POLI SCI 351 Lecture Notes - Lecture 4: 1973 Oil Crisis, Crony Capitalism, Infitah

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Political Economy
Intersection of contests/struggles over resources and authority]
Types of Political Economies
Production / extractive state
o Role of state in terms of economy is to foster economic development and
growth
Most countries in the world (create growth, employment, taxes)
Rentier / allocative state (Middle East)
o Doesn’t try to create wealth, major role is to distribute / allocate the
natural wealth of the country (wealth not due to productivity, but to lucky
location --- oil)
o Distribute rents (income not from productive activity)
o Spectrum of rentierism
Production States
1960’s/70s state-led development
Import substitution industrialization (ISI)
o Goals: development and independence
Local production, protection
Populist promise: end exploitation, improve lives
o Reality:
Political logic > economic utility
States > markets
Redistribution > growth
Waste, unemployment, debt
Public enterprises unprofitable
Inflated public employment unsustainable
Structural adjustment
80s/90s -> free market; “Washington Consensus”
International Money Fund conditionality
o Target inefficiencies
o Increase private enterprise
Stages:
o Stabilization
Reduce expenditures and subsidies
o Reform
Privatization
Political significance: revise state/society bargain
o Impetus to some political liberalization
Politics of neo-liberalism: Case of Egypt
Pres. Anwar Sadat: Infitah (mid 1970s)
o Private sector, foreign investment, dismantle some welfare
o 1977 cut subsidies
Bread riots
What would you do?
Similar protests in other countries
o Populist legacy difficult to undo
Weigh economic and political costs
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