January 31st, 2011
07:37 AM GMT
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(CNN) - It took a few days for Egyptian President Hosni Mubarak to calculate his next moves, and when the decision came the strategy was predictably an "old school" approach to a modern-day governmental challenge sparked by social media.

In power for three decades, no one expected Mubarak to present an "I got it" moment. He chose a right hand man as vice president, Omar Suleiman, who literally saved his life after an assassination attempt. The "big boss," as many in the former government and business community refer to him, sacked his "new school" cabinet of reformers. Then-Prime Minister Ahmed Nazif and his four key ministers representing trade, finance, telecommunications and investment were highly regarded in the global business community and trusted faces at the World Economic Forum each winter in Davos.

The act by the president to sack the "new school" reformers sends the wrong signal to global investors and some of the Egyptian corporate brand names that have become well known beyond their borders. Even if he survives the uprising by Egyptians on the street, nearly all the progress made over the past five years goes out the door - not to mention the impact on the tourism sector which is the country's number one foreign exchange earner.

Often overlooked in the rush of history and protests, since 2005, the prime minister and his team pushed through a laundry list of economic reforms and cut through Egypt's famous red tape. Their government branding was "Egypt: Open for Business," and it worked. $47.5 billion dollars of foreign direct investment poured in over five years. The big global brands flocked in, wanting access to this market of 80 million consumers and a low cost, multi-language workforce. They believed the business environment was changing for good. They might be mistaken.

In the halls of the Davos conference center I spoke to a dozen regional and global business leaders to get an "on-camera" response after the president's decision. Not one wanted to be on the record, but they all shared their views. One highly respected businessman from the Gulf said Mubarak should have communicated much earlier. "I am worried," he said. "This was handled miserably." A usually reserved regional central bank governor was even more critical, saying, "This ageing leadership is disconnected from reality."

I struggled against an army of Angela Merkel's bodyguards in the conference hall only to get a firm rejection of no reply from the German chancellor. Turkey's Deputy Prime Minister Ali Babacan said, “The situation is so tricky I don't even want to talk about it."

Egypt and Turkey have roughly same-sized populations, but that is where the similarities end. Turkish Prime Minister Recep Tayyip Erdogan of Turkey is presenting his ideals of a modern Islamic society to the world, including freedom of speech and much more voice for citizens in carving their destiny in a real democracy.

Turkey's finance minister Mehmet Simsek told me that the government's number one priority has to be raising the standard of living for all. In Egypt, millions struggle to join the middle class with reforms still too young to reach all rungs of society. This is a failure that lands squarely on the desk of the man in charge, the president. He started economic reforms in the 1980s but stopped the process when the going got tough. It is fair to say he probably regrets that decision now.

Since this latest attempt at reforms, per capita income nearly doubled from $1,200 in 2005 to just over $2000 today, but Turkey's per capita income is four times the size of Egypt's. And as U.S. Secretary of State Hillary Clinton noted when the news broke this week, economic reforms need to run in tandem with political and human rights reforms - something Mubarak obviously does not agree with, despite the overwhelming evidence against his strong-armed approach.

I spoke to best-selling author Nassim Taleb on the phone who wrote the famous business book the "Black Swan," which identifies situations that have mathematical multiplier effect due to their unforeseen power. In the 2008 banking crisis it was $60 trillion of exposure to vast leveraged debts that the financial system could not handle.

Taleb says the U.S. government made the same mistake with Mubarak that it has done with its large scale banks. It has funded him since the peace accord with Israel, so much so that he became too big to fail, and the only choice now left is to bail him out against the will of Egyptians themselves. This may buy some time, but similar to the massive exposure of a Lehman Brothers, Mubarak may very well turn out to be the next black swan.



soundoff (16 Responses)
  1. Jerkinp

    Oh my Allah! Mubarak is a bank. He's to big to fail and need constant supply of yearly bailouts. lol

    January 31, 2011 at 8:21 am |
  2. what?

    (insert ballet movie joke here)

    January 31, 2011 at 9:02 am |
  3. bsteh

    Typical of a dictator, the incumbent gives his cabinet the sack while it is him that his people wants removed. Someone once remarked that power corrupts and absolute powers corrupts absolutely. More's the irony that this particular dictator survived for 30 years because of the support of the Beacon of democracy and freedom.

