quoting nevent1q…c2uhBecause a lot of it is visual and measurable, and occurred within the past decade, Egypt is currently providing a useful case study in the perils of central planning.
The country over the past ten years (when current leadership took over) took on $120 billion in external debt, and also used a lot of local deficit spending, with the reasonable goal of building lots of new infrastructure, alleviating congestion with new cities, and boosting international tourism to what are some of the best beaches in the world.
But details and order matter. And an entity with a monopoly on violence has less incentive to get the details and path dependence correct, and has fewer error correction methods built in than private developers do.
So the government built a big network of roads and bridges, which helped somewhat, although many of the roads are badly designed and always delayed. They built an entire new capital city for the government and military HQ, along with business and residential districts, which nine years in is still mostly vacant. They are developing the north coast city of El Alamein, but unlike well-designed private developments (eg in El Gouna on the Red Sea), the government was heavily involved for El Alamein, did massive overbuilding with incongruent designs that will take decades to fill (by which time the buildings will be deteriorating).
Now they have chronic power outages due to insufficient power generation. They are building their first nuclear facility, but it only began in 2022 and won’t be finished until 2026 or later (probably later). Maybe they should have started that facility earlier, before their now-empty city…
The average Egyptian pays for a lot of this through currency debasement. They look around and say “yes there are new bridges and entire new cities, but it takes me more hours of work to afford a car than it did ten years ago and there are three-hour power outages each day…” Basically they get taxed in opaque ways via debasement, and don’t benefit from most of the development that they are paying for.
And while those developments might make sense if successful, the order of development, the details of development, and so forth have clearly been suboptimal.
Anyway, good morning.
Based on what my relatives have been telling me back in Egypt, this is a spot on assessment of what's been going on.
Another example:
A big reason for the insane traffic in Cairo and Alexandria is that their transit systems are nowhere near extensive enough for the population size.
With all the money being spent building new cities from scratch, some of that must be spent to vastly expand metro systems in both.
To put it into context: Cairo metropolitan area and NYC metropolitan area have about the same population size of about 22 million.
NYC metro area has:
- Largest subway system in the world with 472 stations and 36 lines.
- LIRR commuter rail to the Long Island suburbs with 11 lines and 126 stations
- Metro North commuter rail with 5 lines and 124 stations
- NJ Transit commuter rail with 12 lines and 165 stations
Cairo metropolitan area has:
- Cairo Metro with 3 lines and 84 stations
…you can see where the traffic comes from