I have always been one of those skeptics that all governments have a tendency to bend the truth and very little of what they say should be believed. In this context, many years ago I had a chance encounter with my first experience with economic data fabrication in Egypt. I was just a young analyst, and was following economic trends in Egypt closely. I started noticing that Egypt’s three government-owned newspapers carried articles daily on new incoming investments, foreign and domestic, and the number of jobs they were likely to create. These investments seemed so fabulous, so potentially transformative of the Egyptian economy, I studiously kept reading day after day in awe.
As the stories on job creation got bigger though, there seemed to be no link between what was being reported and the reality I was seeing on the ground. So, on a hot somber day in the summer of 1990, and with the help of one my graduate assistants, I began monitoring the three government run dailies for one year. I kept a running count of stories on job creation as they appeared in the press. After 365 days of monitoring, we found that these newspapers had reported the creation of approximately 22 million jobs in slightly over a year. Interestingly, this was at a time when Egypt’s population was about 50 million, and if you created 22 million jobs in one year, discounting the elderly, children under the age of 16, the handicapped, and people who simply chose to be out of the work force of their own volition, there would be no unemployment countrywide to speak of.
Yes, the claims were 22 million jobs created in just one year. Of course, this was not the case with unemployment being rampant, structural unemployment being the norm, and you had every variation of mismatch of skills, doctors driving taxi cabs, engineers painting walls, etc. So what was this reporting? Was it just journalists with very little aptitude, or was it the government intentionally trying to mislead the public on the general state of the economy, or maybe both?
As I dug deeper, a pattern of economic misinformation seemed to be the norm of the 1980s and the 1990s, and continued throughout the rein of former President Mubarak. Numbers were being used in the most bizarre ways. The numbers themselves were often right, their presentation, however, would mislead readers into believing a completely false reality, that the Egyptian economy was in fact vibrant and growing. So, just because a number was correct and it wasn’t a lie, it didn’t mean that it wasn’t deceptive. Most liars know that they are liars, but when a government uses economic data with the intent to deceive, presenting only portions of the truth in order to mislead the general public, they become congenital liars attempting to portray prosperity where it is nowhere to be found.
Let me give you some examples of this phenomenon. One government economic report I once read, showed that Gross Domestic Product (GDP) had grown from $79 billion in 2004, to $188 billion in 2009. The report was ecstatic that GDP had more than doubled in a five year period. However, what the report didn’t tell you was that General Motors 2004 revenues were over $94 billion. And, just in that year alone the value added generated from General Motors was actually more than the value of all goods and services produced in the Egyptian economy in one year. Yes, General Motors in revenue in 2004 was bigger than Egypt’s overall yearly GDP. How was that possible?
From the 1960s onwards we were being told by one government after the next that our mission was to produce everything from “needless to rockets”, that industry was the mainstay of the Egyptian economy, yet GDP was infinitesimally small decades later. In fact, it still is, but we talk about Egyptian industry as if we were this huge industrial machine, when in fact it is not, and has never been. Are we all victims of economic misinformation, and data misrepresentation? True, a liar's punishment is, not in the least that he is not believed, but maybe the problem eventually becomes they believe their own lies and are unwilling to listen to anyone else. So, those that question the might of Egypt’s industrial greatness, those that can read GDP numbers for what they are, small rather than big, it is they that become the problem, not simply technicians speaking the truth, because the presenter of this data cannot see himself misinforming, it is your ignorance that is making you a detractor of obvious success.
Let’s take this a little further. If I were to have said to officials of the time that the number of $188 billion in GDP for 2009, the number they were so proud of, was in fact quite small, something that I in effect did, what would have been their reaction? What if I had said that in relative terms GDP in 2009 of $188 billion was roughly the amount of spending by teenagers in the US, with the US Golf Industry estimated to be about $190 billion in spending that same year, and Apple’s Market Cap, the number of shares owned by the populous at large, was $210 billion. If I were to argue that in fact what the report wasn’t telling us, was that what US teenagers spent on getting their ears pierced, getting Henna tattoos, and cell phone covers with Hello Kitties on them, was actually more than what Egypt produced in one year? What would have been my fate? Would I have been invited to government investment forums? Asked to speak with Ministers at Davos?
Encouraged to present a different point of view? Well, I can tell you in full honesty, most like-minded people who presented things for what they really were in that era got no invites, no free lunches, and were shunned for expressing their views on the vulnerability of the Egyptian economy. The party line was the economy was strong, vibrant, an economic powerhouse, and if you thought otherwise you were a fool, or just pissing on their parade.
For goodness sakes, the Egyptian economy’s productive value was actually smaller than the amount of shares that people had bought in Apple in 2009. In fact, Apple, Microsoft, and Exxon, individually were worth more that year, than the value emanating from all of Egyptian industry combined. Yet, we called Egypt the “Tiger on the Nile” fearlessly claiming that prosperity was around the corner. We became masters of economic misinformation, poverty deniers, and those that said other were hooligans, nay sayers, or just welad sitin alf kalb (synonymous to sons of bitches).
For more significance, what would you have thought when we were told that Egypt exported a whopping $18 billion in goods and services in 2004. Sounds big, doesn’t it as a stand-alone number? Well not really, because McDonald’s revenue in 2004 was $19 billion, and American’s purchased more than $18 billion worth of pizza that year. So, what exports were they really talking about? The number was shamefully embarrassing, but it was presented as if a major accomplishment was achieved. It was kind of like saying you lost 15 pounds when you started that amazing diet, but not saying that you started it three years ago, and had contracted diabetes the year before. But, if you had challenged this claim, insisted that export numbers were dismal, the people calling Egypt the “Tiger on the Nile” would have hit back and said that exports had almost tripled from 2004 to 2008 going from $18 billion to $54 billion. So, what have you got to say to that loser? Well again, what are your relative comparators?
