Egypt’s toxic divisions, the mood in Tahrir Square and what happened after I got shot

Jeremy Bowen's Notebook.

It is always a pleasure to visit Mohamed ElBaradei’s home in Cairo. He is a charming and civilised man, and his elegant house near the pyramids always feels like a place of calm and sanity. These days you need a refuge from the turmoil on the streets. A few years ago, when he returned from Vienna, the winner of the Nobel Peace Prize for the work he had done with the International Atomic Energy Agency, he spoke out courageously against President Hosni Mubarak. ElBaradei’s global position protected him from being arrested. Instead, the Mubarak regime’s newspapers and TV stations gave him a roasting, suggesting that he had spent so much time abroad that he was no longer a proper Egyptian. He stuck out his neck for democracy.

So it was strange to hear him, on the day it happened, justifying the army’s move against a president voted into office in an election that was applauded around the world. Even the White House, with its severe misgivings about the Muslim Brotherhood, welcomed the result in June 2012.

When I suggested to ElBaradei that the military’s actions fitted every definition of the word “coup”, he explained that this time was different, because it had the support, he reckoned, of 80 per cent of Egyptians. It was, he said, simply the best way to get Egypt’s revolution back on track. A return to civilian rule, and new elections, would come soon. He would be the first to complain if the new political line-up in Egypt did not include the Muslim Brotherhood.

The only alternative to military intervention, he said, was civil war and Egypt’s descent into another Somalia. I wonder how many misgivings he has now, not so many days and dozens of deaths later. A country that was already polarised has had a new, toxic and bloody mixture injected into its divisions.

Politics squared

Tahrir Square is a good measure of the political temperature in Egypt. During the 2011 revolution against President Mubarak every day was different. Sometimes it was violent, sometimes it was joyful, sometimes it was full of men ready to fight and sometimes they brought along their wives and children. Yet throughout, Egyptians kept commenting, proudly, that it was the most tolerant place in Cairo. Some horrible incidents marred this – my friend Lara Logan of CBS News was among those sexually assaulted – but for most of the time men and women, Muslims and Christians, respected each other. In the past two years it has changed, like Egypt.

One of the big complaints against President Morsi was that he did nothing to improve law and order. I sat drinking tea in one of the streets leading off the square with a couple of taxi drivers. It was a pavement café but not the kind you get in Paris. A few dirty wooden chairs were lined up along a wall full of political graffiti. Waiters brought glasses of tea with half an inch of sugar in the bottom and shisha pipes. The men said they would prefer Mubarak to Morsi any day, because at least under the old regime their families were safe.

After dark

Since President Morsi fell, Tahrir Square has had some carnival days, full of families grazing on the street food you can buy there – everything from candyfloss and popcorn to liver sandwiches and my favourite, kusheri, the Egyptian delicacy that is a mess of lentils, rice and pasta topped with fried onions and spicy tomato sauce. Small children copy the adults, waving flags and running through their repertoire of chants.

But Tahrir Square has also felt like a pressure gauge showing the ugly side of Egypt. I could see it at night because every evening I had to be there to do a live broadcast on BBC News at Ten. It wasn’t always bad, but at its worst crowds of youths and men would rampage around, shooting off fireworks and green laser pens, sometimes picking on suspected spies or on women.

Getting on for midnight one evening, there was a disturbance around the door of the building we were using for live broadcasts. The doorman had locked out a gang of men who had been trying to sexually assault a woman in her forties; she had run into the building for help. Apparently they had used a familiar trick, supposedly “rescuing” her from another group and then taking her away. Luckily she realised what was happening and escaped, and was being sheltered by people who did not want to hurt her.

That night, Tahrir and the streets around the square looked like a set for one of those apocalyptic films about cities gone mad. In the morning it was quiet again. But Egypt is like that. It can flare up very fast.

To the lab with the Brothers

The removal of a Muslim Brotherhood president has caused some secular celebration about the downfall of political Islam in the Middle East. It is premature. The Muslim Brotherhood worked from its foundation in 1928 to gain power in Egypt, to create a state suffused with the principles of sharia law. Just because the army has ejected President Morsi from office after only a year doesn’t mean that it is going to give up.

The Brotherhood was bad at government. President Morsi failed dismally to build a national coalition to deal with Egypt’s huge problems, which start with an economy that is close to collapse. But the movement has deep roots and is strong on the streets. Egypt’s experiment with democracy will not be resuscitated if there is no place in it for the Muslim Brotherhood.

