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Food and failed Arab states

Even Islamists have to eat. It is unclear whether President Hosni Mubarak of Egypt will survive, or whether his nationalist regime will be replaced by an Islamist, democratic, or authoritarian state. What is certain is that it will be a failed state. Amid the speculation about the shape of Arab politics to come, a handful of observers, for example economist Nourel Roubini, have pointed to the obvious: Wheat prices have almost doubled in the past year. 

Egypt is the world's largest wheat importer, beholden to foreign providers for nearly half its total food consumption. Half of Egyptians live on less than $2 a day. Food comprises almost half the country's consumer price index, and much more than half of spending for the poorer half of the country. This will get worse, not better.  Not the destitute, to be sure, but the aspiring and frustrated young, confronted the riot police and army on the streets of Egyptian cities last week. The uprising in Egypt and Tunisia were not food riots; only in Jordan have demonstrators made food the main issue. Rather, the jump in food prices was the wheat-stalk that broke the camel's back. The regime's weakness, in turn, reflects the dysfunctional character of the country. 35% of all Egyptians, and 45% of Egyptian women can't read. 

Nine out of ten Egyptian women suffer genital mutilation. US President Barack Obama said Jan. 29, "The right to peaceful assembly and association, the right to free speech, and the ability to determine their own destiny … are human rights. And the United States will stand up for them everywhere." Does Obama think that genital mutilation is a human rights violation? To expect Egypt to leap from the intimate violence of traditional society to the full rights of a modern democracy seems whimsical. 

In fact, the vast majority of Egyptians has practiced civil disobedience against the Mubarak regime for years. The Mubarak government announced a "complete" ban on genital mutilation in 2007, the second time it has done so - without success, for the Egyptian population ignored the enlightened pronouncements of its government. Do Western liberals cheer at this quiet revolt against Mubarak's authority? 

Suzanne Mubarak, Egypt's First Lady, continues to campaign against the practice, which she has denounced as "physical and psychological violence against children." Last May 1, she appeared at Aswan City alongside the provincial governor and other local officials to declare the province free of it. And on October 28, Mrs Mubarak inaugurated an African conference on stopping genital mutilation. 

The most authoritative Egyptian Muslim scholars continue to recommend genital mutilation. Writing on the web site IslamOnline, Sheikh Yusuf al-Qaradawi - the president of the International Association of Muslim Scholars - explains:
The most moderate opinion and the most likely one to be correct is in favor of practicing circumcision in the moderate Islamic way indicated in some of the Prophet's hadiths - even though such hadiths are not confirmed to be authentic. It is reported that the Prophet (peace and blessings be upon him) said to a midwife: "Reduce the size of the clitoris but do not exceed the limit, for that is better for her health and is preferred by husbands."

That is not a Muslim view (the practice is rare in Turkey, Iraq, Iran and Pakistan), but an Egyptian Muslim view. In the most fundamental matters, President and Mrs Mubarak are incomparably more enlightened than the Egyptian public. Three-quarters of acts of genital mutilation in Egypt are executed by physicians. 

What does that say about the character of the country's middle class? Only one news dispatch among the tens of thousands occasioned by the uprising mentions the subject; the New York Times, with its inimitable capacity to obscure content, wrote on January 27, "To the extent that Mr. Mubarak has been willing to tolerate reforms, the cable said, it has been in areas not related to public security or stability. 

For example, he has given his wife latitude to campaign for women's rights and against practices like female genital mutilation and child labor, which are sanctioned by some conservative Islamic groups." The authors, Mark Landler and Andrew Lehren, do not mention that 90% or more of Egyptian women have been so mutilated. What does a country have to do to shock the New York Times? Eat babies boiled? 

