Economic Rents, Foreign Aid, and Political Regimes: Afghanistan & Egypt 24 February 2025

Economic Bases for Regimes

Overview

• Examination of economic rents and their influence on political regimes, specifically democracy and dictatorship.

• Key focus on the relationship between the state and society in various contexts, particularly around natural resources and foreign aid.

The Role of Economic Rents

• Definition of Economic Rents: Earnings derived from resources without competing costs; crucial in determining state strength and society's role.

• Natural Resource Curse: Specifically concerning oil, countries rich in oil revenues often weaken societal structures, leading to authoritarian governance.

  • Oil Revenue Dynamics: Regimes relying on oil revenues may not need to tax citizens heavily, allowing them to bypass societal engagement or negotiation.

Foreign Aid Curse

• Concept Introduction: Foreign aid can similarly create a disconnect between governments and citizens, decreasing accountability and increasing dependence on external support.

• Case Study - Afghanistan:

  • Afghanistan's reliance on foreign aid illustrates how external funding can foster corruption and weaken state capacities.

  • Previous efforts to modernize led to rebellion and conflict, demonstrating the complexity and pitfalls of foreign assistance.

The Impact of Remittances on Political Structures

Definition and Characteristics

• Remittances: Money sent back home by citizens working abroad, particularly those from lower-income countries.

• Example: The Philippines as a prime example of remittance economies where expatriates send significant income back home.

Influence on Democratization

• Positive Effects on Democracy:

  • Remittances can incentivize democratization by promoting individual autonomy and undermining clientelistic networks.

  • Financial independence from the state empowers citizens to demand better governance and accountability.

• Educational Opportunities: Studying abroad further enhances exposure to new ideas, which can also promote democratic values.

Case Study: Afghanistan

Historical Context

• Geopolitical Importance: Afghanistan's location among significant powers, including Pakistan and parts of Russia and China.

• Invasions and Empires: Historical invasions impacting governance, especially the Mongol Empire and later Soviet interventions, shaping Afghanistan's current political landscape.

The Soviet-Afghan War

• Key Events:

  • Soviet troops enter Afghanistan to support a communist government, leading to a prolonged conflict with the Mujahideen, funded by the US and Saudi Arabia.

• Aftermath:

  • The withdrawal of Soviet forces in 1988 leads to civil strife, the rise of the Taliban, and eventual chaos in governance.

Case Study: Egypt

• In 1967, the Six Day War pits Egypt and other Arab countries against Israel, and Israel wins and occupies the West Bank or Jordan, the Golan Heights, part of Syria, and the Gaza Strip, which was officially Egyptian territory. So it defeats also dominates the Sinai Peninsula. So this is a major feat for the Arab powers and deeply humiliating, especially for the government of Egypt.

• Egypt has borrowed a lot from foreign bankers to finance this this rather inefficient economy. Egypt has, in fact, grown as an industrial economy in great part because of this, but it hasn't paid off.

Socio-Political Dynamics

• Hydraulic Empire Concept: Egypt's governance revolves around control over the Nile, impacting agricultural productivity.

• Role of the Military:

  • The Egyptian military functions as both a political power and a significant economic entity controlling about 50% of the economy.

  • Military regimes have persisted in power, often supported by significant foreign aid.

  • In 1978, Jimmy Carter negotiated what is called the Camp David Accords. This is a peace treaty between Israel and Egypt.

Foreign Aid and Economic Support

• US Aid Dynamics: US foreign aid is heavily directed towards military support in Egypt, reinforcing a dictatorship while preventing democratic processes.

• Economic Challenges: Egypt faces severe economic issues, including sovereign debt and the need for foreign capital, leading to a reliance on remittances to stabilize the economy.

• Primate city- It’s the largest city that is 2x the size of the next largest city.

• Israel and Egypt are The only countries that get Foreign aid from the U.S.

Remittances as Economic Support

• Flow of Remittances: A significant portion of Egypt's economy benefits from remittances sent by expatriates, primarily in Gulf countries, which counterbalances some of the economic struggles.

• Democratic Implications: Like in Afghanistan, remittances may alleviate some dependency on the state, encouraging more democratic engagement among citizens.