Re-shaping the “Socialist Factory” in Egypt in the Late 1960s–1970s
By Malak Labib
In January 2021, the Egyptian government decided on the liquidation of the Egyptian Iron and Steel Company (EISCO), one of the country’s oldest public-sector enterprises. While officials pointed to the company’s accumulated losses and its deteriorating production capacity, the decision was met with wide opposition. Workers conducted a sit-in at the company’s headquarter in Helwan, demanding the continuation of production and the adoption of a modernization plan. Intellectuals and activists also launched public campaigns calling for the saving of Egypt’s public sector giant. The wide mobilization against the liquidation plan can be explained by the symbolic value of EISCO. As the largest industrial project launched in post-1952 republican Egypt, EISCO represents for many the symbol of the postcolonial project of self-sufficiency and national independence. At the same time, the liquidation of EISCO was not an isolated decision. Other state-owned companies – including the National Cement Company and the Egyptian Navigation Company – have recently faced a similar fate, although they have received less attention.
With this recent wave of closures, the Sisi regime has revived the policies of privatization and public sector reform pursued during the Mubarak era. Egypt’s neoliberal turn, which led in the 1990s and 2000s to the sale of a large number of state-owned enterprises, has attracted extensive scholarly attention. This contribution seeks, in contrast, to explore an earlier moment in this history. It sheds light on economists’ debates on public sector reforms in the late 1960s and early 1970s, a period of economic adjustment that culminated with the Infitah, or open-door policy. During those years, the “crisis” of state-owned enterprises and their inefficiencies became a subject of public debate, and economists looked to foreign experiences of reform. While the discourse of public sector reform has often been seen as a product of liberal right-wing ideology, I argue that this discourse was initially shared among economists of various political leanings and intellectual backgrounds. Economists – including figures from the left – called for “liberating” the public sector from bureaucracy; yet they paid little attention to the rising expressions of labor discontent, which questioned the verticality of power relations on the shop floor.
“Liberating” the public sector
The years 1965 and 1966 witnessed the first signs of a crisis of the central planned economy in Egypt. During the previous decade, the Nasser regime had pursued a strategy of state-led industrialization. With the large-scale nationalizations of 1961, the public sector became the main engine of growth: State-owned enterprises monopolized the industrial sector, foreign trade as well as the banking sector. Yet Egypt’s “socialist” experiment was interrupted with the balance of payment crisis of the mid-1960s, a crisis aggravated by the country’s defeat against Israel during the 1967 war. While the crisis ushered in a policy of economic adjustment, it also opened the door to a political-economic debate on state-owned enterprises and their “inefficiencies.”
Calls for public sector reform came from economists representing different intellectual and political trends. One of the most prolific writers on the topic was Ali Al-Salmi, an economist and technocrat, who was trained in business administration in the United States and taught at the newly founded National Institute of Management Development. In a study published in 1969 in the magazine al-Ahram al-Iqtisadi, Salmi highlighted that “public sector performance has been significantly below our hopes and expectations”, as shown by the low volume of industrial production, the high levels of idle production capacity, and low exports. One of the main causes of this poor performance, Salmi argued, was bureaucratic rigidity and the existence of multiple planning and supervising authorities, which left little autonomy to company managers. While the actual functioning of state-owned enterprise was quite different from the picture of rigidity and centralization painted by Salmi, his analysis served to justify specific policy choices. “Liberating the public sector” from bureaucracy (tahrir al-qita’ al-‘am) meant, in practice, emphasizing profitability in companies’ targets and strengthening managerial powers. In this and other writings, Salmi promoted the image of a new manager, the entrepreneurial manager, i.e., the exact opposite of the “bureaucratic” manager, who had become a figure of mockery and critique in the Egyptian press during those years.
Significantly, many left-wing economists shared similar ideas around public sector reform, as can be seen in the pages of the monthly journal al-Tali‘a, which was the main public forum of the Marxist intelligentsia. In an article published in 1970, Fu’ad Mursi, an economist and one of the central figures of the communist movement, argued for the urgency of making the public sector more efficient by improving enterprises’ profitability and expanding managers’ freedom, although within certain limits. Like many of the left-wing intellectuals and militants of his generation, Mursi moved closer to the Nasser regime in the mid 1960s, and occupied several positions within the state economic apparatus in the late 1960s and early 1970s. He as well as other socialists economists, like Ismail Sabri Abdallah for instance, sought to influence policy-making during these crisis years. They promoted public sector reform as the only way to maintain its dominance, against those who called for a greater role for the private sector in the economy. Their suggestions also included the adoption of better management techniques and greater labor discipline in state-owned factories. 