Young Tunisians and Egyptians want jobs. But (via Brian Murphy at the Associated Press on January 29) "many people have degrees but they do not have the skill set," Masood Ahmed, director of the Middle East and Asia department of theInternational Monetary Fund, said earlier this week. "The scarce resource is talent," agreed Omar Alghanim, a prominent Gulf businessman. The employment pool available in the region "is not at all what's needed in the global economy." For more on this see my January 19 essay, Tunisia's lost generation. There are millions of highly-qualified, skilled and enterprising Arabs, but most of them are working in the US or Europe. 

Egypt is wallowing in backwardness, not because the Mubarak regime has suppressed the creative energies of the people, but because the people themselves cling to the most oppressive practices of traditional society. And countries can only languish in backwardness so long before some event makes their position untenable. 

Wheat prices 101 and Egyptian instability

In this case, Asian demand has priced food staples out of the Arab budget. As prosperous Asians consume more protein, global demand for grain increases sharply (seven pounds of grain produce one pound of beef). Asians are rich enough, moreover, to pay a much higher price for food whenever prices spike due to temporary supply disruptions, as at the moment. 

Egyptians, Jordanians, Tunisians and Yemenis are not. Episodes of privation and even hunger will become more common. The miserable economic performance of all the Arab states, chronicled in the United Nations' Arab Development Reports, has left a large number of Arabs so far behind that they cannot buffer their budget against food price fluctuations. 

Earlier this year, after drought prompted Russia to ban wheat exports, Egypt's agriculture minister pledged to raise food production over the next ten years to 75% of consumption, against only 56% in 2009. Local yields are only 18 bushels per acre, compared to 30 to 60 for non-irrigated wheat in the United States, and up 100 bushels for irrigated land. 

The trouble isn't long-term food price inflation: wheat has long been one of the world's bargains. The International Monetary Fund's global consumer price index quadrupled in between 1980 and 2010, while the price of wheat, even after the price spike of 2010, only doubled in price. What hurts the poorest countries, though, isn't the long-term price trend, though, but the volatility. 

People have drowned in rivers with an average depth of two feet. It turns out that China, not the United States or Israel, presents an existential threat to the Arab world, and through no fault of its own: rising incomes have gentrified the Asian diet, and - more importantly - insulated Asian budgets from food price fluctuations. Economists call this "price elasticity." Americans, for example, will buy the same amount of milk even if the price doubles, although they will stop buying fast food if hamburger prices double. Asians now are wealthy enough to buy all the grain they want. 

If wheat output falls, for example, due to drought in Russia and Argentina, prices rise until demand falls. The difference today is that Asian demand for grain will not fall, because Asians are richer than they used to be. Someone has to consume less, and it will be the people at the bottom of the economic ladder, in this case the poorer Arabs. 



That is why the volatility of the wheat price (the rolling standard deviation of percentage changes in the price over twelve months) has trended up from about 5% during the 1980s and 1990s to about 15% today. This means that there is a roughly two-thirds likelihood that the monthly change in the wheat price will be less than 15%. 

It also means that every so often the wheat price is likely to go through the ceiling, as it did during the past 12 months. To make life intolerable for the Arab poor, the price of wheat does not have to remain high indefinitely; it only has to trade out of their reach once every few years. 

And that is precisely what has happened during the past few years: 



After 30 years of stability, the price of wheat has had two spikes into the $9 per bushel range at which very poor people begin to go hungry. The problem isn't production. Wheat production has risen steadily - very steadily in fact - and the volatility of global supply has been muted: 



The line in Chart 3 above marked "production volatility" is the five-year standard deviation of annual percentage changes in world wheat supply (data from US Department of Agriculture). During the 1960s and 1970s, it hovered around the 3% to 5% range, but fell to the 1% to 3% range. 

It shows an approximately two-thirds likelihood that world wheat supply will change by less than 3% each year. Wheat supply dropped by only 2.4% between 2009 and 2010 - and the wheat price doubled. That's because affluent Asians don't care what they pay for grain. Prices depend on what the last (or "marginal") purchaser is willing to pay for an item (what was the price of the last ticket on the last train out of Paris when the Germans marched on June 14, 1940?). Don't blame global warming, unstable weather patterns: wheat supply has been fairly reliable. The problem lies in demand. 

