The Black Markets in
the White Revolution
800091330
Final Term Paper
Yara Elhemaily
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The Revolution and the Informal Economy are Hand in Hand
Once upon a time, on a cold and windy day, Donia grabbed her Egyptian flag and headed
to the demonstrations. Before riding a taxi, that never had a counter, she bought a bottle of water
from a hawker. As soon as she rides the taxi, she listens to some songs in a cassette tape that is
probably not original and was bought in a manner similar to how the bottle of water was bought.
The bottle of the water probably fell in the Tahrir square, on the 25th of January, Donia ran and
ran back home to escape from the police cops.
Donia did not spend a single piaster of her income in the formal economy. And not a
single pound was calculated in the official national accounts of Egypt. Every and each other
Egyptian is involved in one way or another in that informal economy, to an extent that made it
represent 77% of the Gross Domestic Product and ranked the Egyptian shadow economy as the
second around the globe (Schneider, 2000).
On the 28th, the scene has changed a bit, the winds were more vigorous. The picnic kit of
Donia completely changed. She no longer had a bottle of water. Instead she held onions, vinegar,
as well as, Coke. Although she bought her picnic kit using the old way i.e. through hawkers, the
end of the day was never similar to the 25th. The winds of change soon blew to the whole
country.
Everyone was forced to behave like Donia and was involved in the black markets and
informal economy, simply because the formal economies have been completely paralyzed. In
other words, the black markets became the only alternative for anyone who wishes to conduct
any kind of transaction, ranging from the simple purchase of consumption goods to purchase of
currencies. If the shadow economy was not present, not only would that result in massive loses
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but also it would have led to the decease of the revolutionary movement.
In this paper I attempt to answer the following question: “What was the role of the
Shadow economy in survival of the Egyptian Revolution? Did the informal economy affect the
movement positively or negatively?” The paper will be divided into five parts. First, literature
upon different definitions on shadow economy will be discussed. The most relevant definition
will be used and reasons behind its choice will be discussed. Second: a theoretical background
about the informal economy in Egypt will be discussed; in terms of history and significance of
such a sector. Thirdly: a historical overview of the movement will be discussed. Fourth: the role
of the informal economy in the survival of the social movements will be discussed, from a
resource mobilization perspective. This argument will be taken one step further to discuss the
role of the informal economy in the redistribution of wealth during the 18 days of the uprisings,
if not more. At time business elites were making losses lower income sellers were starting to
become better off. To what extent have this been the case is then discussed. A small remark
would be given on the role of shadow economy in maintaining the tolerance of bystanders and
out-comers, who were not involved in the movement for the movement’s continuity. Finally,
recommendations on possible areas to be used in any future research in a similar topic are
discussed.
I argue that the shadow economy did have a major role in the survival of the Egyptian
revolution. In fact the Egyptian revolution would not have sustained the full 18 days, in the
complete absence of formal firms and utilities, if the informal economy was not present sturdily.
The hypothesis however can be falsified if the responses showed incomplete, or only slight,
reliance of the revolutionary movements’ members upon the shadow economy during the 18
days of the uprisings.
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Evidence that verify or nullify the hypothesis are mainly primary data based on original
research effort using various sets for surveys, for the buyers as well as interviews ,for both the
sellers and the activists.
I. A Light on Egyptian Shadow Economy:
The underground economy, shadow economy or simply black markets have influenced
the Egyptian since its advent. The shadow economy has been granted different definitions. Tanzi
concluded that the underground economy is the national income or production that is not traced
by statistical analysts when they compile the total value of National Income (Tanzi, 1999). This
definition thus implies that Egypt’s actual Gross Domestic Product (GDP) is higher than the
reported GDP. Simply the shadow economy would be any kind of revenue that is not reported to
the tax authorities (Tanzi, 1999). Acknowledging this definition Feige spelled out underground
economy as all economic activities that are intentionally or unintentionally not included in the
national accounts (Feige, 1989). Schneider and Enste chose to articulate this phenomenon as
“parallel economy”, which is any economic transaction that, if incorporated into legal
framework, would influence the GDP and other aggregate figures (Schneider & Enste, 1998).
