Developmental Economics

Q1

Energy subsidies are given by the state to its citizens using the tax revenue collected from industries and individuals for the sake of boosting production, maintaining competitiveness, and making production cheaper. This is a program that is aimed at making the less fortunate have their way through competitive markets and does business for them. However, there have been instances when experts argue that subsidies are not sufficient, while others support them as the best way to ensure equity among producers, especially in countries where the income gap is significant between the wealthy and powerful and the poor. In the process of production, poverty alleviation is usually the primary target since this is a factor that pulls the society back economically (Bargawi 219). Thus, firms produce with an aim to benefit owners and stakeholders so that all of them can take a step forward economically. However, the cost of energy comes back to haunt the whole process, which is why some countries invest a portion of the tax revenue into giving subsidies to people (Elshennawy 856). However, at times subsidies do not help the intended group of poor people since it is an indiscriminate process, which equates the poor with the rich.

 

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One strong point in favor of energy subsidies is that it makes production cost lower than the prevailing one in the market, thus making small firms enjoy economies of scale through higher production. Energy subsidies have the capacity to stimulate production in small economies in the long run; and they have an effect on the level of poverty in the country (Glomm and Jung 1784). For instance, in countries like Egypt where most economic indicators are dependent on manufacturing industries, energy subsidies may play a vital role in improving lives through poverty alleviation. Energy subsidies make production cheaper, which reduces the market price, hence increasing affordability. This is a major advantage of this production strategy since the cost of production is the key determinant of market prices, hence interfering with the affordability of products and living standards.

The other strength of energy subsidies is that they increase the production rate and the government can collect more taxes, which go to other economic sectors, hence reducing the overall poverty level. However, subsidies have one weakness since more production due to the reduced cost leads to dumping of local products in the international market because of overproduction (Elshennawy 858). This is not regulated by the subsidy strategy, hence exposing the country to a poor balance of trade, which in turn affects the process of poverty alleviation negatively in the long run. Reducing such subsidies may have both positive and adverse effects in the Middle East countries (Ramadan and Thomas 637). On the positive side, subsidies in Arabian countries after the Arab Spring may be converted into developmental funds and invested directly in the economy and the government, which may make more income and increase public investment (Salevurakis and Abdel-Haleim 35). Public investments may become productive, making the government reduce the tax rates, which will still make production cheaper. Reducing subsidies may also make production costly and adjust market prices upwards, making market affordability challenging.

In the Middle East economies in the post-Arab Spring period, the cost of production is known to be higher than before, which is why subsidies are necessary. The economic effects of removing subsidies include an increase in prices and overall cost of production, which may result in mass layoffs by firms, hence creating unemployment in the economy. Reduction of subsidies may also make production costly and discourage investors from establishing production firms, which would make the country run short of products; and the result will be an insufficient supply and a high cost of living (Glomm and Jung 1784). In Egypt, there are several issues causing challenges to the process of growth and poverty alleviation like the cost of education and medical care. Thus, the following recommendation can be made to the country to promote living standards, which will bring inclusive development. The first recommendation is government sponsorship of students at the basic levels of education.

Poverty hinders people from going to school, which in turn creates long-term poverty stricken communities. If education is subsidized, many people would go to school and become economically useful in the poverty alleviation process (Ramadan and Thomas 639). The second recommendation is that medical care should also be subsidized to ensure that every person has access to quality medical attention, which will in turn make people healthy and included in the production and poverty alleviation in Egypt. The country can ensure that tax revenue is significantly invested back into the economy to boost production by working on the least profitable sectors (Rohac 311). In normal circumstances, the private sector only deals with those industries where the maximum return is guaranteed, thus neglecting vital sectors where profits are limited. This is what the government of Egypt should focus on and invest heavily into in order to ensure that the public sector employs people and produces in sectors in which private investors are not willing to participate. This way, the country will have an equitable economy, whereby both private and public sectors are actively involved in improving lives through production and job creation. One way of improving people’s lives is through creating wealth by availing employment opportunities to the society.

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The country should also invest heavily in the property rights mechanisms where inventors of ideas have their sole rights to them so that new industries can emerge and create jobs. Property rights help people who invented the ideas to conceptualize the best way to invest in these ideas and see them through to the maturity without unfair competition from economic giants in the industry. Lastly, availability of microloans to small-scale producers should be a sufficient means of involving many low-income individuals into active production. The government can reduce the amount of subsidies given and give loans to start-ups so that there can be diversity in the economy. People cannot be included in the process of production without creating jobs for them or giving them loans to boost their businesses and invest in their ideas. This is what the government of Egypt should do since the country is located in a dry region and businesses are the only significant way of remaining stable economically.