Officially, Egypt's unemployment rate is slightly above 9%, the same as America's, but independent studies say that a quarter of men and three-fifths of women are jobless. According to a BBC report, 700,000 university graduates chase 200,000 available jobs. 

A number of economists anticipated the crisis. Reinhard Cluse of Union bank of Switzerland told the Financial Times last August:

"Significant hikes in the global price of wheat would present the government with a difficult dilemma. 

Do they want to pass on price rises to end consumers, which would reduce Egyptians' purchasing power and might lead to social discontent? 

Or do they keep their regulation of prices tight and end up paying higher subsidies for food? In which case the problem would not go away but end up in the government budget. 

Egypt's public debt is already high, at roughly 74% of gross domestic produce (GDP), according to UBS. Earlier this year the IMF projected that Egypt's food subsidies would cost the equivalent of 1.1% of GDP in 2009-10, while subsidies for energy were expected to add up to 5.1%.
...
Tensions over food have led to violence in bread queues before and it wouldn't take much of a price rise for the squeeze on many consumers to become unbearably tight."
One parameter to watch closely is the Egyptian pound. Insurance against Egyptian default was the London Interbank Offered Rate (Libor) +3.3% a week ago; on Friday, it stood at Libor + 4.54%. That's not a crisis level, but if banks start reducing exposure, things could get bad fast. In 2009 Egyptian imports were $55 billion against only $29 billion of exports; tourism (about $15 billion in net income) and remittances from Egyptian workers (about $8 billion) and other services brought the current account into balance. Scratch the tourism, and you have a big deficit. 

Egypt has $35 billion of central bank reserves, adequate under normal conditions, but thin insulation against capital flight. Foreigners hold $25 billion of Egypt's short-term Treasury bills, for example. It would not take long for a run on the currency to materialize - and if the currency devalues, food and fuel become all the more expensive. A vicious cycle may ensue. 

Under the title The Failed Muslim States to Come (Asia Times Online December 16, 2008), I argued that the global financial crisis then at its peak would destabilize the most populous Muslim countries:
Financial crises, like epidemics, kill the unhealthy first. The present crisis is painful for most of the world but deadly for many Muslim countries, and especially so for the most populous ones. Policy makers have not begun to assess the damage. The diplomatic strategy of the industrial nations now resembles a James Clavell potboiler, in which an earthquake interrupts a hopelessly immured plot. Moderate Islam was the El Dorado of the diplomatic consensus. 

It might have been the case that Pakistan could be tethered to Western interests, or that Iran could be engaged peacefully, or that Turkey would incubate a moderate form of Islam. I considered all of this delusional, but the truth is that we shall never know. The financial crisis will sort them out first.
I was wrong. It wasn't the financial crisis that undermined dysfunctional Arab states, but Asian prosperity. The Arab poor have been priced out of world markets. There is no solution to Egypt's problems within the horizon of popular expectations. Whether the regime survives or a new one replaces it, the outcome will be a disaster of, well, biblical proportions. 

The best thing the United States could do at the moment would be to offer massive emergency food aid to Egypt out of its own stocks, with the understanding that President Mubarak would offer effusive public thanks for American generosity. This is a stopgap, to be sure, but it would pre-empt the likely alternative. Otherwise, the Muslim Brotherhood will preach Islamist socialism to a hungry audience. That also explains why Mubarak just might survive. Even Islamists have to eat. The Iranian Islamists who took power in 1979 had oil wells; Egypt just has hungry mouths. Enlightened despotism based on the army, the one stable institution Egypt possesses, might not be the worst solution. 