This definition will be used in this paper due to its comprehensiveness and relevance to the
economic activities related to the revolutionary movement.
The history of underground economy in Egypt shows a vigorous economy that ranks the
second after Nigeria (Schneider F. , Graphical Dimensions of the Shadow Economy, 2000). To
trace the size the shadow economy throughout Egypt’s history consider figure A1. In general the
shadow economy seems to be following an escalating trend in the size of the grey market with
1
The shadow economy has been measured using the Currency-Demand Approach. The size of shadow economy is
measured using different macroeconomic and microeconomic measures that are behind the scope of this paper.
4
exception to the last two years, that have seen a high capturing campaigns by the Ministry of
Interior for the drug dealers, which raised the rise of drugs highly and thus decreased the
consumption relatively (Ihab, 2011).
Figure A: Historical Background on Size of Shadow Economy
During Sadat’s reign and the start of Mubarak’s reign and due to the trade liberalization
and open market policies and also due to the rise of Islamist Fundamentals movement in Egypt,
the shadow economy have seen a considerable decline (Elguindi, 1981). However, in the early
1990’s and with the adoption of the Economic Reform and Structural Adjustment Programs
(ERSAP) of the World Bank (WB) and the International Monetary Fund (IMF), many citizens no
longer found a place in the formal markets in the light of ruthless unemployment rates that
reached 22% in the early 1990’s (Galal, 2002). During the 1990’s the size of the shadow
economy was relatively stable to start its increasing trip again in 2000’s with the flotation of the
Egyptian Pound, which increased the price of imported goods (i.e. mainly food) which have
toppled the country into an inflation (Roubi & Ghazaly, 2007). Data were limited to the year
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2009, however the year of 2010 have seen a very large shadow economy size as well as the year
of 2011 (which will be tested by the study).
II. The White Revolutionary Movement: Historical Background:
Before testing the validity of the hypothesis, it becomes crucial to understand the origin
of the movement in study. January 25th can safely be articulates as a revolutionary movement,
this social movement that aims to topple government, state or regime at a minimum (Goodwin &
Jasper, 2009) .The story of social content dated back in the early 2006 with the escalated
contention that started to accumulate as a result of the “hybrid state” which held authoritarian
and neo-liberal essences in heart (Springborg, 2006).
However, the story of social movements started earlier, particularly in the fall of
September 2000 with the emergence of social protests that supported the Palestinian uprisings
“intifadah” .On the 20 and 21st of March 2003, protests re-emerged opposing war on Iraq. As a
result of these two protesting events, a decentralized horizontal social movement managed to
mobilize activists and emerge-“Kefaya Movement”. (Shehata, 2011)
The year 2006 marked an important embarking stage of labor activism, particularly
portrayed in strikes of Mahalla, which were replicated, though more forcefully in years 2007 and
2008. In the year 2008, the labor did not protest alone but were accompanied by different student
and announced a civil disobedience, that led to the formation of 6th of April Movement as well
as Baradei- Youth for Change Association. Various labor strikes succeeded in years after in
different sectors. (Benin, 2008)
Upon the death of Khaled Saed, the young person who was tortured to death by police
officers, various demonstrations took place (Aljazira Website, 2010). These were to be
succeeded by the protests that took place to oppose intimidation against Copts as a result of the
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church bombing in Alexandria “Elqedisin’s incident” (Almasry Alyoum website, 2011).