Which models of reform?
In his 1969 study, Salmi observed that “the call for economic reforms and for improving public sector management is not limited to our society; we find similar calls in many countries of the socialist world today”. In this period of intense debate over economic reform, Egyptian economists looked to foreign experiences and they paid specific attention to the developments in the Soviet Union. In the mid-1960s, a series of policy changes – later known as the Kosygin reforms – sought to introduce more flexibility into the Soviet planning system and to increase the profitability of enterprises, in a context marked by a slowing down of the economy.
The Kosygin reforms were not confined to the domestic arena; they contributed to shape Soviet development aid policy abroad. In the case of India, for instance, David Engerman has argued that the mid-1960s marked a substantial change in the language of Soviet advice. Soviet aid officials became concerned with the performance of the public sector as a whole, rather than focusing merely on the operation of specific projects; the new approach thus expanded the scope of Soviet leverage. Like India, Egypt was a major recipient of development aid from the Soviet Union and the latter contributed to finance the country’s first Five-Year Plan (1960–1965). By the mid-1960s, however, as Egypt faced a growing balance of payment crisis, Soviet aid officials began advocating a policy of economic retrenchment. More research needs to be done on the contours of Soviet aid policy to Egypt during these years, and its links with the economic reforms undertaken in the Soviet Union. What we know, however, is that Egyptian economists turned to the Soviet-style reforms as a possible model, or used this model to justify their policy choices.
Did the debate around public sector “inefficiencies” and the calls for reform translate into concrete policy? The move toward a more market-oriented economy in the 1970s did not lead, in the short-term, to major shifts in the way in which state-owned enterprises were managed. Legislative changes – adopted first in 1975 – aimed at reorganizing the public sector along the lines of the private sector model; yet these measures were to some extent circumvented by networks of interest within companies and state economic institutions. For instance, key enterprises such as EISCO were not subjected to close scrutiny, in terms of their profitability.
On the other hand, the same years marked a revival of labor militancy in state-owned enterprises. While state-labor relations under the Nasser regime were characterized by patron-client relationships – based on a tradeoff between political rights and economic benefits – the deteriorating economic conditions of the late 1960s and early 1970s led to a rise in worker protests. After the country’s defeat in 1967, the regime urged workers to sacrifice for the “battle” by increasing their output and their working hours without compensation; these measures widened the wage discrepancies between workers and managers, producing social tensions in factories. The area of Helwan, where major industries were located, became a center for emerging labor militancy, and EISCO witnessed a large protest action. In August 1971, thousands of steelworkers organized a three-day sit-in, elected strike committees, and sequestered the head of the state-controlled Egyptian Trade Union Federation, Salah Gharib. While the state-controlled press denounced the workers’ “unacceptable” behavior without mentioning the reasons for the mobilization, other sources indicate that workers’ demands initially revolved around salary increases. Some observers noted that workers also raised political issues, relating to workers’ participation in production decisions and to government interference in union elections. As argued a few years later by Sayyid Bayyumi, a worker in the company, union elections often resulted in the appointment of “established individuals” – mostly factory supervisors and white collar employees – who “did not serve workers’ interests.” Significantly, labor protests such as EISCO’s received little attention from leftist intellectuals and economists, reflecting their distance from workers’ struggles during this period of rapid economic and political change, and their inability to move beyond the limitations of the Arab socialist project.
 These policies led to the sale of more than 100 state-owned enterprises in the second half of the 1990s; this was followed by a second phase of privatizations in the 2000s. Roberto Roccu, The Political Economy of the Egyptian Revolution (Basingstoke: Palgrave Macmillan), 44–45.
 The Infitah, or opening, refers to a shift in economic policy that aimed at stimulating the inflow of foreign funds, in particular Arab capital from the Gulf, and at stimulating the private sector. The Infitah was initiated by Anwar el-Sadat, after the 1973 war, but the first signs of this policy shift appeared in the late 1960s.
 John Waterbury, The Egypt of Nasser and Sadat: The Political Economy of Two Regimes (Princeton: Princeton University Press, 1983), 95–100.