 


# reads: 344

Original piece is http://www.atimes.com/atimes/Middle_East/MB02Ak01.html


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My comments were mostly *intended* for Elie Wiesel. No one has any right to "forgive" the suffering of others. IMHO, the moral offense of The Mufti and the Islamists is more morally offensive than nazism. The nazis were ashamed of their evil deeds and tried to hide them. OTOH Islamists are proud of killing innocents and name public objects after them.

Posted by ymr on 2011-02-06 09:45:02 GMT


If your response if referring to my comment Ymr, I wasn't talking about any "meaningful forgiveness" of the said Mufti, I was referring to a different state with a stiff neck that denies birthrights that affects my little world.

I only restore bridges when justice is served.

That is the God given gift of the Jewish which I admire.

I'm not Jewish.

The unnamed comment appears to be the one I thought didn't get through which I re-sent with one or two changes but the body of it was the same.

Posted by L Newington on 2011-02-06 05:43:49 GMT


Jacob,the last paragraph of your comment is the reason I was sitting here this hour of the morning, looking through a book I had read many years ago written by Elie Wiesel; And the Sea is Never Full. He made mention of Himmler"s friend Mufti Hajj Amin el-Husseini of Jerusalem who he given a guided tour of Auschwitz. I"m wondering if there is any connection with the Brotherhood of 1928 and any Muslim friends of Himmler then and now. BBC World News on their Have Your Say radio programme interviewed an "ex member", if I heard correctly and he claims they are a political party with good intentions and there was no need to be fearful if they came into power. I wouldn"t blame any one for their reservations reflecting on Elie"s reluctance to comment on that visit in his book and it was "better to let it go". There would have to be a lot of soul searching then and now I would think.

Posted on 2011-02-05 23:40:06 GMT


No wonder Elie Weisel preferred to "better let it go". He was/is a bridge builder. How much water must have had to go under the bridge to bring this about then and now. In my little world it would never do for me dealing with a state who has a stiff kneck and denies birthrights.

Posted by Lynne Newington on 2011-02-05 21:04:56 GMT


1) Heard of "Egyptian Cotton"? Cotton is a water-intensive crop; regularly-flooding areas near the Nile are well-suited to growing cotton. 2) Hajj Amin al Husseini was the Grand Mufti of Jerusalem during WW II - the highest position among Islamic clerics in the Holy Land. Husseini was in awe of the ability of the Nazis to actually exterminate Jews en masse, their advanced technology and efficiency. This was his Islamic Dream Come True. The Nazis had no use for Muslims (who were even more backwards at that time than today). The only thing the two groups shared was their irrational hatred of Jews and their crazed desire to wipe out Jews. All of the Jews. 3) Israel"s current Deputy PM Silvan Shalom was born in Tunisia. I believe that some of his family members or members of that community were shipped from N Africa to Europe to be exterminated in the Concentration Camps. Husseini was trying to bring the Nazi "final solution" to Africa and the Middle East. (He was also hiding out from the British in the Mandate who had convicted him of murder. "Islamic religious leader" - some things haven"t changed at all.)

Posted by Jake in Jerusalem on 2011-02-05 19:09:07 GMT


The last paragraph of Jacob"s letter is why I find myself looking through ELies Weisel"s book; And the Sea is Never Full: He made a brief mention of Himmlers friend, Mufti Hajj Amin el Husseini who was given a guided tour of Auschwitz. I"m wondering if there is any connection between Muslims generally, the Brotherhood of 1928, Muslims of 1942 and the Brotherhood of today. Elie"s reluctance to elaborate on the reason for the special treatment of a guided tour and that it was "better to let it go" leaves one with reservations to say the least. BBC World News this morning interviewed an "ex member" who stated they are a political party with no agenda"s with the best of intentions and there should be no fear if they were to gain power. There would have to be a lot of soul searching there if history proves there is a connection one would think. Elie also muses; had there been Muslims in Auschwitz, are we forgetting the SS Muslim division. I wonder if Elie would be prepared to shed a little further light on the subject today.