Many reasons caused to increase the dissident in the Egyptian’s people minds, starting
from the neo-liberal economic ideologies implemented by the government which entailed
agricultural reforms that increased the unemployment in the country side on one hand and
privatization laws and actions that fostered unemployment in cities. (Hanieh, 2011)
All these factors in addition to a wave of contagion that hit the Middle East Nation
(MENA) region ,have led into the emergence of a revolutionary movement that started on 25th
of January in Cairo, Suez, Alexandria and many other cities (Koopmans, 2010). The first “day
of revolt” was extremely peaceful with minor clashes with police in Cairo and of higher intensity
in Suez to a degree that killed some martyrs (Guardian Website). On 26th of January the
message service was closed down and small demonstrations continued (Washington Post, 2011).
On the 27th of January morning the face book was blocked for a couple of hours and was soon
reactivated (Al-Badil Website, 2011). In the night the Facebook was officially banned and two
hours after the internet service was closed (Al-Badil Website, 2011). At mid day the mobile
service has been shut down, which only increased the number of protesters (Al-Badil Website,
2011).
On the 28th January a Friday of Anger was witnessed by the participation of ElBaradei
and Muslim Brothers for the first time and other important activists. The police officers shot
protesters using tear gas, Molotov, rubber bullets, roman belly bullets and machine gun bullets
killing hundreds of victims. The police system withdrew and the prisons that are of a geographic
location near to urban areas in order to terrorize people. The presidential guard forces arrived to
the square in the night shooting people and throwing tear gas. Later in the night the military was
deployed. Husni Mubarak made his first speech promising to form a new government, at the time
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protesters started arranging for their sit-ins in the square. (Al-Badil Website, 2011)
The period of study is confined to the 18 days of the uprisings and particularly since
January 28th till the resignation of Mubarak and his delegation of power to the Supreme Council
of the Egyptian Armed force. During this period the most important incident that happened was
the Camel’s battle in which hired thugs who were pro-Mubaraks attacked the square using
camels, horses, sticks and Molotov (Al-Badil Website, 2011). The movement did not die on the
11th of February but is still an ongoing movement, mostly characterized by spontaneity,
marginality as well as high civic ethics. (Bamyeh, 2011)
III. The Informal Economy and the Egyptian Revolutionary Movement, Hand in Hand:
The white revolution possessed many black market transactions. The effect of these
transactions upon the survival of the revolutionary movement as well as partial achievement of
the social equity goals will be discussed in the coming section, after explaining the methodology
through which evidence have been related to the examined subjects.
i. Methodology:
In order to find whether the shadow economy have positively attributed to the survival of
the movement, the effects tend to be divided into direct and indirect effects. The indirect effects
entails whether the shadow economy had a positive role on the movement’s survival in terms of
bystanders. In other words, to what extent have the presence of informal economy helped in
non-mobilizing these bystanders against the movements through maintaining their basic needs
met. This was answered through surveys conducted targeting people who were not a part of the
movement, through an internet poll of 100 respondents.
The direct effects which are more relevant to the topic of this research include two
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important points. First: how much did the shadow economy per se and the sustainability it
brought to the movement; affect positively the biographical availability of the participants? It
becomes necessary to understand if the shadow economy affected the indigenous organization of
the social movement and whether it helped the members of the movement acquire material or
cultural resources? The questions of whether the underground economy helped in the survival of
the movement directly through sustaining life in the square is via helping members of the
movement mobilize additional resources is discussed. This is tested through interviewing 10
activists as well as referring to the internet polls with regards to responses from people who were
members of the movement.
