mainstay of the regime, holding 63 percent of the seats (compared with only 14 percent by capitalists).2 Before the 1952 land reform, a tiny elite of about eleven thousand landlords (0.4 percent of the total)3 owned almost two million feddans (34 percent of the cultivated land);4 in fact, the two thousand largest landowners possessed nearly 20 percent of the agricultural land. At the other end of the spectrum, 2.6 million owners (94.3 percent) possessed 2.1 million feddans (35 percent) (Mabro 1974, 61, 73). However, once the army seized control of the country, the balance of power between the two competing coalitions—the Free Officers and the landowners—tilted decisively toward the former, and thus the existing equilibrium between the winners and losers could be altered.
The determination of the landowning faction in parliament to defend their privileges was made evident by their relentless opposition to any measure that tried to improve the distribution of land. For example, in 1945 a bill had been introduced that prohibited future acquisition of more than one hundred feddans of land. In 1950 another bill proposed breaking up, with adequate compensation, all holdings over fifty feddans. Another bill in 1950 provided that newly reclaimed agricultural land owned by the government should be sold only to peasants who owned less than two feddans. All these measures were decisively rejected by the parliament. “The most that could be wrung out of the landlord-dominated Parliament,” notes Issawi (1954, 135) “was a law requiring owners of large estates to provide better housing and health and social services for their tenants.” And what constituted better housing and other services lay in the eye of the landowner.
Similarly, a bill abolishing waqf (land and property gifted to an ecclesiastical or other corporation) had been introduced in 1937, but this also had been rejected by the parliament. (Family waqf amounted to nearly 600,000 feddans—about 11 percent of the cultivated area—and vested the use and enjoyment of the land in the heirs in perpetuity.)
The Free Officers recognized that the immediate order of business was to break the power of the landowning coalition. This led to the promulgation on September 9, 1952—barely a month and a half after the seizure of power—of a law on agrarian reform that limited individual ownership to two hundred feddans. The reforms had had a mixture of political, social, and economic objectives. First, it was to eliminate the power of the large landowners. Second, it aimed to improve the living conditions of the rural population. The reform measures did succeed in improving the condition of the tenants, whose disposable incomes increased as a result of the reduction in rents and by the greater security offered to their tenancy by the Agrarian Law.5 Third, it was to stimulate the movement of capital from the agricultural to the industrial sector by discouraging further land purchases and by permitting landlords to invest the government bonds (with which they had been compensated) in approved industrial enterprises. Fourth, it was to raise agricultural output, in the belief that an owner would put more resources into improving the land than would a tenant.
Of the stated objectives, the first was crucial. The reform measures stripped the rich landowners and contributed to ending the power that the class formerly possessed, and stopped it from obstructing other policies that the revolutionaries might want to implement. Writes Mabro (1974, 56), “The political implications did not escape the civilian Prime Minister, Ali Maher, a man of the past, who objected to the [agrarian reform] project and was asked to resign.”
This early move by the revolutionary government found support not only in Egypt, but also abroad. The United States moved quickly to establish relations with the Free Officers. Roussillon (1998, 2:354) states that the Americans were the first to be notified that the coup was imminent and “taking into account the discreet contacts made with the officers through their representatives, in July 1952 they had many reasons to think that ‘their men’ had seized power on the banks of the Nile.” He notes that United States aid to Egypt within the framework of Point Four (the forerunner of today’s USAID) “shot up from less than $6 million before 1952 to $40 million only a few weeks after the coup, and Dean Acheson, the U.S. Secretary of State, asserted that Egypt could henceforth count on the United States’ ‘active friendship.’” The honeymoon hit turbulence in 1955 after Egypt’s purchase of weapons from Czechoslovakia.
The British moved more cautiously. However, based on the messages from their ambassadors (Jefferson Caffery of the United States and Sir Ralph Stevenson of Britain), both countries were in favor of the land reform. Indeed, Gordon (1996, 166) reports that Winston Churchill scribbled “Down with the Pashas, Up with the Fellahin” on a note to Anthony Eden and dispatched experts to advise the Egyptians.
Another crisis, another major set of reforms. In 1956, Britain, France, and Israel attacked Egypt following President Gamal Abd al-Nasser’s nationalization of the Suez Canal. Because of these hostilities, the coalition of British and French interests in Egypt could be defined as enemies of the country and thus easily be overcome; British and French assets in the country consequently were sequestrated.6 Joan Nelson (1990, 3–32, 321–362) analyzed the politics of reforms between 1979 and 1988 in a sample of nineteen countries in Latin America, Asia, and Africa and found that it had been easier to introduce reforms in countries and periods in which the opposition was discredited, disorganized, or repressed. The changes in Egypt’s economic framework in 1956 conformed to this finding.
The Suez crisis of 1956 also triggered a fundamental change in Egypt’s political-economy environment. Egypt’s external policies tilted toward the Soviet bloc, with collateral effects on the economy. The principal impact of the crisis was a drastic increase in the role of the government in economic matters and a vigorous move to “Egyptianize” the main arteries of the national economy.
These matters are discussed further in chapter 4. For our immediate purpose, it is sufficient to note that these changes included the sequestration of British and French assets; the extension of nationalization to other sectors of the economy; and the introduction of comprehensive economic planning. Egypt’s politics began to shift from the West toward the Communist Bloc; economic management started to move away from relying on the private sector; and state intervention and influence set about reshaping the economic landscape. The power of the British/French coalition as well as that of the Egyptian private sector was thus progressively overcome, and the country’s economic structure came to be dominated by domestic public-sector organizations.
Yet another instance of a crisis strengthening the hands of one group and enabling it to effect substantive economic reforms occurred after the Egypt–Israel war of October 1973. Egypt’s economic situation in the months leading up to the war and after had become dire. GDP growth had dropped to about 3 percent in 1973. Oil prices had fallen, and with the resulting fall in revenues, the deficits in both the budget and the balance of payments increased sharply. The external situation was made even worse by the requirements of servicing the foreign debt, especially as the country had resorted to financing earlier deficits through bank credit facilities that had an average maturity of only 180 days. The overall budgetary deficit in 1974 was estimated at 17 percent of GNP (Gross National Product), with much of the financing borrowed either from abroad or from the domestic banking system. This inevitably had a major impact on the money supply and domestic liquidity, and fueled inflation. A detailed description of the economic situation in 1973 and 1974 is provided in chapter 5.
These developments made it clear that Egypt could not continue with a “business as usual” approach to economic policy. In April 1974, President Sadat outlined a new direction in the October Paper that was presented to the People’s Assembly. This document laid out the basis for a new strategy, in which the public sector would be responsible for implementing projects that other sectors would not or could not undertake, and for providing essential services, while the
