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: André Spicer
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“It’s scary to do it again”: the five-year-old fined £150 for running a lemonade stand

Enforcement officers penalised a child selling home-made lemonade in the street. Her father tells the full story. 

It was a lively Saturday afternoon in east London’s Mile End. Groups of people streamed through residential streets on their way to a music festival in the local park; booming bass could be heard from the surrounding houses.

One five-year-old girl who lived in the area had an idea. She had been to her school’s summer fête recently and looked longingly at the stalls. She loved the idea of setting up her own stall, and today was a good day for it.

“She eventually came round to the idea of selling lemonade,” her father André Spicer tells me. So he and his daughter went to their local shop to buy some lemons. They mixed a few jugs of lemonade, the girl made a fetching A4 sign with some lemons drawn on it – 50p for a small cup, £1 for a large – and they carried a table from home to the end of their road. 

“People suddenly started coming up and buying stuff, pretty quickly, and they were very happy,” Spicer recalls. “People looked overjoyed at this cute little girl on the side of the road – community feel and all that sort of stuff.”

But the heart-warming scene was soon interrupted. After about half an hour of what Spicer describes as “brisk” trade – his daughter’s recipe secret was some mint and a little bit of cucumber, for a “bit of a British touch” – four enforcement officers came striding up to the stand.

Three were in uniform, and one was in plain clothes. One uniformed officer turned the camera on his vest on, and began reciting a legal script at the weeping five-year-old.

“You’re trading without a licence, pursuant to x, y, z act and blah dah dah dah, really going through a script,” Spicer tells me, saying they showed no compassion for his daughter. “This is my job, I’m doing it and that’s it, basically.”

The girl burst into tears the moment they arrived.

“Officials have some degree of intimidation. I’m a grown adult, so I wasn’t super intimidated, but I was a bit shocked,” says Spicer. “But my daughter was intimidated. She started crying straight away.”

As they continued to recite their legalese, her father picked her up to try to comfort her – but that didn’t stop the officers giving her stall a £150 fine and handing them a penalty notice. “TRADING WITHOUT LICENCE,” it screamed.


Picture: André Spicer

“She was crying and repeating, ‘I’ve done a bad thing’,” says Spicer. “As we walked home, I had to try and convince her that it wasn’t her, it wasn’t her fault. It wasn’t her who had done something bad.”

She cried all the way home, and it wasn’t until she watched her favourite film, Brave, that she calmed down. It was then that Spicer suggested next time they would “do it all correctly”, get a permit, and set up another stand.

“No, I don’t want to, it’s a bit scary to do it again,” she replied. Her father hopes that “she’ll be able to get over it”, and that her enterprising spirit will return.

The Council has since apologised and cancelled the fine, and called on its officials to “show common sense and to use their powers sensibly”.

But Spicer felt “there’s a bigger principle here”, and wrote a piece for the Telegraph arguing that children in modern Britain are too restricted.

He would “absolutely” encourage his daughter to set up another stall, and “I’d encourage other people to go and do it as well. It’s a great way to spend a bit of time with the kids in the holidays, and they might learn something.”

A fitting reminder of the great life lesson: when life gives you a fixed penalty notice, make lemonade.

Anoosh Chakelian is senior writer at the New Statesman.