The second pivotal direct effect is whether the shadow economy’s increase in size during
the revolution was large enough to create a greater inequality, through making small formal and
informal traders better off; at time business people and stock brokers were suffering. The losses
of large-business people during the revolutionary become important to quantify as well as any
gains to small and informal traders. In order to asses this, internet polls were used to trace the
buyers’ side, which was limited to internet users and Facebook communities ruling out a great
proportion of the society who are uneducated. The sellers’ side is assessed through interviews
with large formal business people, small business people and informal hawkers. The questions
aim to capture information about the extent of losses incurred by business people and gains
realized by informal sellers, if any.
ii. The Indirect Effects of Shadow economy upon the movement:
The bystanders’ consumption patterns were certainly affected by the revolutionary
movement. The majority of them increased their consumption as a panic oriented collective
behavior, which led to shortages of goods in many different places. The underground economy,
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however did not seem to fulfill these shortages, in a way that urged them to postpone their
purchase decision. This means that if the movement continued for a longer period of time, the
tolerance of bystanders would have been shaken, affecting the sustainability of the movement
using this tactic.
iii. The Direct Effects:
Though the indirect effects are relatively important in the survival of the movement, the
direct effects of resource mobilization as well as achievement of a goal are of a higher
significance. The first part of this section discusses the resource mobilization effect and how it
was achieved via underground economy, whereas the second part explains the role of the black
markets in a fulfillment of one of the goals.
A) The Effect on Shadow Economy on Resource Mobilization:
Resource mobilization tends to be better at explaining this social movement. The
propositions of this theory assume that the survival and growth of the movement is a function of
the ability of its members to mobilize different resources starting from moral, cultural, human as
well as material resources. (Edwards & McCarthy, 2010)
This theory assures that the content and dissent are not sufficient to sustain the movement
(McCarthy & Zald, 2009). However resources are needed (McCarthy & Zald, 2009). Resources
that are examined in this paper are material resources. Nearly all the means of access to material
resources during the 18 days were carried out in an informal framework, with exception to the
purchase of food.
The only similar study was done on the effect of black market operations on the survival
of guerrilla movements and reached similar results in direction, though the degree of reliance
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upon the shadow economy in the guerilla movements was higher and was identical to the results
given by the Muslim Brotherhood Organizations and 6th April Movement (Naylor, 1993). The
three movements assured that they relied 100% of the time upon informal economy and not only
during the revolution because they feared that their materials will be confiscated by the State
Security.
The results in this part of the study were based upon both interviews with 10 activists and
internet polls. The internet sample had problems with 33% who have not taken part of the social
movement, whereas the other 66% have been to the square at least once during the 18 days. The
majority of the participants (82%) have participated with attending from one to six days, which
may were present during the Tuesdays and the Fridays of the million populated weekly
demonstrations. 12% were available for at least a week and only 6% were present for more than
15 days. Also the majority of the sample (64%) attested a closure of 25%-75% percentage of the
stores. This is important because it cannot be assumed that the formal economy was totally
down. In other words, formal substitutes still existed, though not on the square. However, the
interest of the research is the informal products bought by participants only and not the outcomers and bystanders, which were disclaimed previously.
The shadow economy has not been able to completely provide all products inside the
square. 46% of the respondents ensured that certain products were not available inside the square
and they had to walk outside the square. However, the survey did not track if they got the
products, then, from formal or informal markets. On the other hand 37% claimed that all the
products were available inside the square and at the same prices. However, 16% said they were
all available but at a much higher price.
Concerning the type of commodity that they had to go out to buy it 30% said they could
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not find food in the square. 17% did not find prepaid mobile cards, 15% could not find sanitary
products (i.e. medical products) and clean water, while 13% could not find cigarettes. A figure
with the products that the shadow economy failed to provide inside the arena of the social
movement is compiled in figure B.
Figure B: Commodities that were not available in the square during the 18 days of uprisings
In general the perception that was deduced from the participants was that shadow
economy has not been able to substitute formal economy inside the square, which was totally
opposite to the results of the interviews with the activists. Several material resources and the way
of their acquisition have been examined:

Nutritional Products:
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Basically the ten activists attested that their daily main meals products from a small
formal restaurant which was few meters away from the square – “Akher Sa’aa”. The Tagamo’
activist asserted that they used to buy at bulk and used to receive a daily 300,000 sandwiches for
free as in solidarity with the revolutionary movement.