    Now that the dictator is on the verge of being uprooted, both protagonists are having a go at each other blaming the other for being the cause of the present volatile situation. Both are equally correct for while one failed to see the perils of overstaying his welcome, the other underestimated the groundswell unpopularity of their continued patronage of the former.

    In speaking out against the incumbent, the Beacon has thrown fat into the fire as it is now apparent to even the blind that a client is only tolerated for as long as he is relevant and the support evaporates just as fast as it emanates. This should have the wakeup effect on the few clients that still exist on the hugely unpopular military presence of the Beacon.

    The ruling elites must find their hummous flat to the taste tonight as they awkwardly digest on the realisation that their protector is as much a liability as a libertine let loose in a nunnery O/D on viagra. One has already taken the pragmatic approach of purchasing the affections of its people with a gift of money and free grocery for a year. In this year of living dangerously, it must surely be seen as poltical savvy and a clear signal of grave misgivings of sitting on billions with the slender protection of a much maligned mentor.

    That an Arabic rejuvenation is long overdue does not make it any more urgent and we have Mr.GW Bush to thank for causing the prices of oil to triple in the last 10 years coinciding with his foreign misadventures that are typical of American presidents after Roosevelt. The escalating prices of essentials not only weighed down on US productivity, employment and its general economy, the toll on lesser economies became wretched. Coupled with the groundswell of animosity to American belligerence and interference in the Middle East region, the region is ready to explode as it surely must.

    January 31, 2011 at 9:14 am |
  4. Tareq

    You are right about Egypt and Turkey. Although the current government of Turkey is more Islamic and anti-Western, they represent the majority of people, not a small elite. A government should be accountable to the majority of people. That's why democracy is very important. In Egypt, Mubarak stayed in power only with the support of a small elite and only this elite benefited from his government.

    January 31, 2011 at 9:59 am |
  5. YemenSpirit

    not the black swan he is the black PIG

    January 31, 2011 at 10:31 am |
  6. beaujam90

    Mubarak is over 80, he needs to retire.

    January 31, 2011 at 4:16 pm |
  7. Stephan J.

    Unfortunately Mubarak is a ruler, not a leader. As a leader he would have ensured his survival and that of his followers by ensuring that there is enough growth in life-quality for so many Egyptians, that he would have avoided the situation he faces now. Now the street is leading the way – his way out of the country. While he and his "special friends" (our Tour Guide in Egypt years ago voiced that only 70 families control the country) have enouh money to survive for many more generations the troubles will come after his departure.

    But there is also hope: If the Egyptian Army really orchestras a smooth transition to a new Constitutional Congress election and then peaceful parlamentarian election in Egypt it would be up to the rest of the democratic world in Europe and America to decide: Invite Egypt and Tunesia (if it also transitions safely to full democracy) into NATO or not. Along with Turkey they would be the second and third Islamic country in NATO and it would proove to the new generation of young Arabs that peace and democracy lead right the way into being equal to any.

    Mubarak in this case would have been the entry-door into a yet unimagined peacful new world order. If the US and Europe fail in this issue they will soon face a radical Egypt and a radical Tunesia since it is them, whose democratic example the people in Egypt and Tunesia try to follow. They will never understand that they do not get the support when only asking to live freel like in the West.

    The only one gaining an advantage from a radicalisation of Egypt will be Israel. Only a non-peaceful, non-democratic Egypt guarentees Israel that it will continue to receive favorite treatment and billions of aid from the US and the EU. If Tunesia and Egypt lead the way to a young peaceful generation of Arabs taking democratic control of their destiny and countries then Israel – surrounded by democratic, peaceful staes, will no longer be able to continue its current path.

    Tunesians and Egyptians will hopefull see that their peacefulness and comittment to democracy in this period of time is the best and the only way to bring peace and freedom to their Palestinian brothers and sisters – the US, the EU and NATO permitting by taking this chance in history instead of unnesseccarily siding with Isreael's opinion in a blind move.

    January 31, 2011 at 7:22 pm |
  8. Taner

    I am a Turkish citizen and don't like being called as an Islamist country.Turkey is being converted into an islamist ditatorship by the ruling party AKP, which was in power by democratic elections but doing their best to convert Turkey into a Middle-Eastern, Islamist country. Just last week , alchol was banned for the ones below 24 and in many public places. We who didn't vote for AKP are going to battle to protect secularism and against the " hypocracy" of the EU, who support AKP and find its actions democratic(!)...The ruling party will be succesfull in the next election in June by giving money or coal or other things bought by my taxes to the poor.is that what we call " democracy?". Turkey is another candidate for a second Iran in the region.We should be greatful to the western world who see the PM , Tayyip Erdogan, who is the one of the richest PMs, democratic. Thank you!

