What States and Deeds Can’t Do

AMR Adly is an Associate Professor of Political Economy at the American University in Cairo. Egyptian by background, he has studied Egypt and the wider Middle East and North Africa, including Tunisia, Morocco, and Turkey, for over a decade, focusing on state-business relations, informal economies, and the region’s political-economic development.

The Confluence: What drew you to studying political economy in the Middle East and North Africa specifically?

Dr. Adly: Political economy applies the analytical tools of political science, power relations, governance, to understand how resources are allocated, in contrast to how conventional economics approaches the same questions. I’ve always been drawn to questions of development: why some parts of the world develop faster than others.

The Middle East and North Africa is a region that struggles with a lot of social, economic, and political problems that Western scholarship has often explained through culture or religion. I wanted to de-essentialize that: there’s nothing uniquely cultural about the region’s problems, because much of the Global South faces the same ones. It comes down to the region’s place in the global division of labor, meaning what a region produces and trades within the world economy, and how that place has been shaped by decades, even centuries, of European colonialism and US imperialism. Looking at it that way lets you see what lies beneath the poverty and marginalization, which is also why I became interested in informality specifically.

The Confluence: How would you describe the relationship between the Egyptian state and the private sector, compared with how governments and businesses typically relate in the West?

Dr. Adly: This isn’t unique to Egypt. Countries that industrialized while trying to catch up needed the state to coordinate the process rather than leaving it to the market alone: think of Japan, then South Korea, and now China, as well as Malaysia, Thailand, and Vietnam in Southeast Asia.

That kind of coordination blurs the line between where business ends and the state begins, which is sometimes a problem: it can produce an unhealthy marriage between business and the state that leads to corruption, nepotism, and crony capitalism, where political decisions distort markets. That’s part of Egypt’s story too.

But the successful Asian cases showed the same blurred line and turned out fine, so the real question is what kind of closeness you get. Close state-business ties can form a developmental coalition that enables upgrading and growth. Or they can form a rentier coalition: politically connected businesspeople who redistribute wealth that other sectors created rather than generating growth themselves. Egypt’s problem is mostly the second kind: state and business are close, but that closeness rarely produces the coordination that upgrading requires.

The Confluence: What determines whether a state ends up with the first kind of relationship or the second?

Dr. Adly: There’s no simple answer, it takes detailed historical analysis, because the factors interact. One is how autonomous the state itself is. In the Asian cases, the state wasn’t just authoritarian, it was also autonomous enough from powerful interests to discipline business and enforce rules, even without Western-style rule of law.

The Arab region has generally lacked that. There are also structural factors: the region’s wealth in fossil fuels defines its role in global trade and investment, and that generates rentier coalitions that share in profits from a small number of sectors, which doesn’t encourage the kind of learning or upgrading that businesses need to do. And there’s history: this is a region that’s been heavily shaped by imperialist intervention, from direct US military involvement to Israeli settler colonialism, all of which has made coordination harder to achieve.

The Confluence: You’ve written extensively on Egypt’s informal sectors, informal housing, informal labor. What does the persistence of such a large informal economy tell us about the Egyptian state?

Dr. Adly: First, that Egypt isn’t exceptional. Rapid urbanization without industrialization produced unplanned, informal settlements in Egypt just as it did in Brazil, Argentina, Mexico, Nigeria, and India. That’s a common feature of the Global South, where urbanization outpaced the historical pattern of industrialization driving it.

But it also tells us something about state-society relations: Egypt, like many Global South countries, can be authoritarian and still have very little ability to control the day-to-day workings of its economy and society. That’s how you get agricultural land quietly repurposed for housing, or entire apartment buildings built without oversight. So the state can be authoritarian yet weak, and that distinction matters for understanding not just Egypt, but the wider Global South.

The Confluence: Hernando de Soto and the World Bank argue that formalising property rights, giving informal owners a legal deed, would unlock “dead capital” and let people borrow against it. You’ve pushed back on that. Why?

Dr. Adly: Because the evidence doesn’t really support it. Peru is the test case de Soto’s own argument was built on, and formalisation programmes there didn’t produce the credit access or investment boom the theory predicted; a title alone doesn’t create a functioning credit market or the income needed to use one.

My own ethnographic fieldwork on how informal housing markets actually work at the neighbourhood level found something different: informality is already a functioning market, with its own systems of trust, pricing and dispute resolution. What small, informal businesses actually lack isn’t a deed, it’s capital. So the better intervention is to give those units access to capital and let them grow, rather than hand them a formal document and expect the growth to follow.