However, the beverages and water were all available through the hawkers and bought at
the same prices or slightly higher as reported by the activists. Snacks (i.e. chips and biscuits)
were all available inside the square, as well as Egyptian snacks such as: “tirmis” and “homos el
sham”. Some of them reported the presence of hawkers who used to sell popcorn, cotton candy
and tea. The only product that 7 of the activists reported to be found at an exteremly higher price
was cigarettes.

Printing materials, banners and flags:
It was interesting that all the activists with exception to Tagamo’ and Kefaya reported
that they have not only used the shadow economy to acquire these products to sustain the life of
the 25th January movement, but also their own movement too. During the 18 days of uprisings
they continued to informally print out their materials, partially because the publishing centers
and presses refused to do the transactions formally in fear of being subject to taxes and state
security’s intimidation. Therefore the majority confessed that they used formal presses, though
through an informal transaction, to sustain the movement through printing out banners. This is
yet considered a part of informal economy, since the transaction is not reported to authorities. It
was reported by eight activists that the prices have nearly doubled during the 18 days, whereas
two activists did not report any change in the prices. The increase in the price was due to several
factors like the speed of the order, the risk taken by the presses due to security and state security
reasons and typically because few other alternatives were available.
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The findings are indispensible in understanding that the shadow economy helped the
movements’ actors to mobilize more resources through making the print of banners and
informational materials possible. At time when the formal economy refused to help the
movements’ survival, the informal economy have offered the only hope for further mobilization
especially as the demand of the movement escalated and different banners were required to react
to political decisions that were taken at this time.

Blankets:
The responses varied with regards to this point. The Muslim Brotherhood (MB) activists
asserted that they did not have to buy any additional blankets during the movement, and all the
blankets donated to the protesters were owned by the MB before the revolutionary movement.
When asked about the reason they kept blankets at their movements’ headquarters, the activists
claimed that these were stored to be offered as part of a shelter aid that the movement carried as
a volunteering program in Upper Egypt and poor countryside towns.
Tagamo’ activists said that they were not a part of housing inside the square and they
were sufficed by opening up their party’s quarters, which is in a street near to the square, to the
protesters to sleep in there. Other activists agreed that they had no role in supplying blankets
with exception to 6th of April movement who supplied some blankets that were bought from
formal sellers but using the same informal way, the banners were bought.
Generally the reliance upon the informal economy in procuring blankets was less than the
reliance in the case of press and printing materials, however the only transactions that took
place were all informal. The blankets and their informal purchase sustained to keep the
protesters staying in the square for 24 hours
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
Tents:
The tents were reported to be self manufactured by many groups eg: MB and Altras
Ahlawy, through products such as: plastic bags and bottles. The only groups that used
readymade tents were Baradei-Youth for change and kefaya activists, who bought it formally.
Thus, the tents can be dropped out from the informal economy, however, most of the tents
were self made. Yet, as a conclusion there was no general trend towards the purchase of tents.
Though, future research needs to quantify the tents that were self made versus these that were
purchased. If the self made tents outnumbered the readymade tents, then this would give a
supporting impetus to the hypothesis of that the underground economy helped in the sustaining
and even growth of the movement.

Podium:
As for the podium, the Coalition of Revolution’s Youth reported that the podium was
granted as a gift by the business man Nagiub Sawires and hence they were not able to provide
information about the vendors. The other groups at the beginning of the revolution did not
possess except small podiums that were self manufactured using primitive raw materials that
they bought also informally. “Youth for change” and “We are all Khaled Saed” did not own
any podium. The MB was the first to set up a podium using raw materials that were purchased
prior to the revolutionary movement due to reasons the activist refused to reveal.
In generally with the exception of Sawiras podium all other podiums have been set up
informally. However, it would be necessary in future research to track the economic channels
through which Sawiras’ podium was set up; because it was the most equipped and well set up
podium and also the only podium that belonged to the Revolution’s Coalition.
