What price bread in Egypt?

Moving from an "autocracy of bread" to a "democracy of bread".

Debate rages as to the exact nature of events leading to the military ousting of President Mohamed Morsi. Was it a conspiracy engineered by the legions of personnel left in place after the departure of former President Hosni Mubarak; the failure of the police to maintain law and order and state agencies to provide adequate power supplies that whipped the people into fever pitch?

While the validity of these accusations may be a matter of contention, the challenges facing Mubarak, Morsi and Egypt’s next president are the same: how to restructure Egypt’s economy to end the crippling regime of subsidies that hamper growth and act as a drag on government finances.

Food subsidies have been used as a tool to buy loyalty and ensure stability for decades. While a continuing burden, Egypt began to feel the pain in 2008, when grain prices reached record levels and unemployment soared.

By 2010, the Egypt government’s bread subsidy bill topped $3bn a year. Much of this took the form of selling subsidised flour to local bakeries; an inefficient process system that lent itself to massive corruption. As global prices rose bakers resold subsidised flour and bread into the black market, where they could go for five or more times the subsidised rate, pushing up the price of bread for consumers.

The US contributed to the creation of the "autocracies of bread" through the provision of cheap wheat as a device to secure influence during the Cold War. Egypt’s Hosni Mubarak was the main recipient along with Iraq’s Saddam Hussein who received billions of dollars’ worth of surplus American wheat through grants and loan guarantees, while Jordan, Yemen, and other Middle Eastern countries got lesser amounts. This funding of the "social safety net" was seen as a cheap way of keeping friendly regimes in power.

In the long term cheap wheat has come at a high price; lack of investment in domestic agricultural production and a dangerous dependence on cheap imports from abroad. Bread subsidies also failed to lift the recipients out of poverty. The Middle East is the only region outside sub-Saharan Africa where the number of malnourished people has risen since the early 1990s with Egypt and Tunisia experiencing declines in the standard of living for all income groups outside of the top 20 per cent, despite the rise in GDP.

In 2008 when the price of bread soared, a wave of bread riots broke out across the MENA region. Governments intervened by raising wages, cash handouts and increased subsidies. These were short term remedies that proved unsustainable and had the unintended consequence of making more people dependent on subsidised bread.

Over the next two years a combination of factors - changing consumption patterns among the developing world’s middle class, drought, poor harvests, bio fuels and export embargoes - pushed food prices to an all-time high. The United Nations’ Food and Agriculture Organisation announced in early 2011 that food prices had surpassed 2008 levels.

The regimes in the region responded in the way they always had - with subsidies. Egypt, Yemen and Jordan increased food subsidies, Algeria, Tunisia and Morocco lifted customs duties and import tariffs on food, while Saudi Arabia unveiled a multi-billion dollar spending plan.

For hydrocarbons poor Egypt, the challenge was how to keep pace with subsidies at a time of contracting government revenue. Egypt’s food bill is unsustainable without significant donor handouts or high tourist receipts. The donors have been deterred by the policies of the Morsi government and the tourists have stayed away because of violence on the streets.

If the ousting of Morsi leads to the election of a secular leadership the donors may return. Saudi Arabia is willing to find a non-Muslim Brotherhood leadership and a new president may reach accommodation with the IMF for the release of funds. While these scenarios may stabilise Egypt in the short term and allow the government to continue to fund its food bill, donor aid will simply allow the restructuring of the Egyptian economy to be postponed until some indeterminate time in the future. The fundamental problems and grievances will be perpetuated transforming the government from an "autocracy of bread" to a "democracy of bread".

Photograph: Getty Images

JLT Head of Credit & Political Risk Advisory

Photo: Getty Images/AFP
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Is Yvette Cooper surging?

The bookmakers and Westminster are in a flurry. Is Yvette Cooper going to win after all? I'm not convinced. 

Is Yvette Cooper surging? The bookmakers have cut her odds, making her the second favourite after Jeremy Corbyn, and Westminster – and Labour more generally – is abuzz with chatter that it will be her, not Corbyn, who becomes leader on September 12. Are they right? A couple of thoughts:

I wouldn’t trust the bookmakers’ odds as far as I could throw them

When Jeremy Corbyn first entered the race his odds were at 100 to 1. When he secured the endorsement of Unite, Britain’s trade union, his odds were tied with Liz Kendall, who nobody – not even her closest allies – now believes will win the Labour leadership. When I first tipped the Islington North MP for the top job, his odds were still at 3 to 1.

