the main reasons has been the proliferation of extra-curricular “private lessons” with school or university professors as a means of ensuring students’ passing their grade: without paying that informal tax, students would often fail the class, independently of their capacity since professors would stop teaching much useful material during class time to ensure maximal recruitment for their “extra-curricular” teaching hours.

The rise of this compulsory “private tutoring” trend surfaced as the percentage of GDP spending on the education system by the Egyptian state decreased dramatically due to austerity measures included in the 1990s IMF Structural Adjustment Policy package, declining from 5.2 to 3.6 percent over eighteen years (1990 to 2008, World Bank figures). As classrooms got increasingly more crowded, from an average of 23 pupils per teacher in 1991 to 27 in 2007, and professors were paid diminishing real wages, parents had to bear a growing part of the cost of the educational bureaucracy, via a massively inefficient under-the-counter resource distribution mechanism. In effect, then, the informal bureaucratic taxation mentioned earlier corresponds to a semi-privatization of the state bureaucracy, whereby the state, on the one hand, and private citizens, on the other, share the costs of bureaucratic maintenance, in varying ratios of responsibility.

That being said, the presence of middle-executive abuses of bureaucratic power, between the ideal-types of corruption and semi-privatization, cannot be denied. Clearly, greed exists, as well as other less glamorous incentives than mere survival, as motivators of bureaucratic action. In one extreme case, a street hustler for cars that I’ve known for twenty years came up to me and asked, for the first time in our long relation, whether I could do him a favor. “You see, my daughter is now in her second year of college, but I’m afraid she won’t pass her year unless I give her professor some gift for all the private help he’s given her…He said he really liked whiskey, but when I got him a bottle, he refused to take it explaining he only drank foreign brands. The problem is I don’t know where to get foreign liquor here, so I thought you being a well-traveled man could perhaps have access to such information.”

That a university professor would be willing to humiliate a relatively poor student’s parent to such an extent, by refusing a gift and asking for a much more expensive one, denotes a mandarin bureaucratic context where officials in power treat their immediate subordinates as disposable commodities while displaying utter servility towards their superiors. Beyond informal taxation as a simple survival mechanisms described earlier, this example reveals one of the more disturbing and far-reaching consequences of bureaucratic semi-privatization, namely, the institutionalization of bureaucratic class-privilege. The repeated and habitual process of informal taxation, once institutionalized, leads to a mindset where the state officer’s de facto role changes from serving the citizen to preventing the citizen from accessing state services—a restriction out of which the bureaucrat derives a great portion of their income. In time, this gatekeeper’s role to state services grows into a form of bureaucratic privilege, subject to more than slight abuse.

In the context of bureaucratic semi-privatization, the implementation of a wisely-devised minimum wage appears as the most cost effective antidote to the ills of “corruption”. By allowing public officials to survive decently, minimum wages also take away the most compelling reasons for engaging in petty bureaucratic privilege and informal taxation of the population. Beyond the minimum wage security line, adopting competitive remuneration for public service on the basis of skill and private sector benchmarks, in the way that Singapore or Switzerland have, appears as the only plausible way to counter the lack of bureaucratic professionalism rampant through the Egyptian state apparatus, and develop a committed bureaucratic ethos.

Espousing a moral approach to the problem, and failing to distinguish between classical corruption and the semi-privatization of the state that followed IMF policy hegemony, reduces all the corruption issues plaguing the Egyptian political landscape to cultural and psychological problems whose solution can only be found in educational campaigns and legal fetishism. To talk of semi-privatization shifts the frame to a political-economic perspective, which intrinsically links bureaucratic inefficiency and informal-taxation with issues of wage levels. From this vantage point, discussions of national corruption cannot, and should not, be separated from debates on the minimal wage.

Many economic commentators argue that implementing the 300% increase in the average wage necessary to abide by the demands of the workers’ representatives who won the 2010 Egyptian Administrative Court ruling on minimum wage in the wake of an economic recession amounts to little else than fiscal suicide. According to their premonitions, Egypt could not survive a massive economic meltdown, a large-scale collapse of its tourist industry and of FDI, while sustaining drastically increased spending on bureaucratic overheads, and neither could the private sector, considering its already rapidly diminishing profit margins. “Where would we get the money from?”, we hear on an ominous and regular basis.

It is surprising to hear this question so often when the solutions seem to abound. First, the Egyptian state could easily lift law 91 of 2005, which, as part of the “tax reforms” of the state, “simplified” taxation to only three brackets. As a result, anyone making above 40’000 EGP—including people who earn multiple millions—pays 20% of their income in taxes, as opposed to the more justifiable 35% or 48% paid by the highest tax bracket in the US or France. One easy solution, particularly at a moment where one recognizes that a lot of the wealth rapidly acquired by the richest Egyptians has dubious origins, would consist in introducing additional tax brackets for the rich, proportional to their wealth.

Another solution involving a bit more external politicking, implicates international lending bodies. If the IMF, the WB, and governments were willing to provide the Mubarak regime with massive loans and development aid that came dangerously close to looking exactly like collaboration with an autocratic regime, would they not, just as easily, want to lend to a new, democratic and representative Egyptian government? If a newly-born democracy asked for short-term loans, would the international community not owe it to the Egyptian people to support it in this easiest of manners, maybe not out of guilt or obtaining forgiveness, but simply to maintain their legitimacy?

The question is all the more surprising considering this indebtedness would only constitute a short-term phenomenon. The process of informal taxation of private citizens and state resources depleted the coffers of the state in more ways than one. First, it eroded confidence in the state, for who in their right mind would want to transfer hard-earned money to cronyistic, petty bureaucrats devoid of management skills? Second, it promoted tax evasion by the citizens, who could opt out of paying taxes by instead making smaller informal payments to state officials.  Further, by semi-criminalizing bureaucratic activity—since half or more of one’s income originated from gray, informal taxation, activities—semi-privatization also led to people investing in real estate or luxury items instead of depositing capital in the financial sector, thereby driving the price of money upwards, and contributing to low re-investment of national surplus in productive activities.

Although a bit depressing, the multiplicity of way in which the state and the Egyptian economy lost important sources of income through bureaucratic semi-privatized inefficiency is also encouraging for it points out that investing in the implementation of minimum wages constitutes a short-term investment with very high returns in the medium-term. Harnessing the political momentum imparted on the country by this revolution is crucial to passing strictly enforced and realistic minimum wages. It is hard to imagine a more strategic time to overhaul a fundamental bureaucratic and social institution in such dire need of reform. To do so requires the shedding of our moralistic vocabulary around the issue of corruption, and the adoption of a political-economic analysis to grasp the roots of the problem.