The underground economy though have not been highly utilized by participants of the
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movement, was greatly depended upon by the activists, who used this economy positively in
order to endorse and strength their movement. In fact in many incidents, especially: housing and
printing of banners, the shadow economy saved the movement and help mobilized more
resources.
B) The Effect of Shadow Economy on Social Equality during the movement:
“Change...Liberty...Social Equity” or “Taghyeer...Horreya...Adallah Egtema’eya”
chanted the members of the revolutionary movement. At times the stock market brokers’ were
losing, business people were shutting down and incurring losses, huge city malls were shutting
off their doors, the capitalist elite was incurring unprecedented losses, at this time another group
of small informal hawkers and sellers were accumulating some money, that, also exceptionally
and for the first time increased their income up to the poverty line, a dream that would not be
possible without this movement.
The assumption is two-fold. First an assumption of that large business companies have
incurred losses during the 18 days need to be observed. Reasons behind their shutting down, the
quantity of losses incurred and the decision making agent behind the decisions become
legitimate questions, that are tested, using interviews with various managers and decision makers
in many private and public companies. The second assumption is that the informal sellers and
formal sellers who executed informal transactions have been better off in terms of profits during
the 18 days of the uprisings, if not more.

General Change in Profit during the 18 days:
In general the business people and large public companies reported that they incurred
losses during the uprisings, mainly because most of them shut down more than 3 days at least
and because of their operation up till the curfew only. Moreover, they said that the losses were
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also due to the fact that they had to pay wages for days when the productivity of employers was
zero. They also incurred losses in their fixed assets since some of their stores were destroyed and
robbed by thugs on the 28th of January.
This was not the case on the side of the hawkers and other informal sellers who did not
bind to the curfew since many of them were mostly selling inside the square. They also reported
higher and unprecedented incomes during the 18 days. These informal sellers sold a variety of
products including: flags, affiliation cards, bumper stickers, popcorn, homos el sham, tirmis, tea,
coffee, mineral water and soft drinks. They were highly welcomed inside the square, where no
single hawker in the sample was asked to leave the square neither from the demonstrators nor
from the army’s soldiers. The only type of products that they were not allowed to sell inside the
square was the flags that had sticks because the checkpoints popular committees feared that the
sticks would be used in violent acts.

The Closure Decision:
It becomes then important to understand who decided to shut down the business. Both
the interviews and the internet polls were used to answer this question. 39% of the sample
worked in a private or international organization, whereas 30% were students, 21% worked for a
public company or a governmental organization, 7% were unemployed and 2% worked in the
grey markets. The businesses of 80% of the respondents were closed at least for a day during the
revolutionary movement. It was relevant then to ask them why they thought their business were
closed down. 88% attributed this to security reasons, which was true in the case of the private
companies, according to the interviews. However, this was not true in the case of the public
companies that were given orders to close down. If the two pieces of information were put
together; the fact that the private companies closed due to security reasons (i.e. thugs of the
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regime) and governmental orders, it becomes obvious that it was a part of the counter revolution
and policy adopted by the regime to cripple the economic life and either kill the movement or
result in a civil war that implies the necessity of an upper hand intervention and that would
distract people from the greater aim.50% thought the decision making agent behind the closing
down was the business and the other 50% thought it was based on governmental orders.
In general the closure decision did not seem to be spontaneous, the government had an
upper hand in this either directly through dictating orders or indirectly through leading a counter
revolution terrorizing the businesses, to an extent that made them close down and incur losses.
The shadow markets has not been affected negatively with the security situation, since they are
highly mobile and could change their place of trade to a more safe and profitable place, which is
Tahrir square, at which they were allowed to sell any of the products with no restrictions or
taxes.

Raw Material Acquisition and Prices:
The raw materials are important in both making these products available and possible to
produce as well as determining the price of the product. Many business people reported that they
continued to operate until their stock of raw material was out, since their distribution retailers
refused to take more orders, due to security reasons, when travelling in the streets. The other
business people that continued to receive stock reported that they were not priced differently.