In conclusion, energy subsidies are a topic of heated controversy due to mixed outcomes in different countries. However, strategic planning and its implementation along with other public sector economic policies can be of utmost significance in the process of poverty alleviation. The government of Egypt has tried many policies in a bid to ensure that every citizen is out of poverty bracket, but not all of them work. However, with the recommendations given, it is believed that the country can achieve a significant improvement in the war against poverty and marginalization of communities now that the post-Arab Spring effects are calming down. The first internationally recognized step in the poverty alleviation process involves availing of affordable and quality education to everybody since illiteracy is the primary ingredient of making people stuck in poverty in any country or society.

Q4

Initially, the government of Egypt was not significantly vocal about women employment in the private sector. In fact, the private sector was left to make its rules of engagement, whereby investors did not have any guidelines on how to indiscriminately employ their members of the staff. However, in the post-Arab Spring era the government has begun to develop strategies, which will see women being more engaged in employment than before through gender equality policies. Initially, the government did not have much concern about the way private investors engaged women both on the service level and in management since there were no determined rules governing the activity (Wafa 597). However, after the Arab Spring the country had to come back to a stable level economically and stakeholders realized that women were contributing significantly towards the development of the economy (Vassefi 1097). This was when there happened introduction of policies regarding gender equality and anti-discriminative employee engagement in both private and public sectors.

Currently, the government of Egypt is championing gender equality in the management levels of the economy after having ensured that these people are significantly engaged on the service levels. The government has been working in a close collaboration with the USAID to ensure that women have been empowered through offering jobs in top positions as well as giving them loans to start businesses (Shash and Forden 76). The government has also been working with other United Nation’s agencies to ensure that stigmatization of women through female genital mutilation is prohibited in the country. The UNICEF and UNDP have been active since 2012, trying to see that women do not go through the FGM since it has internationally been listed as an activity that hinders women from exploiting their potential. After the Arab Spring, the status of Egyptian women was getting worse and the government had to do something to change the situation. Women faced violence in public offices and discrimination hindered them from getting employment, while others were being sacked without a due process.

The effects of the Arab Spring hit women the most and the public outcry became louder concerning the fate of female employees. Thus, the government has been in the process of shaping the political space for women to have their voice since then. There are several attempts intended to ensure that women are politically and economically empowered and protected from discrimination and violence, which stem from the status of women in the Islamic culture (Hafez 84). The inequality gap has been getting closed through the efforts made by the UN and the Egyptian government by bringing women closer to power. Women have been getting more employment opportunities and their exposure to politics has been growing (Vassefi 1097). This has been making the gender equality policy a reality although there are still challenges relating to stigma in the society. The government has set out policies, which demand inclusion of women in the employment both in private and public sectors. Priority is given to women in political appointments in a bid to ensure that they have their voice in the management of their affairs.

The United Nations has reached out to stakeholders in the media and learning institutions in an attempt to ensure that no discrimination exists against women and that their success stories are significantly covered and published. This will ensure that the world understands the capabilities of women and respects their efforts both in business and administrative posts (Wafa 597). The government together with the World Bank has launched several financial initiatives so that loans are availed to female entrepreneurs in a bid to make them realize their dreams economically. In 2015, the government of Egypt introduced a new labor law, which obliged all employers to consider women in their recruitment exercises and give women rights to hold offices and own property just like men (Shash and Forden 74). However, one challenge that is still holding Egyptian women back is the high level of illiteracy. It is believed that 37 percent of Egyptian women have not completed the basic level of education and can only be employed on manual jobs (Wafa 599). This locks them out of employment opportunities although the government has been trying to improve the education structure in the country.

Egypt has involved stakeholders in the private sector in a bid to ensure that there is understanding of the policy of women employment. This is supposed to make women who are semi-literate be considered for undertaking less technical assignments in the economy so that there is a motivation to young girls to study at school (Bargawi 219). The government is committed to making women an active and equally relevant party in the management of the country. Soft loans and production subsidies have been tried and proved to work since many women have come up to seek governmental financial and moral help in establishing businesses. However, the motivation to get an education and secure employment in both private and public sectors of the economy is of utmost importance for the sake of upgrading women’s moral and economic statuses in the country (Shash and Forden 74). The pattern of inequality before the Arab Spring was so deeply engrained that the country’s women were twice as unemployed as men. This is to mean that for every one unemployed man, there were two women without jobs. This was a result of discrimination against women in schools where basic learning was carried out, then coming down to employment and labor market.

In conclusion, women used to suffer from harassment and violent discrimination in public offices and their statuses had diminished significantly. However, with the current efforts by the government and the United Nation’s agencies aimed at motivating and empowering women, Egypt has experienced a significant boost in the economy. The government is committed to seeing women equally engaged in the country governance through political appointments and the strategy seems to be working although at a slow pace. The main government’s target is to include women in the running of businesses and political offices so that they can have their ideas and complaints heard and can get platforms to showcase their capabilities. The effects of the Arab Spring have not been favorable to women, but the government of Egypt has been able to stabilize the economy and the political domain to ensure that women do not suffer from discrimination and harassment from their male counterparts.