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

Getty
Show Hide image

Westminster terror: Parliament hit by deadly attack

The Met Police is treating the events in Westminster as a "terrorist incident". 

A terrorist attack outside Parliament in Westminster has left four dead, plus the attacker, and injured at least 40 others. 

Police shot dead a man who attacked officers in front of the parliament building in London, after a grey 4x4 mowed down more than a dozen people on Westminster Bridge.

At least two people died on the bridge, and a number of others were seriously hurt, according to the BBC. The victims are understood to include a group of French teenagers. 

Journalists at the scene saw a police officer being stabbed outside Parliament, who was later confirmed to have died. His name was confirmed late on Wednesday night as Keith Palmer, 48.

The assailant was shot by other officers, and is also dead. The Met Police confirmed they are treating the events as a "terrorist incident". There was one assailant, whose identity is known to the police but has not yet been released. 

Theresa May gave a statement outside Number 10 after chairing a COBRA committee. "The terrorists chose to strike at the heart of our Capital City, where people of all nationalities, religions and cultures come together to celebrate the values of liberty, democracy and freedom of speech," she said.

London Mayor Sadiq Khan has tweeted his thanks for the "tremendous bravery" of the emergency services. 

Labour leader Jeremy Corbyn also released a short statement. He said: "Reports suggest the ongoing incident in Westminster this afternoon is extremely serious. Our thoughts are with the victims of this horrific attack, their families and friends. The police and security staff have taken swift action to ensure the safety of the public, MPs and staff, and we are grateful to them."

After the incident this afternoon, journalists shared footage of injured people in the street, and pictures of a car which crashed into the railings outside Big Ben. After the shots rang out, Parliament was placed under lockdown, with the main rooms including the Commons Chamber and the tearoom sealed off. The streets around Parliament were also cordoned off and Westminster Tube station was closed. 

Those caught up in the incident include visitors to Parliament, such as schoolchildren, who spent the afternoon trapped alongside politicians and political journalists. Hours after the incident, the security services began evacuating MPs and others trapped inside Parliament in small groups. 

The MP Richard Benyon tweeted: "We are locked in Chamber of House of Commons." Shadow education secretary Angela Rayner tweeted: "I'm inside Parliament and me and my staff are safe."

The MP Jo Stevens was one of the first to confirm reports that a police officer had been attacked. She tweeted: "We've just been told a police officer here has been stabbed & the assailant shot."

George Eaton, the New Statesman politics editor, was in the building. He has written about his experience here:

From the window of the parliamentary Press Gallery, I have just seen police shoot a man who charged at officers while carrying what appeared to be a knife. A large crowd was seen fleeing the man before he entered the parliamentary estate. After several officers evaded him he was swiftly shot by armed police. Ministers have been evacuated and journalists ordered to remain at their desks.   

According to The Telegraph, foreign minister Tobias Ellwood, a former soldier, tried to resucitate the police officer who later died. Meanwhile another MP, Mary Creagh, who was going into Westminster to vote, managed to persuade the Westminster tube staff to shut down the station and prevent tourists from wandering on to the scene of the attack. 

A helicopter, ambulances and paramedics soon crowded the scene. There were reports of many badly injured victims. However, one woman was pulled from the River Thames alive.

MPs trapped inside the building shared messages of sympathy for the victims on Westminster Bridge, and in defence of democracy. The Labour MP Jon Trickett has tweeted that "democracy will not be intimidated". MPs in the Chamber stood up to witness the removal of the mace, the symbol of Parliamentary democracy, which symbolises that Parliament is adjourned. 

Brendan Cox, the widower of the late, murdered MP Jo Cox, has tweeted: "Whoever has attacked our parliament for whatever motive will not succeed in dividing us. All of my thoughts with those injured."

Hillary Benn, the Labour MP, has released a video from inside Parliament conveying a message from MPs to the families of the victims.

Former Prime Minister David Cameron has also expressed his sympathy. 

While many MPs praised the security services, they also seemed stunned by the surreal scenes inside Parliament, where counter-terrorism police led evacuations. 

Those trapped inside Parliament included 40 children visiting on a school trip, and a group of boxers, according to the Press Association's Laura Harding. The teachers tried to distract the children by leading them in song and giving them lessons about Parliament. 

In Scotland, the debate over whether to have a second independence referendum initially continued, despite the news, amid bolstered security. After pressure from Labour leader Kezia Dugdale, the session was later suspended. First Minister Nicola Sturgeon tweeted that her "thoughts are with everyone in and around Westminster". The Welsh Assembly also suspended proceedings. 

A spokesman for New Scotland Yard, the police headquarters, said: "There is an ongoing investigation led by the counter-terrorism command and we would ask anybody who has images or film of the incident to pass it onto police. We know there are a number of casualties, including police officers, but at this stage we cannot confirm numbers or the nature of these injuries."

Three students from a high school from Concarneau, Britanny, were among the people hurt on the bridge, according to French local newspaper Le Telegramme (translated by my colleague Pauline). They were walking when the car hit them, and are understood to be in a critical condition. 

The French Prime Minister Bernard Cazeneuve has also tweeted his solidarity with the UK and the victims, saying: "Solidarity with our British friends, terribly hit, our full support to the French high schoolers who are hurt, to their families and schoolmates."

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.