Sharp shot

I would like to be reporting from Cairo this week. Instead, I am back in London, having an operation to deal with small perforations and metal left behind in my body by an Egyptian army shotgun. After I was shot, kind Egyptians queued up to apologise and to offer me tissues to wipe the blood away. Decent people, with a country that’s in a terrible mess, and getting worse.

Jeremy Bowen is the BBC’s Middle East editor. A revised and updated paperback edition of his book “The Arab Uprisings: the People Want the Fall of the Regime” will be published by Simon & Schuster on 18 July

A military helicopter seen from Tahrir Square. Photograph: Getty Images

This article first appeared in the 15 July 2013 issue of the New Statesman, The New Machiavelli

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Labour's investment bank plan could help fix our damaging financial system

The UK should learn from the success of a similar project in Germany.

Labour’s election manifesto has proved controversial, with the Tories and the right-wing media claiming it would take us back to the 1970s. But it contains at least one excellent idea which is certainly not out-dated and which would in fact help to address a key problem in our post-financial-crisis world.

Even setting aside the damage wrought by the 2008 crash, it’s clear the UK’s financial sector is not serving the real economy. The New Economics Foundation recently revealed that fewer than 10% of the total stock of UK bank loans are to non-financial and non-real estate businesses. The majority of their lending goes to other financial sector firms, insurance and pension funds, consumer finance, and commercial real estate.

Labour’s proposed UK Investment Bank would be a welcome antidote to a financial system that is too often damaging or simply useless. There are many successful examples of public development banks in the world’s fastest-growing economies, such as China and Korea. However, the UK can look closer to home for a suitable model: the KfW in Germany (not exactly a country known for ‘disastrous socialist policies’). With assets of over 500bn, the KfW is the world’s largest state-owned development bank when its size is measured as a percentage of GDP, and it is an institution from which the UK can draw much-needed lessons if it wishes to create a financial system more beneficial to the real economy.

Where does the money come from? Although KfW’s initial paid-up capital stems purely from public sources, it currently funds itself mainly through borrowing cheaply on the international capital markets with a federal government guarantee,  AA+ rating, and safe haven status for its public securities. With its own high ratings, the UK could easily follow this model, allowing its bank to borrow very cheaply. These activities would not add to the long-run public debt either: by definition an investment bank would invest in projects that would stimulate growth.

Aside from the obviously countercyclical role KfW played during the financial crisis, ramping up total business volume by over 40 per cent between 2007 and 2011 while UK banks became risk averse and caused a credit crunch, it also plays an important part in financing key sectors of the real economy that would otherwise have trouble accessing funds. This includes investment in research and innovation, and special programs for SMEs. Thanks to KfW, as well as an extensive network of regional and savings banks, fewer German SMEs report access to finance as a major problem than in comparator Euro area countries.

The Conservatives have talked a great deal about the need to rebalance the UK economy towards manufacturing. However, a real industrial policy needs more than just empty rhetoric: it needs finance. The KfW has historically played an important role in promoting German manufacturing, both at home and abroad, and to this day continues to provide finance to encourage the export of high-value-added German products

KfW works by on-lending most of its funds through the private banking system. This means that far from being the equivalent of a nationalisation, a public development bank can coexist without competing with the rest of the financial system. Like the UK, Germany has its share of large investment banks, some of which have caused massive instabilities. It is important to note that the establishment of a public bank would not have a negative effect on existing private banks, because in the short term, the UK will remain heavily dependent on financial services.

The main problem with Labour’s proposal is therefore not that too much of the financial sector will be publicly owned, but too little. Its proposed lending volume of £250bn over 10 years is small compared to the KfW’s total financing commitments of  750 billion over the past 10 years. Although the proposal is better than nothing, in order to be effective a public development bank will need to have sufficient scale.

Finally, although Brexit might make it marginally easier to establish the UK Investment Bank, because the country would no longer be constrained by EU State Aid Rules or the Maastricht criteria, it is worth remembering that KfW’s sizeable range of activities is perfectly legal under current EU rules.

So Europe cannot be blamed for holding back UK financial sector reform to date - the problem is simply a lack of political will in the current government. And with even key architects of 1980s financial liberalisation, such as the IMF and the economist Jeffrey Sachs, rethinking the role of the financial sector, isn’t it time Britain did the same?

Dr Natalya Naqvi is a research fellow at University College and the Blavatnik School of Government, University of Oxford, where she focuses on the role of the state and the financial sector in economic development

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