Remember bookmakers aren’t trying to predict the future, they’re trying to turn a profit. (As are experienced betters – when Cooper’s odds were long, it was good sense to chuck some money on there, just to secure a win-win scenario. I wouldn’t be surprised if Burnham’s odds improve a bit as some people hedge for a surprise win for the shadow health secretary, too.)

I still don’t think that there is a plausible path to victory for Yvette Cooper

There is a lively debate playing out – much of it in on The Staggers – about which one of Cooper or Burnham is best-placed to stop Corbyn. Team Cooper say that their data shows that their candidate is the one to stop Corbyn. Team Burnham, unsurprisingly, say the reverse. But Team Kendall, the mayoral campaigns, and the Corbyn team also believe that it is Burnham, not Cooper, who can stop Corbyn.

They think that the shadow health secretary is a “bad bank”: full of second preferences for Corbyn. One senior Blairite, who loathes Burnham with a passion, told me that “only Andy can stop Corbyn, it’s as simple as that”.

I haven’t seen a complete breakdown of every CLP nomination – but I have seen around 40, and they support that argument. Luke Akehurst, a cheerleader for Cooper, published figures that support the “bad bank” theory as well.   Both YouGov polls show a larger pool of Corbyn second preferences among Burnham’s votes than Cooper’s.

But it doesn’t matter, because Andy Burnham can’t make the final round anyway

The “bad bank” row, while souring relations between Burnhamettes and Cooperinos even further, is interesting but academic.  Either Jeremy Corbyn will win outright or he will face Cooper in the final round. If Liz Kendall is eliminated, her second preferences will go to Cooper by an overwhelming margin.

Yes, large numbers of Kendall-supporting MPs are throwing their weight behind Burnham. But Kendall’s supporters are overwhelmingly giving their second preferences to Cooper regardless. My estimate, from both looking at CLP nominations and speaking to party members, is that around 80 to 90 per cent of Kendall’s second preferences will go to Cooper. Burnham’s gaffes – his “when it’s time” remark about Labour having a woman leader, that he appears to have a clapometer instead of a moral compass – have discredited him in him the eyes of many. While Burnham has shrunk, Cooper has grown. And for others, who can’t distinguish between Burnham and Cooper, they’d prefer to have “a crap woman rather than another crap man” in the words of one.

This holds even for Kendall backers who believe that Burnham is a bad bank. A repeated refrain from her supporters is that they simply couldn’t bring themselves to give Burnham their 2nd preference over Cooper. One senior insider, who has been telling his friends that they have to opt for Burnham over Cooper, told me that “faced with my own paper, I can’t vote for that man”.

Interventions from past leaders fall on deaf ears

A lot has happened to change the Labour party in recent years, but one often neglected aspect is this: the Labour right has lost two elections on the bounce. Yes, Ed Miliband may have rejected most of New Labour’s legacy and approach, but he was still a protégé of Gordon Brown and included figures like Rachel Reeves, Ed Balls and Jim Murphy in his shadow cabinet.  Yvette Cooper and Andy Burnham were senior figures during both defeats. And the same MPs who are now warning that Corbyn will doom the Labour Party to defeat were, just months ago, saying that Miliband was destined for Downing Street and only five years ago were saying that Gordon Brown was going to stay there.

Labour members don’t trust the press

A sizeable number of Labour party activists believe that the media is against them and will always have it in for them. They are not listening to articles about Jeremy Corbyn’s past associations or reading analyses of why Labour lost. Those big, gamechanging moments in the last month? Didn’t change anything.

100,000 people didn’t join the Labour party on deadline day to vote against Jeremy Corbyn

On the last day of registration, so many people tried to register to vote in the Labour leadership election that they broke the website. They weren’t doing so on the off-chance that the day after, Yvette Cooper would deliver the speech of her life. Yes, some of those sign-ups were duplicates, and 3,000 of them have been “purged”.  That still leaves an overwhelmingly large number of sign-ups who are going to go for Corbyn.

It doesn’t look as if anyone is turning off Corbyn

Yes, Sky News’ self-selecting poll is not representative of anything other than enthusiasm. But, equally, if Yvette Cooper is really going to beat Jeremy Corbyn, surely, surely, she wouldn’t be in third place behind Liz Kendall according to Sky’s post-debate poll. Surely she wouldn’t have been the winner according to just 6.1 per cent of viewers against Corbyn’s 80.7 per cent. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.