Sadat’s decision to liberalize the country’s economy was of great and far-
reaching significance for Egypt. His aim was in the first place to promote the
investment of foreign as well as of Egyptian capital in the country. By helping
to create an atmosphere conducive to investment he brought about an end to
the flight of capital Egypt had experienced in the preceding years. But it also
led to the establishment of many ultra-modern factories, mostly backed by
foreign investors, which caused serious problems for existing local industries
that had offered better chances of employment for the local population. And
massive imports led to the Egyptian market being flooded with foreign goods.
Only the ‘fat cats’, a limited number of persons among the richer class, could
profit immediately, often through corruption and illegal transactions, while
the disparities between the social classes, which Nasser had tried to wipe
out as far as possible, grew. When Sadat tried to raise the price of hitherto
highly subsidized bread, there was a people’s revolt. Hunger spread among
the growing numbers of the poor, and the general lack of long-term plan-
ning proved detrimental, especially for the industrial sector of the economy.
The huge sums spent on the construction of new towns and other housing
communities had no positive effects, as will be described in Chapter 11.