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Subsidized Bread Staving Off Starvation & Uprisings

by Asinus Asinum Fricat Tue Apr 29th, 2008 at 05:24:53 PM EST

You better get used to this sort of headline. It's going to get a lot tougher for most of us on this planet. You heard about poor Haitians having to eat mudcakes as "food" of the last resort. Let me give you an account of another country on the brink of disaster: Egypt's government is now struggling to contain a political crisis as violent clashes have broken out at long lines for subsidized bread, and the president, worried about unrest, has ordered the army to step in to provide more. The president himself had to intervene. You might say, that's his job. Well, yes, but he is unable to control soaring food prices, none of us can. The Egyptian authorities are fearful that this could be a prelude to a chronic shortage of wheat worldwide and a return to lawlessness.

Nearly 40 percent Egypt's 76 million people live below or near the poverty line of $2 a day and quite a few on less than a dollar a day. The prices of staples such as cooking oil and rice have nearly doubled in recent months forcing them to ban rice export for a period of six months.

Cross-posted from PolitiCook & DKos

Diary rescue by Migeru

People have turned to eat more bread because they can afford little else. Official figures show the price of food has increased by an average of 25% in the past year. The price of both cereals and bread had soared to a whopping 50%, vegetables by over 15% and dairy goods by 21%. The price hikes mean rice and pasta - staple foods for the poor, are now out of reach for millions of Egyptians. Efforts by the government's subsidies has kept the price of one loaf to one cent. It needs to. For decades Egypt has been one of the world's largest importer of wheat and has provided subsidized flour to bakers to produce a cheap country bread called baladi, a puffy disc weighing roughly 400 grams. This bread enables millions of Egyptians to survive on meager salaries as well as staving off discontent and possible uprisings.

It is a costly policy for the government and one that may imperil its fragile economic fabric as it spent an extra $850m on wheat for the subsidized bread. The total bill is expected to reach $2.67bn for the last year alone.

Last month, the Egyptian government waived duties on imported rice, dairy goods, food oils, steel and cement to fight inflation, the official MENA news agency reported. "Rice is a staple food in Egypt and the main substitute for flour, whose price has gone up following wheat price rises on the international market", said Sayyed Abul-Komsan, advisor to Commerce Minister Mohammad Rashid.
Egypt produces around 4.5 million tons of rice a year, of which 3.5 million is allocated to the local market, said Komsan. Most exports go to Turkey, Lebanon, Syria and Jordan.

In recent weeks the government has been hit by growing unrest, including deadly clashes that police said left at least seven people killed, outside bakeries as huge queues form to buy bread. Despite having an official growth rate of 7 percent, Egypt suffers from rampant unemployment. Everyone in Egypt remembers the food riots of 1977, when the government foolishly decided to lift subsidies on bread, triggering the only mass popular uprising in the last 50 years. This global food crisis has prompted warnings from the IMF and the World Bank, and the UN's World Food Program.

Now is the time to act, no more words, action is what's needed. Or it will get much worse.

"We have seen riots around the world and there's risk that these will spread because of rising prices in countries where 50-60 percent of incomes go to food", Jacques Diouf, the director general of the United Nations Food and Agriculture Organization, said in India today.

This does not augur well. Tomorrow I have a piece on the factors that have contributed to this wheat crisis.

Thanks for this diary.  This wasn't intended to be a response to your diary, since I hadn't actually seen your diary when I wrote it (sorry!) but it did sort of work out that way.  I think the point is that Egypt's problem is not just food prices, it's that the entire system is broken and dysfunctional.  The subsidies have been a patch to avoid redressing the fundamental inequities in the Egyptian system, and suddenly the patch isn't holding anymore and the wound is gaping wide open.  And since this is a repressive police state in which the people have practically zero opportunity to hold the government accountable for its failures, this gaping wound has become dangerously infected.

As Amartya Sen wrote, "There is no such thing as an apolitical food problem."

by the stormy present (stormypresent aaaaaaat gmail etc) on Thu Apr 17th, 2008 at 07:56:00 PM EST
Greeting from Ireland! Great comment. Yes, I agree that it is the entire system that is at fault, not just the bread subsidies and I hope that it will change for the better for the people rather than for the few at the top.  I have another diary on the food shortages, which I'll post tomorrow (at home now and on dialup hell).
by Asinus Asinum Fricat (patric.juillet@gmail.com) on Thu Apr 17th, 2008 at 10:28:09 PM EST
[ Parent ]
The FAO is reporting:

Overall in Asia, prospects for the 2008 wheat crop, already close to harvest, are favourable, although outputs are forecast below the record levels of last year.