    January 31, 2011 at 8:59 pm |
  9. Jdeuty

    Mubarak must go! He does not much good for the country of Egypt in his 30 years... that is pretty evident seeing as happy citizens do not start revolutions. He has made too many false promises for his people. Obama – Europe, listen to the people of Egypt! They shout for Democracy! They shout for our help. Some doubt the US because we have done nothing to fulfill our promises to them for a better government; but yet, the people still shout for our help! We cannot just sit back and have a 'well let's just see what happens,' attitude. We did that with Iran and look where we are now... Democracy is a government for the people by the people. The Egyptian people want freedom, they want democracy. Helping the people, reassuring them that we are on their side will make them trust in democracy even more. But! If we do nothing, why would they desire democracy anymore?

    Here are some lines of 'WISDOM' which once governed this great country for 4000+ years... Perhaps we should listen to them again!

    Make people come to You through your good nature.
    Make your officials great, so that they act by your laws.                            
    He who has wealth at home will not be partial,
    for he is a bountiful under his King and thus lacks nothing.
    The poor man does not speak justly.
    One who says : 'I wish I had." is unrighteous,
    (for) he inclines to him who will pay him.
    Great is the man whose great men are great.
    Strong is the King who has councilors.
    Speak truth in your house,
    that the officials of the land may respect You.
    Righteousness of heart is proper for the Lord (of the Two Lands).
    The front of the house puts awe in the back...
    When free men are given land,
    they work for You like a single team.
    No rebellious heart will arise among them,
    and Happy will not fail to come.

    February 1, 2011 at 7:51 am |
  10. S. Strauch

    The author of this article clearly sees the whole thing from a "what's good for the US" perspective. However, events will not pan out in accordance with what's best for the West. Muslims are sick and tired of being ruled by Western stooges.

    February 1, 2011 at 3:31 pm |
  11. Maner

    Taner you are a great loser.

    February 1, 2011 at 3:33 pm |
  12. Osman

    Taner get out of turkey if you dont like it. Erdogan i the best leader turkey has ever seen.

    February 1, 2011 at 5:28 pm |
  13. arbalet

    Taner don't give disinformation. Alcohol doesn't banned in Turkey for the ones below 24. You can still buy alcohol at the age of 18 unlike US which is 21. The only change is manufacturers can't give free promotions to ones below 24. And tell me; if AKP converted Turkey an islamist dictatorship, howcome the girls with headscarf still can't enter universities? Stop showing your political views as a fact. As a strong liberal, I believe AKP democratize Turkey more than ever. You are blind to see why they are winning over and over again and trying to justify your loses with other bullshit. They'll win again in the next election because oppositions parties suchs and don't have a good politics which let them compete with AKP. And people see the economic, and democratic changes...

    February 1, 2011 at 11:53 pm |
  14. Erdal

    I am a Turkish citizen who lives in USA Turkey is not an Islamic country but the best model of the democracy in the countries that has Very high Muslim population and In USA Nevada Alcohol is illegal to use under 21 and i still don't understand how is that topic related with alcohol and in middle east Erdogan is a strong political character who can be a leader for middle east countries like Egypt or Tunisia even thought my friends who came from Syria says erdogan is a great leader and Of course Turkey is a regional power more than it even be
    Seninde taner Allah belani versin ki bu kadar gerizekalisin bu kelimeleri ingilizce olarak buralara yazip zaten ulkemize karsi olan on yargilari azdirmaya arac verdigin icin siyaset takim tutmaya benzemez ulkenin onunu alkolle sex le acamazsin senin bahsettigin avrupa ulkelerinin cogunda alkol tuketim yasi sinirlidir alkolun zararlarini senin beyin huclereine verdigi sekilden de gorebiliyoruz salak !!!

    February 2, 2011 at 5:30 am |
  15. Manuel Vilhena

    In one sentence: Mubarak should go.

    February 2, 2011 at 7:25 pm |
  16. image formation by converging lens

    Something any more on that theme has incurred me.

    P.S. Please review our icons for Windows and windows13icons.

    September 15, 2012 at 5:49 pm |

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