Posted on 2011-02-04 20:34:31 GMT


Why can"t EGYPT produce the wheat it needs ?? If my memory serves me right, I remember having learned in school that "EGYPT IS A GIFT FROM THE NILE" and therefore, it was its floods which allowed to plant grain on the wetlands the river made... Am I right ?? But SADAT allowed the Russians to convince him on the convenience of the ASSUAN DAM (criticized by the environmentalists)and this is what you get. On the other hand, the river has water aplenty and never ran dry. How about using it for agricultural purposes ?? Or is it still asking too much ?? Imagine ISRAEL having this much water at its disposal ?? A reply of JOSEPH with Pharaoh, feeding not only EGYPT but all of AFRICA.. But ISLAM is in the way and watch what will happen if GOD forbid, the Brotherhood laying in wait, ever gets the upper hand...

Posted by jacob mandelblum on 2011-02-04 14:06:12 GMT


History has recorded among other things, what sets Israel apart is that the door is never closed to dialogue and negotiation. Unfortunately those whose legitimisation is questioned and not always figuratively speaking, confrontation always ensues regardless of rights and that's across the board.

Posted by Lynne Newington on 2011-02-03 20:53:22 GMT


I just remembered a story I heard from an IDF officer in the 1960"s. In the Six Day War, the IDF simply drove into Gaza and took it. The Egyptian soldiers there simply surrendered immediately. Israel took thousands of Egyptian soldiers prisoner and later, famously, traded something like 8,000 Egyptian POWs for 4 Israelis or something like that. Anyways, there was this Egyptian POW whose turn finally came to be repatriated home. He didn"t want to go. He explained to the Israelis that he only joined the Egyptian army because he was hungry. He had a dozen siblings and his father was a lazy drunk, so they joined the army just to get fed. His older brother had been a POW in Israel in 1956 and advised his younger brother that when the Israelis come, to just surrender immediately; they will feed you well. That"s what he did. So did so many of his brothers-in-alms. :-) Eventually, he was convinced by the Israelis to go home. They also advised him to pass on that same advice (on immediate surrender) to other Egyptian soldiers. :-) Here we are, in the second decade of the 21st Century, and Egyptians are still hungry... PS I think that the bulk of the PA budget goes to paying salaries; they don"t have real economy. The PA even pays people in Hamastan, who aren"t allowed to work, but get paid anyways. Will it still be like that in the 22nd century, too?

Posted by Jake in Jerusalem on 2011-02-03 11:43:26 GMT


Ymr; no I am not and I"m sorry if I have caused you to think I am. It"s the "witless" terminology that threw me. I had to refresh my memory on the scriptural basis and have just finish going over Genesis chapter 41 and 42. My understanding is that Joseph was trusted by Pharoah and only to point of matters of the throne was he greater. They worked as a team. It also appears to a point they still do, Israel allowing Egypt to move troops into the Sinai Penninsula, something to do with the 1979 peace treaty, a good thing due to the uncertainty of the issue with Prime Minister Mubrak. I listen to the overnight BBC World News and on February 1 there was an Israli woman being interviewed and taking questions. I think it can be heard on podcast; Egypt prepares for demonstators, Israels concern about unrest. It"s good listening. Keep in mind I don"t have the Jewish legacy you have.

Posted on 2011-02-03 11:24:00 GMT


Thank you Ymr; but who are the "witless" ones, the Israelis running the agricultural technology or the Egyptians. As I said, it was a simple loved Bible story at an impressive age, I had better bring out my Bible and reread the story. I"ll get it right.

Posted by Lynne Newington on 2011-02-03 08:43:28 GMT


I"m wondering what the subscriber of this comment is really saying. Knowing the Bibical story well, I"m hoping it"s not a snide remark and I"ve misssed something.

Posted by Lynne Newington on 2011-02-03 07:39:16 GMT