The PRC is claiming:

China will have an ample harvest of winter wheat in 2008 as higher yields and increased acreage offset the impact of severe drought, industry officials said on Monday. The winter wheat output will grow 1.3 percent this year to 102.6 million tonnes, lifting China's total wheat output, including spring wheat, to 107.6 million tonnes this year, up 2.5 percent from 2007, the China National Grain and Oil Information Centre said. "This year is a normal year for winter wheat and the yield will increase by 2-7 percent," Mao Liuxi, a senior researcher with the China Meteorological Centre, told a conference in Beijing.

Personally, I doubt it.

Meanwhile the world's grain reserves have fallen to 54 days -- a record low.  

Ethanol production soaked up, in the US, 81 million tons of grain - mostly corn (maize) - in 2007.  Should all the ethanol distillers come on-line as projected this will rise to a projected 114 million tons or 28% of projected US grain harvest.  

With the rise in grain prices several grain exporters have already put export restrictions in place.

Together this suggests the total grain available for purchase on the open market will decrease from 2007 triggering further increase in market prices by governments who have to purchase grain in order to feed their population.

Given this, a question: Does Egypt have the financial resources to continue to subsidize bread prices?  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Apr 18th, 2008 at 02:38:36 AM EST
Does Egypt have the financial resources to continue to subsidize bread prices?

No.  Even before the food prices started increasing, Egypt was operating with an enormous budget deficit.   This document from 2006 says the budget deficit was $1.62 billion and growing, while this Reuters article says the budget deficit was 7 percent of GDP in 2006.

(And this will tell you something about how things are done here -- they're "reining in" the deficit by... privatization. Oh, joy.)

Traditionally, the most expensive part of Egypt's extensive subsidy program has been fuel subsidies, but when grain prices started shooting up that made the bread subsidies that much more unsubstainable.

But if people aren't paid a living wage (and the vast majority here are not, not anything close to it) then they can't get rid of the subsidies without prompting either mass starvation or popular unrest or both.

Budgetarily, a lot of the problems are because of corruption -- Egypt has plenty of income, serious sources of hard currency in the form of tourism, petroleum revenues (even though it's not a truly major producer) and Suez Canal fees.  (Never mind the $2 billion a year in US civilian and military aid....)  So Egypt could much more easily afford to meet the needs of its people if the people who run the government weren't so busy lining their own pockets and those of their pals.  But all that money goes directly into the pockets of the ruling elite, Mubarak's cronies and a handful of super-rich businessmen.  People run for Parliament here to get rich, not to change things.  (And to get immunity from prosecution....)  This shouldn't be a poor country -- it isn't a poor country -- but 40 percent of the population are poor, living on around $2 a day or less.

So the subsidies stay.  Because to fix the system so as to make the subsidies unnecessary (or at least much smaller-scale) the ruling elite would have to actually start (a) giving a damn about the people, and (b) reduce the flow of money into their own bank accounts.

by the stormy present (stormypresent aaaaaaat gmail etc) on Fri Apr 18th, 2008 at 05:12:02 AM EST
[ Parent ]
How long do you think before we see serious unrest?

you are the media you consume.

by MillMan (millguy at gmail) on Fri Apr 18th, 2008 at 03:26:34 PM EST
[ Parent ]
I wish I had a crystal ball and could even consider answering that.

Truth is, I dunno if we will see serious unrest.  This is a subject for much debate among certain of my friends.  We can't tell, really, whether we're seeing just another surge of activism that will be crushed by the regime and have no real lasting effects (which has happened before -- see 1972 and 1977 and 1989...) or we're seeing the real rumblings of change (which has also happened before, but a lot longer ago -- see 1919 and 1952.)   There's a lot of what-if, what-if going around.

Personally, I'm enough of an inveterate cynic to generally doubt that anything will ever really change, anywhere, so I usually lean toward the belief that the regime will find some way to defuse or crush all of this, and that far too many people here have been cowed and dispirited to the point that they don't believe things will ever really change, either, so are unwilling to risk everything (and it would be everything) in order to go out into the streets and demand change.

