Food and failed Arab states

[Spengler makes the point that the Egyptian crises is unsolvable no matter who is in charge. Egypt can’t afford to feed its people. So the crises is all about gaining power and not about feeding the people.]

By Spengler, Asia Times

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 the International 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
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.

Spengler is channeled by David P Goldman. Comment on this article in Spengler’s Expat Bar forum.

February 2, 2011 | 8 Comments »

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8 Comments / 8 Comments

  1. Ted, you forgot to include

    (Copyright 2011 Asia Times Online (Holdings) Ltd. All rights reserved.

    Coincidentally, I had just been catching up on Spengler. His post from January 19 was about how Tunisia has been so focussed on education (unlike Egypt) that the birth rate has dropped to 1.35. Tunisia has a good chance of emerging as an island of secular Arabs who get the tourists back because the women of Tunisia can read.

    I have not checked to see if the US has any surplus wheat – we seem to be using too much cropland for ethanol.

  2. What is missing in this article is observing the basic global overpopulation problem and especially Muslim countries as contributors. Like the Catholic Church, Muslims see child bearing as fundamental to controlling demography. It follows that the oppression of women and the suppresion of birth control are important fronts for Muslim political aggression. Muslims use genital mutilation to make their women better fit as conduits for political dominance

  3. To change the climate in Egypt and across the ME a man not connected to politics at all will stand brave enough to speak the truth. This will happen perhaps not in my life time but some time. If not, we are all dead.

    Take heart Susan, in the end we are all dead!!

  4. It use to be one would read commentaries from those on the right expounding the reason people in the ME are poor is because of oppression by dictatorial regimes even mentioning the dictatorial regime of Mubarak. Now of course it is a completely different story. If anyone here could look in a mirror and see the flop flops being sewn I swear you would all be dumbstruck!!

    Time was when I read commentaries from the right about the virulent anti American, anti Israel and anti Jewish libels emanating from STATE RUN NEWSPAPERS AND UNIVERSITIES in EGYPT. Now we hear the good being done by the wife of Mubarak.

    I know if Obama would have taken a different stance with Mubarak what I would be reading and hearing right now would be completely different.

    Oh and by the way, the following link I got off a far right blog about two years ago.

    I want to say I never thought in my life I would stand with any Arab anywhere for I freely admit my feelings are quite anti Arab/Islam, etc., but what I am reading is ridiculous. WHY now are we so worried about the MB when a liberal minded Arabist President is in office whose views are not hidden? Where were were these voices when our guy was in office and our voices, especially the voices of conservative commentators and politicians could have had such a strong influence on the man we elected?

    Who knows what will happen to Egypt. For sure we are all smart enough to know our Jeffersonian kind of democracy will never happen in Egypt or anywhere in the ME not even in Israel. Having said that, from the get go how was it possible to be so against a group of people wanting to oust a very evil man if not centered in politics?

    I know this, when Obama made that ME speech everyone went crazy. I found it quite extraordinary for with only a few exceptions, it sounded exactly like the speech Bush gave.

    To change the climate in Egypt and across the ME a man not connected to politics at all will stand brave enough to speak the truth. This will happen perhaps not in my life time but some time. If not, we are all dead.

  5. I disagree with Spengler in that Egypteven under ideal economic conditions could not support their population explosion. In 1983, when I left Yamit Egypt had a population of around 60-65 million. Today they have between 80-90 million people. They can’t provide sustinance jobs for 1,5-2 million new worker per year coming into the job market. Since around 50% of Egyptian are under 30, it stands to reason that within a few years the under 20 yr olds 35% of the population will be without work, no income.

    Not to worry most of the world is not far behind the Egyptian condition.

    Nobody will be immune or escape the coming global depression and the civil unrest that will accompany the global economic disintegration. In a way countries with an autocratic and dictatorial machines in place may weather the coming storms better the the liberal systems like Europe and North America.

    3 years ago I divested of most stocks for commodities and have not been sorry.

    Rule of thumb: Never trust any government. When it hits the fan it’s every man/woman for themselves.

  6. Hi, Bob

    Our posts crossed, so I haven’t seen yours until now. I like reading Churchill, because he was an interested student of history. Thank you for posting what you did.

  7. It is self-evident, that the “solution” offered by Spengler will not come about:

    “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.”

    Obama has shown no inclination to ship massive supplies to Egypt; and few Americans would support this, seeing that there are far more needy clients that are less anti-American. Even if he does send food, though, neither Mubarak (who is busy trying to get Obama’s knife out of his back) nor any other Egyptian will offer effusive public thanks. The last I heard, the mood on the streets in Cairo has turned away from hunger and frustration to hatred of Americans and Jews.

    So Spengler doesn’t do well in the “solution” department. He does better at correctly assigning blame:

    It wasn’t the financial crisis that undermined dysfunctional Arab states, but Asian prosperity.

    That is truly enlightening to me; I had never thought of that angle. We can even get a good “blame train” going: the Arabs can blame the Americans for all their problems, and the Americans can blame the Chinese. The Chinese, of course, will blame the Japanese, and I suppose the Japanese will blame the Jews. Then the Jews can blame the Arabs, and we come full circle.

    Of course, we still have no solution 🙁

  8. Before Islam (Certainly in Romans Times) The REAL Egyptians were the biggest PRODUCERS of wheat in the ancient world. Since the coming of Islam the reverse has been true. Winston Churchill described the Muslim mind 112 years ago and his description still stands:

    How dreadful are the curses which Mohammedanism lays on its votaries! Besides the fanatical frenzy, which is as dangerous in a man as hydrophobia in a dog, there is this fearful fatalistic apathy. The effects are apparent in many countries. Improvident habits, slovenly systems of agriculture, sluggish methods of commerce, and insecurity of property exist wherever the followers of the Prophet rule or live.

    A degraded sensualism deprives this life of its grace and refinement; the next of its dignity and sanctity. The fact that in Mohammedan law every woman must belong to some man as his absolute property, either as a child, a wife, or a concubine, must delay the final extinction of slavery until the faith of Islam has ceased to be a great power among men.

    Individual Moslems may show splendid qualities, but the influence of the religion paralyzes the social development of those who follow it.

    No stronger retrograde force exists in the world. Far from being moribund, Mohammedanism is a militant and proselytizing faith. It has already spread throughout Central Africa, raising fearless warriors at every step; and were it not that Christianity is sheltered in the strong arms of science, the science against which it had vainly struggled, the civilization of modern Europe might fall, as fell the civilization of ancient Rome.”