Sufism is commonly studied as individual or small group praxis. It is has been pursued from its texts and through ethnography. This paper adopts a different kind of approach. It hypothesizes that the form of Sufism reflects the form of the political economy, that Egypt over a period of a century went from a mercantilist state form which it had had for a long time to a capitalist nation state form. In the first, Sufism expressed iself through the tariqa rooted in trade and craft and class and in the second, while the tariqa remains, there is a crisis in organizational form as the political economy no longer reinfores the Tariqa type of group solidarity. The ethos is more atomized. It is in this context that Sufism gets challenged by the early Salafis who offer a generic Islamic way of life. The Sufism remaining becomes a part of elite practices and or became mixed on a popular level with saint worship and the like. It loses ground among the middle strata previously its mainstay. This later period, the period of the nation state saw Salafi attacks on the Mawlid al-Badawi and the attempt to control the Mawlid al-Nabi and tighter government cvontrol and regulation of all the orders. While other papers in the panel will pursue these themes, this paper concentrates on the earlier breakdown of Sufism as reflected both institutionally and personally, some attention given to a particular Khalwati, Shaykh Hasan al-`Attar (d. 1835) and the stages of his development in which he was drawn into Tariqa-sufism and then later essentially withdrew. A number of interelated considerations have to be addressed for this to emerge clearly, not the least of which is the changing relationship of al-Azhar to society and to Sufism, the availability of other sites of learning and reflection other than that of the Sufi Majlis and the repositioning of Egyptian merchant power to the provincial towns about which admittedly our knowledge is scant. These bear on our interpretation of Shaykh Hasan al-`Attar. Among points worth noting are his attempt to grasp Ibn `Arabi's idea of Wahdat al-wujud which he failed in his own view to do, and then following his rise in fortunes in later life, his decision not to attempt to work thorugh Sufi institutions but rather to remain on the margin of or within the new institutions of the Muhammad `Ali reform period.