These findings were confined to private sector companies, because the public sector firms within
the sample mainly operated in non-tradable sector and thus possessed no raw materials.
On the informal side the picture was totally different. First concerning the small formal
sellers such as: kiosks and supermarkets, they reported higher profits and a safer setting due to
the availability of popular committees. The only transaction that is of relevance to this study in
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the formal traders is the cigarette that was bought from wholesalers at a higher price and through
the black markets due to the refusal of the formal wholesalers to travel till the kiosks. This
should be studied more carefully in future research studies, because it was assured by different
entities that the good that was mostly scarce and over priced during the revolutionary movements
days was cigarettes. Was this a policy by the government to force people to end their sit in? Only
interviews with the companies of tobacco should answer this question.
Second concerning the hawkers they did face problems acquiring their stock of products
during the first two days of the uprisings but then managed to get orders at higher prices from
their wholesalers, who were then forced to pass this increase in prices of wholesale products to
the end consumers. Some of them confessed that they did increase their profit margin when it
came to cigarettes due to their awareness that the demand for cigarettes was relatively inelastic.
In fact the highest profits inside the square were reported from the cigarette traders, who sold
cigarettes at twice its prices.

Would the gains of the informal sellers be offset by the losses of formal
sellers?
This question was hard to answer given the secrecy of the numbers and the refusal of
both entities, formal and informal, to reveal numbers for the losses or the gains. Moreover, the
big size of few formal companies and the small size however the big number of small informal
sellers make this question hard to find. Future research needs to be done with regards to this
point in which the size of shadow economy to be measured using aggregate data as soon as the
primary data of aggregate variables about the 18 days of the revolution becomes available.
The total societal loss or gain is uncertain; however the equalizing effect is definite and
positive. The shadow economy had a crucial role in making the poor people relatively richer, and
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making the rich business people relatively poorer at least during the 18 days of the uprisings. The
sustainability of the effect however needs to be investigated. In other words, the degree to which
the equalizing effect remained after the revolution is important, yet, behind the scope of this
paper.
The business people have confirmed the fact that they lost during the uprising. However,
this excludes smaller businesses that were able to sell more as a result of the closure of bigger
businesses. Thus one can safely assure that the underground economy has managed to be an
appropriate arena to those who were marginalized by the formal economy and this was more
portrayed and made relevant during the revolutionary movement.
However, the only informal traders that made loss during the revolution were the drug
dealers who reported the difficulty of obtaining imports due to the unsafe security conditions.
Other than that the informal economy has had an equalizing effect and helped in fulfilling one of
the goals which is the social equality.
IV. Conclusion:
The shadow economy had its role in attaining the survival of the movement for the 18
days of the uprisings. In order to reach this hypothesis it was necessary to start by defining the
shadow economy and explaining its significance and size in Egypt through over the history, and
how the shadow economy’s size varied as a function of different political and economic
decisions and policies in Egypt. Before tackling the effect of the underground economy upon the
Egyptian Movement, it becomes indispensible to give a quick review of the movement, in terms
of its causes and a historical timeline, and explain what type of social movement it is considered.
The effect of underground economy upon the movement was then discussed. The effects have
been compiled into indirect and direct effects, though the direct effects have been attributed a
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greater attention due to its higher relevance to the subject of the study. The direct effects are
these effects at which the shadow economy directly influenced the survival or the growth of the
movement. The effect of the shadow economy upon the resource mobilization of activists and
members of the movement and thus on the survival of the movement has been investigated. In
addition the effect upon the social equity and thus a partial fulfillment of one of the goals of the
movement is discussed and related to the survival of the movement and its escalation of
demands.