 Ali al-Salmi, “al-Kafa’a al-Idariyya fi al-Qita‘ al-‘Am: Dirasa Misriyya,” al-Ahram al-Iqtisadi, 15 February 1969.
 Fu’ad Mursi, “al-Wihda wa-l-Tanawwu‘ fi I‘adat Tanzim al-Qita‘ al-‘Am,” al-Tali‘a, July 1970, 59–63.
 The Nasser regime arrested and imprisoned the great majority of Marxist militants in 1959; they were released in 1964 and many of them joined the Nasserist establishment. Leftist intellectuals and militants distanced themselves again from the regime in the mid 1970s after Sadat officially announced the Infitah policy. On this history, see Rami Ginat, Egypt’s Incomplete Revolution: Lutfi al-Khuli and Nasser’s Socialism in the 1960s (London: Frank Cass, 1997); Gennaro Gervasio, al-Haraka al-Markisiyya fi Misr 1967-1981 (Cairo: al-Markaz al-Qawmi li-l-Tarjama, 2010); and Joel Beinin, “Will the Real Egyptian Working Class Please Stand Up?” in Workers and Working Classes in the Middle East: Struggles, Histories, Historiographies, ed. Zachary Lockman (New York: SUNY Press, 1994), 247–270.
 Khalid Ikram, the Political Economy of Reforms in Egypt: Issues and Policymaking since 1952, (Cairo: American University in Cairo Press), 212.
 On these reforms, see Yakov Feygin Feyging, “Reforming the Cold War State: Economic Thought, Internationalization, and the Politics of Soviet Reform, 1955-1985,” (PhD diss., University of Pennsylvania, 2017).
 David Engerman, The Price of Aid: The Economic Cold War in India (Harvard University Press, 2018), 290–293, 349.
 Elizabeth Valkenier, “New Soviet Views on Economic Aid,” Review, no. 76 (1970): 17–29.
 Waterbury, The Egypt of Nasser, 117–122.
 Marsha Pripstein Posusney, Labor and the State in Egypt: Workers, Unions and Economic Restructuring 1952-1996 (New York: Columbia University Press, 1997), 147.
 The key demand raised by workers was to obtain a “nature of work” compensation, as a supplement to their salaries. Salah al-Ansari, “I‘tisam al-Hadid wa-l-Sulb, 1 Ughustus 1989,” al-Hiwar al-Mutammadin, no. 2676, https://www.ahewar.org/debat/show.art.asp?aid=174911.
 Ghali Shoukri, Égypte, contre-révolution (Paris : Le Sycomore, 1979), 81–84.
 “Humum ‘Amil al-Hadid wa-l-Sulb: Sayyid Bayyumi,” al-Tali‘a, September 1976, 59.
 On the leftist intelligentsia’s position vis-a-vis workers and the labor movement during the Nasser and Sadat era, see Joel Beinin, “Will the Real Egyptian Working Class Stand Up?,” 247–270.
Malak Labib is a research fellow at the Institut Français d’Archéologie Orientale (IFAO), Cairo. She received her doctorate from Aix-Marseille University / Institut de Recherche sur le Monde Arabe et Musulman (2015). Her background is in history and political science. Her research interests cover the history of knowledge, political economy and the history of development. She has taught at Aix-Marseille University, the American University in Cairo, and Cairo University. Between 2018 and 2020, she was a postdoctoral EUME fellow at the Forum Transregionale Studien, affiliated with the Freie Universität Berlin.
Further articles in the Factory Reloaded series on TRAFO:
Görkem Akgöz, Malak Labib, and Nurçin İleri, Factory Reloaded: Transregional Perspectives on the Industrial Workplace, 18 February 2021.
Görkem Akgöz, Spaces of National-Industrial Modernity: Factories and Factory Women in Early Republican Turkey, 5 March 2021.
André Weißenfels, Middle Class Factory: The (partial) Privilege of industrial Labor in Tunisia, 19 March 2021.
Josefine Carla Hoffmann, Training as a Gatekeeper at the Indo-German Factory, 16 April 2021.
Citation: Malak Labib, Re-shaping the “Socialist Factory” in Egypt in the Late 1960s–1970s, in: TRAFO – Blog for Transregional Research, 30.04.2021, http://trafo.hypotheses.org/28429.