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

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Momentum vice chair Jackie Walker calls claims of antisemitism in Labour “a weapon of political mass destruction”

The issue was also compared to a “monstrous soufflé” during a tense and often bizarre Momentum debate at Labour party conference.

A two-hour debate hosted by Momentum – asking whether there is antisemitism in the Labour party – grew heated on Sunday evening of the Labour party’s annual conference.

The packed out room, at the campaign movement’s fringe called The World Transformed, was warned beforehand to avoid “bitter incivility of discourse”. Which, translated from the language of Labour conference, means: “Don’t say anything dreadful.”

Jackie Walker, the vice-chair of Momentum, argued that antisemitism claims have been “exaggerated for political purposes”, and “the most fundamental aim of such allegations, I suggest, is to undermine Jeremy Corbyn”, and “silence” his supporters.

She claimed that there is “little if any hard evidence” that Labour has a problem with antisemitism, and blamed a “rabidly, anxiously anti-Corbyn” media for using antisemitism claims as a “weapon of political mass destruction”.

“Being offended is not the same as experiencing racism,” Walker added. “Claims of racism have been weaponised . . . Both the chair and the vice-chair [referring to herself] of Momentum are Jewish, and many leading members of Momentum are Jewish.”

(Later an audience member picked up on this theme perhaps a little too zealously. “Trotsky the Jew? Lenin the Jew? What about Zinoviev? What about Kamenev?” he cried, concluding that therefore claims of left-wing antisemitism are “nonsense”.)

Jeremy Newmark, head of the Jewish Labour Movement, clashed with Walker, accusing her of having “perpetuated” the “antisemitic myth” of slave trade collusion (referring to a comment she made on Facebook for which she was briefly suspended from Labour).

She hit back by saying she was “disappointed” in his comment, and had “simply repeated the defamation of his friends in the Jewish Chronicle”, accusing them of racism towards her as a black woman.

Newmark lamented that, “the relationship between our community and the Labour Party has deteriorated”, and “it pains me that a once historic natural alliance [should] dissipate, dilute and disappear”.

He warned those who “want to criticise someone for over-egging” the issue of antisemitism in the party should look no further than Jeremy Corbyn, who called for Shami Chakrabarti’s inquiry into the subject. “Perhaps you should criticise him.”

It was a tense exchange, which elicited gasps and heckles from the audience. But perhaps less predictable was the description of the Labour antisemitism row as a “monstrous soufflé” by Professor Jonathan Rosenhead, an LSE academic involved in boycotting Israeli universities.

He called it “a monstrous soufflé of moral panic being whipped up”, and warned the audience: “We need to ask about this soufflé”.

“Who are the cooks? Where’s the kitchen? What are the implements?” he asked, before the killer rhetorical question: “Why has this soufflé been cooked?”

Anoosh Chakelian is deputy web editor at the New Statesman.