Combinations of primary and secondary data have been used to reach conclusions. First
various definitions suggested by different scholars have been discussed and threaded but the
most relevant definition to the paper due the nature of transactions that took place during the
movement, was Schneider and Enste’s definition, which comprehensively asserted that the
shadow economy is meant to describe any commercial transactions that operated outside the
formal channels of the economy and if had been incorporated into the formal economy, it would
have affected macroeconomic variables such as GDP or Gross National Product(GNP). This
definition was used because many of the transactions in the movement has occurred through
formal sellers, though have followed an informal setting, mainly due to the fear of being taxed or
being subject to state security’s intimidation.
The shadow economy has followed an increasing trend throughout the history however
three important turning points have been traced. The first have seen a major decrease in illegal
transactions during the 1980s and with the rise of Islamic movements. The other showed a great
sprint in the shadow economy with the start of the ERSAP reforms that led many people who
could no longer afford to operate within a formal framework to resort to informal transactions.
The third has been with the flotation of the Egyptian pound and the rise of imported food prices
21
as a result along the inflation that accompanied this, which all had led people to rely heavily on
the informal sector which offered solutions which were not offered in the official markets. An
only outlier was the last two years where the state has increased its prosecutor campaigns which
decreased the supply of drugs and thus reduced its consumption. However, the year 2010 which
has not been measured is expected to show a new rise in the shadow economy, which needs to be
measured by other future studies.
The shadow economy is expected to have flourished during the year 2011, however
estimates would be hard to compile before the end of the year. The movement is expected to
cause an increase in the size of this economy, which is the second largest shadow economy in the
world. The movement has been announced to be a revolutionary movement that has aroused as a
result of political and socioeconomic demands. One of these demands has been social equity
which is investigated in this paper. The movement that started on 25th of January has not ended
till date; this is why any conclusions are to be handled with cautious.
The shadow economy, however, is said to influence the movement by a set of direct as
well as indirect effects. The indirect effect, that is not mobilizing bystanders and non-movement
members against it, has not seen an effective shadow economy in achieving this proposition. The
shadow economy has not been able to substitute the formal economy or absorb people’s anger
over their unfulfilled demand on everyday’s commodities. Perhaps the shadow economy has not
been tested, due to the non complete closure of store, and perhaps the people were over
panicking since they have never put in this situation. Only separate studies concerning this point
would answer this question.
However, the more important and relevant effect were the direct effects. It turned out that
the shadow economy has had positive effects upon resource mobilization in all aspects with
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exception to nutritional products which the shadow economy could not fully compensate for. The
resource mobilization, particularly material resource mobilization gave the activists the
opportunity to mobilize other cultural, human and moral resources which were made possible as
a result of relying upon the shadow economy in wide range of tactics starting from banners and
informational materials till helping them sustain their movements through offering raw materials
for tents and other forms of housing in the square.
The shadow economy had also a big role in equalizing between big business people, who
has experienced losses and small informal traders who accumulated sums of money they have
never seen before. The counter argument would be that because of the fact that businesses were
shut down; small workers have always been endangered. However, this was not true since they
continued to receive their wages. The only agent that was hurt is business owners in terms of
profits. Of course if thing have continued the owners of the businesses may have lain off
workers, however this has not happened and is behind the scope of this paper. The closure
decision seemed to be in part a government induced phenomenon, either directly through
dictating orders or indirectly through opening up prisons and terrorizing the owners of business.
As a conclusion, shadow economy has influenced the movement positively in a direct
manner through helping in resource mobilization as well as fulfilling one of its goals , which is
social equity, however, the indirect effects upon people outside of the movement is questionable.
This topic with relevance to the Egyptian movement needs a big body of literature and research.
However, the effect of shadow economy upon the survival of the movement is completely scarce
with an exception to one study that studied that studied the effect of black markets upon guerilla
movements in Africa. Future studies need to address this topic which is highly important
23
especially in these movements that operate outside institutional frameworks and which are
sometimes highly intimidated by the governments.
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