This week marks the second anniversary of the fall of Egyptian president Hosni Mubarak. Two years after the refrain “the people want to topple the regime” filled Tahrir Square, it is now Egypt itself that is toppling. Street violence has pitted various groups against each other—anarchists against Islamists, policemen against protesters, men against women—and has left scores dead throughout the country.

The economy is hemorrhaging reserves and incapable of securing foreign investment, while Egypt’s currency tumbles to record lows. The international community, captivated two years ago by the revolution, has little confidence that Egypt’s new rulers can make peace between the country’s feuding factions. If the conventional wisdom among Western policymakers holds that Egypt is too big to be allowed to fail, the stark reality is that by many measures it is already failing.

A $4.8 billion IMF loan has been put on hold pending President Mohamed Morsi’s stabilizing the political situation. The catch is that the loan requires a host of reforms, like slashing subsidies for fuel and household staples, that will cause yet more suffering across a wide swath of Egyptian society, most likely bringing further instability. Much of Egypt’s technocratic class is in exile or in jail, charged, often spuriously, with corruption under the old regime. Any of the liberal reform measures that might actually help set Egypt back on its feet are associated with precisely those figures that the revolution sought to punish.

Iranian president Mahmoud Ahmadinejad promised to extend Egypt a line of credit last week during his visit to Cairo, the first by an Iranian leader since the 1979 Islamic revolution. However, Iran’s currency has taken an even steeper plunge than Egypt’s. Under heavy U.S. and EU sanctions, Tehran needs cheap agricultural imports to keep food prices down and unrest at bay, but Egypt doesn’t even feed itself.

During his tour of Cairo, Ahmadinejad was accosted by a Sunni Islamist who rapped him on the head with his shoe in a piece of Middle Eastern political theater that illuminates the key differences between Egypt and Iran. To be sure, the ruling regimes of the two countries share an abiding hatred of Israel, but the more important issue for both right now is the civil war in Syria, where Tehran needs to prop up Bashar al-Assad and Cairo is sickened by his regime, which has targeted tens of thousands of fellow Sunnis for death. Moreover, Iran has put Morsi in an awkward position by continuing to send arms to Hamas through the Sinai. As much as Morsi may want to join Hamas’s war against Israel, he can’t lest he forfeit American and European backing. There is no alternative superpower for Cairo to turn to. Inasmuch as Morsi is tied to Washington’s apronstrings, Iran’s active support of Hamas only highlights his impotence.

The good news regarding Egypt is brief, but noteworthy: Those forecasts auguring from the entrails of Mubarak’s demise the birth of a universal Muslim Brotherhood-run caliphate stretching from North Africa to the Persian Gulf were off by a very wide mark. The Islamist organization, which has been building its political base and waiting in the shadows to take power since its 1928 founding, turns out to be incapable even of governing Egypt.

Contrary to the reading of many Western academics, the Brotherhood did not win the presidency because of its long history of grassroots work, its social activism, or its political acumen and organization. Rather it came to rule Egypt simply because everyone else—from the secularists and liberals who kicked off the revolution to the military—was that much more incompetent. The fearful notion, still held by many in the West, that the Brotherhood plots to own the hearts and minds of the world’s billion-plus Muslims comports not with reality but only with the Brotherhood’s preening and now patently absurd self-image. Under Morsi’s stewardship, the Muslim Brotherhood model has been shown to produce poverty, hunger, instability, and violent internal conflict. Who among the umma would seek to unify under such a banner?

Understandably, some U.S. policy-makers want to wash their hands of Egypt. The White House, after Obama leased a place on the right side of history by demanding that Mubarak step down, has yet to tailor a policy suited to the changed circumstances. Egypt is no longer a pillar of regional stability but must itself be stabilized. Sen. Rand Paul wants to ban sales of advanced weapons—tanks, F-16s, etc.—to a country whose rulers allowed a mob to overrun the U.S. embassy and threaten our diplomats in September. Sen. James Inhofe just wants to suspend sales of those arms, but is perhaps the frankest in his appraisal of Egypt’s president. “Morsi’s an enemy,” Inhofe said during secretary of defense nominee Chuck Hagel’s confirmation hearings. Inhofe, the ranking member of the Senate Armed Services Committee, has a point.