But a friend of mine, who's very smart about these things (although we do ideologically disagree on a lot of things, I have to concede his smartness) argues that the regime has become so calcified and so inept and so useless that it is unable to even take the required steps to protect its own interests, and is therefore more vulnerable now than it has been in a very long time.  And people are hungry, that is certainly true.

Some would argue (like The New York Times in this story) that hunger fuels anger, and people who are angry and hungry enough go out into the streets, and can overthrow governments.  But in Zimbabwe, it had exactly the opposite effect -- hunger weakened people, distracted them from the political.  They were literally physically weakened, with less energy for organizing and agitating, and also were more likely to be preoccupied with the day-to-day struggle to feed their families, rather than the long-term struggle to change the government.  And food became a weapon of the ruling party -- you had to prove your loyalty in order to get it, which works pretty well at keeping really hungry people more or less in line.

So, uh, that's a very long and rambling way of saying I just don't know, and nobody does.

by the stormy present (stormypresent aaaaaaat gmail etc) on Fri Apr 18th, 2008 at 05:40:31 PM EST
[ Parent ]
Lot of meat to chew on.

From what you write, I 'get' IF things get wonky the fall of the government would create a power vacuum followed by civil disorder as various groups fight each other to become the New Boss.


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Apr 18th, 2008 at 06:27:12 PM EST
[ Parent ]
Is a sure sign a country is rife with corruption and has a weak and inefficient government.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Apr 18th, 2008 at 10:06:58 AM EST
Do explain.
by Colman (colman at eurotrib.com) on Fri Apr 18th, 2008 at 10:07:43 AM EST
[ Parent ]
It's explained in the post above, by stormy present. He should know, I guess, since he writes from Egypt.
by Asinus Asinum Fricat (patric.juillet@gmail.com) on Fri Apr 18th, 2008 at 10:21:38 AM EST
[ Parent ]
Hi.  I'm a she, actually. :-)

I actually disagree with the premise -- the subsidies themselves are not per se a symptom of the corruption etc., but the fact that so many people are dependent upon them is.  Any country with poor people in it should take steps to ensure that those people have enough to eat.  Ideally, yes, we'd like countries without poverty, but there aren't very many of those.

by the stormy present (stormypresent aaaaaaat gmail etc) on Fri Apr 18th, 2008 at 02:44:17 PM EST
[ Parent ]
Hi, your writing is muscular, and incisive. I'm a he, and I agree , we're not living in an ideal world.
by Asinus Asinum Fricat (patric.juillet@gmail.com) on Fri Apr 18th, 2008 at 10:49:09 PM EST
[ Parent ]
Hi, your writing is muscular, and incisive.

(sound of limp, vague, girly spluttering)

by Sassafras on Wed Apr 30th, 2008 at 03:10:08 AM EST
[ Parent ]
It's the same thing that Jerome talks about with gas in Russia. It would be far more effeicient to hand out cash to the starving masses so they can afford expensive bread (gas) compared to subsidizing the bread. But in a corrupt society with a weak government it's far easier for officials to skim off cash benefits compared to skiming off bread subsidies.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Apr 18th, 2008 at 03:23:56 PM EST
[ Parent ]
It depends. Maybe you want to help bread producers rather than all sellers. Maybe the local agricultural industry specifically needs high production prices to be sustainable.

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Fri Apr 18th, 2008 at 08:25:03 PM EST
[ Parent ]
I was talking about reducing the poverty gulf to make sure poor people don't starve. I think that is a crucial policy for any state, to say the least, and it absolutely pales compared to helping agribusiness.

And if your local agricultural industry can't survive without subsidies, you should really be doing other things than farming.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Apr 19th, 2008 at 02:40:55 AM EST
[ Parent ]
Have you seen my diary ? Quite often, the poor people actually starving are the food producers, not the food buyers. In many places, food production isn't done by agribusiness. It is done in small farms, and doesn't qualify as a "food industry".

Since most developed countries consider food independence as worthy to defend, they subsidize their own agriculture. The end result is that any local farming sector needs subsidies to survive, and even more to develop and become more productive.

Of course, thanks to the Washington consensus which followed more or less the principles you put forward, agricultural development was stuck, and even reversed, for much of the 80's and 90's. And, well, famines happened.

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sat Apr 19th, 2008 at 04:30:51 AM EST
[ Parent ]
You mean, like all EU governments ?

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Fri Apr 18th, 2008 at 10:30:13 AM EST
[ Parent ]

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