If we use the weight loss analogy again, in 2008 the size of the US weight loss market was $58 billion, the size of the mobile phone accessories market in the US was $55 billion, and Bill Gates’ net worth was estimated at more than $55 billion. So, the $54 billion aggregate number remains anemic at best, ridiculously low for an economy like Egypt, which is supposed to have this huge industrial base.
Two even more interesting goodies that were repeated during the lost decades of 1990–2010 were that FDI sky rocketed and our stock market grew like no other in the World. Really? Stating that foreign direct investment which was $237 million in 2004, and had grown to $9.5 billion in 2008 sounded like quite an achievement, didn’t it? The government praised itself for this incredible growth in FDI, and all in less than half a decade. But, analyzing this more closely, you get a different picture. In 2004, when the movie Titanic was released it earned $600 million in revenue, in comparison to Egypt’s total FDI which was only $237 million. So, in fact, Titanic’s revenue, for what I thought was a really bad movie, was actually grossing three times as much as Egypt’s FDI did in 2004. Yup, three times as much. Now you might think that $9.5 billion in 2008 was a more respectable number, but if you compare that to the annual spending on plastic surgery in the US which was $12 billion, Nestles’ 2009 profit which was $9.6 billion, or Prince Alwaleed Bin Talal Alsaud’s net worth which stood at $19.4 billion, does the number look high now? It’s was kind of like having your friend invite you to his wedding and to warn you before hand that his wife to be was this amazing beauty, radiant, flowing, with such profound splendor it was as if the veil was invented for the likes of her. And, when you saw her in person, she’s the polar opposite of what has been described, proving again that beauty is in the eyes of the beholder. But, when it came to economic data it seemed what was beautiful to them was ugly to the people that knew better; and if you pointed out that the picture they had framed belonged in the dumpster, you would be quickly dismissed from the gallery never to get another invite. To get in the door, you had to see the beauty they saw, and if you didn’t, you didn’t belong.
The story line on our stock market is also something I feel compelled to touch upon. Market capitalization we were told for all listed companies in Egypt in 2004 was $27 billion, and it had increased to $91 billion in 2009, a threefold increase. Woof! But, market capitalization of our stock exchange in 2004 at $27 billion was actually smaller than the amount of money that Google attracted on the first day of its IPO which was $27.2 billion dollars. Similarly, the market capitalization of the Egyptian stock exchange in 2009 at $91 billion, was small than Walmart’s market cap of $203 billion, Googles’ market cap of $170 billion, IBM’s market cap of $161 billion, and Coca Cola’s market cap of $125 billion. What this essentially means is the trading for these stocks individually in one year was more than the total amount of trades conducted on the Egyptian stock exchange in its totality. As Leo Tolstoy said in Anna Karenina, “Be bad, but at least don't be a liar, a deceiver!”
And, it got worse from there. On the topic of Egypt’s reserves, we were told that including gold, we saw almost a doubling from $15 billion to $34 billion dollars from 2004 to 2008. But, the purchase price for Hertz Rent-a-Car in 2004 was $15 billion, equal to Egypt’s reserve that year, and our reserves in 2008 of $34 billion were smaller than the total amount of Wall Street’s bonuses that year that amounted to $38 billion dollars. In fact, Warren Buffet’s 2008’s charitable contributions stood at $37 billion dollars in 2008, $3 billion dollars higher than Egypt’s reserves that year. As for savings, we were also told that Egyptian savings in banks amounted to $15.5 billion in 2004, and grew to $38.5 billion in 2008. A doubling again. My goodness. But, we were not told that Egypt’s savings of $15.5 billion in 2004 were smaller than what it cost Greece to host the Athens Olympic games ($16 billion), and the 2008 $38.5 billion number for savings was actually smaller than the size of the US market for servers at $50 billion that year. For God’s sake, even Bernie Madoff made off with the savings of his investors to the tune of $50 billion dollars in that calendar year.
To top all of this, the Ministry of Tourism of the time touted that tourism receipts went from $4.7 billion in 2004, to $12 billion in 2008. Impressive, yes? But, the demand for dental products in the US in 2008 was $16 billion, Facebook’s valuation in 2007 was $15 billion, and the cost of the 2010 US Census was $14 billion, and to add insult to injury, the amount American’s spent on Mother’s Day in 2010 was approximately $13 billion.
So, I guess this leaves us with one conclusion. Those that misrepresented economic data and say today they weren’t lying, are obviously not very good liars, because any legitimacy to these lies has gone up in smoke. The reality of an economy is, it is what it is, and you can’t wish it to be something else. No Egypt is not “rich” as its last deposed leader once said. It is also not an industrial power house, it is not void of poverty, or inequity, and no amount of playing with numbers will change that. I, for one, always thought that after the revolution it would have been easier to tell everyone that they had been misled about the economy for decades. That the new dawn necessitated that we tell the truth about the country’s economic challenges, that we explain how hard the next decade was going to be, and to take it from there. But, I am not, nor have I ever been a congenital liar, and that’s why I would have taken this position. No more pretending that our economic salvation is just around the corner. Just tell the truth, for once.
And, for those savvy liars, who today insist they were honest about everything, not one of them has stood up to take responsibility for the economic misinformation of the time. They said we were the “Tiger on the Nile”, but we turned out not to be tigers. It sure sounded nice though, like a congenital, or a pathological liar putting it on thick for a girl at a bar. He knows what his true intentions are, but she has her suspicions and may just be having fun with him because it gives her something to do. The one liner of “if I could rearrange the alphabet you and I would be together” sounds so utterly believable coming from that pathological liar, the tiger in sheep’s clothing.