Since the signing of the Camp David accords in 1978, Egypt has been one of the cornerstones of the U.S. position in the Middle East. By lavishing arms, money, and political and diplomatic prestige on the largest and most influential of Arab states, Washington showed what prizes were in store for any Arab power that chose to make peace with Israel. Conversely, massive American airlifts to Israel during the 1973 war had shown what any Arab regime could expect if it chose to make war on the Jewish state.

Morsi threatens to undo this arrangement. Anti-Semitic remarks of his that have recently come to light, calling Jews the “sons of apes and pigs,” lend weight to the concern that the Egyptian government is looking for a way out of the peace treaty. In the aftermath of Israel’s operations in Gaza in November that degraded Hamas’s arsenal and decimated its leadership, the White House billed Morsi as a peacemaker, but that increasingly looks like wishful thinking. If Morsi doesn’t do more to shut down the smuggling tunnels from Egypt, Israel will soon be back in Gaza.

Moreover, it’s not clear that the second half of Inhofe’s assessment—Egypt’s “military is our friend”—is accurate, or that it matters. Last week, General Abdul Fattah al-Sisi, Egypt’s defense minister, spoke with outgoing secretary of defense Leon Panetta and affirmed Egypt’s commitment to the 1978 treaty. However, whether Egypt will adhere to the accord is subject to the same winds of fortune that have buffeted virtually every political decision Cairo has taken in the last two years. Sisi recently noted that “the struggle between political forces .  .  . may lead to the collapse of the state,” a statement some have read as a warning to Morsi: If the government cannot ensure stability the military will take over. But the last two years have shown that the military does not want to run Egypt and may be incapable of it. Even worse, a coup might leave the army split, like the rest of Egyptian society, and fighting itself.

Indeed, pitting the army and Morsi against each other would widen yet another fissure in a country that has long been at war with itself. Muslims against Christians. The regime and its security services against its own people. Urban against rural. Secularists against Islamists. Muslim Brotherhood against Salafists. It is hardly any wonder that the country’s first elected president evinced the same anti-Semitic sentiments that poison almost all of Egyptian society. Egyptians don’t like Jews, and they don’t much like each other either. Anti-Semitism has therefore functioned something like an escape valve, and blaming Israel, and/or the United States, for everything wrong with Egypt was the most practical way to keep Egyptians from each other’s throats.

The immediate cause of the recent violence is a court decision in January against the supporters of a soccer club. Last year, the fans of the Port Said team ambushed the fans of a Cairo team, Al Ahly, at a game in Port Said, killing 74. The Ahly supporters claimed that security forces were in on the plot, seeking revenge against them for their role in the revolution and their violent clashes with the police. (The Ahly supporters also played a large part in storming the Israeli embassy in 2011.) When the court handed out 21 death sentences to the 73 accused, including police officers, riots ensued, leaving 39 dead. The violence spread to nearby cities, like Suez, where 9 were killed, as well as Ismailia, which saw another fatality.

In Cairo, protesters fought with security forces and armed gangs, who also stormed hotels firing automatic weapons at tourists. The head of Al Azhar, the mosque-university that for hundreds of years has served as a seat of authority in Sunni Islam, convened a meeting between Morsi’s representatives and the opposition. It’s a useful first step but probably won’t change the fundamental antagonisms. The opposition believes that Morsi has too much power, and the Brotherhood believes that the opposition just wants to seize on the streets the power it couldn’t earn at the polls.

Morsi is not the problem, then, he is merely the president of the problem, which is Egyptian society itself. After two years of upheaval, the question is, how long can this go on? Will Egypt explode at a certain point? If so, what will touch it off and what will be the repercussions?

Already, a friend from Cairo laments, Egyptians are growing accustomed to daily violence. The problem is not just the people who are committing the violence, he says, but that everyone else is gradually acclimating himself to chaos and failure on a massive scale.

Lee Smith is a senior editor at The Weekly Standard.

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