Where to Now for the Poor of Egypt?

The Baltimore based Maldon Institute has some sobering thoughts on the what the toppling of Mubarak may mean for the people of Egypt.

As Hosni Mubarak relinquished power as Egypt’s President, passing the office to his Vice President Omar Suleiman and control of some 80 million Egyptians to a Military Council, factors, neither political nor social have to be considered about the future of the country.

Egypt has no oil. insignificant industry, small amounts of natural gas. and 40 million people, who live on less than S2 a day and are about to become very hungry. Without figuring out how to feed the destitute bottom half of the Egyptian population, all the talk of “democracy” becomes window dressing!

Since the end of World War II. international subsidies (mostly from the United States), have been needed by Egypt to keep the price of bread, at a sufficiently low level, to prevent food riots. So the bread subsidy has continued for some sixty years, costing Cairo and its supporters about $2.74 billion a year. Over all. the government spends more on subsidies (bread, tea. sugar, gasoline), than it spends on health and education.

It will take some four months [June. 20111 before we learn of the extent of the damage to China’s winter wheat crop, virtually all its grain production. Extremely low rainfall this winter parched more than 12.4 million acres of China’s 34.6 million acres planted, and the next few weeks’ weather will determine if the world faces a real shortage of corn.

Hoarding on the part of North African countries, starting with Algeria, already has pushed up the wheat price in the Mediterranean to a 20 percent premium over the price shown on the Chicago futures market. The immediate risk is that pre-emptive purchases of wheat will price the grain out of the reach of poor Egyptians, not to mention Pakistanis and Bengalis.

Moreover, if reserve-rich China, usually self-sufficient, goes into the world markets to buy millions of tons of corn and wheat their prices can. or will rise to an arbitrarily high level.

The root cause to the Egyptian uprising is that China’s prosperity in Asia has created demands for grain, such that a minor supply disruption such as the 2010 droughts in Argentina and Russia caused huge price increases.

Egypt’s rulers have had a good run as an American client. They have not yet begun to understand the enormity of Washington’s abandonment of a reasonably faithful and consistent ally. Accustomed as they were to hypocrisy in all public discourse, the Egyptian rulers did not grasp President Barack Obama’s obsession with the salvation of the world of his father and stepfather, the world, which his anthropologist mother labored her whole life to defend against globalization.

President Obama is prepared to gamble core U.S. interests on the sketchy proposition that Egypt will turn into a Muslim democracy. Washington alternates between sentimental blather and diplomatic backsliding. Many have been shocked and dismayed by the inconsistency, bordering on amateurism. of the U.S. response to events in Egypt. 

First, the president, then Secretary of State Hillary Clinton then again the president’s special envoy,
Frank Wisner, to Hosni Mubarak have oscillated between distancing themselves from one of our allies and calling for him to step down, further calls for him to do it a s soon as possible and then, taking a U-turn, endorsing an “orderly transition” headed by Omar Suleiman, his intelligence chief.

If Obama succeeds in forcing the Muslim Brotherhood into a new Egyptian regime. Mubarak’s cronies really would be better off in London exile.

That implies a tsunami of capital (light and the disappearance of Egypt’s managerial class who, feckless as they might be,  nonetheless keep the economy working day by day. Already, Egypt’s $I2 billion a year in tourist revenue has gone to zero and will take years to restore under the best of circumstances.

Within some 20 weeks, Egyptians could begin to starve. The government’s immediate response is to spend more and has promised, as of February 5, that government subsidies would offset the rise in the world market price of food The government budget will help to “achieve social justice,” a minister told the media.

But no one speaks as to how the budget will be funded

Much depends on the weather in China.

Revolutions can be great fun. If you are rich and don’t have to live in the affected country.


Author: Admin

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