Governance Reform to Achieve Social Justice and Inclusive Growth in Egypt: Building Inclusive Economic Institutions

The development literature has focused mostly on the relationship between governance and growth, and most studies show a positive correlation between different governance indicators, particularly those relating to the security of property rights and government effectiveness, and growth. However, the direction of causality is not always clear. Good governance facilitates growth, but it is also true that growing countries with higher incomes demand better governance. That is, governance is also endogenous to growth. Nevertheless there is a growing consensus among development experts that institutions, and hence governance, are important to the creation of inclusive markets that support growth and equality of opportunity. In their best-selling book Acemoglu and Robinson argue that it is political institutions that determine what kind of economic institutions develop in a country. Hence, a country’s economic development is driven by its politics. More open political systems that provide voice for their citizens and allow them to hold governments accountable naturally lead to inclusive economic institutions. This paper presents a case study of Egypt. It focusses on the issues of social justice and inclusive growth rather than economic growth per se. It reaches two broad conclusions. First, achieving inclusive growth and social justice in Egypt requires expanding the middle class and raising its standard of living, providing greater opportunities for youth, and improving livelihoods of small family farmers (especially in Upper Egypt). Second, a policy of inclusive growth and social justice needs to be supported by the development of more inclusive economic institutions. This could imply adopting an “inclusive planning model”, providing more space and incentives for CSOs to act as advocates for the poor and vulnerable and to provide much needed economic services, and to encourage and strengthen farmer organizations and cooperatives while protecting their political and operational independence.